R. v. Arnold, 1991 CanLII 2547 (NS CA)
S.C.C. No. 02310
IN THE SUPREME COURT OF NOVA SCOTIA
APPEAL DIVISION
Clarke, C.J.N.S.; Jones and Macdonald, JJ.A.
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
‑ and ‑
PETER REGINALD ARNOLD and CARL THOMAS BOSWICK
Respondents
Bruce P. Archibald for the Appellant
David J. Bright for the Respondent
Appeal Heard: March 26, 1991
Judgment Delivered: April 18, 1991
THE COURT: Appeal allowed, acquittals of the respondents set aside and a new trial ordered on the bill of indictment herein, per reasons for judgment of Macdonald, J.A., Clarke, C.J.N.S. and Jones, J.A. concurring.
MACDONALD, J.A.:
The respondents, Peter Reginald Arnold and Carl Thomas Boswick, were acquitted after trial in the County Court Judge's Criminal Court of District Number One before the Honourable Judge N. R. Anderson on a bill of indictment alleging that they:
"... between the 1st day of February, A.D. 1983, and the 14th day of December A.D. 1985, at or near Halifax, in the said County and Province, being agents for clients of P.R. Arnold and Associates Ltd. and Carl T. Boswick & Associates Limited, respectively did corruptly accept from J. & J. Management Limited and Woodrock Management Ltd., a reward or benefit, to wit: money in excess of one hundred fifty thousand dollars ($150,000.00), as consideration for doing or having done an act relating to the affairs of the clients of P.R. Arnold & Associates Ltd. and Carl T. Boswick & Associates Limited concerning the investments by the clients in Lakewood Manor Limited Partnership, contrary to Section 426(1)(a) of the Criminal Code of Canada and amendments thereto;
AND FURTHER between the 18th day of June, A.D. 1983, and the 9th day of November, A.D. 1983, at or near Halifax, in the said County and Province, being agents for clients of P.R. Arnold & Associates Ltd. and Carl T. Boswick & Associates Limited, respectively did corruptly accept from Rockwood Real Estate Limited and Woodrock Management Ltd. a reward or benefit, to wit: money in excess of three hundred thousand dollars ($300,000.00) as consideration for doing or having done an act relating to the affairs of the clients of P.R. Arnold & Associates Ltd. and Carl T. Boswick & Associates Limited concerning the investments by the clients in One Oak Street Limited Partnership, contrary to Section 426(1)(a) of the Criminal Code of Canada and amendments thereto."
1. History
The material background of this matter may be briefly summarized as follows. The respondent, Peter Reginald Arnold, operated a business called P.R. Arnold and Associates Limited. The respondent, Carl Thomas Boswick, operated a business called Carl T. Boswick and Associates Limited. The respondents held themselves out to be economic professionals who specialized in complete financial management and planning services for doctors and dentists. As financial advisors they attracted clients who came to them from various areas of the Atlantic provinces for advice regarding tax planning, tax shelters, investments, RRSP's, etc. These clients paid an initial consulting fee and thereafter a rather nominal annual fee. Through the solicitations of Arnold and Boswick and in reliance on their recommendation, a substantial number of the respondents' clients invested in the two limited partnerships referred to in the bill of indictment.
A large number of these clients testified at the trial. There was some dispute whether all of them were fee paying clients. There was no dispute, however, that 14 of such witnesses had in fact paid fees to either Arnold or Boswick for advice with respect to financial planning. Some of these witnesses testified that Arnold or Boswick mentioned that they were receiving commissions. One or two made reference to Arnold or Boswick receiving a finder's fee. The majority, however, testified that they had no recollection of commissions being mentioned as being received by Arnold and Boswick. I think it fair to say that the thrust of the evidence of the client witnesses was that they had put their complete faith and trust in Messrs. Arnold and Boswick.
The respondents contend that they did make disclosure to their clients on the initial interview by reference to the statements relating to compensation as such appear in a three‑ring binder prepared by Arnold and Boswick which contained certain materials that they referred to during consultation with their clients.
Messrs. Arnold and Boswick also rely for disclosure purposes on letters and brochures sent to clients. None of these mention the respondents by name nor do they set out the amounts of commissions or the nature of any profits, bonuses or overrides. In the brochures with respect to the two limited partnerships, agents commissions appear with a global amount under the heading "Initial Services". These services are also indicated as including offering expenses, cash flow guarantee, brokerage fees, legal and accounting fees and security registration. These statements do not disclose the respondents' financial interests in the two limited partnerships which they promoted to their clients, nor the fact that they were to receive not only commissions on the sale of the units but also a predetermined percentage of the purchase price of such units.
