FERRIS -v- THE STATE OF WESTERN AUSTRALIA [2007] WASCA 69 (27 March 2007)

Court of Appeal (WA)|2007-03-27|Before: Steytler P

1 STEYTLER P AND McLURE JA: We have had the advantage of reading the reasons for judgment of Roberts-Smith JA. We agree with him for the reasons he gives that ground 4 should be upheld. However, that has no impact on the outcome of the appeal. Further, we agree with Roberts-Smith JA that grounds of appeal 5.4, 5.5, 5.6, 5.7, 6.2 and 6.3 should be dismissed for the reasons he gives. We agree with Roberts-Smith JA that ground of appeal 5.3 should be dismissed but for different reasons. However, we disagree with Roberts-Smith JA on grounds 1, 2, 5.1, 5.2, 6.1, 6.4 and 7 of the grounds of appeal. As a result, we would dismiss the appeal.

2 Details of the charges, grounds of appeal, facts and evidence are set out in the judgment of Roberts-Smith JA and not repeated here unless required for an understanding of these reasons.

4 Each fraud count related to money received from specified investors ("the investors") in response to a proposal letter to the investors from finance broker Blackburne & Dixon Pty Ltd offering them the opportunity to participate in a pooled mortgage investment. Each fraud count involved two allegedly fraudulent representations made in the proposal letter being that (1) the moneys invested would be used for the development of a motel complex in Geraldton ("the use representation")and (2) the Geraldton land the subject of the proposed mortgage had a current value of $1.8 million ("the valuation representation"). Ground of appeal 4 relates to the valuation representation. We agree with Roberts-Smith JA that a conviction on counts 1 to 13 on the basis of the valuation representation would be unsafe and unsatisfactory.

5 Counts 14 to 25 were against the appellant and Manton only. They each charged the offence of stealing funds received with a direction, contrary to s 378(9) of the Code. The prosecution relied on s 373 of the Code which relevantly provides that where a person receives money with a direction that such money or any part thereof shall be applied to any purpose, such money is deemed to be the property of the person from whom the money was received until the direction has been complied with: see Parker v The Queen [1997] HCA 15; (1997) 186 CLR 494; Orsi v Legal Contribution Trust [1976] WAR 74. Each stealing count related to individual payments made by Elk Cove from the moneys advanced by the investors for purposes unrelated to the Geraldton project. Count 14 related to the sum of $220,000 which was lent by Elk Cove to the Rancher Property Trust and Rancher Trading Trust (both referred to as "Rancher") (entities associated with the appellant and Manton) for a purpose unrelated to the Geraldton project. Count 16 related to the sum of $10,000 paid by Elk Cove to O'Brien. It was accepted at the appeal hearing that it was open to the jury to conclude the $10,000 may have been related to the Geraldton project. All other stealing counts were for sums between $6000 and $52,000, the majority of which were paid to Rancher. The company controlling Rancher had also borrowed money through Blackburne & Dixon for property projects and was having difficulty meeting its commitments to its lenders. Of the $1,000,000 loaned to Elk Cove, $484,012 was paid to Rancher.

6 The jury found the appellant guilty of 13 counts of fraud and 10 counts of stealing (counts 15 and 17 to 25). The appellant was found not guilty on counts 14 and 16. Manton and O'Brien were acquitted on all counts.

7 Grounds of appeal 1 and 2 are related. The appellant contends that the verdicts of guilty on the fraud counts (1 to 13) and on the 10 counts of stealing by direction are unsafe and unsatisfactory because they are inconsistent with the verdict of acquittal on count 14. The inconsistency submission derives from the fact that the proposal letter was the source of both the use representation to the investors and the direction from the investors as to the purpose for which the money was provided. The appellant's contentions were as follows: (1) in order to convict the appellant of the fraud charges, the jury had to be satisfied beyond reasonable doubt that the appellant, by means of the proposal letter, represented to the investors that all the money they advanced to Elk Cove would be used for the purposes of the Geraldton project; (2) by acquitting the appellant on count 14 the jury must not have been satisfied to the requisite standard that the representation related to the use of all the money (or that the appellant did not intend the representation to relate to the use of all the money); (3) as a consequence, it was not open to the jury to convict the appellant on the fraud counts; (4) it not being open to convict the appellant on the fraud counts, it was not open to convict the appellant on any of the stealing counts.

8 Before addressing these propositions it is necessary to outline the prosecution case. There was no evidence that the appellant had seen or been advised of the terms of the proposal letter which had been drafted by O'Brien and forwarded to the investors by Blackburne & Dixon. The State case was circumstantial. The prosecution contended that the appellant advised O'Brien by means of a Schedule (ex 126) ("the Schedule") that all the money the subject of Elk Cove's loan application would be used for the Geraldton project; the appellant so advised O'Brien with the intention and expectation that O'Brien would convey that information to the investors; O'Brien conveyed that information to the investors in the proposal letter; the investors agreed to and did advance the money on the terms and for the purpose specified in the proposal letter by which means the use representation became in effect a use direction by the investors to the borrower, Elk Cove. The State case as to the appellant's knowledge of the direction from the investors also depended on circumstantial evidence. In particular, it relied on the Schedule and Blackburne & Dixon documents (ex 129 and ex 130), the contents of which were known to the appellant. It is necessary to refer to the documents on which the State relied.

9 By letter dated 14 October 1998 signed by the appellant, Elk Cove applied to Blackburne & Dixon for finance in the sum of $1,225,000 to pay out an existing mortgage of $390,000 on land owned by Elk Cove in Green Street, Geraldton. The letter referred to a second stage loan that would be required for the construction of a motel and function centre on the land. A schedule to the letter indicated that the loan was to pay out the existing mortgage with the balance to be paid to the borrower at settlement.

10 By letter dated 23 October 1998 signed by the appellant, Elk Cove provided the Schedule as to how the loan funds would be spent. The Schedule is in the following terms:

11 The proposal letter to the investors was in common form. A typical example is as follows:

"Dear Mr & Mrs Forbes

JOINT FIRST MORTGAGE $1,000,000.00

YOUR PROPORTION $15,000.00

We are pleased to offer you a joint first mortgage investment of $15,000.00 with terms and conditions as detailed below:-

BORROWER

Elk Cove Pty Ltd of 10/47 Monash Avenue, Como, a new company established for the express purpose of developing a motel complex in Geraldton. The directors are Mr LP Ferris & MR JC Manton. Both directors are financial advisors and property developers. Mr Ferris has a net worth of $3.43M and Mr Manton $3.08M. They will join in the mortgage as guarantors.

COMMENCEMENT DATE

November 17, 1998.

INTEREST RATE

9.35% (net 9% to you) payable monthly.

SECURITY

First mortgage over Lot 838 Green Street, Geraldton; a vacant lot with an area of 1.4392 hectares, zoned 'Special use - Motel'. Approval is held to construct 61 motel units and a function centre on the property which is located 5 kilometres north of Geraldton City Centre, adjacent to the North West Highway.

Valuer Mr RJ Elliott of Geraldton valued the property September 1998 at $1,800,000.00 and the completed project at $9,000,000.00. The proposed loan represents 55.5% of land value.

Elk Cove Pty Ltd purchased the property in May 1998 and were successful in having it zoned for motel purposes in August 1998. They require loan funds to payout existing mortgage of $390,000.00 and provide for costs as detailed below until all building approvals and licences are in place. They will apply for additional finance for construction and development expenses within 6 months and you will be offered the opportunity to continue your investment in the project. Interest for the 6 months term will be held in our trust account and paid direct to mortgagees each month.

17/11/98 Payout existing mortgage $390,000.00

Mortgage expenses $40,000.00

Reimbursement - valuation $5,000.00

- Consultancy fees $30,000.00

- Planning & Design fees $21,000.00

- Architectural fees $58,000.00

Carry on finance - development projects $200,000.00

$744,000.00

To be held in trust account

Interest for 6 months $50,000.00

Project consulting fees $60,000.00

Balance architect fees $30,000.00

Deposit to builder $90,000.00

Contingencies $26,000.00 $256,000.00

$1,000,000.00

The property is very well located and visible to traffic using the North West Highway. Most motel accommodation in Geraldton is only average quality. The proposed motel and function centre will provide better quality accommodation, with recreation facilities such as Spalding Park Golf Course, Tennis Club, Eadon-Clarke Sports Centre and sail boarding at Bluff Point nearby. The proposed Kingstream Steel Project port facility will also be close by.

Messrs Ferris & Manton have been clients of Blackburne & Dixon for approximately 3 years. They have arranged finance for them and their investment clients to carryout developments in the metro area and country towns, Bridgetown and Collie.

Please sign and return the enclosed duplicate of this letter as your acceptance of the investment should it meet with your approval.

Yours faithfully

BLACKBURNE & DIXON PTY LTD

(Signed)

Jason Blackburne

Investment Manager"

12 On 13 November 1998 the appellant signed, inter alia, a formal loan application and a letter to Blackburne & Dixon (ex 129) authorising the disbursement of the loan funds ("the disbursement authority") as follows:

(ii) $362,397.96 plus $73.90 to pay out the existing mortgage;

(v) $256,000 to Blackburne & Dixon's trust account.

