Bazouni v R

Sole ground of appeal

1. The appellant relied on a single ground of appeal: that the trial judge had erred by directing the jury on an element of the offence, being that they could be satisfied that the alleged dishonesty could be proved by mere recklessness.

Background

1. On 1 November 2019, the appellant was found guilty of all of the offences outlined above. He was sentenced to a head sentence of imprisonment for five years with a non-parole period of three years.
2. The offences alleged to have been committed by the appellant were frauds, and one attempt to commit fraud, committed upon the St George Bank ("the Bank").
3. At the time of the alleged offences, between 9 April 2013 and 22 October 2013, the appellant was an experienced loans manager employed by the Bank.
4. The Crown contended that the appellant was part of a joint criminal enterprise with two other men, Mr Hastings (a pseudonym adopted for abundant caution in accordance with the unopposed submission of the Crown in this Court, in light of a previous non-publication order) and Mr Elias Melhem. Its aim was to defraud the Bank by causing it to approve loan applications for the purchase of apartments at an address in Nelson Bay, north of Sydney, at artificially inflated purchase prices, based on false documentation, and indeed by purported borrowers who did not, in truth, exist.
5. At the time, the appellant was the lending manager at the Strathfield branch of the Bank. He had held that position for quite some time. He had won awards for his work. He had worked in banking generally for quite some years. As part of his position, the Crown contended, he had the authority to approve autonomously loan applications in which both the sum to be lent was less than $600,000 and the loan to value ratio (LVR) between the sum of the loan and the value of the apartment was less than 80%.
6. Mr Hastings entered into an agreement with Equloan Pty Ltd (Equloan), the owner of the apartments, to sell 2 and 1-bedroom units for the "minimum" prices of $265,000 and $135,000 respectively. The commission for the sales to be paid to Mr Hastings was the amount of the purchase price above those minimum prices. According to the Crown case, the appellant and his associates then created false documentation to cause it to appear that the price of all units was $575,000. That had the obvious potential to cause Equloan to pay Mr Hastings sums to which he was not entitled.
7. The appellant and his associates then engaged several purported purchasers: Turgay Beha, Karumakara Paniker (a fictitious person who was impersonated by Bashir Kumar), Sasi Kumar (a fictitious person who was impersonated by Rajesh Sayal), and Daniel Wu. The units were to be purchased in pairs by each of those persons.
8. The "purchasers", through the appellant, then applied to the Bank for loans of $460,000 per unit, each loan therefore totalling $920,000.
9. Mr Hastings, Mr Melhelm, and Mr Kumar provided false documentation, including false statutory declarations, to the appellant. His role in the joint criminal enterprise was to advance those documents through the computer system of the Bank, with the result that the funds would be forthcoming. The Bank accepted those documents at face value.
10. The loan applications in the names of Turgay Beha, Sasi Kumar and Karumakara Paniker were approved. They "purchased" two units each after the loan funds were made available by the Bank. Two loan applications in the name of Daniel Wu were successfully approved, and he successfully "purchased" four units, again with funds from the Bank applied to the purchase price. The appellant submitted a further application in the name of Sasi Kumar, but it was ultimately rejected.
11. The Crown case was that, in doing all of that, the appellant was either well aware, or at the least foresaw the possibility, that the documents being put forward were false, and was also aware or at the least reckless that his employer was being tricked into advancing loan sums that it would never have advanced if it had known the truth.
12. All of that led to the counts outlined by me above: five of completed fraud, and one of attempted fraud.
13. By way of the funds provided after the successful loan applications, the Bank advanced a total of $4.6 million.
14. Funds transferred very shortly after the provision of some of the loans for the "sales" were subsequently traced to a bank account in the name of Me Co Pty Ltd, of which the appellant was the sole director. As for the fifth loan, the appellant ordered his share of the funds to be transferred to Bahir Kumar, who was to give the money to the appellant in cash. That was in order to prevent the funds being able to be traced to the appellant.
15. That was the Crown case in short form. The defence case was as follows.
16. Mr Hastings and Mr Melhem were brokers who worked for B2B Referrals Pty Ltd (B2B). B2B was a busy mortgage broker that would refer its clients to the Bank.
17. The appellant had a private arrangement with B2B whereby it would send him clients, and he would prioritise their applications, in the sense of putting them forward speedily within the Bank. In exchange, B2B would pay him sporadically. The Bank was not informed that the appellant was making money "on the side" in that way.
18. Initially, when the loans under discussion began to be investigated, the appellant had told a fraud investigator of the Bank that he and his wife ran a beauty clinic, and that the funds he had received were from the sale of cosmetic equipment. The appellant did not then tell the fraud investigator what he later swore to be the truth - about the confidential payments on the side from B2B - because he believed he would lose his job. In other words, the case for the appellant conceded an admitted lie about a material matter.
19. In the trial, the appellant gave evidence that the funds deposited into the bank account of his business were payments from B2B as part of the above arrangement. He denied having any role in any other, far more remunerative, scheme being conducted by Mr Hastings and Mr Melhem. Nor did he have any knowledge of the fraudulent loan scheme being conducted by those two gentlemen. He neither knew, nor believed, nor even suspected (with one exception discussed below), that any documents placed before him were false, or that any purported loan applicants were impostors. He had approved all of the loan applications that came before him in good faith, in accordance with the law, and with the policies of the Bank.