The evidence indicates that Arnold and Boswick informed their clients on the initial meeting that "our firm is compensated in two ways: directly ‑ fees, commissions, and indirectly ‑ solid referrals, a growing reputation for 'professionalism". The evidence is clear, however, that there was no disclosure by Arnold or Boswick that they would receive fees in relation to the Lakewood and Oak Street projects unless they were specifically asked. On such occasion the replies they gave were vague to say the least and, in my opinion, could not be categorized as full and frank and fair; rather, according to the evidence of the client witnesses, the fact that Arnold and Boswick were receiving a predetermined percentage of the monies generated by the sale of the partnership units together with a 10% commission thereon, was never disclosed by them to their clients. Indeed, it is clear from the evidence of the investors and not denied by the respondents that at no time did they advise their clients as to the financial arrangements they had with the promoters of the two limited partnerships nor the amounts of money they were to receive from such promoters for marketing the partnerships.
The first count in the indictment relates to Lakewood Manor Limited Partnership. This was a limited partnership offering in December 1982 by a developer named John Tenwolde operating under the company name of J. & J. Management Limited. Involved in the syndication was Perry Rockwood. The subject matters of the limited partnership were two apartment buildings located at civic numbers 79 ‑ 81 Lakecrest Drive in Dartmouth. These buildings contained a total of 144 apartments.
The Lakewood Manor Limited Partnership consisted of 100 units offered to investors at $10,000.00 per unit with a guaranteed return or profit of $5,000.00 within two years. The guarantor was the general partner, J. & J. Management Limited. The guarantee was met.
Geoffrey Christopherson was at all material times an accountant with Mr. Rockwood. He testified that before the limited partnership of Lakewood Manor was marketed the investment was discussed between Perry Rockwood, John Tenwolde, Mr. Arnold, Mr. Boswick and himself to "make sure it was an investment that would be suitable for their clients and that their clients would invest in". This meeting to discuss the investment took place in Mr. Arnold's office. The incentive offered Mr. Arnold and Mr. Boswick to market the Lakewood Manor Limited Partnership was described by Mr. Christopherson as follows:
"Q. And what incentive was involved for Mr. Arnold and Mr. Boswick in relation to that limited partnership?
A. Well they were to receive a standard commission, 10% of the selling price of each unit and additionally they were also to receive 25% of the profits that were generated from the sale of the project.
Q. And how was the ... how was the profit calculated in terms of Lakewood Manor?
A. It would be calculated from the revenues that were received which would basically be the [that] all the cash that was brought into the project less that ... plus any profits that were on wrap mortgages any mortgage paper that we would take back, less the cost of the building and all the other costs associated with selling it including the commissions."
Mr. Arnold and Mr. Boswick, following the meeting, contacted their clientele, recommended the investment and between them sold the 100 units within a short period of time. The total proceeds of such sale was $1,000,000.00. The documentation tendered at trial shows the balance available for distribution on the purchase of 79 ‑ 81 Lakecrest Drive was $1,062,009.64 ‑ various disbursements reduced the profit figure to $618,907.87. This amount was divided by equal payments of $154,726.95 to Mr. Arnold and Mr. Boswick and a payment of $309,453.93 to Mr. Tenwolde. These payments to Mr. Arnold and Mr. Boswick were in addition to their 10% commission of $100,000.00.
The second count in the indictment relates to One Oak Street Partnership. This partnership was syndicated in May and June of 1983. Again a meeting was held with Mr. Rockwood and Mr. Christopherson at the offices of Mr. Arnold and Mr. Boswick to obtain their input into the project. The syndication involved the sale of 200 units at $10,000.00 each with a guaranteed return of $10,000.00 plus $6,000.00 per unit within two years. This guarantee was never met. The guarantor was the general partner, Rockwood Real Estate. From the gross amount of $2,000,000.00 realized from the sale of these partnership units, Mr. Arnold and Mr. Boswick received a total of $480,380.00 by way of commission and what is referred to, erroneously, as profit sharing.
Both Mr. Arnold and Mr. Boswick testified at their trial. They do not deny receiving the amounts referred to above. Mr. Boswick testified that Mr. Arnold and himself received a 23% commission on the Lakewood Partnership and a 24% commission on Oak Street. He said they were to receive a base commission of 10% plus an override which was not ascertainable until the project was sold. The defence was that although the amount received was not disclosed, their clientele were aware that they were receiving commissions.
2. Grounds of Appeal
The notice of appeal contained nine grounds. Counsel, however, have reduced them to the following four issues:
"(a) What is the proper meaning to be given to the word 'corruptly' in section 426(1)(a);
(b) What is the nature of the disclosure which must be made in order to avoid conviction under section 426(1)(a);
(c) Was there a misapprehension or lack of appreciation of the relevant evidence by the Trial Judge in relation to the foregoing issues as a result of his having misdirected himself on the law in relation to them; and
(d) Was the Trial Judge in error in excluding the statement of the respondent Arnold pursuant to the Charter?"