13 Settlement of the loan was effected on 18 November 1998. By letter dated 18 November 1998 (ex 130) from Blackburne & Dixon to the appellant and Mr Manton, Blackburne & Dixon advised of the settlement and how the funds were disbursed ("the settlement letter"). The settlement letter materially provides:

"Please find outlined below statement of how funds were disbursed.

To Elk Cove Pty Ltd - Reimbursement of previous partial payout (Cheque herewith)

Held in trust for construction costs, contingencies etc.

14 The State relied on the correlation between the amounts for the specified purposes in the Schedule and those in the settlement letter, in particular the amounts of $114,000 and $206,000. The amount of $320,000 in the Schedule when added to the amount to discharge the mortgage (approx $390,000), mortgage costs (approx $40,000), the amount to be held in trust for interest ($50,000) and the $200,000 carry on finance add up to $1,000,000 which was the amount of the loan.

15 On 19 November 1998 two cheques for $114,000 and $243,238.10 (totalling $357,238.10) were paid into Elk Cove's bank account which had a credit balance of $71.87. On 20 November 1998 Elk Cove wrote three cheques, the first was for $220,000 made payable to Rancher, the second for $40,000 also made payable to Rancher and the third for $10,000 made payable to East West Realty, a business owned by O'Brien and his wife. Those cheques were the subject of counts 14, 15 and 16 respectively.

16 In a letter dated 14 December 1998 to Blackburne & Dixon the appellant requested to draw down a further $40,000 for project management and consulting fees and $30,000 for architect/drawing fees. The money was paid to Elk Cove but not applied for the stated purposes. Two further payments of $45,000 were drawn down at the appellant's request in December 1998 and January 1999 for the stated purpose of paying the builder. The money was not used for that purpose.

17 The relevant legal principles relating to inconsistency of verdicts are not in dispute. Where, as in this case, the inconsistency is said to arise from jury verdicts on different counts in the same indictment, the test is one of logic and reasonableness. The appellant has to satisfy the Court that the verdicts cannot stand together, meaning thereby that no reasonable jury who had applied their minds properly to the facts in the case could have arrived at the conclusion: MacKenzie v The Queen [1996] HCA 35; (1996) 190 CLR 348. The High Court in MacKenzie said (at CLR 367):

"[T]he respect for the function which the law assigns to juries (and the general satisfaction with their performance) have led courts to express repeatedly, in the context both of criminal and civil trials, reluctance to accept a submission that verdicts are inconsistent in the relevant sense. Thus, if there is a proper way by which the appellate court may reconcile the verdicts, allowing it to conclude that the jury performed their functions as required, that conclusion will generally be accepted. If there is some evidence to support the verdict said to be inconsistent, it is not the role of the appellate court, upon this ground, to substitute its opinion of the facts for one which was open to the jury." [references omitted]

18 The appellant contended there were only two possible ways to reconcile the acquittal on count 14 and the convictions on the fraud counts. They are that:

the jury was not satisfied that the proposal letter contained a representation that all the funds would be used for the Geraldton project;
although the proposal letter contained a representation that all the funds would be used for the Geraldton project, the jury had a doubt as to whether the appellant had instructed O'Brien that $200,000 would be used for development projects other than the Geraldton project.

19 Both alternatives relate to a contested issue at trial which was the proper construction of the item "Carry on finance - development projects $200,000.00" in the proposal letter. Mr O'Brien gave evidence, denied by the appellant, that the appellant informed Mr O'Brien that this money was to be used for other projects. Either way, according to the appellant, it was not open to convict the appellant of the fraud counts because the prosecution case was confined to a representation, known and intended by the appellant, that all the borrowed funds would be used for the Geraldton project. Before dealing with this submission it is preferable to address the respondent's attempted reconciliation of the verdicts.

20 The respondent contended that the verdict on count 14 was reconcilable with its case that the appellant had represented that all the money would be used for the Geraldton project on the basis that the interim use of the funds for an unrelated purpose until the money was required for the Geraldton project was not inconsistent with the direction. It was accepted by all parties that the jury related the sum of $220,000 in count 14 to the "carry on finance" item in the proposal letter. That amount was identified in a schedule provided to the jury as the first payment out of the borrowed funds.

21 We do not accept the respondent's attempted reconciliation. The interim use of the carry on finance for an unrelated purpose pending its use for the directed purpose was not suggested to the jury. Unlike the money held on trust, there is nothing in the formulation of the carry on finance item that suggests there would be a delay in applying the funds for the authorised purpose. In any event, there is no proper basis to distinguish the carry on finance amount from many of the other stealing charges on which the appellant was convicted.

22 Returning to the appellant's submissions. It was not suggested that there is a legal inconsistency in the verdicts. Rather, the appellant contends the inconsistency arises as a result of the "all or nothing" approach of the prosecution in its case on the use representation, namely that the proposal letter represented that all the borrowed funds would be used for the Geraldton project.

23 On our reading of the trial Judge's summing up, a reasonable jury would not have understood that they could not convict the appellant on the fraud counts if they were satisfied beyond reasonable doubt that he represented (by causing O'Brien to represent) that all the borrowed funds, save for the carry on finance of $200,000, would be used for the Geraldton project. Certainly no reasonable jury would have understood that a finding of not guilty on count 14 necessitated a finding of not guilty on the fraud counts.

24 The trial Judge referred on a number of occasions in his summing up to the State case as to the use representation. He formulated the representation in terms that "the funds loaned would be used for the purposes of the Geraldton motel development" (t 4226, t 4241). He then related the use representation to the proposal letter, in particular to the items and amounts detailed therein. He said (at t 4230):

"[T]he State says that the accused engaged in deceit or fraudulent means by stating in the [proposal] letter to the investors that Elk Cove would use the funds as detailed in page 2 of the letter - you will remember the items and the amounts set out against them - that Elk Cove would use the funds as detailed in the letter, that is, for use in relation to the Geraldton project ... "

25 The trial Judge directed the jury that if they found the appellant not guilty of fraud, they were required to return verdicts of not guilty on the stealing charges. He continued (at t 4239):

"So it's only if you convict Mr Ferris on the fraud charges, then you have to consider the stealing charges."

26 The trial Judge advised the jury of the State case on the stealing charges which was to the effect that by endorsing and returning the proposal letter and advancing the funds, the investors directed that the funds were to be used for the purposes stipulated in the proposal letter.

27 The trial Judge directed the jury that to find the appellant guilty of stealing they had to be satisfied beyond reasonable doubt, inter alia, that:

" [T]he relevant words or circumstances relied upon by the prosecution unambiguously identified or made clear the purpose to which the money the subject of the direction was to be applied."

28 This requirement was repeated in documentary form in a handout provided to the jury. The trial Judge went on to explain why, if they found the appellant not guilty on the fraud charges, they were required to find him not guilty on the stealing charges. The trial Judge said (at t 4248):

"If there was no representation or false representation as to the use of the funds, and the understanding was that the funds could be used for any purpose, then in those circumstances there could not be a stealing because the stealing also requires the direction, the direction being that the funds were only to be used for the purpose of the Geraldton project ... "

29 That statement does not convey a requirement that the jury had to be satisfied that the representation and direction had to apply to all the funds on all counts. Further it does not convey to the jury that if they were not satisfied beyond reasonable doubt of the appellant's guilt on one of the stealing charges they were required to acquit the appellant on the fraud charges or that they were required to acquit the appellant on the fraud charges even if they were satisfied beyond reasonable doubt that the appellant represented that all the borrowed funds, save for $200,000, would be used for the Geraldton project. This is particularly so in the context of the further directions of the trial Judge relating to the carry on finance item in the proposal letter. The trial Judge said (at t 4268):

"[W]hat is meant by or what may be understood by the word 'carry on finance development project, $200,000'. There was some consistency but also some conflict between the investors as to that. A number were of the view that 'development projects' meant projects to do with the development of land at Geraldton. Some accepted in cross-examination that it could refer to other matters. So again, it's a matter for you, members of the jury, to consider the evidence of the investors in that respect."

"As to the use of the funds, reference was made to the various documents. I would suggest to you, ladies and gentlemen, that the documents speak for themselves. The expression 'carry-on finance development projects,' did the investors rely on this phrase? Again, that's a matter for you. Mr Ferris's evidence was that at all times some of the money was going to be used for purposes other than Geraldton but for other purposes. The point was made of the difference between the singular project and the plural projects. That's a matter for you."

31 The evidence of the investors was that they understood from the proposal letter that the money was to be used for the Geraldton project. What they understood the proposal letter to mean was relevant to the objective meaning of the use representation conveyed by the proposal letter as well as to the investors' reliance on the alleged fraudulent misrepresentation. Whether the use representation and direction excluded the carry on finance item in the proposal letter was a real issue at trial. The jury would not have understood from the trial Judge's directions that if they had any doubt on that issue they would be required to acquit on the fraud charges and (following the trial Judge's direction) on all the stealing charges.

