In late May 2022, the Court of Quebec Criminal and Penal Division issued its decision in AMF v. Goyette.
It is significant because it is the very first decision deciding that the market manipulation offence set out at section 199.1 of the Quebec Securities Act (QSA) is a full mens rea offence, requiring the prosecuting regulator, the Autorité des marchés financiers (AMF), to prove the accused’s guilty mind. It also offers a definition of “fraud” – a word used a handful of times in the QSA but not defined therein.
Branding himself as a “personal and financial coach”, Mario Goyette solicited clients for loans in excess of $600,000 to himself, his business partner and a number of corporate entities, to support varied business ventures, in return for promised high and guaranteed interests which never materialised.
While the AMF laid penal charges against them for numerous breaches of the QSA, we will focus on the Court’s discussion of the offence set out at section 199.1 QSA, which reads as follows:
199.1. A person who directly or indirectly engages or participates in any transaction or series of transactions in securities or any trading method relating to a transaction in securities, or in any act, practice or course of conduct is guilty of an offence if the person knows, or ought reasonably to know, that the transaction, series of transactions, trading method, act, practice or course of conduct
(1) creates or contributes to a misleading appearance of trading activity in, or an artificial price for, a security; or
(2) perpetrates a fraud on any person.
Strict Liability or Mens Rea Offence?
The AMF argued that this offence was a strict liability offence, not requiring proof of a guilty mind, following the Supreme Court’s seminal decision in Sault Ste-Marie, 1978 CanLII 11. You will recall that in Sault Ste-Marie, the Supreme Court
- recognized three categories of offences:
- Mens Rea Offences which require the prosecution to prove some positive state of mind such as intent, knowledge, or recklessness
- Strict Liability Offences which do not require the prosecution to prove the existence of mens rea,the doing of the prohibited act prima facie importing the offence, leaving it open to the accused to avoid liability by proving that he took all reasonable care
- Absolute Liability Offences which do not require the prosecution to prove the existence of mens rea,the doing of the prohibited act prima facie importing the offence, where it is not open to the accused to exculpate himself by showing that he was free of fault
- placed, on a prima facie basis, “public welfare offences” in the second ‑ strict liability ‑ category
- indicated that public welfare offences would fall in the first category “only if such words as “wilfully,” “with intent,” “knowingly,” or “intentionally” are contained in the statutory provision creating the offence”
According to the AMF, as the offence set out at section 199.1 QSA is of a regulatory (i.e. akin to public welfare) nature, it should be presumed to be a strict liability offence and as the words “wilfully,” “with intent,” “knowingly,” or “intentionally” are absent from the statutory provision, the offence could not and should not be elevated to a mens rea offence.
The Court disagreed.
It found that the offence set out at section 199.1 is a mens rea offence, requiring proof of a guilty mind, like the other offence which uses the word “fraud”, i.e. the market manipulation offence set out at section 195.2 QSA of “influencing or attempting to influence the market price or the value of securities by means of unfair, improper or fraudulent practices”.
The Court relied on :
- the dissenting opinion of Justices Dickson, Etsey and Pratte in Strasser Roberge, 1979 CanLII 236 (CSC) that the presence of the words “wilfully,” “with intent,” “knowingly,” or “intentionally” should not be regarded as exhaustive of the situations where public welfare offences may require mens rea
- the judgment of the Quebec Court of Appeal in Dupont c. Brault, Guy, O’Brien inc. following the dissenting opinion in Strasser
- the judgment of the Quebec Court of Appeal in Québec (Régie de l’assurance maladie) c. Desruisseaux to the effect that the words “with intent,” “knowingly” or “wilfully” mentioned in Sault Ste-Marie were not designed to be a closed list of indicative words requiring proof of intent or knowledge and the real point is whether or not the legislature, in the language it has used, has clearly indicated its desire that intent or knowledge on the part of the accused be proved by the prosecution if the accused is to be convicted, and
- last but not least, the words “knows, or ought reasonably to know” in section 199.1 QSA which were found to be clearly indicative of the legislature’s desire that intent be proven for an offence to have been committed
Meaning of “fraud” in Section 199.1 QSA
The word “fraud” used in section 199.1 is not defined in the QSA.
The Court held that this offence was intended by the Quebec legislature to track the criminal law offence of fraud, such that the meaning of “fraud” in the QSA should follow its criminal law meaning as analysed in the Supreme Court of Canada’s decision in R. c. Théroux, 1993 CanLII 134.
The actus reus of fraud will be established by proof of:
- the prohibited act, be it an act of deceit, a falsehood or some other fraudulent means; and
- deprivation caused by the prohibited act, which may consist in actual loss or the placing of the victim’s pecuniary interests at risk.
and the mens rea of fraud will be established by proof of:
- subjective knowledge of the prohibited act; and
- subjective knowledge that the prohibited act could have as a consequence the deprivation of another (such putting the victim’s pecuniary interests at risk).
Applying these principles, the Court found that the AMF had discharged its burden of proving Goyette’s guilty mind as the evidence had shown, beyond a reasonable doubt, that he had knowingly used the sums loaned by his victims to pay off personal debts, as opposed to investing them in the varied business ventures presented to the victims.
The author would like to thank Mikaela Mailly for her contribution to this article.