Ferris v The State of Western Australia

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: FERRIS -v- THE STATE OF WESTERN AUSTRALIA [2009] WASCA 54

CORAM: MARTIN CJ
MILLER JA
BEECH AJA

HEARD: 16 SEPTEMBER 2008

DELIVERED : 27 FEBRUARY 2009

FILE NO/S: CACR 118 of 2007

BETWEEN: LAWRENCE PETER FERRIS
Appellant
AND
THE STATE OF WESTERN AUSTRALIA
Respondent

ON APPEAL FROM:
For File No               :  CACR 118 of 2007
Jurisdiction              :  DISTRICT COURT OF WESTERN AUSTRALIA
Coram  :MACKNAY DCJ
Citation  :STATE OF WESTERN AUSTRALIA v LAWRENCE PETER FERRIS and KENNETH FRANCIS O'BRIEN
File No  :IND 648 of 2007

Catchwords:

Criminal law - Fraud - Section 409 of the Criminal Code (WA) - False representations - Section 30(3)(a) of the Criminal Appeals Act 2004 (WA) - Turns on its own facts

Evidence - Section 31A of the Evidence Act 1906 (WA) - Section 31A should not be construed as exclusively defining the only circumstances in which evidence that might come within its cope is admissible - Unduly prejudicial evidence

Legislation:

Criminal Code (WA), s 409
Evidence Act 1906 (WA), s 31A

Result:

Leave to appeal granted
Appeal dismissed

Category: B

Representation:

Counsel:

Appellant: Mr S Vandongen
Respondent: Mr B Fiannaca SC

Solicitors:

Appellant: Mark Andrews & Associates
Respondent: Director of Public Prosecutions (WA)

Case(s) referred to in judgment(s):

Beverland v The State of Western Australia [2009] WASCA 2
M v The Queen [1994] HCA 63; (1994) 181 CLR 487
Martinez v The State of Western Australia [2007] WASCA 143
Plomp v The Queen [1963] HCA 44; (1963) 110 CLR 234
R v Hillier [2007] HCA 13; (2007) 228 CLR 618
Shepherd v The Queen [1990] HCA 56; (1990) 170 CLR 573
Spencer v The Commonwealth [1907] HCA 82; (1907) 5 CLR 418

MARTIN CJ: Lawrence Peter Ferris appeals from his conviction on 17 counts of obtaining a benefit by deceit or fraudulent means and with intent to defraud, contrary to s 409(1)(c) of the Criminal Code (WA). Although there are three grounds of appeal, the principal ground of appeal argued (ground 2) was an assertion that the verdict of the jury was unsafe and unsatisfactory because the evidence adduced at trial was insufficient to establish all the elements of the offences charged beyond reasonable doubt.

The State case

Mr Ferris is a property developer. His business included buying land, undertaking development or improvement of that land, and selling it at a profit.
The charges brought against Mr Ferris were brought against him and Kenneth Francis O'Brien jointly. Mr O'Brien was a finance broker, at all relevant times, and was employed by a licensed finance broker, Blackburne and Dixon Pty Ltd (Blackburne and Dixon). The business of Blackburne and Dixon included receiving proposals from borrowers which would then be presented to prospective investors on the basis that each investor would advance funds to the borrower secured by a first mortgage over land provided by the borrower to all investors jointly. Blackburne and Dixon derived its income by charging borrowers a brokerage fee for procuring loans in this way.
Although the State case was opened rather more widely, the case ultimately left to the jury by the trial judge was to the effect that Mr Ferris counselled or procured Mr O'Brien to present to prospective lenders to Markets International Pty Ltd (Markets International), a company in which Mr Ferris had an interest, representations about a proposal to advance funds against the security of a mortgage over property owned by that company in Stock Road, Bibra Lake on which markets were conducted (the Stock Road Markets), which both knew to be false (and therefore deceitful or fraudulent) in two material respects, namely:
(a)that all approvals for the development and subdivision of the land into strata title units had been obtained; and
(b)a valuation of the property provided by C R Marr & Associates was a current valuation
when in fact, approval for the development and subdivision of the property had not been obtained, and the valuation was of the property after subdivision of the land into strata title lots had occurred.
The State case was that in reliance upon one or other or sometimes both of those false representations, between February and May 1999, 16 investors agreed to advance funds to Markets International. Because one investor advanced funds on two separate occasions, 17 counts were brought against Mr Ferris and Mr O'Brien.