3. Criminal Code Section 426
This section provides as follows:
426.[383] (1) Every one commits an offence who
(a) corruptly
(i) gives, offers or agrees to give or offer to an agent, or
(ii) being an agent, demands, accepts or offers or agrees to accept from any person,
any reward, advantage or benefit of any kind as consideration for doing or forbearing to do, or for having done or forborne to do, any act relating to the affairs or business of his principal or for showing or forbearing to show favour or disfavour to any person with relation to the affairs or business of his principal; or
(b) with intent to deceive a principal, gives to an agent of that principal, or, being an agent, uses with intent to deceive his principal, a receipt, account or other writing
(i) in which the principal has an interest
(ii) that contains any statement that is false or erroneous or defective in any material particular, and
(iii) that is intended to mislead the principal.
(2) Every one commits an offence who is knowingly privy to the commission of an offence under subsection (1).
(3) A person who commits an offence under this section is guilty of an indictable offence and liable to imprisonment for a term not exceeding five years.
(4) In this section "agent" includes an employee, and "principal" includes an employer.
This section has its genesis in the Secret Commissions Act, S.C. 909, c. 33, as amended by S.C. 1920, c. 43. It was incorporated in the Criminal Code in the 1927 edition.
The nature of the offence and the requisite mens rea and the meaning of "corruption" have been judicially considered over the years. In my view, the authorities to which I shall now refer support the view that s. 426(1)(a)(ii) of the Code makes criminal the act of an agent of accepting a reward, advantage or benefit from a third party for doing or forbearing to do an act relating to the affairs or business of his principal without first making full disclosure thereof to the principal. The element of corruption is simply doing the act enjoined by the section without having first made full disclosure to the principal.
In R. v. Gross, 1945 CanLII 55 (ON CA), [1946] O.R. 1, 86 C.C.C. 68 (Ont. C.A.), the court considered that the evil at which the enactment is aimed is the giving of a gift or consideration designedly wholly or partially for the purpose of bringing about the effect forbidden by the section. It need not necessarily amount to a bribe to do some specific act or an award for having done it.
Mr. Justice Roach, speaking for the court, said (p. 75, C.C.C. Report):
" The word 'corruptly' in the section sounds the keynote to the conduct at which the section is aimed. The evil is the giving of a gift or consideration, not bona fide but mala fide, and designedly, wholly or partially, for the purpose of bringing about the effect forbidden by the section. It need not necessarily amount to a bribe to do some specific act, or a reward for having done it. The learned trial Judge apparently thought that unless it did amount to a bribe the conduct was not corrupt within the meaning of the section, and, having applied that ratio, he misdirected himself."
In R. v. Brown, 1956 CanLII 154 (ON CA), [1956] O.R. 944, 116 C.C.C. 287, the accused was charged under what is now s. 426(1)(a)(i). He admitted making improper payments to an agent, but swore that the agent demanded the payments as a condition of making reports that would procure for the accused what he was entitled to. In charging the jury, the trial judge said:
" It is law that to give money to an agent, whether to honestly or dishonestly influence him in relation to his principal, is a corrupt practice within the meaning of the section ...."
The Court of Appeal unanimously dismissed an appeal from conviction, but expressed different views as to the correctness of the foregoing passage from the trial judge's charge and the effect of the word "corruptly" in the section.
The majority judgment was delivered by Laidlaw J.A. (Hogg J.A. concurring). He expressed the opinion that the offence was made out even if the accused did not appreciate that what he was doing was wrong, but felt that he was justified in adopting such measures as necessary in order to obtain advances to which he was entitled. Mr. Justice Laidlaw expressed the view:
" The evil against which that provision in the Criminal Code is directed is secret transactions or dealings with a person in the position of agent concerning the affairs or business of the agent's principal. It is intended that no one shall make secret use of the agent's position and services by means of giving him any kind of consideration for them. The agent is prohibited from accepting or offering or agreeing to accept any consideration from anyone other than his principal for any service rendered with relation to the affairs or business of his principal. It is intended to protect the principal in the conduct of his affairs and business against persons who might make secret use, or attempt to make such use, of the services of his agent. He is to be free at all times and under all circumstances from such mischievous influence. Likewise, it is intended that the agent shall be protected against any person who is willing to make use secretly of his position and services. Everyone is prohibited from entering into secret transactions under which he 'gives, offers or agrees to give or offer' consideration to an agent for services with relation to the affairs or business of his principal."
He then went on to say:
" In my opinion, the act of doing the very thing which the statute forbids is a corrupt act within the meaning of the word 'corruptly' used in the section under consideration. I think that word was intended to designate the character of the act prohibited by the legislation."
