• •
Cite as: R. v. Karam, 1992 NSCO 44
CANADA
C.R. No.: 11769
PROVINCE OF NOVA SCOTIA
COUNTY OF HALIFAX
IN
THE
COUNTY
COURT
OF DISTRICT HUMBER ONE
BBTWEEN:
HER MAJESTY THE QUEEN
Plaintiff
-
and
JAMIL Y.
KARAM et al
Defendant
Joel E. Pink, Esq., Counsel for the Defendant.
Gary Holt, Esq., Counsel for the Plaintiff.
1992, September 18th, Bateman, J.C.C.:-
(Orally)
FACTS:
Jamil Karam and his company, Twin Cities Amusement
Centre Limited are charged with 6 counts of theft and
fraud.
The
alleged
victims
are
three
charitable
organizations for whom T.C.A. operated bingos.
The Crown submits that the company failed to pay to
the charities their proper share of the bingo revenues.
, .
2
The
trial
spanned
8
weeks.
At
the
outset
I
dismissed a Defence motion for stay due to unreasonable
delay.
Attached
to this
decision
are
the written
reasons, which were provided in an oral judgment at the
conclusion of the motion.
All charges can be dealt with together.
Bingos were
operated for three charities over the 16 month period in
question.
Each charity received bingo
proceeds
for
certain days of the week.
The charges are not under s. 207 of the Code which
specifically concerns gaming.
The Crown is not alleging
an illegal bingo operation.
As required by the Nova Scotia Lottery laws each
charity obtained a license to operate a bingo on certain
days of the week.
The charities, then,
by contract,
completely delegated the operation of bingos to T.C.A.
The contracts provided
a
revenue based formula
under
which the company was compensated for running the bingos.
Essentially, the charities received a very small portion
of the revenues, with T.C.A. retaining the balance.
The
contracts are atrociously drafted and close to impossible
to interpret.
, ,
3
T ..C.A.
provided the physical
paper
product,
and
determined
structure.
Monthly, T.C.A. provided the charities with
a
cheque for their share of the proceeds, purportedly
based upon application of the formula to the revenues.
The
charities
did
not
interpretation of the contracts.
As required, a monthly report as to revenue, prizes
and expenses was filed by the charities with the Lottery
Commission.
with these reports was submitted a
for 2% of the total prizes paid, this being the required
licensing fee.
All information provided on the Lottery
reports was generated by T.C.A., or calculated by the
charities based upon information provided by T.C.A.
There is no dispute that the gross revenues reported
to the charities and to the Commission were significantly
understated, probably by 100%.
the amount reported to the Commission by about 2 million
dollars.
Three
expert
reports
probable level of gross revenue for the period.
police
were
unable
to
locate
space,
workers
and
the
game
and
prize
dispute
the
company's
cheque
Actual revenues exceeded
were
tendered
as
to
the
The
any
company
records
, .
4
detailing revenues.
The daily bingo revenue records were
regula~ly shredded by T.C.A.
The
Crown expert reconstructed probable revenues
based
upon
the
consumption
of
bingo
cards
over the
period.
The principal expert witness for the defence
prepared his estimate using a computer model of customer
buying
patterns
of
bingo
cards;
projecting
his
information backward from subsequent years, to the time
period in question.
A second Defence expert reviewed and
critiqued the Crown expert report; adjusting the result
due to alleged errors in the assumptions of the Crown
report.
The charges are that Jamil Karam and Twin Cities
Amusement Centre Limited:
1.
At or near Dartmouth in the County of
Halifax, Province of Nova Scotia, between the
31st day of December A.D.,
1988, did steal a
sum of money of a value exceeding one thousand
dollars (Sl,OOO.OO), the property of St. John
Ambulance, contrary to Section 334(a) of the
Criminal Code;
2.
At the same time and place aforesaid did
by
deceit,
falsehood,
or
other
fraudulent
means defraud St. John Ambulance of a
sum of
money
of
a
value
exceeding
one
thousand
dollars
(Sl,OOO.OO),
contrary
to
Section
381(1) (a) of the Criminal Code.
, ,
5
The four additional charges mirror the above two;
but related to the Maronite
Church
and the Lebanese
Association.
Theft is defined in s. 322 of the Code:
"322(1) Everyone commits theft who
fraudulently and without colour of
right
takes,
or
fraudulently
and
without colour of right converts to
his use or to the use of another
period, anything, whether animate or
inanimate, with intent,
(a)
to
deprive,
temporarily
or
absolutely, the owner of it, or a
person who has a special property or
interest in it, of the thing or of
his property or interest in it;
(b)
to pledge it or deposit it as
security;
(c)
to
part
with it
under
a
condition with respect to its return
that the person who parts with it
may be unable to perform; or
(d)
to deal
with it in
such
a
manner that it cannot be restored in
the condition in which it was at the
time it was taken or converted.