32 The jury's verdict also has to be seen in the light of the statement of the prosecution in closing. The State said:

"I have, at this stage, put to you quite clearly what the prosecution case is, that is that the representation that was made to the investors was that the whole of the money would be used for the motel purpose. We don't see, with respect, why you would have a reasonable doubt about that $200,000 but if you did and if you had a doubt about what representation was made to the investors about that $200,000 so that the direction that was implied excluded that $200,000 - I'm just putting it as a hypothetical because I don't know at this stage what my learned friends will be saying to you necessarily about that, but if there was a reasonable doubt about that, but you were satisfied that the rest of the money was certainly advanced with a direction that it be used for the motel purposes, then what you have is a situation on 20 November, according to the flowchart, where the first amount that comes out, count 14, is for $220,000. So already we are over and above that $200,000.

So even in relation to that charge, part of the money, if you had the reasonable doubt about that 200, part of that payment was already above the 200 so there was a theft of $20,000 in that amount if you had a reasonable doubt about the 200."

33 The trial Judge did not direct the jury that this statement was wrong or that the prosecution case was all or nothing insofar as the use representation and direction was concerned. Further, as the jury were not given the option of entering a verdict of guilty in relation to an amount less than the amount stated in count 14 ($220,000), the only verdict open to them was one of not guilty on that count.

34 The next question is whether it was open to the jury to convict on the fraud and stealing charges if they were satisfied beyond reasonable doubt that the representation and direction was to the effect that all the borrowed funds, save for $200,000, was to be used for the Geraldton project. It was not contended (and it is not the case) that a representation and direction to that effect has any relevant impact, evidentiary or otherwise, on the other elements of the fraud and stealing offences. However, the appellant contended (and the respondent appears to accept) that the trial Judge had ruled that the State case had to be confined to a representation that all the borrowed funds would be used for the Geraldton project. We are not persuaded that is correct.

35 The trial Judge's ruling relates to the issue of whether, if the jury found the appellant not guilty on the fraud counts, they could find the appellant guilty on the stealing counts. The State contended that they could on the basis that the appellant's knowledge of the investors' direction was based, not on an awareness of the terms of the proposal letter, but on the combined effect of the Schedule (ex 126), the disbursement authority (ex 129) and the settlement letter (ex 130). On this basis the direction was confined to the common elements/purposes in the proposal letter and the Schedule, in particular the amount of $114,000 and $206,000 in the Schedule. The trial Judge rejected the submission that the State could rely on the information in the Schedule to limit the scope of liability in relation to the stealing charge.

36 The trial Judge's ruling is set out in full in the reasons of Roberts-Smith JA. His focus was on the content of the implied direction to Elk Cove (and the appellant) and appears to admit of no ambiguity in the proposal letter. He said that to suggest that only particular amounts of the borrowed funds may have been impressed with the direction "is not consistent with the general tenor or purport of the letter to investors". He accepted a submission that the alternative path on the stealing charges was not open. Moreover, the trial Judge was not asked to consider and did not rule on the proposition that a verdict of not guilty on one of the stealing charges was inconsistent with a verdict of guilty on all the other charges or that it was not open to the jury to find beyond reasonable doubt that the proposal letter represented that all money save for the sum of $200,000 would be used for the Geraldton project. Having regard to the issues in and conduct of the case, there was no unfairness or prejudice to the appellant in the trial Judge leaving that case to the jury. Even if the trial Judge's ruling can be interpreted as confining the prosecution case in the way contended for by the appellant, he did not so direct the jury and the omission does not give rise to a miscarriage of justice. Taking into account the evidence and issues at trial together with the directions given by the trial Judge, the jury's verdicts were open and are reasonable and logical.

37 We are satisfied that the verdicts of guilty on the fraud and stealing charges are not inconsistent with the verdict of not guilty on count 14. We would dismiss grounds of appeal 1 and 2. It follows from our reasons that we agree with the appellant that the trial Judge did not direct the jury that the prosecution was required to prove beyond reasonable doubt that the proposal letter contained a representation that all moneys lent would be used for the Geraldton project and that a representation of an amount less than all was insufficient to sustain a conviction. However, for the reasons given we are satisfied that the trial Judge was not required to give such a direction. Accordingly, we would dismiss ground of appeal 5.3.

38 The appellant contends the trial Judge erred in directing the jury, in effect, that the evidence given by the co-accused that was favourable to the appellant should be looked at critically and in light of the fact that they were accused persons together.

"As regards the evidence of Mr Ferris and Mr O'Brien who came to the witness box and gave evidence before you, the sworn evidence given in court by both accused is evidence available for you to use and you may use that evidence against any other accused; that is, you can use Mr O'Brien's evidence against Mr Ferris and/or Mr Manton so far as it may be relevant to the charges against them ... When I say against another accused, it cuts both ways. It may be favourable - the evidence may be favourable to the other accused and so you can use it, or it may be adverse to another accused.

However, it's a matter of commonsense that you should look carefully and critically at their evidence insofar as it may touch upon another accused. No matter what that evidence is, it's the sort of evidence in relation to which you must bear in mind that here we have a situation where three people are charged with all or some of these offences and the evidence they give or that Mr Ferris and Mr O'Brien have given from the witness box about each other is evidence you should look at critically and always in the light of the fact that they are accused persons together."

40 On a fair reading of the direction, the jury were directed that evidence given by the co-accused about each other, both adverse and favourable, should be looked at critically. We are not persuaded that the direction would lead the jury to believe that the warning attached to the appellant's evidence in his own case, save where it was about O'Brien or Manton. The direction does not offend against the prohibition in Robinson v The Queen (No 2) [1991] HCA 38; (1991) 180 CLR 531 at 535 - 536 against giving a direction to evaluate the evidence of an accused on the basis of the accused's interest in the outcome of the case. The direction was given because, on the State case, the co-accused were accomplices. In situations where co-accused are accomplices, considerable latitude is given to trial judges to address the situation in a manner adapted to the competing interests in the particular case: Webb & Hay v The Queen [1994] HCA 30; (1994) 181 CLR 41 at 94. If a warning is given, the proper course is to confine the warning to unfavourable evidence given by a co-accused. We do not accept the respondent's submission that the trial Judge's remarks were confined to the evidence of a co-accused that was unfavourable to the appellant. However, we are not satisfied that the direction occasioned any prejudice to the appellant. It is clear from the second paragraph of the direction that it is confined to O'Brien's evidence about the appellant. The most

significant aspects of O'Brien's evidence relating to the appellant were indeed unfavourable. First, the appellant's evidence was that the Schedule was not attached to the letter he signed dated 23 October 1998. The appellant said he enclosed the schedule that had been attached to his earlier letter. O'Brien's evidence was that he telephoned the appellant and discussed with him the need to identify the purposes for which the money was to be used and that subsequently he received the letter from the appellant with the Schedule. Secondly, the appellant gave evidence that the disbursement letter (ex 129) was blank when he signed it. O'Brien's evidence was that the figures were on the document and he discussed them with the appellant at the time. Thirdly, O'Brien gave evidence that the appellant informed him that $200,000 was to be used for other projects. The appellant denied such a discussion, denied any knowledge of the Schedule and defended all the charges on the basis that he understood the balance of the loan funds (after paying out the prior mortgagee and costs associated with the transaction) was for Elk Cove's use without any restriction or limitation as to purpose. Fourthly, there was evidence from an investor, supported by O'Brien, that at a meeting on 16 September 1999 the appellant told the investors that the money had been used for architect's fees, building fees and other proper purposes. The appellant's evidence was that he said the money "will be used" for those purposes. Finally, O'Brien gave evidence that he told all prospective borrowers, including the appellant, about the information that would be given to investors in a proposal letter, including what the money would be used for. Apart from matters relating to the absence of any common enterprise and the valuation representation, we are unaware of any other favourable evidence from O'Brien about the appellant.

41 There are obvious logical difficulties with telling a jury to take a different approach to different aspects of a witness' evidence. Where as in this case the prejudicial evidence was both substantial and significant, we are not persuaded the failure to confine the direction to unfavourable evidence gave rise to any miscarriage of justice. No redirection was sought by the appellant's counsel. We would dismiss this ground. The other grounds on which the appellant relies in support of his claim that the verdicts of guilty on the fraud counts are unsafe and unsatisfactory are dealt with by Roberts-Smith JA.

43 ROBERTS-SMITH JA: Cases alleging fraud involving the activities of finance brokers have been a feature of forensic activity in Western Australia in recent years. This is another such case.

44 The applicant ("Ferris"), to whom I shall refer as "the appellant" and two other men, John Charles Manton ("Manton") and Kenneth Francis O'Brien ("O'Brien") stood trial on indictment in the District Court at Perth before Groves DCJ and a jury from 9 May to 8 July 2005.

45 There were 25 counts on the indictment. Counts 1 to 13 were against each of the accused. They each charged an offence of obtaining a benefit for Elk Cove Pty Ltd ("Elk Cove") by deceit or fraudulent means, with intent to defraud, contrary to s 409(1)(c) of the Criminal Code (WA) ("the Code").