Elements of the offence of fraud

1. I turn now to discuss the elements of the primary offence, and thereafter respectfully contrast them with the directions given to the jury by the trial judge. Because error is conceded by the Crown by way of disjunction between the elements and their explanation, I shall be concise. For convenience, I shall not refer repeatedly to the count of attempt.
2. Section 192E(1)(b) of the Crimes Act provides that "[a] person who, by any deception, dishonestly obtains any financial advantage or causes any financial disadvantage, is guilty of the offence of fraud".
3. To express the offence-creating provision in another way, its elements applicable to this trial were as follows: the accused; dishonestly; obtained; a financial advantage; by deception. The count of attempt included the same elements.
4. It can be seen immediately that both deception and dishonesty are elements of the offence. What does Parliament mean by those terms? And why are both included in the offence?
5. Section 4B of the Crimes Act defines dishonesty as follows: Dishonesty (1) In this 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. (2) In a prosecution for an offence, dishonesty is a matter for the trier of fact. (emphasis by underlining added)
6. The offence-creating provision under discussion is of course in the Crimes Act, so that definition applies to the offence in question.
7. In contrast, section 192B of the Crimes Act defines deception as follows: 192B Deception (1) In this Part, deception means any deception, by words or other conduct, as to fact or as to law, including - (a) a deception as to the intentions of the person using the deception or any other person, or (b) conduct by a person that causes a computer, a machine or any electronic device to make a response that the person is not authorised to cause it to make. (2) A person does not commit an offence under this Part by a deception unless the deception was intentional or reckless. (emphasis by underlining added)
8. Again, because the offence-creating provision is to be found within the Part referred to by s 192B, that definition of deception applied to the trial of the appellant.
9. A number of aspects of the elements of this statutory offence are noteworthy. The first is that Parliament has decided to require that the offence be committed both "by deception" and "dishonestly".
10. Secondly, although deception and dishonesty are surely closely related concepts, Parliament has decided to assign to each of them a different mental element.
11. To expand on that: the mental element (broadly defined) necessary for proof of dishonesty has two components. The first is proof beyond reasonable doubt that ordinary persons applying their own standards would regard the alleged acts of an accused person in their context as dishonest. The second is proof beyond reasonable doubt that the accused knew that ordinary persons would make that assessment.
12. In other words, the mental element of dishonesty can be thought of as a subjective state of mind of knowledge, on the part of the accused, about an objective norm that sits outside his or her own assessment, and is reposed in ordinary members of the community.
13. The history of debate - judicial and academic - that led to that mixed objective and subjective formulation - to my knowledge, rare if not unique within the criminal law of New South Wales - need not be delved into here. As the Crown submitted in this Court, it began with the English decision of R v Ghosh (1982) 2 All ER 689; [1982] EWCA Crim 2 (Ghosh), travelled through the decision of the High Court of Australia in Peters v The Queen (1998) 192 CLR 493; [1998] HCA 7, and reached its seemingly final destination with the enactment of the Crimes Amendment (Fraud, Identity and Forgery Offences) Act 2010 (NSW).
14. It suffices to say that, with regard to offences of fraud committed against the law of New South Wales, the accused must be proven to have possessed knowledge about the negative normative judgment of others as to the dishonesty of his or her conduct at the time he or she committed the physical elements of the offence.
15. In contrast, as can be seen from s 192B of the Crimes Act extracted above, an accused person can commit the offence "by deception" either intentionally or recklessly. In the criminal law of New South Wales, except in the context of murder, the latter concept can be understood as meaning with foresight of a (real) possibility about a state of affairs or a consequence.
16. In other words, the lesser state of mind of recklessness is sufficient to prove the element of "by deception". But the greater state of mind of knowledge (albeit about a separate objective state of mind, namely the assessment of ordinary persons) is necessary to prove the element of "dishonestly".
17. It follows in my respectful view that, except in most unusual circumstances, it will always be necessary in a fraud trial for the jury to be directed about those two mental elements separately. The same may be said about the explanation of counts of attempt, or any other ancillary or inchoate offence, based upon this offence-creating provision.