The evidence

It is appropriate to consider the grounds of appeal in the context of the evidence that was relied upon by the State.
The evidence of Ms Kaye Blackburne, who was at all relevant times a managing director of Blackburne and Dixon, was to the effect that Mr Ferris and a business associate had procured loans utilising the services of Blackburne and Dixon for some time prior to the events in question. She estimated that by 1997, when Mr Ferris first procured a loan for the acquisition of the Stock Road Markets, Mr Ferris had previously sourced loan funds utilising the services of Blackburne and Dixon on more than 10 occasions. By the time Blackburne and Dixon ceased operations in 2000, Mr Ferris had obtained about 20 loans utilising their services. It is to be remembered that the State alleged the offences in question took place in early 1999.
Ms Blackburne's evidence was also to the effect that it was the practice of Blackburne and Dixon to only submit proposals to prospective investors if the funds to be advanced to the borrower represented less than 70% of the value of the property offered as security for the loan. It was her evidence that this practice was explained to borrowers.
Mr O'Brien's evidence on this subject was:
Blackburne and Dixon didn't do any loans in excess of 70% of the valuation. We looked to have somewhere in the low 60s if we could manage it. (ts 6209)
Mr O'Brien also said in evidence that it was his practice to sit down with borrowers and explain to them exactly what would be required if they made an application for a loan. In the course of those discussions, he would advise borrowers that Blackburne and Dixon would send a proposal letter to prospective investors containing the information which the borrower had supplied. It was his practice to explain to borrowers that such a proposal letter would include a statement of the value of the property against which security was offered as at the date the loan was to be granted, because that was a matter of obvious importance (ts 6299). Mr O'Brien further stated in evidence that he was the officer of Blackburne and Dixon who dealt with Mr Ferris when he first became a client of the company, and confirmed that he had explained all of these things to him (ts 6299).
During argument on the appeal, counsel for Mr Ferris accepted (quite properly, in the light of this evidence) that there was evidence from which a jury could conclude beyond reasonable doubt that Mr Ferris was aware that it was the normal practice of Blackburne and Dixon to only recommend loans to prospective lenders if the funds to be advanced represented 70% or less of the value of the property offered by way of security for the advance.
On 12 April 1997, Markets International agreed to purchase the Stock Road Markets from Great Southland Homes Pty Ltd for a price of $3 million. The land upon which the markets were conducted was a lot (Lot 25) created by the strata title subdivision of a larger lot. There were various other lots in the strata title subdivision owned by various other persons and entities from time to time.
At the request of Mr Ferris, Mr Ronald O'Connor, who was then a licensed valuer, prepared a report on the value of the Stock Road Markets dated 21 April 1997. The report states that the purpose of the valuation was '[t]o determine the current market value of the proposed reorganised Markets for mortgage finance purposes'. Somewhat contradictorily, Mr O'Connor stated in the report that he considered the 'current Market Value of the subject units as at 21 April 1997 is - On Completion Value $4,280,000'.
The explanation for this apparent conundrum lies in pt 3.3 of Mr O'Connor's report. In pt 3.3 it is recorded that it was proposed to alter the existing layout of the markets 'in order to provide more stalls and better use the existing space', which would include the creation of an additional 17 variety stalls around the perimeter of the tent canopy area. Part 3.3 recorded that the cost of the works had been estimated at between $75,000 and $80,000, and 'the resultant changes would double the rental potential of the development' (also see the Hypothetical Analysis which is an attachment to the report).
In pt 4.1 of his report, Mr O'Connor asserted that existing rental was approximately $350,000 per annum, but that after adding the additional stalls, the property 'would show a total annual rental of approximately $700,000'. On that basis, he estimated the 'current Market Value of the subject property as at 21 April 1997 is … $4,280,000' (pt 4.3).
On 7 May 1997, Mr Ferris wrote to Mr O'Brien on the letterhead of Markets International. He enclosed the valuation prepared by Mr O'Connor. In that letter he asserted that the valuation provided 'the complete story regarding the markets'. The letter requested a loan of $2,750,000. In the light of the evidence of the '70%' policy of Blackburne and Dixon to which I have referred, it was open to the jury to infer that Mr Ferris would have been well aware that if the value of the property was taken as the price of $3 million, which had been agreed less than a month earlier, the borrowing proposal would not comply with the normal requirements of Blackburne and Dixon. However, if the value of the property was taken as that estimated by Mr O'Connor after work had been performed in order to provide 17 additional stalls and double rental income, the proposal would meet the normal requirements of Blackburne and Dixon. As will be seen, this observation formed a component in the argument advanced on behalf of Mr Ferris on appeal.