In R. v. Reid, 1968 CanLII 394 (ON CA), [1969] 1 O.R. 158, [1969] 2 C.C.C. 31 (Ont. C.A.), Laskin J.A. (as he then was) said (p. 41 of C.C.C. Report):
" The provision of the Criminal Code under which the accused was charged, s. 368(1)(a)(i), uses the word 'corruptly' in defining the offence; and it was strongly contended that the Crown failed to prove any element of corruption. This contention was bolstered (1) by a canvass of the history of the provision which originated in the Secret Commissions Act, 1909 (Can.), c. 33; and (2) by contrasting s. 368(1)(a)(i), as it came down through s. 504 of the Criminal Code, R.S.C. 1927, c. 36, with ss. 102 and 104 of the present Code which relate to federal and provincial officials and to municipal officials respectively. Neither s. 102 nor 104 includes the word 'corruptly'. The argument is that although the mere giving of a reward or favour to public officials to influence them in their duties is punishable, there is an additional requirement of proving that the reward was 'corruptly' given in the case of private agents.
Whether or not ss. 102 and 104 must be supplemented by required proof of mens rea under the principle of Beaver v. The Queen, 1957 CanLII 14 (SCC), [1957] S.C.R. 531, 118 C.C.C. 129, 26 C.R. 193, I am in no doubt that there may be a corrupt giving within s. 368(1)(a)(i) even though it turns out that the receiving agent did nothing untoward but merely acted in the ordinary course. The clause under discussion does not demand proof that the agent acted disloyally; rather, it fastens on the purpose of the accused to influence such a result or to reward such a result. In this aspect of the matter, the judgment of this Court in R. v. Brown, 1956 CanLII 154 (ON CA), [1956] O.R. 944, 116 C.C.C. 287, 24 C.R. 404, referable to a dishonest purpose of an accused, is apposite."
In R. v. Morris (1988), 64 Sask. R. 99, the accused was charged with corruptly accepting a reward, contrary to what is now s. 426 of the Code. As manager of a Credit Union he received, secretly, 25% of the fees paid to a law firm for each mortgage document prepared by that firm for a client of the Credit Union. Mr. Justice Tallis, speaking for the court, said (p. 118):
" In the light of this legislative history we conclude that the provisions of s. 383 are directed toward the preservation of integrity of employees and agents of a principal and those who deal with them. Society has decreed that secret commissions are not acceptable if the integrity of our commercial life is to be maintained. The offence created by s. 383(1)(a)(ii) prohibits an agent or employee of a principal from entering into secret transactions under which he 'demands, accepts or offers or agrees to accept from any person' consideration for doing any act relating to the affairs or business of his principal. If he does so his conduct is corrupt within the meaning of the section because the essence of this offence involves the taking of a 'secret commission'. If he does so with a full knowledge and consent of his principal, then no offence is made out because it is not a 'secret commission'."
The reach and scope of s. 426 of the Code came before the British Columbia Court of Appeal in R. v. Kelly (1989), 1989 CanLII 7130 (BC CA), 52 C.C.C. (3d) 137. The factual situation in that case is quite analogous to that in the present. In Kelly the accused was the part‑owner of a company set up to provide financial advice. He was convicted of four counts of accepting, corruptly, a reward or benefit from a development company as consideration for an act related to the affairs of his principal. The victims were clients of his company. The offence arose out of the sale to the victims of certain MURB's. The evidence indicated that Mr. Kelly entered into an agreement with the development company to sell these MURB's and in return his company was to receive a fee which corresponded to the commission which the development company would pay to any outside salesman. The evidence indicated that clients of the accused were given an extensive oral presentation concerning the company during which the various sources of compensation for the company were discussed. The trial judge found that the company's clients were verbally advised that the company received commission from "real estate" transactions but that the company had an obligation to make "full, frank and fair disclosure" of the fees paid by the development company on the MURB project. He concluded that there was not adequate disclosure. Mr. Kelly's appeal from conviction was dismissed by a majority of the Court of Appeal. The majority judgment was delivered by Mr. Justice Locke (Seaton J.A. concurring). After an exhaustive review of the authorities, Locke J.A. said (p. 154‑155):
" In my opinion, the law was correctly stated in R. v. Gross, supra. It was repeated and succinctly summed up in Wellburn 40 years later. In the latter case it was alleged two company directors had influenced the sales of radio equipment to the Iranian Government. At trial the recorder directed the jury as follows [at p. 264]:
'Corruptly is a simple English adverb and I am not going to explain it to you except to say that it does not mean dishonestly. It is a different word. It means purposefully doing an act which the law forbids as tending to corrupt.'
For the Court of Criminal Appeal, Lawton J.A. said at p. 265:
In directing the jury as he did, the recorder adopted the words used by Willes J. when giving his opinion to the House of Lords in Cooper v. Slade ... What Willes J. said was adopted and followed by the Court of Criminal Appeal in Smith (1960) 44 Cr. App. R. 55 ...
. . . . .
In our judgment the recorder was right ... The mischief aimed at by the modern statutes dealing with corruption is to prevent agents and public servants being put in positions of temptation."