Directions to jury in this trial

1. In the summing-up, the learned trial judge instructed the jury about the elements of the counts. Only one of them was impugned in this Court. Relevantly, the jury was provided with instructions about the elements of "deception", "dishonesty", "financial advantage", "intention", and "recklessness".
2. The direction about dishonesty in the summing-up that was said by both parties in this Court to be correct was as follows: "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."
3. His Honour went on to say, however: It is a question of fact for you to determine what is dishonest conduct in this regard, and you 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." (emphasis added)
4. It was agreed by the parties in this Court that the bolded portion of the above was incorrect, in that recklessness had incorrectly transgressed from the correct definition of "by deception" into the definition of "dishonestly".
5. Regrettably, neither counsel at first instance had assisted his Honour by inviting attention to the differing states of mind that needed to be proven with regard to the very similar elements within the one offence of deception and dishonesty.
6. It was further agreed in this Court that that transgression was a significant legal error. That was not only because it conflated two separate mental elements. It also had the practical effect of deflating the mental element of "dishonestly" from the greater level of appreciation by knowledge about the standards of ordinary persons to the lesser level of appreciation by recklessness (in other words, appreciation of a possibility) about that topic.
7. The following written directions were also provided to the jury: Deception--means any deception, by words or conduct. It must be either reckless or intentional. 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. It is a question of fact [f]or the jury to determine what is dishonest conduct in this regard. 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." (emphasis added)
8. Identically, the parties in this Court were agreed that almost all of the above was correct. However, it was agreed that the emphasised portion was incorrect, and that it worked a significant diminution to the mental element of "dishonestly".
9. Yet again, far from being the subject of corrective submissions, regrettably the error was adopted by both counsel.
10. In my opinion, the concession of the Crown about the directions about dishonesty should be accepted: a significant legal error that constitutes a miscarriage of justice has been established, because a necessary mental element of the offence of knowledge about something was diminished to recklessness about something, contrary to the statutory definition that informs the offence-creating provision.
11. Furthermore, despite the fact that the point was not taken at trial by defence counsel, I believe that this legal error with regard to an element of every count on the indictment is so significant and pervasive that Rule 4.15 of the Supreme Court (Criminal Appeal) Rules 2021 (NSW) ("the Criminal Appeal Rules") has no role to play. The Crown did not submit otherwise.
12. As I have said, the real dispute requiring resolution is whether or not the Crown can successfully rely upon the proviso to maintain the convictions, despite that miscarriage of justice having occurred. I turn now to that question.

The proviso?

1. All of the other elements of the offence were, in my opinion, correctly explained to the jury. To expand upon that a little, the conflation between the mental element of "dishonestly" and "by deception" diminished the mental element of the former, for reasons that I have explained above. But it did not diminish the mental element of the latter, because it already encompassed recklessness by way of the statutory definition in any event.
2. In other words, the misdirections about recklessness in the context of dishonesty that were elided with the directions about deception did no harm to the latter, because they were not "reduced" further from the correct requirement of recklessness only.
3. In those circumstances, it is possible that one way that the proviso could be reflected upon is as follows.
4. As demonstrated by its verdicts, the jury was satisfied beyond reasonable doubt that the appellant obtained a financial advantage from the Bank.
5. It was also satisfied to the criminal standard that he had done so by deception, meaning that he at the least foresaw the possibility that the documentation provided to him, and submitted by him, and which led to the provision of very significant sums of money by the Bank, was deceptive.
6. Furthermore, the jury was satisfied to the same standard that the conduct of the appellant in approving the loans was dishonest according to the standards of ordinary people. One can say that because that part of the direction about the element of dishonesty was quite correct. That means that, if the jury had not been satisfied of that element, it would have acquitted the appellant of all counts. It did not.
7. In short, there was no misdirection about any of those elements, and the jury was satisfied about all of them.
8. Does it ineluctably follow, all of those matters having been established beyond reasonable doubt to the satisfaction of the jury without legal or other error, and taking into account the evidence that was conceded or not disputed in the trial, that the appellant must also have known that his conduct was dishonest according to the standards of ordinary people? I turn to what the parties, each of them represented by counsel learned in criminal law, had to say about that question, including whether it should even be asked at all.

Submissions of the appellant

1. Because of the concession about error, and the resultant refinement of the real issue that occurred after the filing of written submissions, the following summary focuses not on the written submissions, but on what was said in oral submissions about the proviso, as opposed to the conceded miscarriage of justice.
2. Senior counsel for the appellant respectfully submitted that the summary of principles about the proviso provided by Macfarlan JA in Hofer v R [2019] NSWCCA 244 at [51] - [58] would be very useful to our consideration.
3. He conceded that the proviso can apply even when there has been a misdirection about an element of an offence.
4. He accepted that one is entitled to step back and make assumptions about "what the jury did" from its verdicts, but submitted that in this case doing so does not establish that no substantial miscarriage of justice actually occurred.
5. Senior counsel accepted that, in some cases, one can reason back from a verdict to see "what the jury did or didn't do". But he submitted that this is not such of a case, because of the way in which the trial was conducted.
6. He agreed that the central question for this Court is whether the Crown could establish that the proviso should be applied, based upon the evidence in the case and the correctly explained elements of which the jury was satisfied to the criminal standard.
7. At one stage, he may have suggested that there was inadequate identification in the summing-up of the actual deception alleged. But I did not understand that to be in any sense a separate argument, bearing in mind the obviousness at trial of the nature of the fraudulent scheme.
8. The point was made that the loan documents certainly were not obviously false on their face, thereby supporting the proposition that lack of criminal involvement by the appellant was a reasonable possibility, with the result that this Court could not be satisfied of guilt beyond reasonable doubt, an essential precondition of the application of the proviso.
9. Senior counsel warned against "reasoning back" from inscrutable verdicts of guilty in order to find that the jury "must have" accepted prosecution evidence or arguments, or rejected defence evidence or arguments.
10. Senior counsel rejected the Crown thesis at trial that the appellant, by actually drawing attention to some proffered false documentation, was in fact testing the procedures of the Bank, and submitted that his actions in doing so were conversely entirely consistent with innocence.
11. In reply, senior counsel cautioned again against "reasoning back" from any part of guilty verdicts that were patently based on a misdirection about an essential element of an offence.
12. It was said that the misdirection could not be "quarantined"; rather, it cut across the consideration by the jury of all of the other elements, thereby rendering the verdicts unable to be relied upon.
13. The point was emphasised that deception and dishonesty were elided, with the result that satisfaction beyond reasonable doubt of the former could not safely play a part in overcoming the misdirection with regard to the latter.
14. The submission was that one simply cannot say how the jury might have felt about the misdirected mental element of dishonesty, if they had been correctly directed about it.
15. The point was also made that it can hardly be held against the appellant if nothing was said in his evidence about that element, bearing in mind the criminal onus and standard that applies just as much to the proviso as it does to a trial.
16. Senior counsel concluded by emphasising that, far from being somehow severable, the misdirection at trial inherently "cut across" the whole defence case, with the result that this Court simply could not be satisfied that no substantial miscarriage of justice had actually occurred.