On 14 May 1997, Mr O'Brien wrote to Mr Ferris advising that Blackburne and Dixon was prepared to provide finance to assist with the purchase and development of the Stock Road Markets, in an amount of $2,750,000. The provision of finance was expressed to be conditional upon the provision of first mortgage security over the land, and:
Confirmation as required by the Strata Titles Act that the Strata company will permit further subdivision of Lot 25 when the proposed development is completed.
It seems that a copy of the letter of 14 May 1997 from Mr O'Brien to Mr Ferris was provided to the vendor, Great Southland Homes Pty Ltd. The following day, the managing director of that company, Dr Brian Aw‑Yong, wrote to the real estate agent who had procured the sale expressing concern at the condition imposed upon the provision of finance requiring strata title subdivision. In that letter, he expressed the view that the value of the property was not dependent upon subdivision, and that the process of obtaining subdivision was normally too lengthy to fit into the normal settlement schedule of a property. The letter suggested that subdivision should be undertaken by the purchaser after settlement.
On 16 May 1997, a Mr Hewitt of Annette Lawrence and Associates (Annette Lawrence) appointed Mr Keith Dufty, of John Bullock and Associates, to prepare a proposal for the subdivision of the land to enable strata titles to be obtained for individual stalls. John Bullock and Associates were consulting land surveyors, while Annette Lawrence was a consultancy business owned and operated by Mr Ferris.
By letter dated 22 May 1997, Mr Dufty wrote to Annette Lawrence enclosing plans for the proposed subdivision. The letter contained a paragraph in the following terms:
Subject to approvals from the Strata Company and authorities we will provide the documents for lodgement at DOLA for dealings to take effect.
At about that time, Mr Dufty received a telephone call from Mr Ferris who asked him to modify the letter by removing any reference to approvals. In response to that request, Mr Dufty removed the words '[s]ubject to approvals from the Strata Company and authorities' and replaced them with the words '[o]nce advised that the [sic] ownership has been obtained', and reissued the letter bearing the same date of 22 May 1997. That version of the letter was sent to Mr O'Brien by Mr Ferris under cover of a letter dated 23 May 1997, together with a copy of the plan of proposed subdivision, an application to the State Planning Commission, and the letter from Dr Aw‑Yong of 15 May 1997. The application to the State Planning Commission enclosed with the letter to Mr O'Brien responded in the negative to a question posed on the standard form in the following terms:
Are there any proposed buildings approved for construction by the local authority which will form part of the strata plan?
On the same day, that is, 23 May 1997, Mr O'Brien sent a letter to Mr Ferris which was in almost identical terms to the letter of 14 May 1997, indicating acceptance by Blackburne and Dixon of the borrowing proposal, save that the condition relating to strata title subdivision was entirely omitted.
Thereafter, Blackburne and Dixon sent letters to various prospective investors soliciting loans to Markets International to be secured by first mortgage security over the Stock Road Markets. At least one such letter was put in evidence. The letter, which was not signed by Mr O'Brien, but by another officer of Blackburne and Dixon, included the following assertion:
The strata company and the local council have approved the construction of another 17 stalls around the perimeter of the tent canopy. The walls will be of brick with a metal roof and concrete floor.
Valuer Ron O'Connor valued the property on April 21, 1997 as at completion of the additional 17 units at $4,280,000.00. The proposed loan represents 64.7% of valuation.
The letter also represents that the alterations to the building were estimated to cost $80,000 and that an amount to cover those costs would be retained in trust 'to meet expenditure as required'. The letter further asserted:
The construction of the additional units will only take 4‑6 weeks from settlement on July 1, 1997. We shall be holding expenses until the new section is complete.
Plainly, this letter seriously misrepresents the position established by the evidence. However, there was no evidence that Mr Ferris ever saw that letter, or any other letter to similar effect.
Blackburne and Dixon were successful in soliciting the advance of the funds requested by Mr Ferris, in the amount of $2.75 million, and settlement of the acquisition of the Stock Road Markets took place, utilising those funds, on 8 September 1997.
Mr Brian Letts was appointed to manage the markets following their acquisition by Markets International. Shortly after his appointment, by letter dated 30 October 1997, Mr Letts advised Mr Ferris that disbursements for the months of September and October 1997 exceeded more than 50% of rental income for those months, and that 'a leasing crisis meeting' had been held with tenants.