46 Counts 14 to 25 were against the appellant and Manton only. They each charged an offence of stealing funds received under direction, contrary to s 378(9) of the Code. The moneys allegedly stolen were those which were alleged to have been obtained fraudulently, the subject of the fraud counts.

47 A concise summary of the prosecution case was given by the State prosecutor at the commencement of his opening address to the jury:

"... this case is about a dishonest scheme by the accused Lawrence Peter Ferris and John Charles Manton to raise $1 million in 1998 on the pretext that it would all go to the development of a motel complex in Geraldton, whereas in fact they intended to use the money to inject funds into other businesses they operated in order to keep them afloat because at the time they found themselves in financial difficulty.

The accused Kenneth Francis O'Brien assisted them to give effect to the scheme as a finance broker, who put the proposal together and invited investors to contribute money into the scheme. In doing so, they pretended to these investors that the value of the property was such that it would provide a good security for the money that they were borrowing and they pretended that the money would be used to develop this motel complex in Geraldton, whereas in fact, as I say, they intended to use it for other purposes.

The case is also about the way in which the accused Lawrence Peter Ferris and John Charles Manton then went about using the money that they had obtained in that way from a number of investors - the bulk of the $1 million that was raised ..."

48 On 8 July 2005, the jury returned verdicts against the appellant of guilty in respect of the 13 counts of fraud (counts 1 to 13) and 10 counts of stealing (counts 15 and 17 to 25). He was found not guilty on counts 14 and 16.

49 Manton was found not guilty on all 25 counts. O'Brien, who had been charged only with counts 1 to 13, was found not guilty on all of those counts.

50 The appellant's appeal notice was filed on 26 July 2005. His Appellant's Case was filed on 30 August 2005. That had one ground of appeal which was in effect, that the verdicts were unsafe and unreasonable having regard to the evidence.

51 On 2 November 2005, Wheeler JA ordered that the appellant have until 17 November 2005 to file an amended Appellant's Case. That was filed on 15 November, but all it contained was what were described as "supplementary submissions".

52 By s 27(1) of the Criminal Appeals Act 2004 (WA), the leave of the Court of Appeal is required for each ground of appeal. Section 27(2) stipulates that the Court must not give leave to appeal on a ground unless satisfied that ground has a reasonable prospect of succeeding. The effect and proper application of that statutory test was explained in Samuels v Western Australia [2005] WASCA 193; (2005) 30 WAR 473 at [50] - [61].

53 On 8 December 2005, Steytler P ordered that the application for leave be heard together with the appeal.

54 The application and the appeal (which I shall refer to compendiously as "the appeal") were listed for hearing on 20 June 2006; however, that date was subsequently vacated by consent on the appellant's application for leave to amend his grounds of appeal. Various orders were made and the grounds of appeal went through various substantial permutations, even up to the eventual hearing of the appeal on 6 December 2006. On that occasion we gave the appellant leave to again substitute new grounds of appeal. They had actually been filed on 22 August 2006, described as "supplementary grounds of appeal".

55 Ground 1 is that the verdicts of guilty on counts 1 to 13 are unsafe and unsatisfactory and are inconsistent with the verdicts of acquittal on counts 14 and 16.

56 Ground 2 is that the verdicts of guilty on the 10 counts of stealing by direction are unsafe and unsatisfactory in that they are inconsistent with the verdicts of acquittal on counts 14 and 16.

58 Ground 4 is that the verdicts in respect of the fraud counts (1 to 13) are unsafe and unsatisfactory insofar as they were based upon a conclusion the appellant was responsible for a false representation of valuation contained in the proposal letter sent to potential investors.

59 Ground 5 complains that the verdicts of guilty on counts 1 to 13 are unsafe and unsatisfactory, unreasonable, and have occasioned a miscarriage of justice. The particulars assert various errors in the trial Judge's summing up, as well as inconsistency with O'Brien's acquittal on counts 1 to 13.

60 Ground 6 is that the verdicts of guilty on counts 15 and 17 to 25 inclusive are unsafe and unsatisfactory, unreasonable and have occasioned a miscarriage of justice. This is particularised primarily in respect of the trial Judge's directions about stealing by direction, and whether or not the evidence could support a critical inference relied upon by the prosecution.

61 Ground 7 is a "round up" ground. It asserts that the cumulative or aggregate errors of law, misdirections and failures to direct or adequately direct, caused the trial to miscarry.

62 In 1998 and 1999 the appellant and Manton were directors of a number of companies and controlled various trusts. These included Rancher Enterprises Pty Ltd ("Rancher Enterprises"), a company which controlled Rancher Property Trust and Rancher Trading Trust.

63 At that time, O'Brien was the general manager of finance broking firm Blackburne & Dixon Pty Ltd ("Blackburne and Dixon"). Blackburne and Dixon would lend money mainly for the development of real estate projects and would bring together persons who wanted to borrow money with those who had money to invest and were looking for a good return in the way of interest. The loans were usually secured by a first mortgage over the particular property.

64 O'Brien's role as general manager at Blackburne and Dixon included obtaining the necessary information regarding the loan application from the borrowers and drafting a proposal letter to send to potential investors setting out relevant information in relation to the loan and asking if they wanted to invest. Once all the necessary information regarding the application had been obtained, the application would be presented at a Monday morning meeting at Blackburne and Dixon where O'Brien, Ms Kaye Blackburne (who was the managing director, and the investment manager), were present. O'Brien would make a recommendation regarding the application and it would either be approved or rejected.

65 Once a loan was approved and settlement had occurred the interest payable on the loan was usually retained in a trust account along with the balance of the loan after any reimbursements had been made for costs already incurred and paid by the borrower. When loan funds were required by the borrower from the trust account, a requisition would be made specifying the amount required and the purpose for which it was required. Once that was approved, the funds would be drawn down and paid to the borrower by cheque from the trust account.

66 Interest payments would be drawn from the trust account and paid monthly to the investors.

67 In April 1998 the appellant and Manton, as directors of Markets International Pty Ltd ("Markets International") entered into a contract to purchase Lot 838 Green Street, Geraldton, ("the Geraldton land" or "the land") for $380,000 from Minaby Pty Ltd ("Minaby P/L) with vendor finance to be provided by Minaby P/L. The directors of Minaby P/L were Gary and Lorraine Auguston.

68 On 1 May 1998 the appellant and Manton purchased Elk Cove, a shelf company, and became directors. The appellant's evidence was that their practice was to have a separate company to manage each project. The sole purpose of Elk Cove was to manage the Geraldton motel project. So it was that Elk Cove was substituted as the purchaser of the Geraldton land.

69 The background to this needs to be briefly explored.

70 The Geraldton land was a vacant block, with some scrub on it. Gary Auguston was a retired fisherman, who had planned to build a motel complex on the land. When Minaby P/L acquired it, the land was zoned "residential". In 1994, Mr Auguston employed an architect, George Milankov ("Milankov") to prepare a sketch plan for the motel. Milankov did that. Mr Auguston submitted it to the Geraldton council with an application for approval for construction of the motel, in March 1995. That approval was given, subject to certain conditions, in May 1995. In September of that year the council also gave approval for the land to be rezoned "special use - motel", in accordance with the sketch plan.

71 In the meantime, Mr Auguston had come to the view the project was too expensive for him to complete, so he decided to sell the land. However, his efforts to do so in 1995 were unsuccessful and he took it off the market. He tried again in early 1997. The land was listed for sale at $420,000. There was not a great deal of interest until the selling agent was approached by a man by the name of Les Currie ("Currie") who worked for a company called Century 21 (Commercial) WA, in which the appellant and Manton had an interest. Currie told the agent he was acting for Markets International. Following negotiations, Minaby P/L agreed to sell the land to Markets International for $380,000.

72 Settlement of the purchase of the Geraldton land by Elk Cove took place on 26 May 1998.

73 Elk Cove paid a deposit of $20,000 with the remaining $360,000 of the purchase price being advanced by Minaby P/L by way of vendor finance, secured by a mortgage over the land. Interest was of course payable on that loan.

74 Also in May 1998 the appellant contacted one Edwin Harold Spragg by telephone and asked if he was interested in investing in the development of a motel on the Geraldton land. The appellant had previously met Spragg through Manton. Spragg orally agreed to invest and in May or June 1998 he signed a Joint Venture Agreement as director of Glenorchy Holdings Pty Ltd ("Glenorchy") agreeing to invest the net proceeds from the sale of wool and the proceeds of a term deposit for 12 to 24 months, with the return being 10 per cent of the net profit. The agreement contained a clause stating that the joint venturer agreed to the owner using the consideration at his will.

75 The appellant also orally agreed to pay Spragg's taxation bill of approximately $57,000; however that did not occur.

76 On settlement, Elk Cove had received the plans prepared by Milankov. In June 1998, a Paul Cunningham contacted Milankov on behalf of Elk Cove to discuss the motel project. Cunningham was employed by Annette Lawrence & Associates. That was a project management consultancy business operated by the appellant and his wife. Milankov had a meeting with Cunningham and the appellant, the result of which was a decision that the sketch plans would be amended to include, amongst other things, a function centre and be resubmitted, together with working drawings, to the council for approval. Milankov, in turn, engaged various consultants in relation to plumbing and other aspects of the project.