Submissions of the Crown

1. Again, because of the refinement of issues after the closure of written submissions, my focus is upon the oral submissions for the Crown at the hearing of the appeal.
2. The Crown emphasised that satisfaction of guilt beyond reasonable doubt on the part of this Court was an essential precondition for the application of the proviso. But it is not a sufficient one in every case. That is because there are some errors to which the proviso cannot apply. Nevertheless, a misdirection about essential elements is not one of them, as demonstrated by the plurality judgment in Kalbasi.
3. It was conceded that this case raised and raises questions of credit. It was said, however, that that does not necessarily stand in the way of the application of the proviso. Again, reliance was placed upon the approach to the evidence by the plurality in Kalbasi. The submission was that, in this trial, the mental element of dishonesty - knowledge that the conduct in question was dishonest according to the standards of ordinary people - was either not substantially "in play", or was subsumed in another, legally correctly based, finding of the jury.
4. It was submitted that here there was an overwhelming case against the appellant, even though there was no "silver bullet" in the evidence that on its own proved guilt.
5. It was explained that the Crown was not contending for a granular analysis of the evidence in support of the proviso. Rather, the Crown invited attention to the underpinnings of the jury verdict, based upon the correctly explained elements, and submitted that they inevitably lead to satisfaction beyond reasonable doubt of the incorrectly explained element. Reference was made to Priday v The Queen [2019] NSWCCA 272.
6. The history of the unusual mental element of dishonesty, which began with the decision in Ghosh, was briefly discussed, with an eye to showing that the misdirection pertained to an unusual and attenuated state of mind, not to something central to the trial as run.
7. It was said that, on the evidence, and bearing in mind that one can use the verdicts and their components to resolve questions of credit, it is impossible to avoid the proposition that the appellant certainly must have known that what he was doing was dishonest according to community standards.
8. The submission was that, although care must be taken in purporting to analyse inscrutable jury verdicts, at the least it could be said that here the jury implicitly rejected the sworn evidence of the appellant.
9. The point was made that there was absolutely no evidence in the trial that the appellant lacked appreciation of the standards of honesty and dishonesty of ordinary persons, or was somehow ignorant or misguided about them, or held idiosyncratic views about them. Indeed, to the extent that he was a person of mature years, obvious intelligence, and an experienced bank officer, quite the contrary.
10. The submissions concluded with an analysis of the evidence, directed towards, as I understood it, the proposition that, quite apart from whatever one can glean from the verdicts, the Crown case at trial was extremely strong.

