Evidence Act 2008, ss 55, 97, and 137, considered - Criminal Procedure Act 2009, s 295; Corporations Act 2001, s 184, referred to.

Jacara Pty Ltd & Ors v Perpetual Trustees WA Ltd [2000] FCA 1886; (2000) 106 FCR 51; Di Paolo v The Queen [2019] VSCA 194; Anthony v Morton [2018] NSWSC 1884; Higgins v The Queen [2016] VSCA 47, considered.

Mr Mark de Crespigny, Commonwealth Solicitor for Public Prosecutions

1. The three applicants, Brent Smith ('Smith'), Mahmoud Khodr ('Khodr') and Fue Mano ('Mano'), are charged on indictment with offences of dishonestly using their positions as directors or officers (as the case may be) of the company, Remedy Housing Pty Ltd ('Remedy Housing'), contrary to s 184(2) of the Corporations Act 2001 (Cth).
2. The applicants seek leave, pursuant to s 295(3) of the Criminal Procedure Act 2009 (Vic), to appeal a decision of the trial judge concerning the admissibility of certain evidence in the trial of those charges, and concerning the use the prosecution might make in respect of that evidence if it is admitted. For that purpose, the trial judge made an appropriate certification pursuant to s 295(3)(a).

1. The offending is alleged to have occurred between 7 November 2019 and 10 February 2021. During that period, Smith was a director of Remedy Housing. Khodr was a director of Remedy Housing until March 2020, and, at all times, he was the company secretary of Remedy Housing. Mano was an officer of Remedy Housing throughout the period of the alleged offending. She variously described herself as the 'chief operations officer' and 'chief applications officer and personal assistant' of Remedy Housing.
2. Twelve of the charges against Mano, and five of the charges against Smith (the 'false representation charges'), allege that they each dishonestly used their positions, as director and officer respectively of Remedy Housing, by making false representations with the intention of inducing people to deposit funds with Remedy Housing. In general, the representations were: that Remedy Housing would provide customers with interest-free mortgages, within 12 months, on payment of a deposit of at least $10,000, or the deposit would be refunded; and that Remedy Housing had external investors, which enabled Remedy Housing to provide those mortgages to customers. It is alleged that, pursuant to those representations, fifteen customers made deposits to Remedy Housing totalling $220,450.
3. Three of the charges, namely, charges 2, 3 and 15 (the 'misappropriation charges'), allege that Smith and Khodr dishonestly used their positions as director and officer, respectively, of Remedy Housing, by transferring funds from Remedy Housing's accounts into accounts which they controlled, in circumstances in which those funds consisted entirely, or predominantly, of deposits made by Remedy Housing customers, who had expected that the deposits be used to provide the customer with an 'interest-free mortgage'. It is alleged that the total amount, thus transferred to Smith and Khodr, was $820,585.74.
4. Specifically, the three misappropriation charges allege as follows:
   • Charge 2 - Between 15 November 2019 and 16 October 2020, Smith and Khodr jointly transferred a total amount of $547,181.42 from Remedy Housing bank accounts to accounts held in the name of Khodr or his wife (Juliana Khodr). Of those transfers, Smith authorised $314,550, and Khodr authorised $232,631.42.
   • Charge 3 - Between 15 November 2019 and 2 November 2020, Smith and Khodr jointly transferred a total amount of $214,467.16 from Remedy Housing bank accounts to accounts held in the name of Smith or his wife (May-Ann Smith). Of those transfers, Smith authorised $39,437.16, and Khodr authorised $175,030.
   • Charge 15 - Between 6 January 2021 and 10 February 2021, Smith transferred a further $19,500 from Remedy Housing bank accounts to a bank account in the name of himself and his wife.