77 The amended plans and working drawings were submitted to council in July 1998. They were approved, again subject to conditions, in August 1998.

78 In July 1998 Spragg forwarded a cheque for the proceeds from the sale of the wool and the term deposit proceeds to Elk Cove.

79 By late 1998 the total borrowings of the companies and trusts controlled by the appellant and Manton were in the region of $9 million and the loans (or most of them) were about to expire. In particular, Rancher Property Trust had a large loan about to be due for repayment, but no money to pay it. At the time of making the application to Blackburne and Dixon, Rancher Enterprises held five loans with Blackburne and Dixon totalling $4,369,000 with monthly interest payments due at rates varying between 9.35 per cent and 10.25 per cent.

80 On 14 October 1998 the appellant sent an application for finance to O'Brien at Blackburne and Dixon applying for a 12 month mortgage loan for $1,225,000 on the security of the Geraldton land (exhibit 125) ("the loan application"). The loan application was made to finance a project to build a motel and function centre on that land. The cover letter stated that all applications for approvals were in place, that a second stage loan would be required for construction of the motel and that construction was expected to commence on 1 February 1999.

81 The cover letter was signed by the appellant and the loan application was put together by him.

82 The supporting documents were identified in the application letter and relevantly included:

(a) licensed valuations from Robert Elliott and Ron O'Connor which both valued the land on an "on completion" basis;

(d) a statement of assets and liabilities for Elk Cove dated 12 October 1998;

(e) a settlement schedule for loan of $1.25 million.

83 The settlement schedule attached to the letter showed the amount of loan to be $1,225,000 of which $390,000 would be used to pay out the existing mortgage (that is to pay out Minaby P/L) and the balance, net of fees and charges, was to be paid to the borrower on settlement. The application said that a second stage loan would be required for the actual construction of the motel units.

84 The prosecution case was that it was clear the appellant was seeking $1.2 million to progress the Geraldton motel project to the point of actual construction, when further finance would be sought.

85 The market appraisal from Century 21 set out projected prices for the various units and the function centre in the proposed complex. They stated that the projected prices were in what they believed to be a "realistic achievable range on completion".

86 The Elliott valuation valued the proposed motel and function centre on a "fully completed and operative basis" at $9 million. Of course that was entirely hypothetical because the land was still vacant. Elliott opined the land content, on a fully completed and functional basis, would have a value of $1.8 million. That was the figure that was later relied upon in the proposal letter which went to the investors.

87 The O'Connor valuation came in at an appreciably lower figure and was disregarded in what was put to the investors.

88 The statements of assets and liabilities for Elk Cove stated that the value of the Geraldton land was $2 million. The special purpose financial report prepared by Elk Cove's accountant, Ray Simpson, which relied upon information provided by the appellant and Manton, also showed the property as a current asset having a value of $2 million. It did make clear that the accountant was relying on a so-called "directors' revaluation" of the property. The appellant had specifically instructed Simpson to revalue the property because to that point the only indication of value was the price Elk Cove had paid for the purchase of it. The State case was that this was a misrepresentation because as a current asset, the Geraldton land was worth only what it could be sold for, and the latest indication of that was the $380,000 Elk Cove had paid for it.

89 On 20 October 1998 the appellant, Manton, Cunningham and Spragg went to Geraldton to view the property. The appellant did not advise Spragg of the application for finance that had been made to Blackburne and Dixon.

90 Between 14 October 1998 and 23 October 1998, O'Brien requested from the appellant by telephone a schedule of disbursements as to how the loan funds would be spent. As part of his duties as general manager of Blackburne and Dixon, O'Brien explained to borrowers that proposal letters were sent to prospective investors and that the letters would contain information as to what the loan funds would be used for. O'Brien had explained those matters to the appellant.

91 A letter dated 23 October 1998 signed by the appellant and an attached schedule of disbursements (exhibit 126) ("the Schedule") was sent to O'Brien at Blackburne and Dixon.

92 The letter simply said "Please find enclosed schedule as requested". The attached schedule set out the following details:

93 (I note the addition is incorrect - the correct "on funding total" should be $114,755.00).

94 In cross-examination the appellant confirmed that he signed the letter but said he could not remember the schedule and had not prepared it. He said he had nothing to do with that schedule and suggested it may have been prepared by Cunningham, using information from a feasibility study they had done on the project. The appellant did acknowledge that the information in the schedule was correct, but adhered to his position that he knew nothing about it at the time. He agreed with the prosecutor's suggestion that the schedule was inconsistent with his earlier evidence that he had expected to receive the entire balance of the loan moneys after the Minaby P/L mortgage had been paid out.

95 The loan application was approved by Blackburne and Dixon for $1,000,000 for a period of 6 months.

96 O'Brien drafted a proposal letter ("the proposal letter") regarding the loan application which letter was typed and sent to prospective investors in late October and early November 1998. The majority of the letters were signed by Jason Blackburne, the investment manager at Blackburne and Dixon, with one being signed by O'Brien. Two copies of the letter were sent to prospective investors and one copy had an indorsement on the front page stating:

"I/We hereby accept the investment below and appoint Blackburne & Dixon Pty Ltd as my/our agent to administer all matters relating to the mortgage... "

97 The indorsement also indicated whether funds already held in trust would be used or whether a cheque was attached and provided a place for signing and dating. The substance of the letters was in common form. A typical example is that addressed to Mr and Mrs Forbes dated 4 November 1998 (exhibit 47B):

"Dear Mr & Mrs Forbes

JOINT FIRST MORTGAGE $1,000,000.00

YOUR PROPORTION $15,000.00

We are pleased to offer you a joint first mortgage investment of $15,000.00 with terms and conditions as detailed below:-

BORROWER

Elk Cove Pty Ltd of 10/47 Monash Avenue, Como, a new company established for the express purpose of developing a motel complex in Geraldton. The directors are Mr LP Ferris & MR JC Manton. Both directors are financial advisors and property developers. Mr Ferris has a net worth of $3.43M and Mr Manton $3.08M. They will join in the mortgage as guarantors.

AMOUNT

$1,000,000.00.

TERM

6 months.

COMMENCEMENT DATE

November 17, 1998.

INTEREST RATE

9.35% (net 9% to you) payable monthly.

SECURITY

First mortgage over Lot 838 Green Street, Geraldton; a vacant lot with an area of 1.4392 hectares, zoned 'Special use - Motel'. Approval is held to construct 61 motel units and a function centre on the property which is located 5 kilometres north of Geraldton City Centre, adjacent to the North West Highway.

Valuer Mr RJ Elliott of Geraldton valued the property September 1998 at $1,800,000.00 and the completed project at $9,000,000.00. The proposed loan represents 55.5% of land value.

Elk Cove Pty Ltd purchased the property in May 1998 and were successful in having it zoned for motel purposes in August 1998. They require loan funds to payout existing mortgage of $390,000.00 and provide for costs as detailed below until all building approvals and licences are in place. They will apply for additional finance for construction and development expenses within 6 months and you will be offered the opportunity to continue your investment in the project. Interest for the 6 months term will be held in our trust account and paid direct to mortgagees each month.

17/11/98 Payout existing mortgage $390,000.00

Mortgage expenses $40,000.00

Reimbursement - valuation $5,000.00

- Consultancy fees $30,000.00

- Planning & Design Fees $21,000.00

- Architectural fees $58,000.00

Carry on finance - development projects $200,000.00

$744,000.00

To be held in trust account

Interest for 6 months $50,000.00

Project consulting fees $60,000.00

Balance architect fees $30,000.00

Deposit to builder $90,000.00

Contingencies $26,000.00 $256,000.00

$1,000,000.00

The property is very well located and visible to traffic using the North West Highway. Most motel accommodation in Geraldton is only average quality. The proposed motel and function centre will provide better quality accommodation, with recreation facilities such as Spalding Park Golf Course, Tennis Club, Eadon-Clarke Sports Centre and sail boarding at Bluff Point nearby. The proposed Kingstream Steel Project port facility will also be close by.

Messrs Ferris & Manton have been clients of Blackburne & Dixon for approximately 3 years. They have arranged finance for them and their investment clients to carryout developments in the metro area and country towns, Bridgetown and Collie.

Please sign and return the enclosed duplicate of this letter as your acceptance of the investment should it meet with your approval.

Yours faithfully

BLACKBURNE & DIXON PTY LTD

(Signed)

Jason Blackburne

Investment Manager"

98 It was the State case that the funds were being sought solely for the purpose of developing a motel complex in Geraldton on the land and that purpose was conveyed by O'Brien in the proposal letter on the basis of what he had been told by the appellant and Manton. The State particularly emphasised that the proposal letter did not mention the Elliott valuation was the hypothetical value of the land content once the project was completed. The point was also made that the statement that Elk Cove purchased the property in 1998 and "were [sic was] successful in having it zoned for motel purposes in August 1998", was not true - that approval had been obtained by Minaby P/L in 1995. However, the State prosecutor said the State was not in a position to say the appellant or Manton had anything to do with that particular representation. Importantly though, the State case was that what the proposal letter said about the loan funds being required to pay out the existing mortgage of $390,000 and provide for costs as detailed in the letter until all building approvals and licences were in place, was a clear representation to investors that the money would be used solely for the motel development project. That included, the State contended, the $200,000 figure designated as "Carry on finance - development projects".