Consideration

1. For the purposes of reflecting upon the possible applicability of the proviso, I turn now to summarise the aspects of the Crown case that were either explicitly accepted or not disputed at trial by the appellant or his counsel. Opening address of defence counsel
2. In his opening address with regard to issues in the trial, defence counsel indicated that the following matters were not in dispute: that the appellant had been a home loan manager for the Bank in Strathfield; that he had occupied that role for a number of years; that he had worked at various banks; that he was "somewhat decorated in that role"; and that he had a team working under him.
3. Nor was it disputed that the Bank had paid out the averred amounts; that "some of the documents that were presented" were fraudulent; and that the appellant was "responsible for" the loan applications (in the sense of his occupation and forwarding them on).
4. The point was made, however, that those documents passed through many hands; that they were not signed off by the appellant; that he did not have "ultimate autonomy" with regard to their approval; and that he was merely "a cog in the system".
5. It was made clear that it was disputed that the appellant was "a part of an agreement with others to defraud his bank", and that his behaviour was "dishonest or deceptive". Entirely appropriately, those two legal concepts were not developed more deeply in the defence opening.
6. It was clear then, from the earliest stage of the trial, that the defence case was that, although a dishonest deception had been practised upon the Bank by others, the appellant was no part of it. To the extent that his physical actions may have advanced the scheme, that was entirely unwittingly. Examination-in-chief of appellant
7. In examination-in-chief, the appellant said that, before commencing work with the Bank, he had worked in two "boutique broker firms." He explained that, as lending manager, he would report to the branch manager. He spoke of the pressure of volume of work in 2013. He gave evidence of the personnel structure within the branch at the relevant time.
8. He explained that B2B was one of his "main referrers", who would bring business to the Bank. Customers who were referred by B2B were given priority, and interest rate discounts, because of the amount of business that they generated.
9. He was asked in detail about each of the loan applications, and gave evidence that nothing about them was unusual. He also explained that neither he nor his team had had any training with regard to the identification of fraud.
10. He accepted that, with regard to the four loans the subject of the trial, there were similarities shared by all of them.
11. He gave evidence of one occasion when he was not comfortable about documentation with which he was provided, spoke to the branch manager and another bank officer, and expressed his concerns. Other bank officers undertook their own enquiries, and there was said to be no problem.
12. The advantage of an LVR of 80% or less was explained to be that there was no necessity for mortgage insurance to be paid by an applicant for a secured loan.
13. He denied that, in 2013, he was able to provide "full approval" of the loans in question.
14. He was taken through the documentation of the loans in detail. The thrust of his evidence was that, apart from the matter referred to above, there was nothing overtly suspicious or even unorthodox about any aspect of the materials with which he had been provided, and that he had advanced the various applications entirely innocently.
15. He denied ever bullying a fellow bank officer into signing documents, or even asking him to sign them without being properly informed of their contents.
16. He explained how the mortgages section of the Bank had queried a discrepancy, but it was corrected by way of the lawyer of a purported customer.
17. He was asked about an interview that took place between himself, the branch manager, and the Bank investigator on 16 October 2013. He explained that, at that stage, he had been lending manager of the branch for "a number of years".
18. Evidence was placed before the jury of an award that the appellant had received as a "high performer" within the Bank in the first quarter of financial year 2011/2012. Similar evidence was tendered of similar awards.
19. Turning to the interview in detail, he explained that he had been given no notice of it, and that it was "a bit shocking". He explained that he told the investigator that he owned his own business by way of a cosmetic procedures clinic, which was quite true. His understanding was that he was entitled to do so, so long as there could be no conflict with his work at the Bank.
20. He agreed that in the interview, he had said that his only other income was from the clinic. He explained on oath that, in fact, he had "sporadically" received bank cheques from B2B for "prioritising" their loans.
21. He was asked in detail about the answers he had provided in the interview about various aspects of the documentation that he had dealt with that had turned out to be fraudulent.
22. He agreed that he had been asked in the interview about three payments into a business account of his: one for $75,000, one for $83,000, and one for $67,000. In the interview, he had explained that that money was payment for cosmetic laser machines that had been sold by his business. In fact, that was not true: he explained that in fact those were payments from B2B. He had received such payments over a number of years. They were "to prioritise their loans and work on their loans". Those payments were certainly not in return for knowingly receiving and forwarding any fraudulent loan applications as averred.
23. As for having told the investigator that the funds in question were in return for the sale of laser machines, the following exchange occurred: "… Were you telling Mr Damiano the truth there? A. No, I didn't tell him the truth. I panicked. Cause I didn't want to lose my job at St George Bank."
24. The witness explained that he received payments from at least one other broker or referrer in order to "prioritise" loans. He did not know how B2B arrived at the amounts that he was to be paid. They were provided "sporadically".
25. When asked why those payments were not directed towards his everyday bank account, but rather to the account of a business associated with him, the appellant replied on oath "[c]ause I didn't want to lose my job".
26. The examination-in-chief concluded with the appellant denying that the loans the subject of the indictment had been processed by him for payment; that he was in an arrangement with any alleged co-offender to defraud the Bank; and that he had acted "dishonestly or reckless" when he had processed the loans. Cross-examination of appellant
27. In cross-examination, the appellant agreed that he appreciated that the subject matter of the interview with the investigator was very serious; that he could have left the interview at any stage; and that he did not need to answer any questions.
28. With regard to a question as to whether he would "blurt out lies", he emphasised "I didn't want to lose my job". The appellant agreed that that was because he had been receiving commissions from B2B, he appreciated that he might lose his job because he was not supposed to be doing that, and that it was "against the rules". He denied, however, understanding at the time that receiving those "kickbacks" was against the law.
29. He agreed that, in the interview, he had neglected to mention Mr Hastings as having been a referrer from B2B, despite his evidence on oath being that Mr Hastings had indeed played that role.
30. He agreed that he had lied in the interview when he explained the payments as having been derived from the sale of laser machines.
31. He agreed that he lied about having spoken in the interview of invoices being available for the sale of the machines, and explained that that was because he was "worried I was going to lose my job".