With respect to the scope of disclosure, Mr. Justice Locke said (p. 160):
"The disclosure must be adequate and full in the sense that the principal must be specifically advised, or it be otherwise made so crystal clear that he could not deny he ought to have known."
In response to the argument that the matter was really one of civil not criminal law Mr. Justice Locke said (p. 160):
"This statute applies to all commercial relationships. Within prosecutorial discretion it will embrace the undisclosed finder's fee of a lawyer, a banker, a broker, or any other person who is to be paid two commissions. The only remedy in each case is for the agent to initially, fully and carefully disclose the true situation."
An application for leave to appeal from the majority judgment in Kelly was dismissed without reasons by the Supreme Court of Canada on December 13, 1990 (Gonthier, Cory and Stevenson, JJ.).
The latest reported case in which the purpose of s. 426(1)(a) of the Code was considered is R. v. Wile et al. (1990), 1990 CanLII 6830 (ON CA), 58 C.C.C. (3d) 85 (Ont. C.A.). In that case the court said (p. 94):
" The secret commission offence provided for in this section of the Code is made out when a person corruptly offers (or gives or agrees to give or offer) a benefit to an agent as consideration for doing or forbearing to do something in relation to the affairs or business of his principal. While the Crown must, of course, prove that the person who was offered the benefit was in fact an agent, in our opinion the agent need not have a specific principal at the time the prohibited offer was made. Nor need the agent intend to carry out the purpose for which the offer was made. The gravamen of the offence is the offer to the agent and the corrupt intention accompanying the offer."
The word "corruptly" as it appears in s. 426 of the Code has been considered in those cases to which I have referred. In its general sense, it connotes the doing of something morally dishonest or wrong or wicked or amounting to a perversion of integrity by bribery or favour. In my opinion, the relevant authorities make it clear, however, that "corruptly" is used in s. 426 of the Code not as requiring morally dishonest or wicked conduct, but rather to define or designate the character of the activity prohibited by the section and not as part of the definition of the offence. It is the agent's non‑disclosure to his principal of the receipt of a reward, advantage or benefit in relation to the latter's business that makes his conduct corrupt.
In addition to the authorities that I have already referred to, I would make reference to the following cases on the issue of corruption.
Section 90 of the Elections Act, 49 Vict. c. 8, made it an offence for a candidate in an election to corruptly compel or induce any person to personate a voter or to take a false oath. In Walsh v. Montague (1888), 1888 CanLII 57 (SCC), 15 S.C.R. 495, that section was considered by the Supreme Court of Canada. As to the word "corruptly" Taschereau J. said (pp. 524‑5):
"It is settled law that the word 'corruptly' as used in sec. 90 of the Elections Act does not mean 'wickedly, immorally or dishonestly', neither can it mean 'consciously' or with intent to commit an offence. The word means, as per Lord Cranworth, in Cooper v. Slade (1), 'in violation of that which this statute was passed to prohibit.' "
In Cooper v. Slade (1858), 6 H.L.C. 746, 10 E.R. 1488, a letter was written to an out of town voter requesting him to come and record his vote for Mr. Slade. A postscript to the letter added "your railway expenses will be paid". Mr. Slade was found guilty of a violation of 17 & 18 Vict. c. 102, s. 2, that declares guilty of bribery "every person who shall directly or indirectly by himself, or by any other person, give or agree to give, or promise money, etc., to any voter in order to induce any voter to vote, or refrain from voting, etc., or shall corruptly do any such act as aforesaid, on account of any voter having voted or refrained from voting", etc.
Mr. Justice Willes said (p. 1499):
"I think the word 'corruptly' in this statute means not 'dishonestly', but in purposely doing an act which the law forbids as tending to corrupt voters, whether it be to give a pecuniary inducement to vote, or a reward for having voted in any particular manner. Both the giver and the receiver in such a case may be said to act 'corruptly'. The word 'corruptly' seems to be used as a designation of the act of rewarding a man for having voted in a particular way as being corrupt, rather than as part of the definition of the offence."
Later Lord Cranworth stated (p. 1504):
"...I am clearly of opinion that the paying of the money was a corrupt payment within the meaning of the statute, because I cannot give the word 'corruptly', as there used, referring to a payment after voting, any other meaning than a payment in violation of that which the statute was passed to prohibit."
I would summarize my conclusions with respect to s. 426(1)(a)(i) of the Code as follows.
The offence of corruptly receiving a benefit is a crime that like other criminal offences requires proof of a mental element. However, as Professor Stewart points out in his text Canadian Criminal Law, 2nd ed. (1987) at p. 148, the offence created by s. 426 is one of those offences where the state of mind required is distinct from the traditional concepts such as intent. In my view, the mens rea of the offence is purposely doing an act which the law forbids as tending to corrupt ‑ in the sense that the act is done without the knowledge or consent of the principal. Putting it another way, the offence created by the section is made out by proof that the agent purposefully did the very thing the section prohibits without the knowledge and consent of his principal. The corruption is simply the agent's non‑disclosure to his principal that he has received a reward, advantage or benefit from a third party as consideration for doing or forbearing to do some act relating the affairs of his principal. A full disclosure of such circumstances by the agent to his principal makes his conduct nonculpable and is a complete defence to the offence created by the section.