1. The banking records of Remedy Housing demonstrate that, in addition to the amount of $220,450 obtained from the persons who are the subject of the 12 false representation charges, Remedy Housing also received deposits of further amounts totalling $1,647,350 from other customers. The prosecution seeks to lead evidence of the existence of those other depositors and the deposits made by them in the trial.
2. It is contended that the evidence of those deposits is relevant and admissible, on the false misrepresentation charges, as evidence of the existence of a 'business practice', by which the particular accused (namely, Smith and Mano), as directors or officers of Remedy Housing, made representations to the public, inter alia, that: customers would receive an interest-free mortgage within 12 months on the deposit of at least $10,000; customers would receive a refund of the deposit in full if an interest-free mortgage was not obtained within 12 months; and Remedy Housing was funded by overseas investors.
3. In respect of the misappropriation charges (charges 2, 3 and 15), the prosecution contends that the evidence of the further deposits is relevant and admissible to show the source of the funds, obtained by the particular accused charged with those offences (Smith and Khodr), and, further, to put the offending in its proper context.
4. The prosecution intends to rely on the following evidence to establish the existence of the business practice or system, namely:
   • The evidence of the individual witnesses, who will give evidence as to the representations made to them, which are the basis of the 12 false representation charges.
   • Representations made by Remedy Housing on its Facebook page and website, including references to 'interest-free mortgages', with a 'deposit as little as $10,000'.
   • A 'welcome pack' received by some (but not all) Remedy Housing customers, containing various representations about the Remedy Housing scheme, and which included a FAQ ('Frequently Asked Questions') document to the effect that the customer would have their mortgage approved and ready in 12 months.
   • A video recording of a seminar attended by Smith, Mano and another person, Trevor Leota (who was held out as a funder of Remedy Housing), in which Smith explained how the interest-free mortgage scheme was intended to operate, and that he had brought investors into the scheme. Mano suggested to the audience that Leota was funding the operation.
   • A series of five emails that Mano sent to Remedy Housing customers between 5 August and 8 December 2020, in which she referred to 'Trevor Leota and the Remedy Housing team', the 'Remedy Housing program', and 'the process'.
5. The prosecution submits that, if the evidence is admitted to establish the business system or practice, the jury may use that evidence, first, to assess whether the prosecution has, on any particular misrepresentation charge, proved its case beyond reasonable doubt. It is further submitted that the evidence, if admitted, would provide a context in which to consider the evidence of the individuals, who are each subject of the false representation charges.

1. In the hearing before the primary judge, each of the applicants objected to the proposed use of that evidence by the prosecution, and, in some cases, to the prosecution adducing the evidence of the deposits that were not the subject of the 12 false representation charges.
2. On behalf of Smith, objection was not taken to the admissibility of evidence: that Remedy Housing had 147 depositors; of the total amount of the deposits made by those persons; and that the deposits were made in particular amounts and particular frequencies. However, it was submitted that the totality of the evidence, sought to be relied on by the prosecution, is not capable of establishing the business practice sought to be proven by the prosecution. In particular, there is no evidence as to what was said to the depositors. Accordingly, the mere fact of the deposits being made in certain amounts, and at particular intervals, does not, and could not, found an inference that the deposits were made on the basis of any of the representations that are the subject of the false representation charges.
3. In respect of the misappropriation charges, it was submitted that the evidence, sought to be relied on, is not rationally capable of affecting the assessment of the probability that any funds withdrawn by the accused were derived from funds received from people to whom the asserted misrepresentations were made. It was submitted that a number of alternative inferences are open in respect of the evidence sought to be relied on, including that the deposits were made for purposes unconnected with the interest-free mortgage program, that the depositors were not the subject of misrepresentations, and that they were told something different to that allegedly told to the complainants in the present case.
4. Further, it was submitted that if the evidence were otherwise admissible, it should be excluded under s 137 of the Evidence Act 2008, on the basis that any probative value of the evidence is outweighed by the danger of unfair prejudice to the accused. It was submitted that the evidence, if admitted, would give rise to impermissible speculation, on behalf of the jury, as to what each of the individuals (who will not be giving evidence in the trial) were told. The inability of the accused to cross-examine such persons would have the effect that the accused would be limited in his ability to submit to the jury that there was an innocent explanation for the deposits, made by the particular persons, to Remedy Housing.
5. The fundamental objection by Mano was that the evidence is not relevant to any fact in issue. Counsel noted that Mano did not dispute that she and Smith made the representations that are the subject of the false representation charges. Counsel submitted that the evidence concerning the proposed business practice, and the deposits that are not the subject of the false representation charges, would lead to impermissible speculation. Accordingly, it was submitted, the evidence should not be admitted.
6. On behalf of Khodr, it was submitted that the evidence of the deposits made by the 147 depositors is irrelevant, that it amounts to an allegation of a series of uncharged acts, and that it fails to establish a business practice in any event. In that connection, it was submitted that the evidence would invite the jury to engage in impermissible speculation. It was further submitted that the use, to which the prosecution proposes to put the evidence, constitutes impermissible tendency reasoning. Finally, it was submitted that the admission of the evidence would be unfairly prejudicial, and that that prejudice would substantially outweigh any probative value of the evidence.

1. In ruling that the proposed evidence is admissible, the judge gave detailed consideration to the various submissions, made on behalf of the three applicants. In considering the admissibility of the evidence sought to be adduced on behalf of the prosecution, the judge referred to the decision of Sackville J in Jacara Pty Ltd & Ors v Perpetual Trustees WA Ltd.[1] Based on the principles outlined in that decision, the judge concluded that the purpose of leading the disputed evidence was to establish a business practice system or structure, which did not rely on tendency reasoning. The judge considered that the similarities in the material, on which the prosecution sought to rely, is capable of establishing the alleged business practice. In particular, her Honour concluded:

If the evidence shows other funds were invested by a specified number of other clients, together with material available on the internet, Facebook, company website of the system to which the business of Remedy Housing operated, the existence of the system, namely steps to encourage clients to loan funds, readily supports an inference that the system was implemented in respect of each case under consideration. The evidence of a system makes it more likely the fact in issue, that is, the making of the statement and its terms occurred independent of an accused's propensity to act in a particular way.