32. The appellant maintained the position that the asserted "kickbacks" were merely for prioritising the work of B2B, and putting their files "ahead in the queue". Relatedly, he maintained the position that the payments were nothing to do with the fraud committed against the Bank by those who had given evidence against him.
33. The appellant confirmed that in the past he had undertaken a "real estate agent's course", which had extended over seven days.
34. It was put to the appellant that, when he had asked enquiries to be made about the driver's licence of a purported purchaser, that was in truth a tactic to see whether the Bank was "onto him", and an attempt to deflect attention from himself. The appellant denied the proposition, and maintained that it was a legitimate enquiry born of sincere concern.
35. The appellant agreed that, in his interview, he had not mentioned Mr Hastings as having been involved with B2B, and put it down to nerves, fear, and panic.
36. He agreed that he had banked the asserted kickback cheques to business accounts, as opposed to any personal account. He gave evidence that there was "no reason" for doing so.
37. Towards the end of the cross-examination, the appellant grudgingly accepted again that he had lied in parts of the interview with the investigator of the Bank, and explained that it was because he did not wish to lose his job. Re-examination of appellant
38. In re-examination, the appellant gave evidence that millions of dollars worth of loans referred by B2B were processed and approved in any one quarter.
39. He confirmed that, in the interview, he had told "partial lies", because he feared that he would lose his employment. Final address of defence counsel
40. In final address, the following matters were emphasised as disputed and undisputed by defence counsel.
41. The presumption of innocence and the criminal onus and standard of proof were firmly relied upon.
42. The credibility of a number of prosecution witnesses who had been granted immunities or discounts on sentence in return for giving evidence against the appellant was trenchantly impugned.
43. It was said that, whatever criminal enterprise may have been entered into by others, it was firmly denied that the appellant was part of an agreement with others to inflate the purchase price of the apartments in Nelson Bay.
44. The asserted paucity of evidence establishing a joint criminal enterprise in which the appellant was involved was highlighted.
45. The point was made that, despite the position and experience of the appellant, he was under significant pressure to process a lot of loans, to the advantage of the Bank. The loans in question were not, of course, the only loans that were demanding his attention. All of that was in support of the proposition that no "alarm bells" rang when the appellant processed the loans.
46. With regard to the alternative defence thesis of payments being explained as kickbacks from B2B for their loans being given priority, defence counsel said: "You might not like the fact that he was taking what is huge payments, in effect under the radar, from B2B". A little later it was said "I accept, on his behalf, that, yes, he was unethical". But the point was made that conceded unethical behaviour was not to be equated with the particular joint criminal enterprise alleged in the indictment having been proven beyond reasonable doubt.
47. It was made clear that there had never been a dispute about the fraudulent nature of the documents put forward; the question was the state of mind of the appellant when he forwarded them on within the Bank.
48. The point was made that, despite his experience, the appellant had never received specific fraud detection training.
49. The related point was that there was nothing about the similar purchase price of similar units that would have aroused the suspicion of the appellant.
50. Defence counsel made it clear that it was not accepted that the appellant "had a delegation of $600,000". And it was said that, if the Crown allegation was that each putative lender had been able to borrow towards a purchase price of $920,000 for two apartments, that was hardly consistent with the cut-off point of the autonomy granted to the appellant.
51. Defence counsel explained that the case for his client was "yes, he did trespass into what could be called unethical behaviour, and he does accept that he brought his bank into disrepute by taking these commissions or payments, or backhanders from B2B. But he wasn't involved in receiving payments in relation to these frauds".
52. The Crown theory, based on tendency reasoning that had been permitted by the trial judge, that the appellant had merely moved "from one scam to another" was rejected by defence counsel, on the basis that the appellant hardly needed to do so, bearing in mind the handsome payments he was already receiving for granting priority to B2B.
53. The behaviour of the appellant in querying some of the documentation was said to be completely inconsistent with him having been in the joint criminal enterprise, in that it drew the attention of the Bank to the very documentation with which he was said to be criminally connected.
54. With regard to the defence thesis about kickbacks, it was said "His behaviour in taking those commissions from B2B was wrong, a degree of immoral conduct. His moral compass was definitely off. There's no doubt about it". But the criminality as alleged in the indictment was firmly denied.
55. Defence counsel submitted that the evidence of persons who were witnesses in the prosecution case in return for immunity or a discount on sentence must be put to one side. So should evidence of inculpatory conversations that were disputed and completely uncorroborated.
56. As for the interview between the investigator for the Bank and the appellant, it was said "[h]e's interviewed at work and he's asked by Mr Damiano to provide answers to loans that suspected at the time were fraudulent loans. And he tells a pack of lies. He tells a pack of lies to Mr Damiano. When, really, you might think ladies and gentlemen, that there was no need for him to tell any lies. In the sense of the payments that he was getting from B2B".
57. A little later, in support of the submission that the lies told to the investigator were not because of a consciousness of guilt of the counts in the indictment, it was said "… you might accept, ladies and gentlemen, as human beings, that placed in that environment, the risk of your job, the shame on your family, and the fact that, you know, this is suspicious behaviour, which I acknowledge, on his behalf, that he panicked and he did tell lies".
58. Defence counsel engaged with the centrality to the Crown case of the timing of the loan approvals and the deposit of significant funds to accounts associated with the appellant. He submitted that, really, that was its centrepiece, without which the allegation would never have been pursued. But it was said that that chronological connection could not lead to proof beyond reasonable doubt.
59. A little later it was said of the appellant "… he's not all bad. But he just had this little sideline going on with B2B, where he was preferring their loans, because he knew - and it's unethical - that he shouldn't have taken those payments from B2B, but there he is. He said he knew it was wrong."
60. The point was emphasised that the jury could not be satisfied that the payments made to the business account of the appellant were in return for participation in the averred joint criminal enterprise, as opposed to the preferential treatment of loans. A contrast was drawn between the criminal behaviour that founded the former, as opposed to the assertedly merely "unethical behaviour" that founded the latter.
61. Defence counsel concluded by submitting that the payments were not "part of a fraud", and that the appellant certainly was not part of an agreement with others to defraud the Bank.

