The applicant for bail was tried before Weinstein DCJ and a jury of twelve on five counts of obtaining financial advantage by deception contrary to s192E (1)(b) of the Crimes Act 1900 (NSW) and one count of attempting to commit an offence against that section. There were alternatives to some of the counts but they may be disregarded for present purposes.
The trial occupied approximately four weeks. On 1 November 2019 the jury returned verdicts of guilty on all six of the counts referred to above. The applicant had been on bail since March 2015 and had complied with the conditions of his liberty and had attended court as directed. The Crown made a detention application upon the return of the verdicts, which was upheld. The applicant was remanded to appear before the trial judge on 12 December 2019 for sentence.
The applicant briefed his present Senior Counsel after conviction, to appear in the sentence proceedings. Senior Counsel formed the view that an error had been made in the summing-up and, on his advice, notice of intention to appeal against conviction was filed on 11 December 2019. The proposed grounds are:
(a) The guilty verdicts were unreasonable or could not be supported having regard to the evidence.
(b) His Honour erred by directing the jury on an element of the offence, that they could be satisfied that the alleged dishonesty could be proved by mere recklessness.
At the sentence hearing on 12 December 2019 the applicant applied to the trial judge under s 62 of the Bail Act 2013 (NSW) for bail pending his appeal. This was refused. Hence, the present application has been brought in this Court for bail pending the determination of the appeal.
Section 18(1)(j) of the Bail Act requires that account should be taken of whether the appeal has a reasonably arguable prospect of success. Section 22(2) requires that bail should not be granted unless special or exceptional circumstances exist. Those sections have been considered in Obeid v R (No 2) [2016] NSWCCA 321. The position recognised in Obeid v R (No 2) is substantially in accordance with decisions that had previously been made under the now repealed Bail Act 1978 (NSW). Those decisions are reflected in a straightforward statement by Johnson J, in R v Khoo [2013] NSWSC 1518 at [19] that "the existence of merely arguable grounds is not enough. The grounds must be most likely to succeed". At least this is the case where the "special or exceptional" circumstance relied upon by the bail applicant is the strength of the proposed appeal. That is the nature of the present application. There is nothing else in the circumstances of the application that could satisfy the strict requirement of s 22.
The applicant relies upon what he claims is the strength of his second appeal ground. It is necessary to refer to the facts of the case in order to understand that ground. In 2013 the applicant was a bank manager with the St George Bank, Strathfield Branch. The Crown case was that he submitted loan applications for approval by his bank, supported by fraudulent documents. The documents misrepresented the price of the properties for the purchase of which the loans were to be made and they misrepresented the incomes of the borrowers. It was alleged by the Crown that the applicant acted in concert with two other persons, one of whom performed the role of a mortgage broker. That person pleaded guilty to similar charges and gave evidence for the Crown in the trial of the applicant.
The Crown alleged that loans of about $460,000 per property were advanced and that the loan in each case exceeded the purchase price by about $200,000. The relevant properties were units in an apartment building at Port Stephens. Most of the surplus of each loan advance over the purchase price of the relevant property was alleged by the Crown to have been taken by the co-accused. Three large payments in sums of between $67,505 and $83,165 were made to the applicant himself.
Section 192E(1)(b) of the Crimes Act, under which the counts were laid, is in these terms:
A person who, by any deception, dishonestly:
(b) obtains any financial advantage ... is guilty of the offence of fraud.
Section 192B(2) is a related provision, as follows:
A person does not commit an offence under this part by deception unless the deception was intentional or reckless.
The Crimes Act does not contain a definition of "reckless".
In R v Smith (1983) 7 A Crim R 437 the Full Court of the Victorian Supreme Court considered a similarly worded section in a case where the "deception" lay in passing cheques that were not honoured. Starke J (Crockett J agreeing) said (at 440) that recklessness required that the accused "either knew or recognised that there was a substantial risk of the cheque being dishonoured and nevertheless went ahead and drew it and passed it". O'Bryan J referred to cases in which the view had been expressed that, for recklessness to be established, "one must foresee the probability of the consequence eventuating".
The word "dishonestly" in s192E is to be understood by reference to the definition "dishonest" in s 4B of the Crimes Act:
dishonest means dishonest according to the standards of ordinary people and known by the defendant to be dishonest according to the standards of ordinary people.