By letter dated 27 May 1998, Mr Letts reported to Mr Ferris that:
The bottom line is that we have grave doubts as to the appeal of any weekend market to upgrade itself to the trading levels which these outlets have previously achieved. Stock Road Markets in particular is hampered by its principal attraction (fruit and vegetables) not being perceived as interesting or even 'value for money'.
We are in a difficult cycle. Without the public, we cannot attract new, innovative or exciting stall holders. Without new, innovative or exciting stall holders, we cannot attract the public.
Every time we gain new stall holders we lose others so that we maintain approximately the same number of stalls occupied, and approximately the same income (slightly higher) than when you first purchased this investment property.
We appreciate that Stock Road Markets has not provided you with the passing income which you anticipated during the 'holding' phase prior to strata titling and sale. We have very real concern that the situation could get worse, thus making it very difficult to sell the strata titled areas.
Unfortunately, our only recommendations are that you invest even more money now on the basis that failure to do so could result in having an unsaleable property in the future.
The annual general meeting of the strata title company created by the registration of the strata title subdivision plan which resulted in the creation of Lot 25 and the various other lots was held on 9 June 1998. The strata title owners present at that meeting gave general approval to commence the process for the further subdivision of Lot 25. However, they requested Markets International to present detailed plans and drawings to an extraordinary general meeting of the strata title owners.
On 7 July 1998, Mr Ferris met with Mr O'Brien. Mr O'Brien's note of that meeting records that he was advised that the approval of the strata title owners to the further subdivision of Lot 25 was required, and that the process could take up to three months.
On 23 September 1998, an extraordinary general meeting of the strata owners of the Stock Road Markets was held. At that meeting, the proposal of Markets International to further subdivide Lot 25 was rejected. Mr Letts advised Mr Ferris of that fact by letter, dated 30 September 1998.
On 13 October 1998, Mr Letts wrote to Mr Ferris requesting an increase in monthly management fees. In that letter he stated:
We entirely understand the predicament of your company. Stock Road Markets is costing you a huge amount of money each month.
On 17 November 1998, Mr Jason Blackburne, an officer of Blackburne and Dixon, wrote to Mr Ferris advising that the loan of $2.75 million secured by first mortgage over the Stock Road Markets was due to be repaid or extended on 11 January 1999. The letter advised that if Mr Ferris wished to request an extension of the facility, various items of information would be required including:
[a]n updated valuation of the property held as security for the mortgage be forwarded to us.
By letter dated 4 January 1999, Mr Letts reported to Mr Ferris on the operation of the markets for the six‑month period ending December 1999. His report revealed that total income received was approximately $147,000 against disbursements of approximately $27,000. Under the heading 'Markets in Crisis', Mr Letts advised that he had been forced to grant temporary rent reductions to two of the food court tenancies, and that a number of tenants had been lost. He advised that in his view:
There is a very real likelihood that a number of other stallholders will close their doors and desert the markets if they experience another poor trading weekend.
We are not being deceived by the usual tenant whinges and complaints. We genuinely believe the situation to be so serious that unless urgent action is taken NOW there will be no income from the markets as even those on licences will close their businesses, and we shall be forced to take legal action for recovery and continued trade.
By letter dated 4 January 1998 (but which it was agreed should have been dated 1999), Annette Lawrence wrote to Markets International purporting to report on the Stock Road Markets. Under the heading 'Operations', the letter stated:
With few exceptions the markets are enjoying a very busy time for trading. Most weeks see occupancy levels reaching 100%. Naturally, because of the very nature of a market, some traders are there for a week at a time but most return. All in all this aspect of things is most encouraging.
Under the heading 'Strata Re-subdivision', the letter asserts:
We are now in the final throes of reaching a conclusion in regard to the strata re-subdivision.
Ross Sharland of Independent Strata Services has been investigating various ways of forming a 'strata within a strata' in order that the existing strata title holders (particularly Fini Properties) are not inconvenienced or disadvantaged in any way.
He has spent a great deal of time on this exercise but now has the wherewithal to put the whole thing to bed and is hopeful of having everything in place before the end of the month.