1. The judge further accepted that the disputed evidence is direct evidence in relation to the misappropriation charges. In respect of any prejudice that might arise in respect of the admission of the disputed evidence, the judge proposed to direct the jury in a similar manner to that approved by this Court in Di Paolo v The Queen.[2]

1. The three applicants each rely on separate proposed grounds of appeal, which are substantially common to each of them, namely, that the judge erred:

(1) in finding that the evidence relied on by the prosecution was capable of establishing the business practice asserted by the prosecution (Smith ground 1, Mano ground (b), Khodr ground 1);

(2) in finding that the asserted business practice is relevant to any of the issues in the trial (Smith ground 1, Khodr ground 2);

(3) in finding that the business practice evidence was admissible as 'context' evidence (Khodr, grounds 2A and 2B); and

(4) by failing to exclude the evidence under s 137 of the Evidence Act 2008 (Smith ground 2, Mano ground (c), Khodr ground 3).

(1) The judge erred in finding that the evidence established that Remedy Housing had a particular business practice, in combination with other evidence, to determine whether some or all of the charges against the applicants are proven beyond reasonable doubt.

(2) The judge erred in failing to exclude evidence of business practice under s 137 of the Evidence Act 2008.

1. In addressing those grounds, counsel for Smith accepted that the prosecution is entitled to adduce evidence of the deposits, totalling approximately $1.6 million, by customers, who have not made statements (non-witness depositors), in proof of the three misappropriation charges, as evidence of the composition of the funds, which are the subject of those charges. In particular, counsel accepted that the prosecution is entitled to adduce evidence as to the making of those deposits, the amounts of the deposits, and the evidence (on the invoices relating to the deposits) that a substantial amount of those deposits were made for the purposes of a mortgage loan.
2. Counsel for Smith also accepted that the evidence, which the prosecution seeks to adduce, of public statements, made by Remedy Housing on its Facebook page and its website and the like, are admissible as evidence of a relevant business practice. The submissions made on behalf of Smith, in support of grounds 1 and 2, were specifically directed to the use, which the prosecution seeks to make, of the deposits totalling $1.6 million by the non-witness depositors, namely, as evidence from which it might be inferred that representations were made to those depositors of the same kind that it was alleged were made to the complainants, who are the subject of the 12 misrepresentation charges.
3. In support of ground 1, it was contended on behalf of Smith that the evidence of the deposits by non-witness depositors, is not capable of establishing a consistent business practice. In particular, it was submitted that the deposits made by persons, who did not make statements to police, and who will not give evidence in the trial, could not, of themselves, support an inference that the representations, relied on by the prosecution, were made to those depositors.
4. In that respect, counsel noted that the representations made to the complainants, who are the subject of the false representation charges, varied. It was submitted that that variability is evident in the social media post relied on by the prosecution, the documentation given to some of the complainants, publicity events conducted on behalf of Remedy Housing, and communications between Remedy Housing and its clients. Further, there is no evidence as to whether any of the alleged representations were made to the non-witness depositors, and it cannot be determined whether any such representations were contemporaneous with the representations made to the complainants, who are the subject of the false representation charges. Accordingly, it was submitted, the reliance, which the prosecution seeks to make on the non-witness deposits of $1.6 million, necessarily involves a circularity of reasoning.
5. In support of ground 2, it was submitted on behalf of Smith that the evidence sought to be relied on is at most of limited probative value. There is no evidence of what was said to the depositors who have not made statements, there is no evidence about when the alleged representations were made to them, and the prosecution appears to accept that different representations were made to different complainants. In addition, counsel noted that a number of the amounts deposited with Remedy Housing are not consistent with the asserted business practice.
6. On the other hand, it was submitted that the evidence, if admitted, would be unfairly prejudicial, as the individuals who made the deposits that are not the subject of the false representation charges, are not available for cross-examination. The inability to cross-examine those persons means that the accused would be limited in their capacity to submit to the jury that the reason the relevant individuals did not make statements to police is that they were content with the service that they received.
7. Mano seeks to rely on three proposed grounds of appeal, namely, that the trial judge erred:

(1) in finding that there was a business practice for the purpose of admitting the evidence;

(2) in considering that the evidence of business practice was relevant and admissible; and

(3) in admitting the evidence under s 137 of the Evidence Act 2008.