( 2 )
A person commits theft when,
with intent to steal anything
he
moves it or causes it to move or to
be moved, or begins to cause it to
become moveable.
(3)
A
taking
or
conversion
of
anything
may
be
fraudulent
notwithstanding that it is effected
without secrecy or attempt at concealment
6
(4)
For the purposes of this Act,
the question whether anything that
is
converted
is
purpose of conversion, or whether it
is, at the time it is converted, in
the lawful possession of the person
who converts it is not material.
(5)
For the purposes of this section, a
person who has a wild living creature in
captivity
shall
special property or interest in it while
it is
in captivity
escaped from captivity."
Fraud is outlined in s. 380:
.. 380 ( 1 )
Everyone who,
falsehood or other fraudulent means,
whether
or
not
pretense within the meaning of this
Act,
defrauds
the
person, whether ascertained or not,
of any property, money or valuable
security,
( a)
is guilty of
offence
and
liable to
imprisonment
not
years, whether the sUbject-matter of
the
offence
exceeds
dollars; or
(b)
is guilty
(i)
of an indictable offence and is
liable to imprisonment for
not exceeding two years, or
(ii) of
an
offence
summary conviction, where the value
of the subject-matter of the offence
does
not
exceed
dollars.
taken
for
the
be
deemed
to
have
a
and
after it has
by deceit ,
it
is
a
false
public
or
any
an
indictable
a
term
of
exceeding
ten
one
thousand
a
term
punishable
on
one
thousand
7
(2)
Everyone
who,
by
deceit,
falsehood or other fraudulent means,
whether
or
not
it
is
a
false
pretense within the meaning of this
Act, with intent to defraud, affects
the public market price of stocks,
shares, merchandise or anything that
is offered for sale to the public,
is guilty of an indictable offence
and liable to
imprisonment
for
a
term not exceeding ten years."
Both offences incorporate "fraud" as an element.
J.D.
Ewart
in this test
'Criminal
Fraud'
1986,
Carswell at p. 143 says:
" ••• mens
rea
exists
where
the
accused has knowledge of the facts
which are found to constitute the
physical elements of the offence, or
is reckless in relation thereto, and
desires
or
foresees
the
facts
constituting the consequence which
the offence forbids."
The
law
does
not
punish
incompetence
or
carelessness.
A person is reckless within the above
definition if he knows that the relevant circumstances
probably exist.
As stated by David Doherty, as he then was, in "The
Mens Rea of Fraud" (1983), 25 Crim. Law Quarterly 348, at
p. 353:
8
"On the other hand, if an accused
makes
a
representation
false but which he believes to be
true (or at least does not know to
be probably false) then he does not
have the requisite knowledge of the
circumstances
(the falsity of the
statement)
to
render
criminally culpable.
even if he should have known it was
false,
in
the
reasonable man in his position would
have known the statement was false.
Negligence or carelessness as to the
truth
of
a
statement
constitute
mens
consistent
with
precept that the search for mental
states
which
are
criminal
liability
subjective one.
be, 'what did this accused know?'
consideration of what any reasonable
person
in
his
place
known, while helpful to the trier of
fact in determining what the accused
knew, is not the ultimate test by
which
criminal
measured." (emphasis added)
See also ~ v. Sault Ste. Marie (City) (1978), 40
c.c.c. (3d)
353 (S.C.C.), Dickson J. at p. 362:
"Where the offence is criminal, the
Crown
must
establish
element, namely that the accused who
committed the prohibited act did so
intentionally or recklessly,
full
knowledge
constituting the offence,
wilful blindness toward them.
negligence
is
excluded
concept
of
the
required for conviction. Within the
context of a criminal prosecution a
person
who
fails
inquiries
as
a
which
is
his
conduct
This is true,
sense
that
a
do
not
rea.
This
is
the
fundamental
relevant
to
must
be
a
The question must
A
would
have
liability
is
a·
mental
with
of
the
facts
or with
Mere
from
the
mental
element
to
make
such
reasonable
and
9
prudent person would make,
fails to know facts he should have
known, is innocent in the eyes of
the law."
It is commonly necessary to rely upon circumstantial
evidence and, therefore, inferences from circumstantial
facts to prove intent.