The letter was written by a Mr Cunningham of Annette Lawrence. In his evidence, he agreed that he probably wrote the letter at the request of Mr Ferris, and that he would have been aware of any proposal by Markets International to refinance the Stock Road Markets.
A copy of this letter was sent to Mr O'Brien together with a letter which was also erroneously dated 4 January 1998, but which should have been dated 1999, in which Mr Ferris requested an extension of the mortgage over the Stock Road Markets.
On the evidence of the information available to Mr Ferris at that time, it was open to the jury to infer that he must have been aware, at the time he provided a copy of the Annette Lawrence letter to Mr O'Brien, that it seriously misstated the position in relation to the markets, both in respect of the operation of the markets and the progress towards obtaining subdivision approval. The markets had performed poorly since their acquisition and the strata title subdivision of Lot 25 had been rejected by other owners of the strata title lots, whose approval was a prerequisite to any further subdivision. Given that Mr Ferris controlled Annette Lawrence, and had an interest in obtaining an extension of the mortgage, it was open to the jury to infer that he caused the letter to be written in disingenuous and deceitful terms so as to provide documentary evidence, which might appear to be from a third party, to support his application for an extension of the mortgage. Indeed, it is difficult to see how the jury could have concluded otherwise.
By letter dated 5 January 1999, Mr O'Brien wrote to Mr Ferris acknowledging receipt of his letter of 4 January and advising that further information was required in support of the application for extension of mortgage, including balance sheet and trading figures for the Stock Road Markets, cash flows, details of the sales programme for selling off the units and anticipated sales prices, a copy of the proposed subdivision, and a '[c]urrent valuation of proposed new strata lots created by the subdivision of Lot 25'.
The following day, Mr O'Brien wrote to some of the lenders to Markets International. At least one such letter is in evidence. In the letter, Mr O'Brien advised that Markets International had requested a renewal of the loan to enable them to complete the subdivision of Lot 25. The letter foreshadowed that a renewal letter would be sent to lenders within two weeks, and would include a 'current valuation'.
By letter dated 8 January 1999, Mr Curry, a principal of Century 21 Commercial WA wrote to Markets International in response to a request to appraise the price and saleability of the Stock Road Markets after completion of the proposed further subdivision of Lot 25. The letter suggests that the total price to be realised from the sale of the strata title units was approximately $5.3 million.
At about this time, Mr Ferris requested Mr Clanan Marr, a licensed valuer, to prepare a valuation report in respect of the Stock Road Markets. Mr Marr produced a report dated 14 January 1999. In the report, it is asserted that it was proposed to alter the existing layout of the markets in order to provide more stalls, in particular by allowing the creation of an additional 17 variety stalls around the perimeter. The report asserts that the cost of the works is estimated at between $75,000 and $80,000, and that the resulting changes would significantly increase the rental potential of the development.
This is the proposal which formed the basis of Mr O'Connor's valuation in 1997 (see above [13]). At that time, prospective lenders were told that the work would be completed within six weeks of settlement, and funds retained in order to pay for those works. The works had not proceeded as forecast and by 1999, there was no proposal to undertake any work of that kind. Rather, the proposal was to subdivide the land by reference to the existing buildings. There was evidence from which the jury could conclude that Mr Ferris was well aware of these matters.
The valuation performed by Mr Marr estimates that the rental to be derived from the additional space would show a total annual rental of up to $1.1 million. Given the report which Mr Ferris had received from Mr Letts in respect of the performance of the markets in the six months ending December 1998, and the earlier reports which Mr Ferris had received from Mr Letts, there was evidence from which the jury could infer that Mr Ferris well knew Mr Marr's estimate of rental was a gross exaggeration (that was, however, not the ground alleged by the State). Mr Marr went on to use his estimate of rental as the basis for his assessment that the value of the land after completing the alterations and obtaining a strata title subdivision, was approximately $4,050,000 (as at 14 January 1999 - although, of course, at that date there were no proposed alterations and subdivision had been opposed by the other strata title owners, as, it was open to the jury to infer, Mr Ferris well knew). The Marr valuation also made statements about the performance of the markets which, it was open to infer, Mr Ferris must have known to be false or misleading.
About this time, Mr Ferris approached another valuer - Mr Nathan King of Hegney Property Valuations. By letter dated 3 February 1999, Mr King advised Mr Ferris that in his view, after completion of the proposed subdivision, the Stock Road Markets would have 'a ceiling value in the order of $3,000,000'. The letter advised that the estimate was derived from preliminary investigations only and did not constitute a valuation.
On 24 February 1999, Mr Ferris and his business associate executed a loan application form at the request of Blackburne and Dixon. It seems that some of the material in the form may have been provided by persons other than Mr Ferris. However, the evidence established that he signed the form. At two points in the form, the applicant is required to provide an estimate of the value of the security to be provided. At each point on the form, the amount specified is $4,050,000. This amount is the amount of the valuation provided by Mr Marr. There is no qualification of the estimate of the value provided at the two points in the loan application form and, in particular, no statement to the effect that the value estimated is dependent upon carrying out alteration works to provide 17 additional units and the completion of the proposed strata title subdivision.
Mr Ferris provided copies of the reports from Mr Curry and Mr Marr to Blackburne and Dixon. He did not provide a copy of the report from Mr King.
Mr O'Brien then sent letters to the existing lenders to Markets International Pty Ltd and, in due course, other prospective lenders. The letters stated:
Approval is held to subdivide Lot 25 into 17 smaller lots, each comprising a number of stalls and a marketing plan to sell the lots to stall holders and investors will be carried out over the next 6 months.
Valuers C R Marr & Associates re-valued the property on 14/1/99 at $4,050,000.00 and the loan represents 68% of valuation.
The letter went on to advise that Century 21 Commercial WA were to market the units over the next six months, and expected to sell the units at much higher figures than valuation. In that respect the letter stated:
In fact the sale price for the complex is $5,318,232, some 31% above valuation and we do not expect sales to be effected at full asking price but they should sell well above valuation.
Over the following months, various investors accepted the proposal promoted by Blackburne and Dixon, and on 28 May 1999, the original mortgage over the Stock Road Markets was discharged and a new first mortgage granted in favour of those investors.
By 11 July 1999, Markets International was in default of payments due under the loan.
Following default by the mortgagor, agents appointed to represent the mortgagees recommended that the property be marketed for sale at a price between $1.3 million and $1.5 million. In 2001, the land was sold at the instance of the mortgagees, realising approximately $600,000.
Mr O'Brien gave evidence. His evidence was generally to the effect that he was aware, at the time letters were sent to investors in 1999, that approvals had not been obtained for the subdivision and that Mr Marr's valuation was dependent upon the subdivision being achieved. However, he asserted that he did not write the letters in question. The jury can be taken to have rejected that assertion, because he was convicted on all counts. Mr Ferris did not give evidence.

