Q: Recently, I have heard about people being cheated on their hay purchases. This has included people being shortchanged, not getting the quality promised or not getting hay at all. Are these kinds of activities not fraud?
A: The Criminal Code states “everyone who, by deceit, falsehood or other fraudulent means … defrauds the public or any person … of any property, money or valuable security …
is guilty of an … offence.”
What amounts to deceit, falsehood or other fraudulent means has been left to the courts to define.
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Criminal offences are composed of two elements: the act and the intent. The fact that someone ended up at the wrong end of a business deal is not fraud in itself. It must be proven beyond a reasonable doubt that the accused intended to defraud the purchaser. As well, the accused need not say anything in his defence. The crown must prove its case against him.
In Zlatic vs. Queen, a Supreme Court of Canada case, Z ran a wholesaling business specializing in T-shirts and sweatshirts and over three months obtained $375,000 worth of goods on credit from various suppliers. The goods were resold and Z gambled the proceeds under a system he thought would produce large winnings.
The accused testified: “I believed my system … I worked on my system …The system is a very small possibility to lose, except if luck is not on your side. And basically it happened that I did lose again.”
As a result of his losses he was forced into bankruptcy and his suppliers remained unpaid. The money he gambled was earned from the sale of the T-shirts and sweatshirts and should have been paid to his suppliers. The question for the court was did his actions amount to criminal fraud?
Z was convicted at trial and the Quebec Court of Appeal in a 2-1 decision upheld the conviction. In a 3-2 split, the Supreme Court upheld the conviction as well. The majority ruled that the suppliers had an interest in the proceeds and that Z’s use of the money in a way that he knew or ought to have known would put the money at risk indeed constituted fraud.
However, this judgment does not mean that every unpaid business bill constitutes fraud.
The court pointed out that had the funds been used for legitimate business purposes, even
investing in the stock market, the result would
be different.
Do your examples constitute fraud? First, I’m assuming that money was paid in advance. If no money has been paid, then in my view there is only a contract dispute.
If a seller takes money, then delivers no goods, fraud may indeed have been committed. The case would be even stronger if the seller took money from 10 farmers and delivered no hay. The more people that are cheated, the clearer it is to conclude that there was intent to defraud.
What if hay is delivered, but not the quality promised? This is a more difficult scenario. Unless there is clear evidence such as an admission that the accused intended to deliver lower quality, it will be hard to prove fraud. More likely, this is a contract dispute, with the issue being what quality of hay was promised and what was
delivered.
If it is determined that the seller delivered less than the agreed upon quality, the buyer would be entitled to collect damages.
Don Purich is a former practising lawyer who is now involved in publishing, teaching and writing about legal issues. His columns are intended as general advice only. Individuals are encouraged to seek other opinions and/or personal counsel when dealing with legal matters.