99 Between 14 October 1998 and 18 November 1998 a total of $1,000,000 was provided by investors to Blackburne and Dixon in response to the proposal letters. The 13 fraud charges relate to $840,000 provided by 13 different investors. Each of those investors signed the indorsement on the copy of the proposal letter and returned it to Blackburne and Dixon.

100 On 13 November 1998 the following documents were signed by the appellant and Manton in relation to the loan application:

(a) A formal Application for Mortgage Advance form.

(ii) $362,397.96 plus $73.90 to payout existing mortgage;

(d) A declaration stating that the money was to be used "wholly or predominantly for business or investment purposes and not for personal, domestic or household purposes". (The declaration had been prepared by Lawton Gillon, solicitors for Blackburne and Dixon and was a standard document prepared to overcome the provisions of the Consumer Credit Code).

101 The loan funds were paid into the Blackburne and Dixon trust account and settlement was effected on 18 November 1998. A letter was sent to each of the investors confirming their investment and advising that settlement had taken place. A letter was also sent to the appellant and Manton at Elk Cove confirming that settlement had occurred and indicating how the funds had been disbursed including $114,000 for "reimbursement of previous partial payout", $243,238.10 as "balance of advance" and $206,000 "held in trust for construction costs, contingencies etc ". Attached to that letter were Blackburne and Dixon cheques made payable to Elk Cove for $243,238.10 and $114,000.

102 On 20 November 1998 the following cheques were drawn on the Elk Cove bank account:

(a) $220,000 made payable to Rancher Property Trust;

(b) $40,000 made payable to Rancher Property Trust with an accompanying loan agreement; and

(c) $10,000 made payable to East West Realty, a business owned and operated by O'Brien and his wife in relation to which an invoice was signed by O'Brien stating it was payment for commission owing in relation to the Geraldton land.

103 On 20 November 1998 two cheques were drawn on the Rancher Property Trust bank account. The first was $100,000 made payable to Century 21, and the second was $40,000, made payable to LP Ferris Family Trust.

104 On 3 December 1998, two further cheques were drawn on the Elk Cove bank account. One was for $25,000 made payable to T Warwick. This was payment for a racehorse purchased by the appellant and Manton and was described on the cheque butt as "drawings" of $12,500 each. The other was for $6,000 made payable to Rancher Property Trust.

105 On 3 December 1998 a cheque was drawn on the Rancher Property Trust bank account for $1,400 made payable to LP and MS Ferris. "LP Ferris" is the appellant and MS Ferris is his brother.

106 On 14 December 1998 the appellant wrote to O'Brien requesting a drawdown of $70,000 of the loan funds being $40,000 for project management and consulting fees and $30,000 for architect/drawing fees, asking that the cheque be made payable to Elk Cove Pty Ltd.

107 On 14 December 1998, $70,000 was drawn from the Blackburne and Dixon trust account by a cheque to Elk Cove. On the same day, Elk Cove paid $25,000 to Rancher Property Trust by cheque.

108 Elk Cove paid $20,000 to Rancher Property Trust by cheque on 18 December and a further $52,000 by cheque on 22 December 1998.

109 On 23 December 1998 a drawdown of $45,000 for the builder's deposit was requested from Blackburne and Dixon in a letter to O'Brien signed by Cunningham and asked that the cheque be made payable to Elk Cove. A letter dated 23 December 1998 was provided by the builder, Allbuild Construction Pty Ltd ("Allbuild") signed by Dennis Peach, the owner, to the appellant requesting $45,000 being the first half of the deposit.

110 On 24 December 1998 $45,000 was drawn from the Blackburne and Dixon trust account by a cheque to Elk Cove.

111 On 7 January 1999 Elk Cove paid $36,006 to Rancher Trading Trust by cheque. On 7 January 1999, Elk Cove paid $ 10,000 to the Shire of Swan by cheque (exhibits 174C, 175). That payment was for expenses incurred in relation to Indian Pacific Property Traders, a business operated by Manton and the appellant's brother Mark Ferris (exhibit 247B).

112 On 22 January 1999 a drawdown of $45,000 for the builder's deposit was requested from Blackburne and Dixon in a letter to O'Brien signed by Cunningham and which asked that the cheque be made payable to Elk Cove. The appellant wrote on that letter "Please pay as requested" and signed the letter. A letter dated 20 January 1999 was provided by the builder, Allbuild, signed by Peach, to the appellant requesting $45,000 being the balance of the deposit and stating that work would commence in the first week of February.

113 On 22 January 1999, $45,000 was drawn from the Blackburne and Dixon trust account by a cheque to Allbuild. That cheque was paid into the Elk Cove account on 22 January 1999.

114 On 25 January 1999, Elk Cove paid $40,006 to Rancher Trading Trust by cheque. On 2 February 1999, the appellant requested in a letter to O'Brien, a drawdown of $46,000 of the loan funds being $20,000 for project management and consulting fees and $26,000 for contingency fees. Attached to that letter was an invoice from Annette Lawrence & Associates for $20,000.

115 On 2 February 1999, $46,000 was drawn from the Blackburne and Dixon trust account by a cheque to Elk Cove.

116 On 3 February 1999, Elk Cove paid $45,000 to Rancher Property Trust by cheque.

117 The Rancher Property Trust bank account had a debit balance between 30 October 1998 and 9 November 1998, between 17 and 19 November 1998, between 26 November 1998 and 1 December 1998, on 3 December 1998, between 8 and 14 December 1998, between 15 and 22 December 1998, between 24 December 1998 and 28 January 1999, between 29 January 1999 and 1 February 1999 and from 3 to 17 February 1999.

118 The Rancher Trading Trust bank account had a debit balance between 2 November 1998 and 22 December 1998, between 24 December 1998 and 22 January 1999 and between 2 and 3 February 1999.

119 The architect Milankov and other consultants performed preliminary work in relation to architectural, plumbing, hydraulics, electrical and engineering matters. The work related to the proposed development and was carried out between November 1998 and January 1999. The consultants provided invoices in relation to that work, but none of them, including Milankov, was paid.

120 In May 1999 the loan went into default and it became apparent that Elk Cove was not in a position to repay the principal to the investors.

121 The appellant sent letters to Milankov dated 11 June and 18 August 1999 confirming the arrangement that the consultants would be paid from the first drawdown of finance. Milankov was not advised of the finance obtained through Blackburne and Dixon.

122 Meetings were conducted at the office of Blackburne and Dixon in relation to the loan on 16 September 1999, 13 October 1999 and 19 November 1999 at which persons present included the appellant and Manton, a number of the investors, O'Brien, Jason Blackburne and for two of the meetings, Ms Kaye Blackburne. The minutes of the meeting on 16 September record that the appellant was asked by an investor where all the money had gone and that his reply was that "[t]he money was used for architect's fees, building fees and purchase". In his evidence the appellant said the minutes were inaccurate and that he had said the money "will be used ...".

123 In all, only approximately $471,000 of the $1 million borrowed was applied by Elk Cove to the Geraldton motel project.

125 The stealing counts on the indictment related to all of the funds received by Elk Cove from the investors via Blackburne and Dixon other than a $20,000 payment to Annette Lawrence and Associates and some other minor expenses.

126 The offence of stealing is created by s 371(1) of the Criminal Code which provides that a person who fraudulently takes anything capable of being stolen, or fraudulently converts to his own use or of the use of any other person, any property, is said to steal that thing or that property.

127 By subs (2) a person is said to do so fraudulently if he does so with an intent to permanently deprive the owner of a thing or property of it or any part of it (s 371(2)(a)) or in the case of money, an intent to use it at the will of the person who takes or converts it although he may intend to afterwards repay the amount to the owner (s 371(2)(f)).

128 The State here relied on s 373 of the Code, which relevantly provides:

"When a person receives, ... any money ... with a direction ... that such money or any part thereof, ... shall be applied to any purpose or paid to any person specified in the direction, such money and proceeds are deemed to be the property of the person from whom the money, ... was received, until the direction has been complied with.

Provided that if the person receiving the money ... and the person from whom he receives it ordinarily deal with each other on such terms that in the absence of any special direction all money paid to the former on account of the latter would be properly treated as an item in a debtor and creditor account between them, the former cannot be charged with stealing the money or any such proceeds unless the direction is in writing."

129 It was common ground that the proviso did not apply in this case.

130 By s 378(9)(b) of the Code, stealing money received under direction is punishable by imprisonment for up to 10 years.