The trial judge issued written directions to the jury setting out the elements of an offence against s 192E. The directions were expressed in general or text book terms, not with any integration to the particulars of the charges in the instant case. The document identified the first element of the offence as "1. by deception, dishonestly". Under a heading "Element 1" the directions contained the following (numbers added for ease of reference):
[1] Dishonesty - means dishonest according to the standards of ordinary people and known by the defendant to be dishonest according to the standards of ordinary people.
[2] It is a question of fact [for] the jury to determine what is dishonest conduct in this regard.
[3] The jury must not only find beyond reasonable doubt that the accused acted dishonestly in deceiving the bank but also that he knew or was reckless that his conduct was dishonest according to the standards of ordinary people.
In par [3] of this passage I have added the underlining of the words "or was reckless". These words are said by the applicant to be erroneous. The applicant's appeal ground (b) relies upon the inclusion of these words. They appear to be wrongly included having regard to the definition of "dishonest" in s4B. That definition was, however, given properly in par [1], where the subjective aspect of dishonesty was expressed precisely in accordance with s 4B.
On the second page of the written directions, under the heading "Element 3; intentionally or recklessly", his Honour included the following (underlining added):
"The Crown must prove beyond reasonable doubt that he was - at least - reckless as to whether he or others involved in the agreement were acting dishonestly and engaging in deception in order to obtain a financial advantage."
This part of the direction followed from a reference by his Honour to the Crown case that the applicant was said to have carried out his acts in execution of an agreement with others, notably, the mortgage broker (and co-accused) who gave evidence for the prosecution. In support of his ground of appeal (b) the applicant also relies on the underlined words in this passage, asserting that it was wrong to suggest to the jury that it would be sufficient to find that the accused was reckless as to whether he or others involved in the agreement were acting dishonestly.
The applicant accepts that this part of the direction was correct with respect to all but the underlined words. It was correct to the following extent:
The Crown must prove beyond reasonable doubt that he was - at least - reckless as to whether he or others involved in the agreement were […] engaging in deception in order to obtain a financial advantage.
In other words, it is accepted that the jury were properly told that proof of recklessness with respect to "engaging in deception" would satisfy one element of the offence. It does not appear to me that this second passage of the written directions assists the applicant's appeal ground (b). In so far as this part of the direction conveyed to the jury that recklessness as to the deceptive nature of the conduct would be sufficient to support a verdict of guilty, that was in accordance with s 192B(2).
The predecessor to s192E was s178BA, which has now been repealed. It was worded very similarly to section s192E but the definition of "dishonest", which now appears in s4B, was not in the Crimes Act when s178BA was in force. Section 178BA was interpreted as importing a special sense of the word "dishonest". That word was held to mean that the Crown had to disprove that the accused acted under any claim of legal right: see R v Love (1989) 17 NSWLR 608, following the decisions of the Full Court of the Victorian Supreme Court in R v Salvo [1980] VR 401; R v Bonollo [1981] VR 633 and R V Brow [1981] VR 783.
This meaning of the element of dishonesty in the former section is a special sense of "dishonest", of the kind adverted to in Peters v The Queen (1998) 192 CLR 493: see Toohey and Gaurdron JJ at [34] and McHugh J at [86]. If the meaning of "dishonestly" adopted in R v Love and in the Victorian cases that it followed is still applicable to s192E, then proof of dishonesty in the sense of not acting under a claim of legal right would in an appropriate case be required in order to sustain a prosecution under this section. However, that did not arise in the present case. The applicant did not assert that he had any claim of legal right to carry out the deception that was alleged against him of putting forward false documents and information in support of mortgage loan applications. He did not claim that he had any legal right to obtain the financial advantage that was the subject of the Crown case, namely, the advance of loans to the customers in amounts that were inflated relative to the security value of the purchased property. No question of the Crown having to dispel or disprove a claim of legal right arose.
It is clear from the final address of the applicant's counsel that his case before the jury was that he did not know of the falsehood of the documents and information that he put forward to that part of the bank from which loan approval would be granted. His case, as urged by counsel in closing, was that he was a busy manager in a busy branch, encouraged by his employer to effect loans in as high a volume as he could achieve and that if false items of information or false documents were submitted by the broker or borrower and passed on by the applicant then this was completely inadvertent on his part.
In a case of this kind it would be sufficient, having regard to the terms of s 192B, for the Crown to prove that the deception was practised by the applicant either knowing that the documents were false; or recklessly, in the sense that he recognised a risk that the documents were false but carried on irrespective. There is no suggestion on the present application that there was any deficiency on the part of the trial judge in summing-up on those alternative ways in which deception might be found under s 192B(2).