1. In support of the first two grounds, it was noted that the applicant, Mano, does not dispute that the representations, particularised in the indictment, were made by her to the complainants in question. Further, it is not in dispute that Remedy Housing was registered with ASIC on 24 October 2019, that accounts were opened on 25 October 2019, that a Facebook page was created on 26 October 2019, and that there was material published on the Remedy Housing website around November 2019. The specific issue, in the case of Mano, is whether the applicant was dishonest in her role as an officer of Remedy Housing. It was submitted that in those circumstances the evidence of the business system in question is not relevant to addressing that question. Accordingly, it was submitted, the jury should be directed that any evidence, concerning representations made to non-witness depositors, is not relevant to the prosecution case against Mano.
2. In support of ground 3, it was submitted that the probative value of the evidence in question is limited. There is no evidence of what was said to the depositors who have not made statements, the prosecution accepts that different representations were made to different complainants, and many of the amounts deposited are not consistent with the asserted business practice. On the other hand, admission of the evidence would occasion unfair prejudice to the applicant. The depositors, who have not made statements, are unavailable for cross-examination, so that it is a matter of speculation as to what those individuals were told. In those circumstances, it was submitted that the jury would likely be overwhelmed by the sheer scale of the amounts involved.
3. Khodr relies on three proposed grounds of appeal, that are similar to those sought to be relied on by Smith and Mano, namely:

(1) the trial judge erred by permitting the prosecution to adduce the evidence of uncharged acts as business practice evidence in circumstances in which the evidence is incapable of demonstrating such a business plan or system;

(2) the judge erred in finding that the business practice evidence was relevant to the issues in the trial, and, in particular, the judge erred by permitting the prosecution to adduce the business practice evidence as context evidence; and

(3) the judge erred by failing to exclude the proposed evidence on the basis that the probative value of the evidence is outweighed by the danger of unfair prejudice.