The grounds of appeal

Two of the three grounds of appeal can be quite shortly addressed before dealing with the substantive ground asserting the insufficiency of the evidence.

Ground 1

This ground asserts that the trial judge erred by admitting evidence of three payments, made by entities controlled by Mr Ferris, to Mr O'Brien during 1997 and 1998. The payments were an amount of $5,000 in December 1997, $5,000 in April 1998, and $10,000 in November 1998.
During 2006, Mr Ferris and Mr O'Brien stood trial on charges to the effect that these payments were secret commissions, made by Mr Ferris to induce Mr O'Brien to act favourably towards him in relation to the approval of various loans. At the conclusion of that trial, the jury were unable to reach a verdict, after which the State discontinued those charges.
Further, the third payment in the amount of $10,000 was also the subject of another count of fraud brought against Mr Ferris arising from what was known as the 'Elk Cove' project. Mr Ferris was ultimately acquitted on that count.
The admissibility of the evidence of these payments was considered by the trial judge at a hearing prior to the commencement of the trial. While the State did not concede that the payments were for consulting work performed by Mr O'Brien for Mr Ferris independently of his work for Blackburne and Dixon, the State undertook not to contend otherwise if the evidence of the payments was admitted. The State adhered to that undertaking in the course of its opening and closing addresses.
The trial judge gave the following direction to the jury in relation to these payments:
Further, the state suggests that the sum of $25,000 said to have been paid to Mr O'Brien by Mr Ferris and the prospect of more, potentially at least, would have made Mr O'Brien favourably disposed to assisting Mr Ferris. The evidence as to those payments, of course, was led by the prosecution on the basis that it was relevant to the relationship between the two men as being a circumstance an ordinary person, considering what that relationship might have been, would want to know about.
However, it's important that you appreciate that the state doesn't allege or suggest that any of those payments were bribes or anything illegal or anything of that kind and it would therefore not be open to you to engage in any speculation of that kind and the evidence could not be used for any purpose beyond a consideration of their relationship and it was not evidence which could directly implicate Mr O'Brien in the commission of the offences alleged or convey any imputation that he was the sort of person who might commit such an offence. (ts 6583)
It seems that the trial judge might have made an arithmetical error in this direction (as the payments total $20,000, not $25,000), but Mr Ferris does not complain of that. Rather, his complaint is that the evidence should not have been admitted at all. That complaint proceeds upon the assertion that the only basis upon which the evidence could be admitted was pursuant to s 31A of the Evidence Act1906 (WA). That section provides:
31A. Propensity and relationship evidence
(1)In this section -
propensity evidence means -
(a)similar fact evidence or other evidence of the conduct of the accused person; or
(b)evidence of the character or reputation of the accused person or of a tendency that the accused person has or had;
relationship evidence means evidence of the attitude or conduct of the accused person towards another person, or a class of persons, over a period of time.
(2)Propensity evidence or relationship evidence is admissible in proceedings for an offence if the court considers -
(a)that the evidence would, either by itself or having regard to other evidence adduced or to be adduced, have significant probative value; and
(b)that the probative value of the evidence compared to the degree of risk of an unfair trial, is such that fair‑minded people would think that the public interest in adducing all relevant evidence of guilt must have priority over the risk of an unfair trial.
(3)In considering the probative value of evidence for the purposes of subsection (2) it is not open to the court to have regard to the possibility that the evidence may be the result of collusion, concoction or suggestion.
Although the evidence of the payments might, on one view, fall within the s 31A definition of 'relationship evidence', and although the trial judge characterised the evidence as evidence going to the relationship between the two accused, the evidence was admissible quite independently and irrespective of s 31A. That is because it was evidence which the jury might use as a basis for drawing conclusions about the motives of Mr O'Brien. In the circumstances established by the evidence, the jury might well have wondered why a person in the position of Mr O'Brien would have made fraudulent representations at the behest of Mr Ferris, when the loans procured as a result of those representations were substantially for the benefit of Mr Ferris and entities with which Mr Ferris was associated. Of course, one answer to that hypothetical question was the financial benefit derived by Blackburne and Dixon from its ongoing commercial relationship with Mr Ferris. Another answer was provided by the evidence in question, which established that Mr O'Brien derived personal benefits from an ongoing relationship with Mr Ferris.
Section 31A was introduced to overcome common law rules which precluded evidence of propensity, or of relationship, being admissible without more. However, those common law rules did not preclude the admissibility of such evidence if it was otherwise admissible - for example, because it went to motive. Section 31A should not be construed as exclusively defining the only circumstances in which evidence that might come within its scope is admissible: see, for example, Beverland v The State of Western Australia [2009] WASCA 2, [1] (McLure JA) and [30] ‑ [39] (Miller JA). If the evidence in question would be otherwise admissible under the common law, it is unnecessary to invoke the section. If the legislature intended that s 31A cover the field in relation to the admissibility of evidence falling within its scope, no doubt the expression 'if and only if' would have been used instead of the word 'if'.
On behalf of Mr Ferris, it is asserted that the evidence was unduly prejudicial, and should have been excluded for that reason. It is submitted that the jury would very likely have drawn an inference of corrupt conduct from the fact of the payments. It is further submitted that the tender of the evidence amounted to an abuse of process because of the discontinuance of the earlier charges relating to the payment of secret commissions, and the acquittal of Mr Ferris on the charge of fraud relating to one of the payments.
There is no substance in these submissions. The evidence of the payments was not capable of supporting an inference to the effect that they were corruptly made. Further, consistently with the undertaking given by the State, when reference was made to these payments in the opening address of counsel for the State, specific reference was made to the suggestion that they were 'consultancy fees'. Counsel for the State told the jury that the only significance of the evidence was that it showed a continuing commercial relationship between the two men. Although Mr O'Brien was cross‑examined at considerable length by counsel for the State, at no point in that cross‑examination was it suggested to him that the payments had any element of corruption or impropriety. Nor was that suggestion put at any point in the closing address of counsel for the State. Further, as I have noted above, the trial judge specifically directed the jury that there was no evidence to the effect that there was anything sinister or corrupt about the payments. In those circumstances, there cannot be any suggestion that the State was abusing the processes of the court by leading evidence which was inconsistent with the resolution of other charges (assuming, without necessarily accepting, that such an action would amount to an abuse of process).
Ground 1 must be dismissed.