Determination

1. As I have said, there is no doubt that a miscarriage of justice occurred in this case. The question is whether one can be affirmatively satisfied that no substantial miscarriage of justice has actually occurred.
2. I believe that the following propositions are applicable to resolution of that question.
3. First, the statutory question is the one that must be answered, and no other: Kalbasi at [16].
4. Secondly, satisfaction to the criminal standard of the guilt of the appellant of the offences of which he was convicted is a necessary but insufficient precondition to the application of the proviso: Kalbasi at [12].
5. To express that another way: in every case in which the proviso is applied, members of this Court must be satisfied beyond reasonable doubt of the guilt of the appellant. In some cases, however, the established miscarriage of justice may be so fundamental or egregious as to mean that the proviso cannot be applied, even if guilt is established in that way.
6. Relatedly, some errors may make satisfaction of guilt beyond reasonable doubt by an intermediate appellate court impossible, because the error itself interferes with the exercise of that function: Kalbasi at [15].
7. Thirdly, the correct explanation of every element of an offence is certainly central to trial by jury. Having said that, as senior counsel accepted, it is not the law that the proviso can never be applied in a case in which an element has been wrongly explained, to the detriment of an accused. Each case will turn on its own facts, the disputed elements at trial, and the evidence: Kalbasi at [16], [55], and [60].
8. Fourthly, all of the other elements of the offences of fraud and attempting to commit fraud were correctly explained. Contrary to the submission for the appellant, it is not the case that the error with regard to knowledge of the normative question within dishonesty "infected" the understanding of any other element. As I have explained, the mental element for dishonesty was reduced from knowledge of community standards to recklessness. But that could have had no effect on the mental element for deception, because that mental element already included recklessness pursuant to statute. Nor could the misdirection have had any effect on the understanding of the jury of any of the other elements, all of which were correctly explained, and of a different nature.
9. Fifthly, that means that, having been correctly directed about the topics, the jury decided that the Crown had proven, beyond reasonable doubt, that the appellant, by way of a joint criminal (leaving aside the question of dishonesty) enterprise, obtained a benefit from the Bank, at the least being reckless as to the operative deception.
10. The jury also found beyond reasonable doubt that the acts of the appellant were dishonest according to the standards of ordinary persons.
11. I believe that all of those findings can be relied upon as sound in determining whether the wrongly explained element has given rise to a substantial miscarriage of justice, just as the verdict of guilty in Kalbasi established the correctly explained element of attempted possession. Contrary to the submission of senior counsel, I do not believe that the misdirection infected or cut across the other, completely correctly explained elements in such a way as to set them at naught.
12. Sixthly, in my opinion, disputed evidence should be put to one side by this Court in determining the question in this case, whatever one might seek to infer from the verdicts of the jury. I say that because, speaking generally, it is difficult and dangerous to make credibility assessments against an appellant based upon folders of transcript and documentary exhibits. I also say it because, in this particular case, there were obvious reasons to approach the evidence of many prosecution witnesses with great caution. Furthermore, they were firmly contradicted by the appellant on oath. Finally, although one can infer generally that the prosecution case was accepted and the defence case was rejected, it is impossible to be sure about which particular parts of the evidence the jury may have found persuasive and which not.
13. Seventhly, just as I believe that one can take into account the establishment to the satisfaction of the jury of the elements that were correctly explained, I also believe that one can take into account evidence in the trial that was either expressly conceded by the appellant and his then counsel, or (more cautiously) not disputed. That is quite consistent with the approach of the plurality in Kalbasi.
14. Turning from propositions to their application, the verdicts establish that the accused was part of a combination whereby a financial advantage was obtained from the Bank (for convenience, I shall continue to overlook the attempt count in this analysis). They also establish that the appellant was at the least reckless about the deception that was worked upon the Bank. In other words, in processing and forwarding the loan application documents, he appreciated the possibility that they were false. Finally, the verdicts also establish that the behaviour of the appellant was dishonest according to the standards of ordinary members of the community. To repeat: all of those elements were correctly explained, and the jury was satisfied of all of them beyond reasonable doubt.
15. As for conceded or undisputed evidence relevant to establishment or not of the misdirected element, the appellant was a highly experienced, indeed decorated, loans manager. He had worked as a broker before his employment at the Bank. He had undertaken a short course in real estate agency. He was in his mid to late 30s at the time of the events in question.
16. In other words, his experience of financial affairs, business acumen, and knowledge of what is generally judged to be honest and dishonest conduct can be very sharply contrasted with, for example, a young and newly-appointed bank teller starting out in his or her career.
17. The three large transfers that were received into his business account occurred within days of the settlement of three of the loans that were based on false documentation. No reason was proffered by the appellant as to why they were paid into a business account, as opposed to a personal account.
18. To recount that is not to determine a credit matter adversely to the appellant. It is simply to recognise three undisputed objective facts that play a role in determining whether a substantial miscarriage of justice has occurred.
19. Most significantly, even on his own case with regard to the transfers having been part of a kickbacks system, whereby he was paid handsomely to prioritise the loans brought to the Bank by B2B, the explanation of the appellant as to why he lied to the Bank investigator was that he well appreciated that he would lose his job over it.
20. In other words, the case for the appellant was that he was well aware that even that lesser asserted wrongdoing would be judged adversely by his employer, to the extent that he would be sacked.
21. In my opinion, the appreciation by the appellant admitted on oath that that lesser wrongdoing would be judged as very wrong by his employer - to the extent that a valuable employee would be promptly terminated - plays a very important role in determining whether the wrongly explained element must have been established, if it had been correctly explained.
22. In other words, the sworn evidence from the appellant himself about the motivation for his lies to the Bank investigator is powerful evidence of his appreciation of the standards of honesty and dishonesty of ordinary people.
23. To be clear: at the time of the interview, the appellant understood perfectly well that receiving secret commissions would lead to his employment being terminated, despite his experience and achievements. For that reason, on his own case, he was prepared to lie brazenly about it. That is powerful evidence, I consider, coming from the appellant himself on oath, as to his entirely orthodox understanding of the standards of honesty and dishonesty of ordinary people running an ordinary institution such as a bank.
24. That state of mind of the appellant, and his preparedness to act upon it, plays a significant role in my view about whether one must be satisfied of the element in question, without misdirection and properly understood.
25. Separately, neither the appellant in evidence nor his counsel in address ever brought this part of establishment of the element of dishonesty into any dispute whatsoever. To expand on that: no ancillary case was ever run to suggest for a moment that, even if it were established that the appellant had been part of a joint enterprise, either members of the community may not have regarded it as dishonest, or (more centrally) he may not have known of that judgment. As I have shown from the transcript, defence counsel always accepted readily that the scheme itself was fraudulent; the issue was whether the appellant was part of it.
26. In saying that, I have not overlooked the difficulty and artificiality in running "fallback arguments" in a trial by jury when one's primary case is a complete denial. Even so, the simple fact is that neither the wrongly explained element in particular nor the element of dishonesty generally was ever placed in discrete dispute. That is because the whole thrust of the defence case was that it could not be proven that the appellant had been part of an undoubtedly dishonest combination, and if he had advanced it, he had done so unwittingly. The defence case was never to suggest that ordinary people would not regard what had been done as dishonest, nor that the appellant may have had the slightest misapprehension about that judgment of members of the community.
27. Finally, the verdicts of the jury established, as I have said, that the appellant was at the least reckless about the deception that was being worked upon the Bank. In other words, he appreciated the real possibility that they were fraudulent, and thereby deceiving his employer. Is it conceivable that a highly experienced lending manager who received and forwarded documents with that state of mind about them could not have known that doing so was dishonest according to the standards of ordinary people? To express that more correctly, can there be any reasonable doubt about that? In my opinion, the answer must be in the negative.