1. The submissions, made on behalf of Khodr, were directed to the proposed use, by the prosecution, of the evidence of the non-witness deposits in support of an inference that they had been induced by representations of the kind that are the subject of the false representation charges.
2. In support of grounds 1 and 2, it was submitted that the evidence of the deposits totalling $1.6 million by non-witness depositors is incapable of demonstrating a clear or cohesive business practice that was in existence at the time of the offending. It was submitted that part of the $1,647,350 relied on by the prosecution, in proof of the existence of the business practice, was provided to Remedy Housing for reasons, other than the provision of interest-free loans. In particular, counsel referred to a sum of $350,000, deposited by the Samoan Seventh Day Adventist Church, which related to the purchase of a new church hall by that institution. Counsel submitted that the prosecution case relies on circular reasoning, and that the prosecution proposes to use the $1,647,350 in proof of the charged acts, while also proposing to use the $220,000, that is the subject of the false representation charges, to prove that the business practice existed.
3. Further, it was submitted that, by seeking to rely on the evidence, the prosecution was, in effect, inviting the jury (implicitly) to engage in tendency reasoning. It was submitted that that reasoning is flawed, because there is no evidence that the other non-witness depositors (who are not the subject of the false representation charges) had received the same representations as those allegedly made to the complainants, who are the subject of the false representation charges.
4. In support of ground 3, counsel submitted that the disputed evidence has very limited probative value. The particular issue in dispute is whether the applicant, Khodr, acted dishonestly in the transfer of the funds from Remedy Housing to his accounts. The disputed evidence could not impact the jury's assessment of that issue.
5. On the other hand, it was submitted that the probative value of the evidence is outweighed by its unfair prejudice. If the prosecution is permitted to rely on the disputed evidence, there is a risk the jury would use it impermissibly as tendency evidence. In addition, it was submitted that, in the absence of the persons who made the deposits constituting $1,647,350 as witnesses, the applicant would be denied an opportunity to cross-examine those persons as to their reasons for depositing the money with Remedy Housing. In those circumstances, there is a risk the jury would engage in impermissible speculation.
6. In response, counsel for the respondent first addressed the issue, raised by each of the applicants, that the available evidence could not support the establishment of a relevant business practice. Counsel submitted that the material, published by Remedy Housing on the internet and social media - on its website, by Facebook, and the like - is clear evidence of a business practice, conducted by the applicants. It was submitted that that evidence, combined with the deposit slips that are exhibited to the statement of Evan Bradshaw, an investigator in the Enforcement and Compliance Division of the Australian Securities and Investments Commission, is sufficient to support an inference that the representations, that are the subject of the 12 false representation charges, were also made to the non-witness depositors. That is, it was submitted that that material was sufficient to found an inference that the applicants had represented that the deposits, which they sought to be made by the non-witness depositors, would be directed to the making, by Remedy Housing, of an interest-free loan.
7. In that respect, counsel noted that the applicants had contended that there are a number of variations in the deposit evidence relied on, namely, variations in the sums of deposits made, the representations made to complainants, and the business model alleged by the prosecution. Counsel submitted that the authorities, concerning business practice evidence, do not require that all representations made, or all acts performed in accordance with the business practice, be identical. Further, counsel noted that the vast majority of the amounts that were deposited by other clients, who are not witnesses in the case, are consistent with those made by the complainants. For example, out of 106 individual clients who deposited funds (not including the Samoan Church, but including the complainants), 77 of them deposited exactly the sum of $10,000. Out of 262 deposits, made by clients other than the complainants, 221 (84.35%) were deposits of, or part of an aggregate deposit of, $10,000 or more made by a particular customer. In addition, counsel noted that the vast majority of the deposits, made by clients other than the complainants, had corresponding invoices issued, in terms that outlined that the payment was for a deposit for a mortgage, or a lay-buy payment for that purpose.
8. Further, counsel noted that each of the false representation charges allege that it had been represented to the particular complainant that an interest-free mortgage would be provided within 12 months of payment of a deposit of at least $10,000. Five of those charges also allege a representation that there were investors funding the business. Ten of the charges allege a representation that the deposit would be refunded in full if an interest-free mortgage was not provided within 12 months. Counsel contended that the number of consistent representations alleged in the indictment, in combination with the evidence from the Remedy Housing website, the Remedy Housing Facebook page, and documents provided to customers, is sufficiently consistent to establish the existence of the business practice relied on.
9. Counsel for the respondent then turned to the submissions made on behalf of Khodr, that the disputed evidence is not properly context evidence, but, rather, is tendency evidence by stealth. It was submitted that the evidence, of the deposits additional to those that are the subject of the charges, is relevant, as direct evidence to the issue whether the funds, that are the subject of charges 2, 3 and 15, were misappropriated by Khodr and Smith. In particular, it was submitted, the evidence is critical rebuttal evidence to any suggestion that there was a revenue stream, other than the deposits from customers that were seeking interest-free mortgages. Counsel further submitted that the evidence, sought to be relied on, does not invite tendency reasoning, but, rather, it demonstrates that there was a business practice, by which representations were made to induce customers to deposit money in order to receive an interest-free mortgage.
10. Finally, counsel turned to the submissions, made on behalf of the applicants, that the evidence should be excluded under s 137 of the Evidence Act.
11. Counsel submitted that the evidence in question has substantial probative value. In particular, the evidence demonstrates a consistency in the amounts deposited, as well as a consistency in documentation located in the 135 customer files (files of depositors who were not complainants). Counsel submitted that in the context of the trial, the evidence in that way is of substantial probative value. In particular, it is anticipated that the applicants at trial will challenge the credibility and reliability of the complainant witnesses on the false representation charges. Further, the business practice evidence explains the true source of the funds in the Remedy Housing account, that are the subject of the three misappropriation charges.
12. Counsel further submitted that if the evidence is admitted, it would not result in unfair prejudice to the applicants. Contrary to the submission made on behalf of Smith, the jury would have evidence as to what the non-witness depositors were told by the applicants, namely, representations made publicly by the applicants (on Remedy Housing's website and Facebook page, in seminars conducted by the applicants, and in promotional videos), in combination with deposits recorded and the descriptions accompanying those deposits. It was submitted that that evidence would be sufficient to found an inference that the non-witness depositors received representations that were consistent with the advertising activities of Remedy Housing, and consistent with representations made to the complainants.
13. Counsel for the respondent further contended that the judge was correct in ruling that any prejudice may be cured by directions to the jury, similar to those given in Di Paolo.[3]