With respect to disclosure, I agree with the majority judgment in Kelly that what is required is that the principal be "specifically advised" by his agent as to the complete and relevant details of the reward or benefit that he has received. The disclosure must be "crystal clear" or "adequate and full" or "fully and carefully made". These phrases are, in my opinion, synonymous with the "full, frank and fair disclosure" as required by the trial judge in Kelly.
Whatever description of disclosure is used what is required is that the principal be fully informed by the agent of the nature of the advantage, benefit or reward he has received, from whom he has received it and the consideration for its receipt.
4. Decision of the Trial Judge
Judge Anderson commenced his decision by reviewing the evidence. In so doing he made a number of findings of fact. The most important of these are:
1) that a fee was paid by the clients to Arnold and Boswick at their first meeting;
2) that the clients knew that such fee would not be the sole source of income of either of the accused;
3) that "during the initial interview the clients were told that the accused would be receiving commissions, fees. And it gets to be a bit of semantics what are fees, profit sharing, or commissions. The terms used by the accused as bonuses, overrides, bonus incentives, I think can all be categorized as fees or commissions for sales of product";
4) that "the crooks in this case are probably Rockwood and Christopherson";
5) that "conflict of interest and greed get people in trouble all the time. That is a moral issue. It is not a legal one. It can lead to illegality." There was no specific disclosure of amounts to the clients. But there was disclosure that fees would be received;
6) "the accuseds' testimony was straightforward and honest. Their books disclosed all the transactions, there was no evidence of secrecy or duplicity in any respect that I can find".
Judge Anderson then proceeded to consider the judgments in R. v. Kelly, supra, and said:
"As for the Court of Appeal, I think the law is more correctly stated in the dissent than it is in the majority decision."
The learned trial judge, after stating that "corruptly" was a necessary ingredient of the offence went on to quote the following passages from the dissenting judgment of Hutcheon J.A. in Kelly (pp. 143, 144 and 146):
" Section 383 of the Criminal Code by the use of the word 'corruptly' focuses, not on the relations between the principal and the agent, but on the relations between the agent and the third party. The words of the section 'corruptly ... accepts ... from any person a reward ... or benefit ... as consideration for ...' reflects a corrupt bargain between the giver and the taker. It is in the relations between the agent and the third party that corruption is bred. The breeding ground of the corruption is in that relationship. The corruption may be initiated by either the giver or the taker of the reward or benefit. In both cases mens rea is required. In this case, we are concerned with the mens rea of the taker."
. . .
"The necessity of the corrupt bargain as an element of the charge explains, in my opinion, the absence of any reported cases over 100 years in which the benefit was accepted but not given to bring about the corruption of the agent."
. . .
" In either case the mens rea is in the corrupt bargain or the attempt at a corrupt bargain between the agent and the third party. Section 383 has no application in the absence of evidence of a corrupt bargain."
Immediately after referring to the last quotation from the judgment of Mr. Justice Hutcheon, Judge Anderson concluded his decision by saying "I would find that there is no corrupt bargain in this case and the accused are not guilty and are discharged".
I view the interpretation of the word "corruptly" by Judge Anderson as requiring proof that the accused knew that he was doing something wrong in accepting a benefit or reward from a third party in relation to the affairs of his principal. This view is reinforced by the approach of Hutcheon J.A. in Kelly, adopted by Judge Anderson, whereby he required proof of a corrupt bargain between the giver and the taker ‑ "it is in the relations between the agent and the third party that the corruption is bred". By adopting this approach he, in my opinion, erroneously focussed on the relationship between the agent and the third party rather than on the relationship between the agent and his principal ‑ it is this latter relationship that in my view is the crucial one given that the gist of the offence under s. 426(1)(a)(ii) of the Code is the receipt by. an agent of a reward or benefit for doing or forbearing to do something in relation to his principal's affairs without disclosing the same to the latter. As I have already stated, it is my view that the corruption referred to in the section is to be found in the non‑disclosure by the agent to his principal of the conduct enjoined in the section. The section does not require proof of the existence of a corrupt bargain between the agent and a third party.
In my opinion, the adoption by the trial judge of the requirement of proof that the agent knew he was doing something wrong permeated his whole decision including his findings of fact. This would account for his comment with respect to Rockwood and Christopherson that they were probably the crooks in the case. It would also explain his statement:
" I do not condone the conflict of interest or the amount received. Conflict of interest and greed get people in trouble all the time. That is a moral issue. It is not a legal one. It can lead to illegality."
