11 C.R.N.S. 1, 1970 CarswellOnt 11

Chapman, Re

Regina v. Chapman

Ontario Court of Appeal

JUDGES:  Gale C.J.O., McGillivray, Kelly, Laskin and Brooke JJ.A.

Judgment: March 5, 1970

COUNSEL: W.H. Langdon, Q.C. for the Crown.

E.J. Horembala, for accused.

HEADNOTE:  Criminal; Property; Corporate and Commercial; Contracts

Criminal Law — General principles involving criminal law — Criminal jurisdiction — Territorial limitations — Determination of situs of offence — Out of Canada.

Criminal Law — Offences against rights of property — False pretences — General offence — Nature and elements of offence — General.

Criminal Law — Fraudulent transactions relating to contracts and trade — Fraud — Charging offence.

Criminal Law — Conspiracy offences — Conspiracy — Nature and elements of offence — Place where offence committed.

Fraud — Conspiracy in Canada to defraud American residents — Proceeds of crime received in Canada — Using mails to obtain money by false pretences — Situs of offences — Jurisdiction of Canadian courts — Whether “the public” in ss. 323(1) and 324 meaning Canadian public — The Criminal Code, 1953-54 (Can.), c. 51, ss. 323(1), 324.

The accused was committed for trial upon the following four counts: (1) conspiracy to defraud the public through a home sewing scheme; (2) unlawfully using the mails in Ontario to transmit letters or circulars concerning a scheme intended to defraud the public; (3) using the mails in Ontario to obtain money by false pretences; and (4) possession in Ontario of money knowing the same to have been obtained by an act that, if it had occurred in Canada, would have constituted the indictable offence of fraud. The victims of the accused’s fraudulent scheme were all American residents. The accused moved to quash the committals by way of habeas corpus with certiorari in aid; the committal on Count 1 was quashed but the motion was dismissed in respect of the other counts. The Crown appealed against his Lordship’s order and the accused cross-appealed.

The Attorney General’s two submissions were: (1) that the conspiracy was punishable in Canada since the scheme was arrived at in that country and the fraud was committed either in Canada or in both Canada and the United States; (2) although the victims were all in the United States, the existence of the conspiracy in Canada was sufficient to support a charge in the latter country.

Held, the appeal should be allowed and the cross-appeal dismissed.

Since the substantive offence of fraud was properly chargeable as committed in Canada, it followed that a conspiracy to commit that crime, having been agreed upon in Canada, was cognizable in a Canadian court. If, as in the case at bar, the scheme was initiated in Canada and profits therefrom were here received, the offence was committed in Canada notwithstanding that the victims were all out of Canada. The phrase “the public or any person” in Code s. 323(1) was not restricted to the Canadian public.

Without holding that the situs of an offence could never be determined on national considerations springing from contract or agency, it did appear that the Court of Appeal in Regina v. Selkirk, [1965] 2 O.R. 168, 44 C.R. 170, [1965] 2 C.C.C. 353, took too limited a view of the facts of that case in their bearing on criminal liability and the reservations about Selkirk voiced by Freedman J.A. in Regina v. Horbas and Myhaluk, 5 C.R.N.S. 342, (sub nom. Regina v. Trudel; Ex parte Horbas and Myhaluk) 67 W.W.R. 95, [1969] 3 C.C.C. 95 at 98 , commended themselves to this Court.

The object of Code s. 324 was to prohibit the use of a public communications facility for fraudulent purposes and it could not be said that “the public” is that section meant the Canadian public.

Appeal and cross-appeal from the decision reported at 8 C.R.N.S. 18.

Joint opinion of Gale C.J.O., McGillivray, Kelly, Laskin and Brooke JJ.A.:

1 The accused Chapman was charged jointly with James Sterling Currie in an information alleging four separate offences, on all of which they were committed for trial by Greco Prov. J. on 19th February 1969. Following the committal, Chapman moved to quash it by way of habeas corpus with certiorari in aid. The motion was heard by Hartt J. who, by an order of 14th July 1969, quashed the committal in respect of the first count but dismissed the motion in respect of the remaining three counts. The Attorney General for Ontario now appeals that order in respect of the first count, and there is a cross-appeal by Chapman in respect of the second and third counts. Although the cross-appeal originally embraced the fourth count, counsel for Chapman abandoned this portion of the cross-appeal at the hearing.