1. The proposed grounds of appeal, and the written submissions filed by the parties, initially raised three issues to be determined on this application. In the course of oral submissions, it became clear that the first two issues are, in fact, not in dispute.
2. First, it is evident that the parties each have accepted, correctly, that the prosecution is entitled to adduce evidence of the composition of the amounts that are the subject of the three misappropriation charges. In particular, in order to establish that point, the prosecution is entitled to adduce evidence as to the deposits, totalling $1,647,350, made by the non-witness depositors. Further, the prosecution is entitled to adduce evidence of the relevant documentation recording the deposits by the non-witness depositors, and, in particular, the documents entitled 'Invoices', issued by Remedy Housing, which record that a substantial proportion of those deposits were made for the purpose of the depositor obtaining a mortgage loan from Remedy Housing. That evidence is admissible on the misappropriation charges to enable the prosecution to establish that the applicants, Smith and Khodr, were not legally entitled to the funds that are the subject of the three misappropriation charges.
3. Secondly, it was correctly accepted by the parties that evidence that Remedy Housing published the nature of its business to the public on social media (in Facebook and on the website and the like), in videos, and in seminars. That evidence is admissible as evidence of business practice of the applicants. Indeed, in that respect, it might be noted that it is anticipated that 10 of the 12 depositors, who are the subject of the false representation charges, will give evidence that it was by such means that they first became acquainted with the business of Remedy Housing. The publications, by Remedy Housing, of the kind that we have mentioned, are admissible as evidence of the business practice of the applicants, in particular, to advertise the business of Remedy Housing as providing finance on the terms, and on the basis, described in the published material. As such, the evidence is relevant and admissible on the false representation charges.
4. The central question is whether the prosecution is entitled to rely on the evidence of the non-witness deposits in order to found an inference that false representations, of the kind that are the subject of the false representation charges, were also made to the non-witness depositors. The prosecution seeks to rely on such an inference in support of the evidence of the 12 complainants as to the representations they alleged were made to them, and which are the subject of the false representation charges.
5. There is no evidence as to the circumstances in which the non-witness depositors made their deposits. It is clear that a large percentage of the deposits were made in amounts of $10,000 or multiples (or fractions) of that amount. Further, it is apparent from the loan documentation that a large percentage of the loans were made by the non-witness depositors in order to obtain a mortgage loan from Remedy Housing. However, there is no direct evidence at all as to what representations, if any, were made to the non-witness depositors. Specifically, there is no evidence that representations were made to them: as to the amount of loan, which would be available to them; the interest (if any) payable in respect of the loan; or the sources of funding for Remedy Housing, which made it possible for the loans to be made to the non-witness depositors. Those representations are central to the prosecution case on each of the 12 false representation charges.
6. In essence, the prosecution seeks to rely on an inference that such representations were made to the non-witness depositors. However, there are at least four difficulties with that proposition.
7. First, as we understand it, the prosecution seeks to rely, not only on the evidence of the publications disseminated by Remedy Housing (on its website, Facebook and the like), but also on the evidence of the representations made to the 12 complainants, which are the subject of the false representation charges. Plainly, that process of reasoning necessarily involves an impermissible circularity. In essence, the prosecution seeks to rely (inter alia) on the evidence of the complainants to support an inference that the same representations were made to the non-witness depositors, which, in turn, will support the evidence of the complainants that the same representations were made to them.
8. On the other hand, and as a second problem, if the evidence of the 12 complainants is not taken into account, there would be insufficient evidence for the prosecution to invite the jury to infer that the same representations, that were made to the complainants, were also made to the non-witness depositors, and on the basis of which the non-witness depositors made their deposits. In the context of a criminal trial, in which it is sought to be alleged that the non-witness depositors were the subject of the same criminal fraud that is alleged in the 12 false representation charges, a jury could not reasonably infer, in the absence of specific evidence, that such representations were made to the non-witness depositors.
9. A third problem with the line of reasoning sought to be relied on by the prosecution, is that if such an inference were permissible, any probative value, derived by the prosecution as a consequence of that inference, would be substantially outweighed by the resultant prejudice to the applicants, so that such an inference would not be permissible pursuant to s 137 of the Evidence Act 2008.
10. For the reasons we have discussed, the probative value of any such inference would be limited, in view of the lack of evidence as to what representations were made to the non-witness depositors, when those representations were made, how they were made, and whether they were made before the complainants made their deposits.
11. On the other hand, there would be significant prejudice to the applicants, if the prosecution were permitted to rely on such a form of reasoning. First, of course, the applicants would not be able to cross-examine any of the non-witness depositors, and therefore they would be limited in how to address the issues so raised by the prosecution. Secondly, and importantly, there would be a substantial risk that the jury might be overwhelmed, if it were permitted to reason that all, or most, of the non-witness depositors (who were responsible for approximately $1.6 million in deposits) were, or might have been, the subject of the fraudulent representations alleged against the applicants. By inviting the jury to draw such an impermissible inference, the prosecution would thereby occasion significant unfair prejudice to the applicants, of a kind which could not be sufficiently redressed by an appropriate direction by the trial judge.
12. The fourth difficulty, with the inference sought to be relied on by the prosecution, is that, in essence, it invites the jury to engage in a form of tendency or propensity reasoning, in circumstances in which the prosecution does not seek to rely on the evidence as tendency reasoning pursuant to s 97 of the Evidence Act 2008.
13. In order to counter that difficulty, counsel for the prosecution contended that such use of the evidence, of the deposits made by the non-witness depositors, would not constitute propensity reasoning, but rather, would be relevant as evidence of a business practice, engaged in by the applicants, and, in particular, by Smith and Mano.
14. In Jacara, the Full Court of the Federal Court gave consideration to the difference between, on the one hand, tendency evidence, and, on the other hand, evidence of a relevant business practice. In that case, the respondent, the proprietor of a shopping centre, leased a shop in the centre to the appellants. The appellants commenced proceedings against the respondent, claiming that the respondent's agent had made misrepresentations in the course of pre-contractual negotiations. The appellants sought to admit into evidence affidavits of five other tenants in the shopping centre, who deposed that the agent had made similar representations to them. The primary judge refused to admit the affidavits into evidence, on the basis that, pursuant to s 97(1) of the Evidence Act, the evidence did not have significant probative value.
15. That ruling was upheld on appeal. Sackville J (with whom Whitlam and Mansfield JJ agreed) commenced by noting that evidence of conduct does not become relevant for a purpose other than proving that a person had a tendency to act in a particular way, merely by asserting that the evidence tends to establish a system or business practice.[4] His Honour noted that the evidence of the other five tenants was only relevant, because it tended to show that the agent had a tendency to make representations to prospective tenants of the kind alleged by the appellants. Accordingly, in the absence of an assumption that the agent had such a propensity, the evidence of the five tenants could not establish a system of business practice. Thus, the use of their evidence, to establish such a propensity on the part of the agent, was a necessary link in the reasoning to the conclusion that the agent made the alleged representations during a meeting with the appellants.[5]
16. In that respect, Sackville J described the difference between such a line of reasoning, and a case in which there is conduct, that is relevant independent of its capacity to demonstrate a tendency or propensity. His Honour stated:

