Director of Public Prosecutions v Morley (a pseudonym)
[2020] VSCA 313
•4 December 2020
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S EAPCR 2020 0158
| DIRECTOR OF PUBLIC PROSECUTIONS | Applicant |
| v | |
| ZAC MORLEY (a pseudonym)[1] | First Respondent |
[1]To ensure that there is no possibility of identification, this judgment has been anonymised by the adoption of a pseudonym in place of the name of the applicant.
S EAPCR 2020 0159
| DIRECTOR OF PUBLIC PROSECUTIONS | Applicant |
| v | |
| TIM MORLEY (a pseudonym)1 | Second Respondent |
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| JUDGES: | MAXWELL P, PRIEST and KAYE JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 17 November 2020 |
| DATE OF JUDGMENT: | 4 December 2020 |
| MEDIUM NEUTRAL CITATION: | [2020] VSCA 313 |
| JUDGMENT APPEALED FROM: | DPP v Morley (a pseudonym) (Unreported, County Court of Victoria, Judge Cahill, 11 June 2020) |
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CRIMINAL LAW – Appeal – Interlocutory appeal – Crown appeal – Fraudulently induce persons to invest money – Dishonest concealment of material facts – Dishonesty – Peters objective test applicable – No requirement to prove subjective awareness of dishonesty – Leave to appeal granted – Appeal allowed – Peters v The Queen (1998) 192 CLR 493, R v Ghosh [1982] QB 1053 considered – Crimes Act 1958 s 191(1).
WORDS AND PHRASES – ‘dishonest’, ‘dishonest concealment’.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr C Boyce QC with Mr M Cookson | Ms A Hogan, Solicitor for Public Prosecutions |
| For the Respondents | Mr C Thomson | C Marshall & Associates |
MAXWELL P
PRIEST JA
KAYE JA:
Summary
This interlocutory appeal concerns the proper construction of the phrase ‘any dishonest concealment of material facts’ in s 191(1) of the Crimes Act 1958 (the ‘Act’). The respondents, who are brothers, are charged with offences under that section.
The relevant allegation against each respondent is that ‘by dishonest concealment of material facts’ he induced a retired couple (‘the investors’) to invest in a scheme involving the purchase, fattening and ultimate sale of goats. The material facts said to have been dishonestly concealed related to the history of the respondents’ goat farming business and their parlous financial position.
It is common ground that the prosecution must prove that the brothers knew the relevant facts, and appreciated their materiality to the investors’ decision to invest. It must also be proved that the respondents deliberately withheld — ‘concealed’ — this information from the investors.
The question for determination concerns the test to be applied by the jury in deciding whether any concealment of material information was dishonest. The prosecution submits, as it did before the judge, that the word ‘dishonest’ is used in s 191(1) in its ordinary sense, such that the jury should be directed that the question of dishonesty ‘is to be decided by the standards of ordinary, decent people’.[2] The defence submission, by contrast, is that the jury would also need to be satisfied that the relevant respondent knew that his conduct was dishonest according to the standards of ordinary people.
[2]Peters v The Queen (1998) 192 CLR 493, 504 [18]; [1998] HCA 7 (Toohey and Gaudron JJ) (‘Peters’).
Initially, the trial judge ruled in favour of the prosecution. Subsequently, however, after becoming aware of interstate appellate authority, his Honour upheld the defence submission. It is from that ruling that the prosecution now seeks leave to appeal.
In our respectful opinion, the prosecution submission is correct and should be upheld. As will appear, the defence contention — that subjective awareness of dishonesty must also be established — rests on the decision of the English Court of Appeal Criminal Division in R v Ghosh.[3] In 2012, this Court in SAJ v The Queen held that Ghosh is not part of the common law of Australia.[4]
[3][1982] QB 1053 (‘Ghosh’).
[4](2012) 36 VR 435; [2012] VSCA 243 (‘SAJ’).
As SAJ established, the correct approach to interpreting a criminal offence provision which uses the word ‘dishonest’ (or a variant of it) is that enunciated by the High Court of Australia in Peters, and endorsed by that court in Macleod v The Queen.[5] That is, unless the word is used in a ‘special sense’ in the particular provision, there is no requirement to prove that the accused was aware that the relevant conduct was dishonest.
[5](2003) 214 CLR 230; [2003] HCA 24 (‘Macleod’).
It follows that leave to appeal must be granted, the appeal allowed and the interlocutory decision set aside. Our reasons follow.