The jury's verdicts show that they were satisfied that either the applicant knew he was putting forward false documents and thereby knowingly practising a deception, or that he put forward the false documents appreciating a risk that they were false and, therefore, did so recklessly.
Aside from the possibility that the elements of dishonesty in s 192E may require disproof of any claim of right, as was the case under s 178BA, the terms of s4B still have to be satisfied in order to sustain a charge under the current section. When s4B was introduced it was said by the then Attorney-General in his Second Reading Speech that this definition of dishonesty involving both an objective and subjective element "... was supported by the High Court in the case of Peters v The Queen and has been adopted in the Commonwealth Crimes Act". With respect, that appears to be inaccurate. The judgments in Peters v The Queen are to the effect that for the offence of defrauding the Commonwealth - and generally for offences of fraud that do not involve the use of the word "dishonestly" in any special sense - it is not necessary to prove that the accused knew that his conduct was dishonest according to the standards of ordinary people.
Whatever misconceptions may have been involved in introducing the section, it is applicable in a prosecution under s 192E(1)(b). The jury should therefore have been directed that, before they could convict, the Crown would have to have satisfied them beyond reasonable doubt both (1) that the applicant's conduct was dishonest according to the standards of ordinary people and (2) that the applicant knew this. His Honour did instruct them as to both of these points in par [1] of his direction regarding dishonesty. In par [3] of that instruction (and possibly in the impugned words under the heading "Element 3 intentionally or recklessly") his Honour did not correctly specify the subjective aspect of the definition of "dishonesty". He left the matter on the basis that it would be sufficient that the applicant was reckless, as opposed to knowing, with regard to whether the deception he practised was dishonest according to the standards of ordinary people.
When these deficiencies come to be assessed by the Court of Criminal Appeal, that Court will have to determine what would have been the significance for the jury, in the context of the whole case, of the departures from the requirements of s 4B, bearing in mind that that section was properly encapsulated in par [1] of the direction but was, to a degree, subsequently contradicted in par [3]. The Court of Criminal Appeal will no doubt take into account that the jury's verdict necessarily shows that they were satisfied on the element of deception; that is, that the accused put forward these fraudulent documents not, as he asserted, inadvertently but at a minimum recognising a risk that they were falsehoods and proceeding nevertheless.
The import of the jury's implicit finding of deception is to be considered in the context that the applicant was a bank manager upon whom responsibility and trust had been bestowed by his employer. He was, self-evidently, educated and trained to be in that position. The Court of Criminal Appeal may well conclude that, on those considerations, it would have been inevitable that the jury would have been satisfied not only that what he did was, objectively, dishonest according to the standards of ordinary people but also that, subjectively, the applicant must have known it was dishonest by those standards. The inference that he must have known his deception was dishonest by the standards of ordinary people might be considered to flow inexorably from the features of the deception itself, from the nature of the applicant's day-to-day activities, from his position of responsibility in the bank and from his knowledge of the bank's interests and its systems.
Further, as the judge did correctly tell the jury that they had to be satisfied beyond reasonable doubt that the accused's deception was objectively dishonest by the standards of ordinary people it must be taken from their verdicts that they so found. Again, the Court of Criminal Appeal may well find that it must have followed irresistibly for the jury that a person in the applicant's position of responsibility would have known that the conduct was dishonest by those standards. In other words, the subjective aspect of the definition of "dishonest" in s 4B, in a case such as the present, would follow almost as a matter of necessity from the objective aspect.
In these circumstances I do not consider that it can be concluded that the applicant's ground (b) of appeal is, in the terms of Johnson J's test, "most likely to succeed" in the sense of resulting in the quashing of his convictions. It would be open to the Court of Criminal Appeal, when it considers the entirety of the case, to conclude that despite the erroneous direction no substantial miscarriage of justice actually occurred.
Generally, where there has been a misdirection as to an element of an offence it will be difficult to show that the proviso to s 6(1) of the Criminal Appeal Act 1912 (NSW) is engaged. But as Kalabasi v Western Australia (2018) HCA 7 has shown, the proviso may be applied in such a case. Whether that will occur in this appeal will depend on the Court of Criminal Appeal's assessment of the evidence on dishonest deception that the jury must be taken to have accepted. It will depend upon whether the Court considers, having regard to the strength and detail of that case, that there could have been a realistic possibility of the jury not being satisfied that the applicant knew that the deception he was practising was dishonest.
For these reasons special and exceptional circumstances are not shown and bail is refused.
[2]
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Decision last updated: 20 December 2019