R. v. InfoSpec Systems Inc., 2013 BCCA 333
[16] The Crown relies on the “other fraudulent means” aspect of s. 380(1)(a) of the Criminal Code. Its position is that the sale of a zapper constitutes a dishonest act or dishonest dealing that creates a risk of loss or deprivation to the public. InfoSpec’s position is that the essential elements of the substantive offence of fraud were not met in this case in the absence of evidence that one of the zappers it sold was used to evade taxes or to otherwise deprive the public of money or other property. Put otherwise, InfoSpec says that the mere act of selling a computer program capable of being used to commit fraud is not itself fraud. It says that to criminalize the sale of a zapper through the fraud provision of the Criminal Code is to create an offence that Parliament has not seen fit to create.
[17] The parties made submissions with respect to whether the sale of a zapper is a dishonest act and, if it is, whether such a sale creates a risk of deprivation to the public. As, in my view, the Crown’s case fails on the first question, there is no need to discuss the second.
[18] In R. v. Olan, 1978 CanLII 9 (SCC), [1978] 2 S.C.R. 1175 at 1180, Mr. Justice Dickson (as he then was) said that “other fraudulent means” encompasses means other than deceit or falsehood “which can properly be stigmatized as dishonest.” In R. v. Zlatic, 1993 CanLII 135 (SCC), [1993] 2 S.C.R. 29 at 45, Madam Justice McLachlin (as she then was) had the following to say about the actus reus of fraud by other fraudulent means:
The fundamental question in determining the actus reus of fraud within the third head of the offence of fraud is whether the means to the alleged fraud can properly be stigmatized as dishonest: Olan, supra. In determining this, one applies a standard of the reasonable person. Would the reasonable person stigmatize what was done as dishonest? Dishonesty is, of course, difficult to define with precision. It does, however, connote an underhanded design which has the effect, or which engenders the risk, of depriving others of what is theirs. J. D. Ewart, in his Criminal Fraud (1986), defines dishonest conduct as that “which ordinary, decent people would feel was discreditable as being clearly at variance with straightforward or honourable dealings” (p. 99). Negligence does not suffice. Nor does taking advantage of an opportunity to someone else’s detriment, where that taking has not been occasioned by unscrupulous conduct, regardless of whether such conduct was wilful or reckless. The dishonesty of “other fraudulent means” has, at its heart, the wrongful use of something in which another person has an interest, in such a manner that this other’s interest is extinguished or put at risk. A use is “wrongful” in this context if it constitutes conduct which reasonable decent persons would consider dishonest and unscrupulous.
[Emphasis added.]
See also: R. v. Théroux, 1993 CanLII 134 (SCC), [1993] 2 S.C.R. 5 at 16: “the existence of [other fraudulent means] will be determined by what reasonable people consider to be dishonest dealings.”
[19] In its factum the Crown lays great stress on the fact that our system of taxation is based on self-reporting and self-assessing and depends on the honesty of taxpayers. It submits that in the context of a taxation system that is vulnerable to being cheated, placing a zapper in the hands of a taxpayer creates a substantial risk of deprivation of the public purse. While this may be so, the first question that must be asked is whether that act of placing is one that reasonable people would consider as dishonest.
[20] While the Crown relies on the fact that a zapper is sophisticated software created solely for the purpose of facilitating tax evasion, in oral argument it acknowledged that at its core, its position is that “other fraudulent means” captures the sale of anything capable of being used to commit fraud when, at the time of the sale, the vendor knows the purchaser intends to use the thing in that way. For example, the Crown agreed that under its theory the following would satisfy the actus reus element of fraud:
(a) the sale of software to a partner that is capable of manipulating the partnership’s records to the financial benefit of that partner, regardless of whether that software is ever installed or used; and
(b) the printing of a duplicate set of records (e.g., invoices) for a person who intends to use them to evade tax, even if that person later decides not to use them.
Indeed, the Crown’s theory logically would apply even if the thing capable of being used to commit fraud was handed over free of charge, e.g., InfoSpec gave a zapper to one of its Profitek customers and it was never used.
[21] It is noteworthy that the law does not prohibit the making, possession, or sale of a zapper. As InfoSpec points out, the Criminal Code contains a number of provisions that criminalize the possession, making, or selling of certain things capable of being used to commit crimes. Those offences can be proven without any evidence that the thing was ever used. For example:
(a) s. 342.01: possessing, making, or selling an instrument, device, apparatus, material or thing that a person knows is adapted or intended for use in forging or falsifying credit cards;
(b) s. 342.2: possessing, making, or selling an instrument, device, etc. intended to be used to obtain unauthorized access to a computer service;
(c) s. 368.1: making or selling an instrument that a person knows is adapted or intended for use to commit forgery;
(d) s. 369: making, using, or possessing any paper that is used to make bank-notes or that is intended to resemble such paper; and
(e) s. 458: possessing or selling any machine, tool, etc. that a person knows is adapted and intended for use in making counterfeit money.
[22] I do not accept the Crown’s submission that InfoSpec “engaged in a course of dealings that was by its very nature dishonest.” InfoSpec participated in commercial transactions involving the sale of a computer program that is not prohibited by law; the restaurants got what they paid for. Whatever reasonable people might think about the propriety of such a sale, I am unable to say they would consider the vendor to have acted dishonestly. If Parliament considers a prohibition on zappers necessary to thwart tax evasion, then it is open to it to enact a provision similar to those to which I have just referred.
[23] It is worth noting that proof that a zapper was used by one of the Winnipeg restaurants would not have converted InfoSpec’s act of selling that zapper into a dishonest one. Had one of those restaurant used a zapper to evade paying taxes, InfoSpec would be a party to fraud by reasons of s. 21(1)(b) of the Criminal Code, i.e., for having aided the restaurant in committing that offence. In those circumstances, the dishonest act would be the restaurant’s use of the zapper for its intended purpose, not its sale by InfoSpec.
[24] As for the Crown’s request to substitute a conviction for attempted fraud, its submission is predicated on InfoSpec having engaged in “fraudulent behaviour”. However, since selling a zapper is not a dishonest act, this argument fails. I note that in both cases the Crown cites for the proposition that a conviction for attempted fraud can be substituted on appeal, the respective appellants were shown to have acted fraudulently. Convictions for attempted fraud were substituted because ultimately the fraudulent actions did not succeed: Detering v. The Queen, [1982] 2 S.C.R. 586 at 596; R. v. Reis, 2003 MBCA 98 at paras. 16 – 19, [2004] 6 W.W.R. 640. See also: United States of America v. Schrang (1997), 1997 CanLII 3588 (BC CA), 114 C.C.C. (3d) 553 at paras. 38 – 44 (B.C.C.A.), leave ref’d [1997] 3 S.C.R. xiv.
[25] One final comment. The charge here was one of fraud in excess of $5000.00. Given there was no evidence that either Winnipeg restaurant used a zapper, it is difficult to understand how the Crown could prove the amount of the alleged fraud, or even of an attempted fraud. This point does not appear to have been raised at trial. When it was raised by the Court on this appeal, the Crown responded that even though there was no evidence as to what the restaurants paid for a zapper, it could be inferred that they collectively intended to evade payment of more than $5000.00 in taxes from the general evidence that InfoSpec charged between $1000.00 and $2,500.00. According to the Crown, the only logical inference is that no one would pay that price for a zapper unless they intended to evade substantially more in taxes. I leave the cogency of that submission for another day.
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