By contrast, there will be cases where evidence of conduct is relevant to a fact in issue independently of its tendency to show that a person had a propensity to act in a particular way. If, for example, the evidence in a shopping centre misrepresentation case shows that the lessor's agent gave instructions that particular representations should be communicated to prospective tenants, that evidence would be admissible independently of s 97(1) of the Evidence Act. The evidence, if accepted, would go beyond proving that the agent had a propensity to make representations of the kind alleged. Rather, it would establish that the agent had set in place a system which, if implemented in the particular case, would have resulted in the representation being made to the applicant. The existence of the system, in the absence of evidence to the contrary, readily supports an inference that it was implemented in the particular case. The evidence of the system makes it more likely that the fact in issue (the making of the representation to the applicant) occurred, independently of the agent's propensity to act in a particular way.[6]

1. The same principle was applied by Ward CJ (In Eq), in the Supreme court of New South Wales, in Anthony v Morton.[7]
2. In that case, the applicant was the former literary agent of the respondent, who was an Australian author. The applicant claimed that she was entitled to be paid 15% commission on all royalties earned from the respondent's first six published works for the life of each work. In support of that claim, the applicant sought to rely on contracts, that she had entered into with other authors, in order to establish that she had a business system, by which she was entitled to a 15% commission on all book deals for the life of each work. The applicant sought to rely on that evidence as the basis of an inference that she followed the same practice in the instant case. Ward CJ held that the evidence was not admissible, as it was relevant only to establish a tendency, on behalf of the applicant, to seek such commissions. Her Honour stated:

I consider that, like Jacara, the present is a case where the impugned evidence is only capable of being relevant if it is capable of establishing a tendency or propensity on the part of Ms Anthony. That is because the evidence does not feature any independent indication of a business practice, system or structure (such as an instruction to employees - the example given by Sackville J; one could also postulate the example of an invoicing system) which does not rely on tendency reasoning. Rather, Ms Anthony relies on the fact that she entered into contracts with other authors in a certain way in order to establish that she had a business system, from which it can be inferred that she followed that practice in the present case. The evidence thus relies on tendency reasoning. Therefore, in my view, Jacara indicates that the evidence should be rejected if it does not have significant probative value as required by s 97(1) of the Evidence Act. I conclude below that it does not meet that threshold.[8]

1. There are a number of cases, in which the business practice, sought to be proven, was not based on tendency or propensity reasoning, and, as such, was held to be admissible.
2. In Di Paolo, the applicant was charged with a number of offences, including sexual penetration by fraud, indecent assault and common assault. The fraud was based on the applicant falsely representing that he had medical qualifications. The court held that the evidence of individuals, who were treated by the applicant and to whom he represented his medical qualifications, was relevant as establishing a business practice, by the applicant, by which he fraudulently purported to conduct practice as a qualified medical practitioner.[9]
3. Similarly, in Higgins v The Queen,[10] the applicant was charged with the possession of a thing (a magazine) in connection with assistance in a terrorist act, contrary to s 101.4 of the Criminal Code 1995 (Cth). The prosecution filed a notice of tendency evidence under s 97 of the Evidence Act 2008, much of which comprised recorded conversations in which the applicant spoke in support of radical Islamic terrorism. The court, on an interlocutory appeal, held that the evidence was admissible, not as tendency evidence, but rather, as evidence which evinced a continuing state of mind, by the applicant, which was relevant to proof of the charge against him.[11]
4. The question in the present case, then, is whether the purported business practice, sought to be relied on by the prosecution, is relevant for some other purpose than establishing a tendency or propensity on the part of the applicants.
5. As the cases have made clear, tendency evidence is evidence that provides a foundation for an inference, namely, that because a person had a particular relevant tendency, it is more likely that that person acted in the way asserted by the party seeking to rely on the tendency evidence, or had the state of mind asserted by that party, on the occasion that is the subject of the proceeding.[12]
6. In the present case, as we have discussed, the prosecution seeks to rely on the evidence relating to the non-witness depositors, to demonstrate a practice (tendency), by the applicants, to make particular false representations to clients of Remedy Housing. That evidence is sought to be relied on, by the prosecution, in support of its case that Smith and Mano made the same, or similar, representations to the complainants who are the subject of the 12 false representation charges.
7. As such, essentially, the reasoning, sought to be relied on by the prosecution, is tendency evidence, in circumstances in which the prosecution has not sought to adduce that evidence, pursuant to s 97 of the Evidence Act 2008. Any suggested business practice, such as that sought to be relied on by the prosecution, necessarily is entirely dependent on proof by the prosecution of a tendency by the applicants to make the representations in issue.
8. It follows that, for the foregoing reasons, it will be impermissible for the prosecution to rely on the evidence of the deposits, totalling approximately $1.6 million, made by the non-witness depositors, to support the proof by each of the individual complainants, who are the subject of the 12 false representation charges, of the representations that are alleged to have been made to them by Smith and Mano.