2 The charges brought against the two men stated that they:

(1) During the year 1968 in the Province of Ontario unlawfully conspired together to defraud the public by deceit, falsehood or other fraudulent means of property, money or other valuable securities through a home sewing scheme conducted by Jamster Industries Incorporated, contrary to the Criminal Code of Canada;

(2) Further during the months of August, September and October in the year 1968 in the City of Sudbury in the District of Sudbury and elsewhere in the Province of Ontario, unlawfully made use of the mails for the purpose of transmitting letters or circulars concerning a scheme intended to defraud the public, to wit, a home sewing scheme conducted by Jamster Industries Incorporated, contrary to the Criminal Code of Canada;

(3) And further during the months of August, September and October in the year 1968 in the City of Sudbury in the District of Sudbury and elsewhere in the Province of Ontario, unlawfully made use of the mails for the purpose of obtaining money under false pretences by transmitting printed material which falsely indicated that Jamster Industries Incorporated was an honest and genuine business being conducted in an honest and genuine manner and was at that time in need of employees to do sewing at home, contrary to the Criminal Code of Canada;

(4) And further during the months of August, September and October in the year 1968 in the City of Sudbury in the District of Sudbury and elsewhere in the Province of Ontario, unlawfully had in their possession money or other valuable securities of a value exceeding fifty dollars ($50.00) knowing the same to have

been obtained by an act to wit: a home sewing scheme conducted by Jamster Industries Incorporated in the United States of America, that if it had occurred in Canada would have constituted the indictable offence of fraud, contrary to the Criminal Code of Canada;

3 There is no dispute about the evidence in its bearing on the three counts in issue in this appeal. For the purpose of deciding the questions raised by counsel, it can be taken that a fraudulent home-sewing scheme, involving the production and sale distribution of baby shoes, was hatched by the two accused through two companies which they controlled. Under an agreement of 1st February 1968, entered into at Toronto, between Wilmax International Limited, a Bahama-based company which Chapman controlled, and Jamster Industries Incorporated, a Michigan company which Currie controlled, the former agreed to furnish to the latter designs and technical services in connection with the manufacture and sale of baby shoes and, in return, Wilmax was to be paid $100,000 by Jamster. Chapman had been carrying on a baby shoe home sewing business in Ontario, and Jamster, under the agreement, was to get the advantage of Chapman’s direction in carrying on a similar business in the United States without competition from Wilmax. Nothing in the present proceedings reflects on the business carried on by Chapman in Ontario. About $70,000 appears to have been paid by Jamster to Wilmax under the agreement of 1st February 1968, up to the time of Chapman’s arrest in Toronto on 8th November 1968.

4 Jamster’s operations, with Currie in charge, had two phases, an American phase and a Canadian one. The American phase lasted from 6th February 1968, when the company opened in Sault Ste. Marie, Michigan, until 9th August 1968, when the United States postal authorities indicated that further use of the mails would be denied. In this period, thousands of pieces of literature were mailed in the United States to United States residents who responded to advertisements in American newspapers soliciting home sewers. Test kits, containing sewing instructions and the pieces of material to be sewn into a pair of baby shoes, were sent to would-be home sewers, who forwarded $2.50 for the privilege of qualifying under a number of sewing plans offered by Jamster. Few of the many thousands who ordered the test kits were able to satisfy Jamster of their competence. Those who did were asked to send $30 as a deposit on 50 sets of shoe parts, and the money was to be returned to them along with certain remuneration from Jamster for each pair when the 50 pairs of shoes were sewn and received by Jamster. Those who did not meet the test could none the less buy kits to be sewn into baby shoes but had to market them on their own.

5 It is unnecessary to dwell on the sorry experiences of countless persons in the United States who were attracted by the Jamster proposals. The company was, indeed, swamped by test kit orders and was unable to fill them with any promptness; many it did not fill at all, and complaints and requests for refunds were often ignored. The dimensions of the operation can be told in a few figures. Jamster purchased $23,970 in meter postage for the period of its American phase. It deposited some $163,000 in a bank account as the fruits of its solicitations. More than 60,000 orders were received for test kits, and there was evidence that about 200,000 inquiries were received as a result of the advertising.