Conclusion

1. In short: an essential element of the offences was incorrectly explained to the jury, to the disadvantage of the appellant.
2. I accept the concession of the Crown that that error constitutes a miscarriage of justice.
3. I also accept that Rule 4.15 of the Criminal Appeal Rules has no role to play.
4. Even so, an erroneous explanation of an element of an offence does not of itself render the proviso inapplicable. The error, the evidence, and the issues at trial must be analysed in each case.
5. Satisfaction of proof beyond reasonable doubt by an intermediate appellate court is a necessary precondition to application of the proviso. But it is sometimes insufficient, because there are some miscarriages of justice that are so fundamental as to constitute inherently a substantial miscarriage of justice that the proviso cannot "cure", or because the error itself renders such satisfaction unsound.
6. Reflecting upon the inferences that may be drawn from the underpinnings of the verdicts that are free from error, in combination with the conceded or undisputed evidence in the trial, I am satisfied beyond reasonable doubt that the appellant knew that his actions were dishonest according to the standards of members of the community. In particular, the evidence on oath of the appellant himself powerfully supports the proposition.
7. No other, more basal failing in the trial has been pointed to that should stand in the way of the proviso being applied.
8. Nor does the established error render my satisfaction of proof of that element beyond reasonable doubt unsafe or unsound.
9. I am therefore satisfied that no substantial miscarriage of justice has occurred in this case.
10. For those reasons, I propose the following order: 1. Appeal against conviction dismissed.

Endnotes

1. Criminal Code Act 1995 (Cth), Division 134 and, in particular, ss 134.1 and 134.2.
2. Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees' Union [1979] FCA 132. See also O'Brien Glass Industries Ltd v Cool & Sons Pty Ltd (1983) 77 FLR 441.
3. Bonnard v London General Omnibus (1921) 38 RPC 1; Re Bonny [1986] 2 Qd R 80; Re: Migliorini; ex parte Silk Brothers (1974) 22 FLR 49; Marc A Hammond Pty Ltd v Papa Carmine Pty Ltd (1977) 28 FLR 160; Palser v Grinling [1948] AC 291; [1948] 1 All ER 1; Chatsworth Investments Ltd v Amoco (UK) Ltd [1968] 1 Ch 665; Burford v Clifford [1932] 2 Ch 122; A.E. Terry's Motors Ltd v Rinder [1948] SASR 167; Commissioner for Superannuation v Scott, F.o. (1987) 13 FCR 404.
4. R v Lockyer (1996) 89 A Crim R 457.
5. See by way of comparison Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53; [2003] HCA 75.
6. Weiss v The Queen (2005) 224 CLR 300.
7. Weiss, supra, at [41] (Gleeson CJ, Gummow, Kirby, Hayne, Callinan and Heydon JJ).
8. Ibid at [18].
9. Cesan v The Queen (2008) 236 CLR 358.
10. Cesan, supra, [2008] HCA 52 at [124] (Hayne, Crennan and Kiefel JJ).
11. Kalbasi v Western Australia (2018) 264 CLR 62; [2018] HCA 7.
12. Ibid (Keifel CJ, Bell, Keane and Gordon JJ)
13. Ibid (Gageler J, Nettle J and Edelman JJ in separate judgments). DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 05 November 2021