1. In summary, we have reached the following conclusions:

(1) The prosecution is entitled to adduce evidence of the deposits, totalling $1,647,350, by the non-witness depositors. In that respect, the prosecution is entitled to adduce evidence of the invoices, and other documentation, evidencing those deposits, and, in particular, the description, on the invoices and that documentation, as to the purpose of the deposit. That evidence is relevant to the misappropriation charges (charges 2, 3 and 15).

(2) The prosecution is also entitled to adduce evidence of a business practice, by the applicants, comprising the publication by them, in connection with the business of Remedy Housing, of: matter on its Facebook, including videos, advertisements, and a list of Frequently Asked Questions; the distribution of a welcome pack to customers of Remedy Housing; seminars, conducted by them, in respect of the business of Remedy Housing; and public presentations, made by the applicants, relating to the business of Remedy Housing.

(3) It is impermissible for the prosecution to seek to rely on the deposits, totalling $1,647,350 by non-witness depositors, to support an inference that the applicants made representations, to the non-witness depositors, of the kind alleged to be made to the complainants in the 12 false representation charges (charges 1 and 4 to 14 inclusive).

1. In view of the third conclusion, the applicants will be granted leave to appeal from the decision of the trial judge, and the appeal will be allowed in part.
2. Accordingly we will make the following orders:

(1) The applicants be granted leave to appeal against the interlocutory decision of the trial judge dated 14 February 2025.

(2) The appeals be allowed, and the orders, made by the trial judge concerning the admission of business practice evidence, proposed to be led by the prosecution, be set aside.

(3) In lieu, it be directed:

(i) the prosecution is entitled to adduce evidence of the deposits, totalling $1,647,350, by non-witness depositors, being evidence relevant to charges 2, 3, and 15 on the indictment;

(ii) the prosecution is entitled to adduce evidence of a business practice, by the applicants, comprising the publication by them, in connection with the business of Remedy Housing, of: matter on its Facebook, including videos, advertisements, and a list of Frequently Asked Questions; the distribution of a welcome pack to customers of Remedy Housing; seminars, conducted by them, in respect of the business of Remedy Housing; and public presentations, made by the applicants, relating to the business of Remedy Housing;

(iii) the prosecution is not permitted to seek to rely on the deposits, totalling $1,647,350, by non-witness depositors, to support an inference that the applicants made representations, to the non-witness depositors, of the kind alleged to have been made to the complainants in charge 1 and charges 4 to 14 inclusive on the indictment.

[1] (2000) 106 FCR 51; (2000) 180 ALR 569; [2000] FCA 1886 ('Jacara').

[2] [2019] VSCA 194 ('Di Paolo').

[3] [2019] VSCA 194, [49]-[51].

[4] Jacara [2000] FCA 1886; (2000) 106 FCR 51, 67 [65].

[7] [2018] NSWSC 1884.

[9] Di Paolo [2019] VSCA 194, [37]-[44] (Priest and Niall JJA, Lasry AJA).

[10] [2016] VSCA 47 ('Higgins').

[11] Ibid [19] (Redlich, Weinberg and Osborn JJA); see also Australian Competition & Consumer Commission v 4WD Systems Pty Ltd [2003] FCA 850, [50]-[52] (Selway J).

[12] Elomar v The Queen [2014] NSWCCA 303; (2014) 316 ALR 206, 278 [359]-[360]; [2014] NSWCCA 303; (Bathurst CJ, Hoeben CJ at CL and Simpson J); RWC v R [2010] NSWCCA 332, [122]-[123] (Simpson J); Murdoch (a pseudonym) v The Queen [2013] VSCA 272, [12] (Redlich and Coghlan JJA); Higgins [2016] VSCA 47, [12] (Redlich, Weinberg and Osborne JJA).