The error in that statement is that an undisclosed conflict of interest is, under the terms of s. 426(1)(a)(ii) of the Code, a legal issue and not simply a moral one. Proof of it constitutes the offence created by the section.
The authorities to which I have referred make it clear in my view that s. 426(1)(a)(ii) of the Code does not require proof of a corrupt bargain between the agent and the giver of the benefit or of the reward. All that is required is proof that the agent received an undisclosed benefit or reward for doing or forbearing to do some act in relation to the affairs or business of his employer. The section does not preclude an agent from accepting a reward, advantage or benefit from a third party as consideration for doing or forbearing to do an act in relation to the affairs of his principal. What makes such conduct culpable and therefore corrupt is the agent's non‑disclosure to his principal of the receipt of such reward, advantage or benefit. I would repeat that the word "corruptly", in my opinion, is used in the section to designate the character of the act prohibited by the legislation and not as an element of the offence. See the authorities to which I have already referred and, in addition, R. v. Philliponi, 1978 CanLII 2619 (BC CA), [1978] 4 W.W.R. 173 (B.C.C.A.) at p. 187, where Craig J.A. quotes, with approval, the following passage from the judgment of Laidlaw J.A. in R. v. Brown, supra:
"In my opinion, the act of doing the very thing which the statute forbids is a corrupt act within the meaning of the word 'corruptly' used in the section under consideration. I think that word was intended to designate the character of the act prohibited by the legislation."
Finally, I would refer to Mewett & Manning, Criminal Law, 2nd Ed., wherein the authors state (p. 453):
"In the English case of Smith, the accused offered a bribe to a public servant, and his defence was that he only did so in order subsequently to expose the dishonesty of the official. The Court of Criminal Appeal held that the accused intended to offer the bribe and intended it to be in return for a favour so that the mens rea was present; and hence the act was done 'corruptly'. This is consistent with the construction of 'corruptly' by the Ontario Court of Appeal in the context of s. 383(1) (an analogous provision forbidding secret transactions with an agent concerning the affairs of his principal). In Brown the majority held that 'corruptly' did not require a superadded dishonest intention; a bare intent to do the act which is forbidden by the section is sufficient for the act of the accused to be characterized as having been done 'corruptly'."
5. The Statement of Arnold
On March 2, 1987, nearly two years before charges were laid against Mr. Arnold, Corporal Scott of the R.C.M. Police took a statement from Mr. Arnold in the latter's office. After holding a voir dire the learned trial judge found that the statement was given voluntarily and that Mr. Arnold was not detained at the time. Judge Anderson, however, excluded the statement because he found that when Corporal Scott "went to talk to Mr. Arnold he knew Mr. Arnold was suspect and subject to possible charges in this matter".
This finding led Judge Anderson to conclude:
"... with the police going there with the intention that he was a suspect and subject to possible criminal charges, I think at this stage more than likely that he had the right to the caution, and a right to be informed that he could have a lawyer, advisor.
Under Section 24, so that the administration of justice is not brought into disrepute, I will not allow the statement to be part of the evidence. It is not admissible."
On the facts disclosed by the evidence, viewed against the relevant authorities, it is my opinion that Judge Anderson was in error in excluding the Arnold statement.
In R. v. Reddick (1987), 77 N.S.R. (2d) 439, the facts were that a police officer asked questions of the prime suspect at the scene of the crime without directly stating that he was under suspicion and without giving him the standard police warning. In upholding the admissibility of a statement made by the suspect, later the accused, this Court said (p. 443):
" As a matter of general principle a police officer when endeavouring to discover whether or by whom an offence has been committed is entitled to question any person whether suspected or not, from whom he thinks useful information may be obtained. A police officer, however, cannot detain a person for the sole purpose of interrogation or compel answers to his questions."
Since Judge Anderson's ruling on the admissibility of the Arnold statement, the Supreme Court of Canada has delivered judgment in the case of The Queen v. Hebert (1990), 1990 CanLII 118 (SCC), 57 C.C.C. (3d) 1. On the issue of the right to remain silent, Madam Justice McLachlin, speaking for seven of the nine members of the Court, rejected the approach which assumes an absolute right of silence in the accused, capable of being discharged only by waiver. Instead, McLachlin J. advocated a rule with respect to the right to remain silent that would retain the objective approach to confessions, which has always prevailed in our law, but would permit the rule to be subject to the following limits (pp. 41‑42):
" First, there is nothing in the rule to prohibit the police from questioning the accused in the absence of counsel after the accused has retained counsel. Presumably, counsel will inform the accused of the right to remain silent. If the police are not posing as undercover officers and the accused chooses to volunteer information, there will be no violation of the Charter. Police persuasion, short of denying the suspect the right to choose or depriving him of an operating mind, does not breach the right to silence.