Ground 3

Ground 3 complains that the trial judge admitted evidence of the ultimate price at which the land was sold in 2001. In support of this ground, it is submitted that the evidence would be taken by the jury as evidence of the value of the land at the time of the alleged offences in early 1999 and would cause them to conclude that Mr Ferris had significantly overstated its value. It is further submitted that changes in the property market in the period between 1991 and 2001, as a result of the collapse of the finance broking industry, and the circumstances of the sale of the land (a mortgagee sale) either precluded or weakened any inference being drawn from the sale price achieved in 2001 as to the value of the property in early 1999.
Although establishment of the value of the property in early 1999 was not an element of the offences charged, evidence as to value was relevant, as providing a context for the offences alleged.
There are innumerable cases dealing with the various ways in which the value of land can be assessed. The primary measure of value in such cases is usually taken to be the price that a willing purchaser would have had to pay on the day in question to a vendor willing to sell it for a fair price but not anxious to sell (per Griffiths CJ, Spencer v The Commonwealth [1907] HCA 82; (1907) 5 CLR 418 at 432). So, the estimate of value is undertaken by reference to a hypothetical transaction. The price at which such a hypothetical transaction would have occurred is often assessed by receiving evidence of actual transactions which are comparable to the hypothetical transaction because, for example, the transaction related to similar land and took place at about the same time as the hypothetical transaction or, because the transaction related to the same land, but took place at a different time. When such evidence is received, there will be differing degrees of comparability, and the extent of the comparability, and of the differences, must always be evaluated in order to assess the strength of the comparison, and the inference properly drawn from the comparable transaction. If the transaction is sufficiently comparable to enable some inference to be drawn in relation to the terms upon which the hypothetical transaction might have occurred, evidence of the actual transaction is relevant and admissible. The strength of the inference drawn will depend upon the degree of comparability
In the present case, evidence of the price at which the land was sold in 1997 ($3 million) was received without objection. As far as I can tell, evidence of its sale price in 2001 was led from only two witnesses, Mr Rogerson (ts 4963) and Mr Davidson (ts 4778). Both were lenders, and both gave evidence of the losses they had incurred by reason of their loan. As best as one can tell from the transcript, this evidence does not appear to have been given any particular prominence.
Counsel for Mr Ferris cross‑examined other witnesses, specifically Ms Blackburne (ts 5481 and 5490) and Mr Curry (ts 5841), to establish the matters that are said to diminish the strength of the inference drawn from the sale in 2001 as to the value in 1999 - namely, the fact that the transaction in 2001 was a mortgagee sale, and the difference in the market in 2001 as a result of the reduction in the credit available from finance brokers. It is reasonable to assume that the jury would have taken those matters into account when evaluating the strength of any inference to be drawn from the evidence they had heard relating to the sale of the land in 2001.