The usual rule is that before an inference can be
drawn from circumstantial evidence, in relation to the
commission of an act, it must be the only reasonable
inference in the circumstances.
in Hodge's Case.
Where
circumstantial
evidence
however,
to
prove intent, this general rule doesn't
apply.
In ~ v. Mitchell [1985]
Spence J. at p. 167 says:
"This
does
not,
in the slightest
degree,
reduce
the
which
rests
upon
criminal
cases
substitute
any
other
direction in Hodge's case did not
add
to
or
subtract
requirement that proof of guilt in a
criminal
case
must
reasonable
doubt.
formula to assist in applying the
accepted
standard
relation to the first only of the
or who
This replaced the Rule
is
relied
upon,
1 C.C.C. 155 (S.C.C.)
onus
of
proof
the
Crown
in
and
does
not
rule.
The
from
the
be
beyond
a
It provided
a
of
proof
in
· ,
10
two essential elements in a crime,
i.e., the commission of the act as
distinct
from
the
intent
which
accompanied that act.
The first
element, assuming every circumstance
could
be established by evidence,
would
be
capable
of
proof
to
a
demonstration.
The latter element,
save perhaps out of the mouth of the
accused himself, could never be so
proved.
The
circumstances
which
establish the former not only can
be, but must be consistent with each
other,
as
otherwise
a
reasonable
doubt
on
the
issue arises.
The
circumstances
which
establish tile"
latter, being evidence personal to
one
individual,
will
seldom,
if
ever, be wholly consistent with only
one
conclusion
as
to
his
mental
state and yet the weight of evidence
on
the
issue
may
be
such
as
to
satisfy
the
jury,
beyond
a
reasonable doubt, as to the guilty
intent
of
the
accused.
The
instruction
of
Baron
Alderson
in
Bodge's Case does not apply and was
never intended to apply to an issue
of this kind."
(emphasis added)
I
take it to be the law that the inference drawn
from circumstantial evidence relied upon to prove intent
need not be the only reasonable inference but, rather,
must be a proper inference, beyond a reasonable doubt.
Proof of fraud requires proof of dishonesty by the
accused.
The Crown must prove that Jamil Karam, as the
controlling mind of T.C.A., had a dishonest state of mind
in
relation
to
the
alleged
withholding
from
the
charities.
11
I
have not, at this point,
determined that the
charities received less than their due
share of the
revenues.
For the purposes of considering mens rea,
however,
I
am assuming a withholding or, at least, risk
of prejudice to the charities.
This is not a finding of
fact, but an assumption to assist the analysis.
To defraud is to dishonestly deprive.
Deprivation
is satisfied by proof of detriment, or prejudice or risk
of prejudice.
Actual economic loss is not essential
(R.v. alan (1978), 41 C.C.C.
(2d)
145 (S.C.C.)).
The Crown must prove that Jamil Karam (T.C.A.) knew
that he was not giving the charities their appropriate
share
of
the
bingo
revenues,
as
determined
by
the
contract. Alternatively, the Crown must prove that Jamil
Karam,
whether
or
not
the charities
received their
appropriate share, desired to withhold funds from them or
foresaw that
a
withholding
could result.
(Risk
of
prejudice) •
In order to have the requisite intent, Jamil Karam
must be found to have had adequate knowledge of the true
state of financial affairs of the bingos.
At the very
least, it must be proved that he had knowledge that the
portion of the proceeds he was remitting to the charities
12
was
less
than their entitlement.
While it is not
necessary to prove that he knew, with precision, what the
gross or net revenues were,
he must be shown to have
known that the revenues exceeded that amount of revenue
suggested by his remittance to the charities.
There
is
no
direct
evidence
of
Mr.
Karam's
knowledge.
He did not testify.
His knowledge must,
therefore, be inferred.
The Crown says the following
constitute sufficient indicia to impute knowledge:
1.
Mr. Karam is intelligent and an
astute businessman.
For a number of
years he operated other bingos in
addition to the ones in question.
It is inconceivable that he would
not
pay
close
attention
to
his
business affairs.
2.
It is reasonable to conclude
that he would develop
a
system to
ensure he was
knowledgeable as to
the bingo proceeds.
3.
In 1985 two employees involved
in
counting
bingo
proceeds
13
occasionally saw Mr.
Karam observe
the money count.
Mr.
Karam would
record the information in a
small
black book,
prior to the
revenue
sheets being shredded.
4.
In 1987 representatives from the
charities
sometimes
obtained
the
financial
information
for
the
Lottery Commission Reports from the
bookkeeper and sometimes from Mr.
Karam.
Therefore, he must have
known the revenues generated.
5.