6 Mail handling and record keeping were chaotic. Customers’ names and addresses were entered on registration cards which were at first filed alphabetically, but the work force could not keep up with the mounting volume and the cards were then put into boxes indiscriminately. When the American postal authorities looked into the operation, Currie decided to discontinue the business and directed that all mail to Jamster should be returned marked “Refused. Out of Business”. The Ameri can phase ended with Currie transferring the registration cards to his home in Sault Ste. Marie, Ontario, and disposing of all sewn shoes and shoe kits on hand as garbage. There was no evidence of any effort by Jamster to market any sewn shoes, and it appears, moreover, that it had no outlets for such shoes.

7 Jamster’s Canadian phase began with the opening of a postal box in Sudbury, Ontario, under the name “North American Mailing Service”. Chapman had initiated inquiries for this purpose, and later, with Currie, he persuaded one Simpkin to open the box and to collect and hold mail coming to it. Mail began to arrive in early September 1968, and the box continued in service until closed by the Canadian postal authorities on 10th October 1968. All the mail came from the United States. It was generated by letters sent from Toronto to persons in the United States, soliciting home sewers. Those solicited were persons on record with Jamster, and many responded with money orders or cheques sent by mail to Sault Ste. Marie, Ontario, and which were deposited in a Jamster bank account opened in that city on 2nd October 1968. A deposit of $16,230 consisting of such remittances, was made on 1st November 1968.

8 The Wilmax meter number was used for the postage on the letters mailed by Jamster from Toronto. Despite the fact that Jamster had no stock of shoe kits, the letters solicited money for such kits and offered a sewing price per pair to those who responded. There was a reference to possible labour troubles at Sault Ste. Marie, Michigan, but the letters went on to indicate readiness to ship material immediately. After the postal box was closed down, a large quantity of letters that had been previously collected from the box was found in two plastic bags and turned over to the police. The bags had been left in rental cars, one of which had been used by Currie.

9 The one question of law raised by the three charges which are before this Court is whether they are cognizable in Canada under the Criminal Code. Jurisdiction over Chapman is obvious; there is dispute, however, whether there is jurisdiction over the alleged offences, that is, whether Chapman was committed for trial for offences that (although they are within the wording of the Criminal Code) took place not in Canada but in the United States. Section 5(2) of the Code fixes the principle in the following terms:

5.(2) Subject to this Act or any other Act of the Parliament of Canada, no person shall be convicted in Canada for an offence committed outside of Canada.

10 Two submissions were made on behalf of the Attorney General with respect to the first charge, that of conspiracy. It was contended that the substantive offence of fraud, if committed at all, was committed in Canada, or at the worst in both Canada and the United States; and, since the agreement for the scheme was arrived at in Canada, the conspiracy alleged was punishable in Canada. The second contention was that even if there was no basis for alleging commission of the substantive offence of fraud in Canada, none the less there was ground to charge a conspiracy in Canada, and although it be a conspiracy to defraud the American public in the United States, the formation or existence of the conspiracy in Canada was a sufficient foundation upon which to charge the commission of an offence in Canada. On the view which this Court takes of the relevant evidence to support the charge of conspiracy to defraud the public of money or other valuable securities, it is unnecessary to come to a conclusion on the merit of the second submission. The Court is of the opinion that the substantive offence of fraud could properly be chargeable as committed in Canada and, hence, a fortiori, the conspiracy to commit that fraud, having been agreed upon in Canada, would be cognizable in a Canadian court.

11 The substantive offence is defined by s. 323(1) of the Criminal Code, reading as follows:

323.(1) Every one who, by deceit, falsehood or other fraudulent means, whether or not it is a false pretence within the meaning of this Act, defrauds the public or any person, whether ascertained or not, of any property, money or valuable security, is guilty of an indictable offence and is liable to imprisonment for ten years.