Secondly, it applies only after detention. Undercover operations prior to detention do not raise the same considerations. The jurisprudence relating to the right to silence has never extended protection against police tricks to the pre‑detention period. Nor does the Charter extend the right to counsel to pre‑detention investigations. The two circumstances are quite different. In an undercover operation prior to detention, the individual from whom information is sought is not in the control of the state. There is no need to protect him from the greater power of the state. After detention, the situation is quite different; the state takes control and assumes the responsibility of ensuring that the detainee's rights are respected.
Thirdly, the right to silence predicated on the suspect's right to choose freely whether to speak to the police or to remain silent does not affect voluntary statements made to fellow cellmates. The violation of the suspect's rights occurs only when the Crown acts to subvert the suspect's constitutional right to choose not to make a statement to the authorities. This would be the case regardless of whether the agent used to subvert the accused's right was a cellmate, acting at the time as a police informant, or an undercover police officer.
Fourthly, a distinction must be made between the use of undercover agents to observe the suspect, and the use of undercover agents to actively elicit information in violation of the suspect's choice to remain silent. When the police use subterfuge to interrogate an accused after he has advised them that he does not wish to speak to them, they are improperly eliciting information that they were unable to obtain by respecting the suspect's constitutional right to silence: the suspect's rights are breached because he has been deprived of his choice. However, in the absence of eliciting behaviour on the part of the police, there is no violation of the accused's right to choose whether or not to speak to the police. If the suspect speaks, it is by his or her own choice, and he or she must be taken to have accepted the risk that the recipient may inform the police." (my emphasis)
The second limitation on the right to silence set forth by Madam Justice McLachlin applies, in my opinion, to the situation here. Corporal Scott identified himself as a police officer prior to taking a witness statement from Mr. Arnold. Judge Anderson found that the statement was given voluntarily and at a time when Mr. Arnold was not in detention. In light of the Reddick and Hebert judgments, it is my opinion that Judge Anderson was in error in excluding the statement.
6. Conclusion
In my opinion, the learned trial judge erred in law in that he misdirected himself as to the requisite mens rea in s. 426(1)(a) of the Code by holding that corruptly was a necessary ingredient of the offence and by requiring the existence of a corrupt bargain between the agent and the giver of the reward or benefit. Further, in my view, the trial judge failed to appreciate that the offence under s. 426(1)(a)(ii) was complete upon proof that the agent did the very thing prohibited by the section without having made a full and frank disclosure to his principal. The final error committed, in my view, by the learned trial judge was in ruling inadmissible the statement given by Mr. Arnold to Corporal Scott.
In my opinion, the errors of misdirection by the learned trial judge resulted in his failing to fully appreciate the relevant evidence which tended to establish the guilt of the respondents. In other words, the misapprehension of the evidence by Judge Anderson was directly caused by his misdirection as to the mens rea of the offence, the ingredients thereof and by his misconception of the word "corruptly". It follows, in my view, that the errors committed by the trial judge raise a question of law within the meaning of s. 676(1)(a) of the Criminal Code that call for the intervention of this Court. See Harper v. The Queen (1982), 1982 CanLII 11 (SCC), 65 C.C.C. (2d) 193, [1982] 1 S.C.R. 2, and R. v. B.(G.) (1990), 1990 CanLII 115 (SCC), 56 C.C.C. (3d) 181 at pp. 194‑95, [1990] 2 S.C.R. 57, pp. 73‑74.
7. Disposition
I would therefore allow this appeal, set aside the verdicts of acquittal and direct that a new trial be held on the charges set forth in the bill of indictment herein.
J.A.
Concurred in:
Clarke, C.J.N.S.
Jones, J.A.
CANADA
PROVINCE OF NOVA SCOTIA
1990, C.R. 11233
V O L U M E III
IN THE SUPREME COURT OF NOVA SCOTIA
APPEAL DIVISION
on appeal from the
COUNTY COURT JUDGE'S CRIMINAL COURT
OF DISTRICT NUMBER ONE
BETWEEN:
HER MAJESTY THE QUEEN
‑ and ‑
PETER REGINALD ARNOLD and
CARL THOMAS BOSWICK
Heard Before: The Honourable Judge N. R. Anderson
Place Heard: Halifax, Nova Scotia
Dates Heard: April 23,24,25,30, 1990
May 1,2,3,7,8,9,10,15,16,17, 1990
COUNSEL:
Ms. B. MacDonald, for the Crown
Mr. David Bright,
Ms. S. MacPherson-Duncan, for the Defence
CASE ON APPEAL
S.C.C. No. 02310
IN THE SUPREME COURT OF NOVA SCOTIA
APPEAL DIVISION
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
‑ and ‑
PETER REGINALD ARNOLD and CARL THOMAS BOSWICK
Respondents
REASONS FOR JUDGMENT BY: MACDONALD, J.A.
Comments
Post a Comment