Statutory and factual context
Section 191(1) relevantly provides as follows:
(1)Any person who, by any statement promise or forecast which he knows to be misleading false or deceptive or by any dishonest concealment of material facts or by the reckless making of any statement promise or forecast which is misleading false or deceptive, induces or attempts to induce another person—
…
(b)to acquire or offer to acquire any right or interest under any arrangement the purpose or effect or pretended purpose or effect of which is to provide facilities for the participation by persons in profits or income alleged to arise or to be likely to arise from the acquisition holding management or disposal of any property other than securities;
…
shall be guilty of an indictable offence and liable to level 4 imprisonment (15 years maximum).
The respondents were farmers. The prosecution case is that the investors paid them almost $400,000, relying on their promise to purchase goats which were to be fattened and sold for a profit to be shared with the investors. As this Court explained when deciding an earlier interlocutory appeal in this matter,[6] an offence under s 191(1) may be committed in a number of alternative ways, and the charges against the respondents contain alternative allegations. For present purposes, it is sufficient to identify them as the ‘false promise’ and ‘dishonest concealment’ alternatives.
[6]Morley (a pseudonym) v The Queen [2020] VSCA 180.
The Court is concerned with the second of these alternatives. The allegation is that the respondents induced the investors to enter into the scheme ‘by dishonest concealment of material facts’. The facts said to have been material are particularised in the indictment. They are all circumstances which, it is said, existed at the time the agreement with the investors was made, namely that:
·the respondents’ accounts were overdrawn;
·they owed more than $900,000 on their combined loan accounts;
·numerous cheques drawn on their main business account had been dishonoured;
·they and their related entities owed more than $800,000 to interests in Malaysia;
·companies operated by them were under contractual obligations to a Malaysian company to purchase at least 10,000 breeding goats, and to breed a further 30,000 goats over three years;
·despite having been paid more than $1.7 million by the Malaysian company, the respondents had breached the agreement with that company by failing to purchase goats as agreed, to breed goats as expected and to export goats as required; and
·after breaching that agreement, they had deregistered the relevant company operated by them.
Consideration
The question of interpretation which arises here is of the same character as that addressed by this Court in 2012 in SAJ. Although the statutory context there was different — the alleged offence being that the company director had ‘used his position dishonestly’ — the competing positions on the approach to interpretation were the same. That is, the prosecution argued that the Peters test was applicable to the element of dishonesty, while the defence submitted that the Ghosh test should be applied.
After an exhaustive review of authority, Weinberg JA and Davies AJA (with whom Nettle JA agreed) concluded that the Peters test was applicable. The Peters test is that set out in the joint judgment of Toohey and Gaudron JJ, who said:
In a case in which it is necessary for a jury to decide whether an act is dishonest, the proper course is for the trial judge to identify the knowledge, belief or intent which is said to render that act dishonest and to instruct the jury to decide whether the accused had that knowledge, belief or intent and, if so, to determine whether, on that account, the act was dishonest. Necessarily, the test to be applied in deciding whether the act done is properly characterised as dishonest will differ depending on whether the question is whether it was dishonest according to ordinary notions or dishonest in some special sense. If the question is whether the act was dishonest according to ordinary notions, it is sufficient that the jury be instructed that that is to be decided by the standards of ordinary, decent people. However, if "dishonest" is used in some special sense in legislation creating an offence, it will ordinarily be necessary for the jury to be told what is or, perhaps, more usually, what is not meant by that word. Certainly, it will be necessary for the jury to be instructed as to that special meaning if there is an issue whether the act in question is properly characterised as dishonest.[7]
[7](1998) 192 CLR 493, 504 [18]; [1998] HCA 7 (Toohey and Gaudron JJ).
The Ghosh test, on the other hand, was formulated in these terms:
In determining whether the prosecution has proved that the defendant was acting dishonestly, a jury must first of all decide whether according to the ordinary standards of reasonable and honest people what was done was dishonest. If it was not dishonest by those standards, that is the end of the matter and the prosecution fails.
If it was dishonest by those standards, then the jury must consider whether the defendant himself must have realised that what he was doing was by those standards dishonest. In most cases, where the actions are obviously dishonest by ordinary standards, there will be no doubt about it. It will be obvious that the defendant himself knew that he was acting dishonestly. It is dishonest for a defendant to act in a way which he knows ordinary people consider to be dishonest, even if he asserts or genuinely believes that he is morally justified in acting as he did.[8]
[8][1982] QB 1053, 1064 (Lord Lane CJ, Lloyd and Eastham JJ).
As Weinberg JA and Davies AJA said in SAJ:
Therefore, Ghosh held that the prosecution had to satisfy two components to establish dishonesty. First, it had to show that the accused had acted dishonestly according to the standards of reasonable and honest people. Second, the accused must have realised that his conduct was dishonest according to those standards. In other words, there was both an objective and subjective component to the test.[9]
[9](2012) 36 VR 435, 441 [42]; [2012] VSCA 243 (Weinberg JA and Davies AJA).