12 The recital of facts herein, referable to the Canadian phase of Jamster’s operations, shows the initiation and consummation of a scheme in Canada through the dispatch of letters from Canada and the receipt in Canada of money or valuable securities by way of cheques and money orders. This is enough to support a charge of the substantive offence in Canada, subject only to the construction of the phrase “defrauds the public or any person”. On the facts before this Court, the only members of the public or persons who could be said to have been defrauded were residents of the United States.

13 The completion of the offence under s. 323(1) lies in the obtaining of the fruits of the fraudulent means or inducement. What was said in Regina v. Brixton Prison (Governor); Ex parte Rush, [1969] 1 All E.R. 316 at 322 also points to this conclusion. If there is an initiation of a fraudulent scheme in Canada (as was the case here in the mailing out of the letters of solicitation) and a realization thereof in Canada through receipt of money or securities intended to be brought in through the scheme, the offence has been committed in Canada although the inducement has extended only to persons outside Canada. In short, “the public or any person” in s. 323(1) are not limited to the Canadian public or to persons in Canada: see Rex v. Shulman, [1946] Que. K.B. 565, 2 C.R. 153.

14 Treating the charge of conspiracy (as we think we must for the purposes of the first submission on behalf of the Attorney General) as requiring proof of the commission of the substantive offence in Canada, the present case is distinguishable from Regina v. Cox (Peter Stanley), [1968] 1 W.L.R. 88, (sub nom. Regina v. Cox (Peter)) 52 Cr. App. R. 106, [1968] 1 All E.R. 410, because there the indictment was not susceptible of embracing the commission of a criminal offence in England, but only of the obtaining of goods abroad by certain false representations made abroad.

15 Counsel for the accused relied on the judgment of this Court in Regina v. Selkirk, [1965] 2 O.R. 168, 44 C.R. 170, [1965] 2 C.C.C. 353, in support of a contention that if there was fraud it was complete when the American residents mailed their remittances in the United States. This contention was in addition to a submission (which, as already indicated, this Court cannot accept) that the public or the persons defrauded must be the Canadian public or persons in Canada. Regina v. Selkirk, supra, involved two charges, of which the one relevant here was a charge under s. 323(1), laid in the following words [at p. 169]:

…that the said George Alexander Selkirk in the year 1962, at the Municipality of Metropolitan Toronto in the County of York, by deceit, falsehood or other fraudulent means defrauded The Diner’s Club (Canada) Ltd. and Diner’s Club Inc. of a Diner’s Club credit card, number 16E421 …

16 The accused Selkirk signed an application for a credit card using another name, and mailed it in Toronto to the American headquarters of the Diner’s Club in Los Angeles. He was at the time an undischarged bankrupt, but did not disclose this in the application and he also lied in answering “no” to a question whether he had previously applied for such a credit card. His previous application was in a different name and was not successful. On this second occasion a credit card, bearing the number recited in the charge, was mailed from Los Angeles to the accused in Toronto and received by him there.

17 The card was used by the accused for various purchases in Toronto, and he was convicted (and the conviction was affirmed) of obtaining credit by fraud contrary to s. 304(1)(b) of the Criminal Code. The Court of Appeal, speaking through Kelly J.A., concluded that this offence had been committed in Canada. So far as the charge under s. 323(1) was concerned, the learned Judge said this [at p. 173 O.R.]:

…in the light of the fact that the accused made application in writing to the club in Los Angeles and that the card when issued was mailed from the Los Angeles office of the club, I consider that no infraction of the Criminal Code took place within Canada. The accused by mailing the application to Los Angeles constituted the postal authorities his agents for the delivery of the application and receipt of the card; when the Club placed the card addressed to the accused in the post office in Los Angeles, delivery of the card had been made to the accused. The whole of this offence, therefore, took place in the United States of America. I would quash the conviction on this count.

18 Hartt J. was bound by this decision, and felt that in the factual circumstances of the present case, it necessarily led to the conclusion that the substantive offence of defrauding the public was committed in the United States, presumably on the principle that the fraud was complete when the letters from the American “customers” were mailed in the United States. From this base of obligation, Hartt J. adopted the view of the House of Lords in Board of Trade v. Owen, [1957] A.C. 602, 41 Cr. App. R. 11, [1957] 1 All E.R. 411, that when the substantive offence is outside the jurisdiction, a conspiracy to commit it is not indictable therein merely by reason of the fact that the conspiracy was entered into within the jurisdiction.

