The Queen v. Lerner and Buckley's Wholesale Tobacco Ltd.

MARTLAND J.:-This is an appeal from a judgment of the Court of Queen's Bench (Appeal iSide) for the Province of Quebec', which unanimously maintained the present respondents' appeals against their convictions on charges laid against them under s. 179(1) (e) of the Criminal Code which provides as follows:

179.

(e) conducts, manages or is a party to any scheme, contrivance or operation of any kind by which any person, upon payment of any sum of money, or the giving of any valuable security, or by obligating himself to pay any sum of money or give any valuable security, shall become entitled under the scheme, contrivance or operation, to receive from the person conducting or managing the scheme, contrivance or operation, or any other person, a larger sum of money or amount of valuable security than the sum or amount paid or given, or to be paid or given, by reason of the fact that other persons have paid or given, or obligated themselves to pay or give any sum of money or valuable security under the scheme, contrivance or operation;

The scheme conducted by the respondents in respect of which the charges were laid is described in agreed admissions of fact as follows:

At material times the above company (i.e. Buckley's Wholesale Tobacco Ltd.) has conducted a mail order product distribution plan that operates as follows:

I d) Each of the above mentioned participants can then sell his three cards at a price of 84.00 each, and upon sending the completed cards 1[1963] Que. Q.B. 91, 39 C.R. 347.

back to the company, receives in turn three cartons of cigarettes. (6f the brand he chooses).

THE e) Thus the orginal participants receive three cartons of cigarettes in return for having sold the 3 cards sent to them, and each subsequent participant receives 3 cartons of cigarettes in return for having purchased et al. a set of cards for 84.00 and having sold those cards to three of his friends. MartldndJ: f) Participants who succeed in selling 2 cards, but have difficulty with the third, can return their 2 completed cards (together with the $8.00 collected) to the company, and receive in return 2 instead of 3 cartons of cigarettes. If they then succeed in selling the third card, they receive a third carton of cigarettes.

The instruction sheet sent by the respondents to their customers read as follows:

Dear Customer:- Enclosed you will find 3 cards for which you have paid $4.00.

Please follow these instructions:

(1) Sell these 3 cards to your customer friends at $4.00 each.

We will then mail you the 3 cartons of cigarettes (of your choice), plus 9 cards for distribution to your 3 customer friends. They, in turn, will sell these 3 cards to their friends at $4.00 each and will then receive their 3 cartons of cigarettes.

Yours very truly,

BUCKLEY'S WHOLESALE TOBACCO LIMITED.

P.S. Do not send cash through the mail. Send money order only, this being your receipt.

In the reasons for the judgment from which this appeal is brought, it was held that a participant in this scheme does not receive anything which falls within the term "valuable security" within the meaning of s. 179(1) (e) and, in consequence, as a participant does not receive a sum of money or valuable security, the scheme did not contravene that paragraph. I am in agreement with this conclusion. Furthermore, I do not think that the scheme would contravene that paragraph even if that which a participant obtains under it could be regarded as constituting valuable security. His entitlement to receive property under the scheme does not arise merely by his payment of money and the property to which he becomes entitled is not received by him "by reason of the fact that other persons have paid a or given, or obligated themselves to pay or give any sum of money or valuable security under the scheme, contrivance or operation".

This is not a scheme such as that which was considered by this Court in Dream Home Contests (Edmonton) Limited v. R. , under which a number of people purchased tickets and the winner received a prize substantialy more valuable than the amount which he had paid for the ticket, as a result of the moneys paid for the tickets paid for by the other contestants. In the present case the typical participant does not become entitled to obtain his cartons of cigarettes or other products upon payment of the $4.00 fee. It is also necessary for him to persuade three other persons to enter into the arrangement which he himself has made. He thereby renders a service to the respondent company which, in turn, derives a benefit by reason of the wider advertising and distribution of the products which it has for sale and for which service it is prepared to compensate the participant in the form of goods of a value exceeding the $4.00 fee. While the scheme in question here is different from that which was considered by this Court in R. v. The Procter and Gamble Company of Canada, Ltd. , and while the charge in that case was laid under different paragraphs of s. 179(1), the reasoning in that case is, I think, also applicable to the present one. The essence of the matter is that the respondent company is prepared to compensate, in the form of goods, at its own expense, for the performance of services which it obviously considers to be of value to itself. It is not conducting a scheme whereby a prize can be won by a contestant which is provided out of the funds obtained from other contestants under the scheme.

For these reasons, in my opinion, the appeal should be dismissed.