Mr.
Karam
would
occasionally
call the bingo hall to determine how
the session was going.
6.
Some employees recall reporting
nightly
bingo
receipts
through
a
telephone beeper system.
Mr. Karam
sometimes carried a beeper.
7 •
Mr.
Karam was the person who
gave
the
St.
John
Ambulance
representative
reports
of
the
14
proceeds in the year 1983.
8.
Toward
the
end
of
1987
the
executive
director
of
St.
John
Ambulance complained about the low
level of receipts by the charities.
She was assured by Mr.
Karam that
proceeds would increase.
In early
1988 the proceeds to the charities
doubled.
The increase in proceeds
cannot be explained as there was no
corresponding increase in sales of
bingo
cards.
The
Crown
says,
therefore, that revenue was always
there and
known to Mar.
Karam as
evidence by his assurances to the
Executive Director.
9.
Ian
Robinson
of
St.
John
Ambulance recalled that he discussed
a
"high" daily rental fee for the
bingo
premises
with
Mr.
Karam.
Although
Mr.
Robinson
felt
the
amount
was
too high and thus too
risky for the charities, Mr.
Karam
was prepared to write off the rent
15
if
the
bingo
proceeds
sufficient to cover the rental.
Crown
submits
that
willingness to forgive any shortfall
is evidence that he knew there was
more
money
available
reported to the charities.
10.
A
person
named
oversaw the bingo hall supervisors
and
dealt
with
operations.
The Crown says he must
have kept Jamil Karam well informed.
Bachir
Karam
was
trial,
having returned to Lebanon.
11.
On
one
occasion
session supervisors made a note on a
daily
report
sheet
shortage
of
books.
addressed to "Jim".
submits, is further evidence that
Jamil Karam was in control;
note
must
be
referring
accused.
There was a further note
initialled by
Bachir
were
not
The
Mr.
Karam's
than
was
Bachir
Karam
day
to
day
unavailable
for
one
of
the
recording
a
The
note is
This, the Crown
as the
to
the
Karam,
which
,
,
16
the Crown submits, would only have
been
made
if
Bachir
reporting to someone else
Karam.
12.
Jamil
Karam
attended at the bingo hall.
did
he
would call
authorize
extra
games.
The Crown says in order to
authorize
such
represented a substantial financial
giveaway, he must have known the
true
financial
operation.
13.
When
one
of
attempted to assign responsibility
for collecting the bingo proceeds to
another
member,
Mr.
incensed, threatened to discontinue
the operation and refused to deal
with the new representative.
submits the Crown, is indicative of
a man with something to hide.
Karam
was
-
Jamil
occasionally
When he
some
games
and
prizes
or
free
events,
which
state
of
the
the
charities
Karam
became
This,
17
That
a
successful businessman must know the true
state of his company's affairs is an almost irresistible
proposition.
The question,
however, is do the facts
before me support such a premise?
The
information
as
to
Mr.
Karam's
limited
involvement in counting the daily proceeds is sketchy and
occurred in a time frame prior to the period in question.
The evidence is not sufficiently continuous or specific
to enable me to conclude that Mr. Karam was involved in
the counting in 1987/1988.
The fact that Mr.
Karam occasionally provided the
financial information to the charities does not tend to
show that he knew that the financial information he was
providing was incorrect.
It goes only to demonstrate
that, at least at times, he was sufficiently involved in
the operation to be advised as to how the operation was
reputed to be performing.
The
fact
that
Mr.
Karam
ran
bingos
at
other
locations is of no assistance.
No evidence was called
attesting to the relationship of the proceeds from the
other
bingo
operations
to
the
one
in
question.
Additionally, there was
no evidence that Mr.
Karam's
18
knowledge as to the financial state of those operations
was accurate.
There was no evidence tying the transmission of the
daily receipts by beeper, to the beeper carried by Mr.
Karam.
The person transmitting the information did not
know who received it.
The fact that the revenue increased in 1988, after
the complaint by St. John Ambulance,
does not confirm
that Mr. Karam knew the true financial state in 1987.
While a prudent businessman might well have devised
a
system to keep himself well information of the bingo
proceeds, it is equally conceivable that he might have
delegated the specifics of the operation and received
only general information as to the operation's financial
health.
Mr.
Karam's
attendance
at
the
bingo
is
not
conclusive
evidence that
he
knew
the true financial
de~ails.
The note by the supervisor to "Jim" is evidence that
she believed him to be in charge of the operation.
Upon
cross-examination,
however,
it
was
clear
that
her
19
assumption that he was in charge was not based upon any
specific knowledge of the arrangements for supervision.
