R. v. Park, 2010 ABCA 248
[24] Inherent in the crafting of conditions for mortgage approval is the assumption of risk by the lender. One can safely conclude that the degree of risk is dependent on the status of the applicant and the satisfaction of the conditions precedent. The mortgage commitments were predicated on compliance with the drafted conditions which were intended to protect and limit the risk incurred by the mortgagees. It is a safe inference that the financial institutions intended, accordingly, to rely on those conditions.
[25] I agree with the Appellant that an absence of evidence from the individual who personally approved a mortgage cannot be equated with positive evidence of non-reliance. Reliance can be demonstrated through indirect evidence, through direct evidence in the form of documents that establish the policies and practices of the lender.
[26] The person who approved a mortgage who happened to be a co-conspirator complicit in the fraudulent scheme or, indeed, a perpetrator of the fraud would not, if indicted and jointly tried with others, be a compellable witness at the instance of the Crown. What if such an individual were deceased? Would the Crown be precluded from relying on the documentation alone? Surely not. What if the bank employee who had approved the mortgage had no memory of the transaction and felt it necessary to rely on the documents? Would the documents have no probative value on the issue of reliance? Surely not.
[27] The trial judge relied on the decision in Alberta Treasury Branches v. Hammond, supra, for his conclusion that the lending policies of the various financial institutions were “red herrings”. He reasoned that since the policies were not “mandatory”, or anticipated some exercise of discretion, no inference of reliance could be drawn from them. Hammond was an action by a financial institution to enforce a guarantee of a loan. The guarantor sought production of the lender’s policy manuals in order to raise the defence that the loan had been advanced contrary to “industry practices”. The Master in Chambers held that this was not a defence to an action for repayment. Hammond is not of assistance in deciding this case. It stands for the proposition that a borrower cannot refuse to repay a loan on the basis that pursuant to its own policies the lender should never have lent the money in the first place. Hammond merely holds that the borrower cannot resort to the lender’s policies for a defence, not that the lender can never rely on its own policies. Reliance is an issue of fact, and no case could lay down as a matter of law that a financial institution never relies on its own internal policies in advancing loans.
[28] The evidence disclosed that for some of the financial institutions involved the person responsible for approving the mortgages had a measure of discretion in determining whether or not the application should be approved. That evidence does not assist the Respondent. The record does not establish and no evidence was led to suggest that the discretion was broad enough to allow a mortgage to be approved when it was clear to the approver that the down payment had not been made, that the application and supporting documents contained forgeries, that claims of the owner/occupier were false or that the buyer’s income or liabilities were misrepresented.
[29] Further, the presence of an element of discretion in the mortgage approval process does not foreclose reliance. The Crown does not have to prove that the mortgage was approved solely through reliance on the fraudulent statements. Criminal responsibility can arise from multiple contributing causes: R. v. Nette, [2001] 3 S.C.R. 488, 2001 SCC 78 at paras. 71-2. As was noted in R. v. Drakes, 2006 CanLII 730 (ON SC), [2006] O.T.C. 24 at para. 47 (affm’d 2009 ONCA 560, 252 O.A.C. 200):
“With respect to the deprivation element of the offence, it is clear that it must have been caused by the defendant's dishonest conduct. However, it is equally clear from cases such as R. v. Smithers, 1977 CanLII 7 (SCC), [1978] 1 S.C.R. 506 (S.C.C.) and R. v. Currie (1984), 1984 CanLII 3543 (ON CA), 12 C.C.C. (3d) 28 (Ont. C.A.) that the defendant need not be the sole cause of the deprivation in order to satisfy the actus reus of the offence of fraud. The defendant’s conduct must have contributed to the deprivation, outside of the de minimus range. As well, the Crown need not prove that a particular complainant was deceived by the representations.”
To the same effect is R v. Guthrie (1991), 114 A.R. 355 (C.A.) at paras. 6, 14, 17 affm’d 1992 CanLII 64 (SCC), [1992] 2 S.C.R. 222. A mortgage might be approved partly because of the policies of the lender, partly because of independent inquiries by the loans officer, partly by reason of an exercise of discretion, and partly in reliance on the fraudulent statements made. So long as the reliance on the fraudulent statements was a material part of the decision-making process sufficient reliance would be shown to support the charge of fraud.
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