131 On 4 July 2005, following counsels' addresses and prior to the Judge's summing up, the State prosecutor took exception to a proposition which had been put to the jury by counsel for Manton. That was that if the appellant or Manton were found not guilty on the fraud charges, they would have to be found not guilty on the stealing charges. Senior counsel for the State submitted there were various scenarios which could arise in which the jury might not be satisfied beyond reasonable doubt of the guilt of one or both the appellant and Manton in respect of the fraud charges, but could be so satisfied of their guilt on the stealing charges. Senior counsel proceeded then to develop that submission, saying at the outset (t 4114) that:

"... obviously this is all contrary to the way in which we put our case."

132 The first way in which it was said this could be so, was if the jury had a reasonable doubt about whether the $200,000 ("Carry on finance - development projects") had been represented to be money that was to be used for the purpose of the motel development, but no reasonable doubt that the balance of the funds was represented to be used for that purpose - and there was correspondingly an implied direction to that effect.

133 A second way was said to be even more specific. This was that there was an implied direction that the $114,000 specified in the schedule was to be used (only) for the purposes there set out. It was said the same applied to the balance of $320,000.

134 The same point was made in a somewhat different way about the payment of the $25,000 for a racehorse.

135 With each of these examples, the argument then ran that even if, for some reason, the jury were not satisfied that the appellant or Manton was a principal offender or party to the fraudulent obtaining of the investors' funds, they could still be found to have known the funds had been received under direction and so guilty of stealing.

136 These submissions did not find favour with his Honour. He gave his ruling on 6 July 2005. He began with the observation that the issue to be resolved before he proceeded with his address to the jury was whether or not it was open to find the appellant and Manton guilty in respect of the stealing charges, irrespective of their verdicts in relation to the fraud charges. His Honour noted that the stealing charges related to moneys received from Elk Cove by the appellant, Manton, Rancher Property Trust and Rancher Trading Trust (both entities in which the appellant and Manton had an interest). All those funds were used for purposes other than the Geraldton motel development.

137 His Honour then referred to the way in which the stealing charges had been particularised. It is not necessary to rehearse all of that here. His Honour was satisfied that the way in which the State case had been particularised, opened and conducted during the trial was that the representation said to constitute the direction was that the funds "would all go to the development of the motel complex in Geraldton". His Honour then continued (t 4186):

"The proposition which the prosecution now contends for is that if the jury do not find that the accused were aware that there was an implied direction that all of the money be used for the motel development, they may find that there was a direction that particular amounts, viz, $114,000 and $206,000, were to be used for the motel development.

The direction, the state [sic] says, is to be implied from all the circumstances in which the application for finance was made and the investors agreed to lend their money including the nature of the application for finance, the contents of the proposal letter sent to the investors, the endorsement signed by the investors in the proposal letter, the disbursement schedule, exhibit 126, the disbursement letter signed by Mr Ferris and Mr Manton, exhibit 129, and the settlement letter sent to Mr Perris and Mr Manton by Blackburne and Dixon, exhibit 130.

From those last two documents, that is, exhibits 129 and 130, the state [sic] contends that the accused were aware of the implied direction. As to the application for finance, it was originally for $1.225 million reduced by Mr O'Brien to $1 million and the thrust of it was that the funds were for the Geraldton development, to move it along pending successful application for construction finance. That is consistent with the state's [sic] opening.

What was the implied direction? As to the proposal letter to investors, the general tenor and purport was that all funds were to advance the Geraldton development. Consistent with that was the evidence of the several investors who all said, in effect, that their understanding was that all of their funds would be applied to the Geraldton development. They would not have invested had they known that their funds would be used for unrelated purposes.

In my view, to suggest now that only particular amounts may have been impressed with the direction is not consistent with the general tenor or purport of the letter to investors. To reduce the all embracing direction to only a partial embracing direction is inconsistent with the case alleged from the outset and run at trial and presents a markedly different case than that on which the state [sic] opened. It is in my view, and I adopt the expression used by Mr Trowell, an all or nothing situation and always has been. The alternative path is not open. The principles so far as an alternative path to conviction are concerned are enunciated in R v Franco [2003] SASC 140; (2003) 139 A Crim R 228 at 233 ..."

138 Later, his Honour said that even if the alternative path were open, he was satisfied it would be unfair to the accused to leave it to the jury. The defence cases may have been conducted differently. He accordingly ruled that the case would be put to the jury on the basis that in the event that either the appellant or Manton were found not guilty on the fraud charges, they would have to be found not guilty on the stealing charges also.

139 It follows, as the appellant submits, that consequently, in respect of counts 1 to 13, the prosecution was obliged to prove beyond reasonable doubt, that the proposal letter contained a representation that all funds borrowed would be used for the Geraldton motel project and that the representation made was knowingly false. Further, in respect of counts 14 to 25, the prosecution was obliged to prove beyond reasonable doubt that the loans were each made subject to a direction by the lender that all the money was to be applied to the development of the Geraldton land.

140 The appellant submits that the not guilty verdict on count 14 is reasonably explicable only on the basis that the jury were not satisfied the appellant had represented, or caused to be represented, that $220,000 of the money borrowed would be applied to the Geraldton motel project. The appellant initially submitted the same argument applied to the acquittal on count 16 in respect of the $10,000, but on the hearing conceded the verdict on that count could properly be reconciled with the convictions. That is because on the State case the $10,000 was a payment to O'Brien personally for ensuring the loan application was approved by Blackburne and Dixon (the appellant's evidence was that it was payment for different projects altogether). Notwithstanding that was said to be a dishonest payment, the jury might reasonably have taken the view it was made in relation to the Geraldton motel project and so within the terms of the direction, or at least had a reasonable doubt about that.

141 Put shortly, in respect of ground 1, the argument is that in respect of count 14 the jury could not have been satisfied there was a direction that all the moneys borrowed be applied to the Geraldton motel project; that being so, the convictions on counts 1 to 13 cannot stand.

142 Grounds complaining that verdicts are inconsistent, are really grounds that the verdicts are unreasonable or cannot be supported having regard to the evidence (s 30(3)(a) Criminal Appeals Act 2004 (WA)). Where, notwithstanding as a matter of law, there is evidence to sustain a verdict, an appellate court is asked to conclude a verdict is unsafe or unsatisfactory, the question for the court is whether it thinks that upon the whole of the evidence it was open to the jury to be satisfied beyond reasonable doubt of the appellant's guilt (M v The Queen [1994] HCA 63; (1994) 181 CLR 487, 493; Jones v The Queen [1997] HCA 12; (1997) 191 CLR 439, per Gaudron, McHugh and Gummow JJ at CLR 450 - 452). The court is not to answer that question merely by an examination of the transcript of evidence and the exhibits, but must have full regard to the fact the jury is the body entrusted with the primary responsibility of determining guilt or innocence and has had the benefit of having seen and heard the witnesses (M v The Queen (supra), 493). The application of the test was explained by the majority (Mason CJ, Deane, Dawson and Toohey JJ) in M v The Queen at 494:

"... In most cases a doubt experienced by an appellate court will be a doubt which a jury ought also to have experienced. It is only where a jury's advantage in seeing and hearing the evidence is capable of resolving a doubt experienced by a court of criminal appeal that the court may conclude that no miscarriage of justice occurred. That is to say, where the evidence lacks credibility for reasons which are not explained by the manner in which it was given, a reasonable doubt experienced by the court is a doubt which a reasonable jury ought to have experienced. If the evidence, upon the record itself, contains discrepancies, displays inadequacies, is tainted or otherwise lacks probative force in such a way as to lead the court of criminal appeal to conclude that, even making full allowance for the advantages enjoyed by the jury, there is a significant possibility that an innocent person has been convicted, then the court is bound to act and to set aside a verdict based upon that evidence." (Citations omitted)

143 There is a distinction between cases of legal or technical inconsistency and those of suggested factual inconsistency. There is legal inconsistency where, as a matter of law, the conflicting verdicts cannot stand together (MacKenzie v The Queen [1996] HCA 35; (1996) 190 CLR 348 at CLR 366). Factual inconsistency arises where, as a matter of logic, a verdict on one count necessarily involves conflict with findings which must have been made, or doubts which must have been held, by the tribunal of fact in respect of the verdict on another count. It is the latter which is contended here.

144 Whether or not there is such a conflict is to be determined as a matter of logic and reasonableness (MacKenzie (supra), 366). The appellant must satisfy the court that the two verdicts cannot stand together, meaning that no reasonable jury who had applied their mind properly to the facts could have arrived at both conclusions (R v Stone, unreported; UKCCA EWCA Crim (Devlin J); 13 December 1954; MacKenzie (supra) at 366 - 368). Noting the respect the law applies to the function of the jury, Gaudron, Gummow and Kirby JJ said in MacKenzie (at 367):

"Thus, if there is a proper way by which the appellate court may reconcile the verdicts, allowing it to conclude that the jury performed their functions as required, that conclusion will generally be accepted. If there is some evidence to support the verdict said to be inconsistent, it is not the role of the appellate court, upon this ground, to substitute its opinion of the facts for one which was open to the jury. In a criminal appeal, the view may be taken that the jury simply followed the judge's instruction to consider separately the case presented by the prosecution in respect of each count and to apply to each count the requirement that all of the ingredients must be proved beyond reasonable doubt." (Citations omitted)

145 Their Honours agreed with the "practical and sensible remarks" made by King CJ in R v Kirkman (1987) 44 SASR 591 at 593 to the effect that appellate courts must be very cautious about setting aside verdicts which are adequately supported by the evidence simply because it may be difficult to reconcile them with the verdicts which had been reached by the jury with respect to other charges. However, their Honours pointed out (MacKenzie (368)) that there is a residue of cases where different verdicts represent an affront to logic and commonsense which is unacceptable and strongly suggests a compromise of the performance of the jury's duty - but it is only where the inconsistency rises to the point that the appellate court considers intervention is necessarily required to prevent a possible injustice that the impugned conviction will be set aside.