Does the circumstantial evidence put forward by the
Crown cause me to conclude, beyond a reasonable doubt,
that Jamil Karam knew that the charities were receiving
less than their proper share of the bingo proceeds, or
desired that result?
There is no question that the circumstances are
suspicious,
particularly the
unexplained increase in
revenue in 1988.
I
am not satisfied, however, for the
purposes of the criminal test, that Jamil Karam knew the
actual bingo revenues, or knew that the revenues were
greater
than
the
share
provided
to
the
charities
revealed.
I cannot conclude, on the evidence before me,
that Jamil Karam had the necessary "dishonest state of
mind".
such a finding is essential to underpin the fraud
or theft charge.
Suspicion is not enough.
In the alternative, the Crown submits that if the
management contracts between T.C.A.
and the charities
were void, then T.C.A was not entitled to retain any part
of the
bingo proceeds
-
all monies
belonged to the
charities.
20
As with the prior issue, however, the question is
not simply, did T.C.A. retain too large a share of the
proceeds, but, firstly, was there the requisite mens rea?
The
Crown
submits that the
management contracts
contravene the regulations of the Nova Scotia Lottery
Commission and are, thus, illegal and void.
The Defence
challenges the authority of the Commission to prescribe
terms
and
conditions
for
bingo
licenses.
In
the
alternative, the Defence says that if the contracts are
illegal they are unenforceable, not void.
As
a final
alternative
the
Defence
submits
that
even
if
the
contracts are void, they are sufficient to negate mens
rea.
In other words, absent evidence that the Defendants
knew
the
contracts
were
illegal,
they
cloak
the
Defendants with color of right.
For the purposes of this analysis,
I will assume
that the Commission did have the necessary authority to
set terms and conditions.
This is an assumption only, at
this
point,
and
not
a
finding
of
fact
or. legal
conclusion.
I will accept, as well, for the purposes of
this
analysis
only,
the
Crown
submission
that
the
contracts breach the Lottery Commission policy and are
therefore void.
21
If the contracts are void both sides concede that
all of .the bingo proceeds would belong to the charities.
Thus,
to the extent that the Defendants withheld any
funds, the charities did not receive their just share.
The
Defendants'
knowledge
irrelevant.
Fundamental to both fraud and theft is a finding of
dishonest intent by Mr. Karam and T.C.A.
the contracts the Crown must prove
indirectly or through circumstantial evidence that the
Defendants knew the contracts were illegal.
If the contracts
were
satisfied, on the evidence before me, that the Defendants
knew so.
The evidence of the workings of the Lottery
Commission leads me to conclude that they followed
largely "hands off" method of operation.
who testified could not say with any certainty that the
policies or regulations of the Commission were made known
to licensees, either systematically or on a ad hoc basis.
Internal documents of the Commission reveal that they
themselves were concerned as to the validity of their own
licensing conditions. The licenses themselves refer to
terms
and
conditions
which
substance
of
the
monthly
of
actual
revenue
is
In relation to
either directly or
indeed illegal
I
am
not
a
The officials
are
not
attached.
The
reports
submitted
by
the
22
charities to the Commission was not questioned.
As early
as 1984 an official of the ST. John Ambulance raised his
concern to the Lottery Commission that the charity might
not
be
operating
the
bingo
in
compliance
with
the
regulations,
in that they
were
not
using their
own
members to run the bingo.
The Lottery Commission took no
action.
There is nothing, therefore, in the actions of the
Commission that would cause either the charities of the
Defendants to know that the contracts (i.e.
operating
arrangements)
were illegal -
if that was,
indeed, the
case.
Additionally, it is arguable that if the contracts
were void there was then no relationship between the
Defendants and the charities.
In such a circumstance the
Defendants would be operating an unlicensed bingo, and
the proceeds would belong, not to the charities, but to
the Defendants.
In such a circumstance there could be no
fraud or theft.
At most it might open the Defendants to
prosecution under the gaming provisions. of the Criminal
Code.
In summary then, it has not been proved that Jamil
Karam or T.C.A.
had the requisite intent.
As
that
23
determination is sufficient to dispose of the charges it
is unnecessary to decide the following issues:
1.
The legal force of the Lottery
Commissions
policies
and
regulations;
2 •
Whether there was, in fact,
a
withholding
of
funds
due
the
charities;
3.
The
legal
effect
of
the
management agreements.
As
I
have
found that the
Crown has not met the
burden of proof on an essential element of the offences,
the Defendants Jamil Karam and Twin Cities Amusements
Ltd. are not guilty.
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