Material Elements of Fraud

• Author: Jonathan Shime/Ian Smith/Grace Hession David
• Pages: 59-74

59

Material

Elements of

Fraud

4

I. What Are the Material Elements of Fraud? ..................... 60

A. Introduction ........................................ 60

B. The Actus Reus of Fraud .............................. 60

C. The Mens Rea of Fraud ............................... 65

II. The Doctrine of Reliance ................................... 67

III. Fraud Versus Negligent Misrepresentation .................... 69

IV. The Nature of the Advice Relied Upon ........................ 71

V. The Absence of the “Badges of Fraud” . . . . . . . . . . . . . . . . . . . . . . . . 72

© [2021] Emond Montgomery Publications. All Rights Reserved.

60 Prosecuting and Defending Fraud Cases

I. What Are the Material Elements of Fraud?

A. Introduction

The material elements that a Crown must prove to establish fraud involve two concepts:

dishonesty and deprivation. The Crown must call evidence on both of these pillars if it

hopes to convince a trier of fact beyond a reasonable doubt that a fraud has been com-

mitted. At this point, it is helpful to review the fraud section in the Criminal Code:

380(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 or

any service.

The actus reus of fraud involves, at its most fundamental, two components: a dis-

honest act/statement and proof of detriment to the economic interests of the com-

plainant in connection with the dishonest act/statement. The mens rea of fraud will

require proof of a subjective knowledge of the prohibited act on the part of the accused

that causes actual deprivation, or subjective knowledge that the prohibited act could

likely result in deprivation even if there has been no loss of funds. In circumstances

where the lie or deceit is not obvious or where the accused testifies that he or she had

no idea the money or assets would be lost, the main issue for the Crown becomes proof

of subjective knowledge. In these circumstances, proof of mens rea borrows from a

civil standard: the “reasonable” person. In fact, in the prosecution of fraud it is often

exceedingly dicult to extract the actus reus from the mens rea because of the applica-

tion of the civil standard when it comes to proving “other fraudulent means.”

B. The Actus Reus of Fraud

1. Dishonesty and Other Fraudulent Means

Usually, and hopefully, dishonesty is easy for all to spot. In this day and age and with

the benefit of hindsight in the latter stages of litigation, it should not be too dicult to

detect an outright falsehood or an act of deceit. The case law in Canada has mandated

that the Crown prove an act of deceit, falsehood, or “other fraudulent means” in

order to meet the requirements of the first aspect of the actus reus of fraud. The first

two items bear no further mention, for obvious reasons; however, the “other fraudu-

lent means” requires some comment. The last time the Supreme Court of Canada

commented definitively on matters of fraud was in 1993, with the release of two piv-

otal decisions that clearly stated the law on “other fraudulent means.” Both of these

cases involved fact situations where the accused took the stand and gave evidence

that attempted to negate the mens rea aspect of the fraud allegations. In both cases,

the Supreme Court of Canada felt it important to raise the spectre of the “reasonable

person” in formulating the doctrine of “other fraudulent means.”

© [2021] Emond Montgomery Publications. All Rights Reserved.