In Macleod, the High Court was concerned with a provision which dealt with directors or other company officers fraudulently acquiring company property.[10] The majority (Gleeson CJ, Gummow and Hayne JJ) held that the term ‘fraudulently’ in the context was synonymous with the term ‘dishonestly’ in other contexts. They continued:
Adopting the reasoning in Peters, as we do, and applying it to the offences now under consideration, there is no requirement that the appellant must have realised that the acts in question were dishonest by current standards of ordinary, decent people. To require reference to a ‘subjective’ criterion of that nature when dealing with a claim of right would have deleterious consequences. It would distract jurors from applying the Peters direction about dishonesty, and it would limit the flexibility inherent in that direction. A direction about the ‘subjective’ element of a claim of right was neither necessary nor appropriate in this case.[11]
[10](2003) 214 CLR 230; [2003] HCA 24.
[11]Ibid 245 [46] (Gleeson CJ, Gummow and Hayne JJ).
In the light of Macleod, the Court in SAJ concluded as follows:
Certainly it seems clear … that the second limb of the Ghosh test now has no place in the common law of Australia.[12]
Their Honours went on to quote from Farah Constructions Pty Ltd v Say-Dee Pty Ltd, where the High Court said:
As a matter of ordinary understanding, and as reflected in the criminal law in Australia, a person may have acted dishonestly, judged by the standards of ordinary, decent people, without appreciating that the act in question was dishonest by those standards.[13]
[12](2012) 36 VR 435, 445 [65]; [2012] VSCA 243 (Weinberg JA and Davies AJA).
[13](2007) 230 CLR 89, 162 [173]; [2007] HCA 22 (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ).
In the present case, what prompted the judge to depart from his earlier ruling was his consideration of the judgment of Western Australian Court of Criminal Appeal in Bond v The Queen.[14] In that case, the Court was concerned with s 126(1)(b) of the Securities Code (WA), which was an equivalent provision to s 191(1). The Court expressly adopted the Ghosh test, holding as follows:
[T]he concealment will be dishonest if it would be so regarded according to the ordinary standards of reasonable and honest people; that is an objective test, but it is necessary also to satisfy a subjective test by establishing that the accused himself realised that his conduct was dishonest according to the standards of reasonable and honest people.[15]
[14](1992) 62 A Crim R 383 (‘Bond’).
[15]Ibid 405–6 (Murray J).
With great respect, the effect of the subsequent decisions in Peters, Macleod and SAJ was to render the decision in Bond of no assistance in the resolution of the present question. His Honour was bound, as is this Court, to apply the law as laid down in Peters and Macleod, as confirmed in SAJ.
It follows that, unless we were persuaded that the word ‘dishonest’ in s 191(1) was used in some ‘special sense’, no question would arise in the present case as to whether the accused respondents appreciated that their conduct was dishonest by the standards of ordinary, decent people.
In our view, there is nothing in the text of s 191(1), or in the legislative history of the provision, to suggest that the word ‘dishonest’ is used in anything other than its ordinary sense. It was submitted for the respondents that, unless proof of subjective awareness of dishonesty was required, the charges could be proved without establishing a relevant criminal intent.
This submission must be rejected, in our view. First, as already noted, the prosecution must establish that the respondents were aware of the relevant information and of its materiality to the investment decision they were inviting the investors to make. Secondly, it will have to be established that the respondents knowingly withheld information which they knew to be material.
Those are the relevant states of mind — the actual states of mind of the respondents — which must be established. Consistently with Peters, the question then is whether that conduct — the deliberate withholding — was dishonest according to the standards of ‘ordinary, decent people’.
Counsel for the respondents also called in aid the mental element in one of the statutory alternatives, that is, knowledge of or recklessness as to the falsity of the ‘false promise’. This was said to support the contention that the ‘dishonest concealment’ alternative should be interpreted as requiring proof of subjective awareness of dishonesty.
That submission must also be rejected. As is demonstrated by the long line of authority concerning the prohibition against ‘misleading or deceptive conduct’, formerly under s 52 of the Trade Practices Act 1974 (Cth) and now under s 18 of the Australian Consumer Law, a representation may in fact be false or misleading without the maker having any awareness that that is the case. That being so, it is unsurprising that a provision like s 191(1), which imposes criminal liability, requires it to be shown that the maker of the promise or representation was aware of its falsity or was reckless as to whether it was true or false. No issue of that kind arises in relation to dishonest concealment.
For these reasons, the interlocutory appeal must succeed, and his Honour’s ruling must be set aside. The jury will need to be directed that, if they are satisfied that the relevant respondent deliberately concealed material facts, the question of dishonesty ‘is to be decided by the standards of ordinary decent people’.
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