19 Without saying that the situs of an offence can never be determined on notional considerations, springing from contract or agency, it does appear that the Court in Regina v. Selkirk, supra, took too limited a view of the facts of that case in their bearing on criminal liability. Since the credit card did reach the accused in Toronto, there was factual realization of the fraudulent scheme put in motion by the accused, and hence a sound basis for concluding that if an offence had been committed it was committed in Toronto. The reservations about the Selkirk case voiced by Freedman J.A. in Regina v. Horbas and Myhaluk, 5 C.R.N.S. 342, (sub nom. Regina v. Trudel; Ex parte Horbas and Myhaluk) 67 W.W.R. 95, [1969] 3 C.C.C. 95 at 98, commend themselves to this Court, and we are of the opinion that what was decided in Regina v. Selkirk does not provide an answer to the first submission put forward on behalf of the Attorney General.

20 The appeal in respect of the count of conspiracy to defraud should be allowed and the order of Hartt J. quashing the committal for trial therein should be set aside. We need not, in this case, deal with the appropriateness in Canada of the principle of Board of Trade v. Owen, supra, in relation to a situation where the substantive offence or the acts referable thereto take place outside of Canada. Nor need we consider the proposition projected from Board of Trade v. Owen that a conspiracy in Canada, wholly to be carried out elsewhere, may be indictable here on proof that its execution would produce a public mischief in Canada. It was advanced as a subsidiary argument on behalf of the Attorney General if his two main submissions should fail. In view of our conclusion on one of those submissions which, in our view, made it unnecessary to deal with the other, it would be even more unwise to deal with any subsidiary contentions.

21 The cross-appeal of the accused concerns charges of the two offences created by s. 324 of the Criminal Code, which is in these words:

324. Every one who makes use of the mails for the purpose of transmitting or delivering letters or circulars concerning schemes devised or intended to deceive or defraud the public, or for the purpose of obtaining money under false pretences, is guilty of an indictable offence and is liable to imprisonment for two years.

22 The gist of these offences is using the mails, the Canadian mails of course, for the prohibited purposes: (1) of transmitting or delivering letters or circulars concerning schemes devised or intended to defraud the public; or (2) of transmitting or delivering letters or circulars for the purpose of obtaining money under false pretences. As Hartt J. observed, in rejecting the motion to quash the committals in respect of the two charges under s. 324, “…no act of any kind performed outside the territorial limits of Canada is necessary to the completion of the offence[s] as described.” Any reliance on Regina v. Selkirk is misconceived so far as the facts herein, arising out of the second or Canadian phase of Jamster’s operations, bear on the two charges.

23 Two points were urged in addition by counsel for the accused. As in the case of the charge under s. 323(1), there was the contention that “the public” in the s. 324 reference to defrauding the public meant the Canadian public, and it was further submitted that the words “the public” must be read into the false pretences portion of s. 324, with similar import. This contention must fail when regard is had to the object of s. 324, that is, prohibiting the use of a public communications facility for fraudulent purposes. Although the reference to “the public” in the first part of s. 324 adds an element to the required proof of the offence (the additional words “or any person” found in s. 323(1) are not included in s. 324), further circumscription by reading in the word “Canadian” cannot be justified, either for context in the particular provision or in the portion of the Criminal Code in which s. 324 appears. The generality of expression comports fully with what this Court regards as the gravamen of the offence.

24 The second point made, particularly in respect of the third charge, was that the words “for the purpose of obtaining money” should be construed to relate to a purpose in Canada and involving Canadians; and since here the solicitation was of Americans there was no offence in Canada. This is merely a reformulation of the first point, and it fails for the same reasons. It is additionally untenable because, in fact, the unlawful purpose was sought to be realized in Canada through receipt here of money from members of the American public.

25 The cross-appeal must, accordingly, be dismissed. We would emphasize what we said earlier in these reasons, that nothing herein must be taken to involve any conclusions about the actual guilt of the accused. Our concern has been with certain legal issues upon the determination of which the prosecution of the charges against him depended. Any assumptions of fact that were made in the course of that determination were for this specific purpose only and should not be construed as findings based on evidence.