146 The principles set out in MacKenzie were applied in MFA v The Queen [2002] HCA 53; (2002) 213 CLR 606 in which Gleeson CJ, Hayne and Callinan JJ noted (at [33]) that where an accused is charged with multiple offences, differences between the verdicts may not, in truth, involve inconsistencies even of a factual kind.

147 Whether or not the appellant has demonstrated inconsistency of the kind required, has to be determined on a consideration of what the State had to prove in respect of the particular counts, the way the State case was put, the directions given by the trial Judge and the whole of the evidence.

148 For the appellant it is submitted that the State case always was that the representation made was that all the funds invested would be applied to the Geraldton motel project, and that then became the direction in accordance with which the funds were held - namely, that they could be applied only to that purpose.

149 The appellant submits the verdict of not guilty on count 14 showed the jury were not satisfied the representation as to the use of the $200,000 for "carry on finance - development projects" was false. In other words, they might have accepted (or thought it reasonably possible) that description indicated the money would be used for projects unconnected with the Geraldton motel project. It is submitted that if that be correct, the State case had to fail both as to the representation that all the moneys would be used for the Geraldton motel project and as to the direction in the same terms, applicable to the stealing counts.

150 The respondent points out that the trial Judge gave very clear directions that before they could convict on counts 1 to 13 inclusive, and counts 14 to 25 inclusive, they had to be satisfied beyond reasonable doubt that there was a representation that all of the money would be used for the Geraldton motel project and that there was an implied direction to that effect. The respondent further points out that his Honour told the jury that if they could not be satisfied beyond reasonable doubt that the appellant made such a representation, and therefore that nor was there such an implied direction, they had to return verdicts of not guilty in relation to all of the counts. It is then submitted that to conclude that the only reasonable basis for the jury's verdict of not guilty on count 14 was that they were not satisfied there was such a representation, is to conclude that they ignored his Honour's express and clear directions. It is submitted the not guilty verdict is reasonably explicable on the basis the jury were satisfied there was a representation and direction as alleged by the prosecution, but were not satisfied that the appellant had converted the amount of money alleged in count 14.

151 Count 14 concerned the payment of $220,000 by Elk Cove to the Rancher Property Trust by cheque on 20 November 1998. That payment was evidenced in the Elk Cove general ledger where it was described as a loan. The $220,000 was part of the initial draw-down of the total money that was loaned to Elk Cove by the investors.

152 The item "carry on finance - development projects: $200,000" did not appear in the schedule provided by the appellant at O'Brien's request. O'Brien said in evidence it was included in his figures after a telephone conversation with the appellant. He said (t 3644) it was a figure they arrived at in a discussion of what costs were involved in the actual project and then they required some additional funds for other projects. Jason Blackburne had testified (t 1494) that O'Brien drew his attention to that item and mentioned it was funds for other projects to help them to get back on track, but in his evidence O'Brien denied saying that. He explained (t 3648) that if he thought people had to get back on track he would not have been considering the loan. He was adamant in cross-examination that the $200,000 was not related to the Geraldton motel project, although he agreed that the description "carry on finance - development projects" in the letter to investors, could represent additional funds beyond those immediately required to get the project to a particular point, so as to allow the project to carry on past that point.

153 Despite that, O'Brien maintained that the $200,000 was for other projects, unrelated to the Geraldton motel project, that the appellant had in train at the time. He said all the money except that $200,000 was to be used for the Geraldton motel project (t 3760). He said later (t 3787) that the $200,000 was not referred to in the schedule because it was not to do with the Elk Cove project - it was for other projects.

154 The appellant's evidence was that he did not discuss with, nor suggest to O'Brien that he should describe one of the amounts as "carry on finance - development projects" (t 3464).

155 The respondent's submission is that the verdict in relation to count 14 is reasonably explicable on the basis that the jury concluded that whilst there was a direction as alleged by the State, it was reasonably possible that at least $200,000 of the $220,000 advanced, was not used in a manner inconsistent with the rights of the investors because the time for its expenditure on the Geraldton motel project had not yet been reached. In other words, it was reasonably possible that when the $200,000 was paid to the Rancher Property Trust, the project had not reached the stage of requiring any carry on finance and so for the appellant to cause Elk Cove to loan the money to other entities, including the Rancher Property Trust, as "a commercial business transaction to get interest on our money instead of sitting in the trust account getting nothing" (t 3274), was not a use inconsistent with the rights of the investors; when the carry on finance was needed, the Rancher Property Trust would have repaid the money to Elk Cove to be used for the purposes of the project.

156 The further submission is that as the jury were not given the option of returning a verdict of guilty in relation to an amount less than that alleged in count 14, the only verdict open to them if they had a reasonable doubt about whether the $200,000 had been converted, was one of not guilty.

157 I cannot accept these submissions. First, that was not part of the prosecution case at trial. That possibility was never put to the jury. Secondly, it flies in the face of the terms of the representation and direction relied upon. A loan to Rancher Property Trust or any other entity other than for the purposes of the Geraldton motel project would be wholly outside their scope.

158 By virtue of s 373 of the Code, the funds were deemed to be the property of the investors until the direction was complied with. That is how the trial Judge directed the jury. The interim use of the funds as a loan to Rancher Property Trust was inconsistent with that situation (Parker v The Queen, unreported; CCA SCt of WA; Library No 950259; 26 May 1995, at 21).

159 Counsel for the appellant submits that if the jury had reached their verdict on count 14 on the basis the $200,000 was not used contrary to the direction of the investors because the time for compliance had not arrived, the same reasoning would have led to not guilty verdicts on counts 15, 18, 19, 20, 22, 24 and 25. That is said to be so because they were all payments to Rancher Property Trust, shown as loans in the Elk Cove books, and the appellant's evidence was that they were so placed because the money was not immediately required. This submission cannot be sustained. It is not to the point what the appellant said about that. The distinction between those counts and count 14 is that the $220,000 the subject of the latter, was the only one of those amounts in respect of which the proposal letter arguably contemplated deferred use (although only as to $200,000). There were other amounts (totalling $256,000) which were to be held in trust pending their use for specified purposes. They included $50,000 interest for six months. That was a provision for interest payments to the investors themselves and would not be available to Elk Cove on any view. Whether or not it could be said they were for deferred purposes, the proposal letter unequivocally stated they were to be held in a trust account (pending their expenditure on the nominated purpose). To apply them as unsecured loans to Rancher Property Trust could not conceivably have been in accordance with that direction.

160 Be that as it may, on the evidence and having regard to the prosecution case and the directions given by the trial Judge, counsel for the appellant contends there can be no logical basis upon which the jury could have reached a verdict of not guilty on count 14, other than that they were not satisfied beyond reasonable doubt the representation made was that all the funds would be applied to the Geraldton motel project. To put it more specifically, they must have accepted, or had a reasonable doubt about whether, the representation was that all the funds except the $200,000 would be used for that project. But the inconsistency with the verdicts on the counts on which they returned verdicts of guilty, is then stark. They could not properly have returned those guilty verdicts unless satisfied beyond reasonable doubt the representation was made (and the direction given) in those terms.

161 There is a necessary inconsistency. The verdicts cannot stand together. One suspects the verdict on count 14 and those on counts 1 to 13 inclusive are explained by the jury taking the view that the representation made was that all the funds except the $200,000 item would be used on the Geraldton motel project. But that was not the way the case had been put, and it was not the way the case had been left to them by the Judge. It is most likely that had the jury appreciated they could only find the appellant guilty on counts 1 to 13 if satisfied beyond reasonable doubt that the representation was that all the funds, without exception, were to be applied to the Geraldton motel project, they would have returned verdicts of not guilty on those counts. This ground is therefore made out.

162 It also follows that the jury could not have found the direction charged had been proved. The direction was presented here as the "mirror image" of the representation alleged. If the jury were not satisfied beyond reasonable doubt in respect of count 14 that the direction given was that all the funds received - including the $200,000 - were to be applied to the Geraldton motel project, then they could not logically have found that direction had been given in respect of the remaining stealing counts. Accordingly, ground 2 must likewise be upheld.

At a glance

Court

Decision date

Before

Source

Judgment (324 paragraphs)

Ground 5 - Counts 1 - 13 (Fraud) - Verdicts unsafe and unsatisfactory

Legislation Cited (2)

Cases Cited (20)