They were expressly directed to do so by the trial judge in his direction to them. He stated:
In relation to the sale price that was achieved for the Stock Road Markets, as I will call lot 25, this particular parcel of land, members of the jury, you have heard some evidence of events which occurred after the loan was obtained and then fell into default, including efforts made to sell the markets and price eventually obtained.
That evidence was led by the state I think to show the full picture, if you like, for completeness. It's important, however, to appreciate this trial was not an inquiry into the value of the markets at that time. The evidence is before you for completeness and so you can see what eventually befell the transaction but there are many possible reasons of course why the value of a property, particularly a commercial property, might substantially change including of course general real estate conditions, the availability of finance money, the number of development properties on the market. I think one witness said that there was a general problem which befell the finance broking industry, if I can call it that, in the following year and that of course - if the availability of development funds dried up in Perth that would have potentially a very great effect on the number of people who were there to buy things and here of course the other thing is the sale was a forced sale, that is, a mortgagee sale.
There has not been any exploration of any of those things for the reasons that I have mentioned, that this was not an inquiry into the value of the property or the sale price and the sale price evidence could not be used to try and gauge the market's value in the first half of 1999. (ts 6563 ‑ 6564)
If anything, this direction was unduly favourable to Mr Ferris because once allowance is made for the factors identified in the evidence and to which the trial judge referred, an inference could nevertheless be drawn from the sale in 2001 as to the value in 1999. Given that the transaction related to precisely the same land, there was sufficient comparability to enable some inference to be drawn. The strength of that inference should have been a matter for the jury, although the trial judge directed them to not draw any inference at all.
On behalf of Mr Ferris it was submitted that this evidence was unduly prejudicial and should have been rejected on that ground. I am unable to see any basis for that submission. The evidence was not given great prominence, and counsel for Mr Ferris elicited evidence in cross‑examination which enabled the jury to give the evidence its proper weight. The direction by the trial judge to which I have referred precludes any conclusion that the evidence would have been used improperly by the jury.
Ground 3 must be dismissed.

Ground 2

General principles

The substantive ground of appeal pursued was an assertion to the effect that there was insufficient evidence to substantiate the appellant's conviction. This can be taken to be an appeal pursuant to s 30(3)(a) of the Criminal Appeals Act 2004 (WA) which provides that the Court of Appeal must allow the appeal if, in its opinion:
… the verdict of guilty on which the conviction is based should be set aside because, having regard to the evidence, it is unreasonable or cannot be supported …
The ground is often identified by reference to the leading case in the area - the decision in M v The Queen [1994] HCA 63; (1994) 181 CLR 487. The test to be applied by a Court of Appeal when such a ground is raised was set out by reference to the decision of the High Court in M v The Queen in Martinez v The State of Western Australia [2007] WASCA 143 at [6]:
The test which faces a Court of Appeal in considering whether a verdict should be set aside on the ground that it is unreasonable or cannot be supported, having regard to the evidence, is set out in two passages from the judgment of Mason CJ, Deane, Dawson and Toohey JJ (at 492 - 493). They are in the following terms:
'The question is one of fact which the court must decide by making its own independent assessment of the evidence [Morris v The Queen (1987) 163 CLR 454] and determining whether, notwithstanding that there is evidence upon which a jury might convict, "none the less it would be dangerous in all the circumstances to allow the verdict of guilty to stand" [Hayes v The Queen (1973) 47 ALJR 603 at 604]. But a verdict may be unsafe or unsatisfactory for reasons which lie outside the formula requiring that it not be "unreasonable" or incapable of being "supported having regard to the evidence". A verdict which is unsafe or unsatisfactory for any other reason must also constitute a miscarriage of justice requiring the verdict to be set aside.
…
Where, notwithstanding that as a matter of law there is evidence to sustain a verdict, a court of criminal appeal is asked to conclude that the verdict is unsafe or unsatisfactory, the question which the court must ask itself is whether it thinks that upon the whole of the evidence it was open to the jury to be satisfied beyond reasonable doubt that the accused was guilty [Whitehorn v The Queen (1983) 152 CLR 657 at 686; Chamberlain v The Queen [No 2] (1984) 153 CLR 521 at 532; Knight v The Queen (1992) 175 CLR 495 at 504 - 505, 511]. But in answering that question the court must not disregard or discount either the consideration that the jury is the body entrusted with the primary responsibility of determining guilt or innocence, or the consideration that the jury has had the benefit of having seen and heard the witnesses. On the contrary, the court must pay full regard to those considerations [Chamberlain v The Queen (supra) at 621].'
When a Court of Appeal undertakes the process mandated by those principles, it must have regard to the entirety of the evidence. It is an error in principle to consider the significance of circumstantial evidence consistent with the innocence of the appellant in isolation from other evidence (R v Hillier [2007] HCA 13; (2007) 228 CLR 618 at [48]).
Further, the case against Mr Ferris was essentially circumstantial. The nature of circumstantial evidence is succinctly set out by Dawson J in Shepherd v The Queen [1990] HCA 56; (1990) 170 CLR 573 at 579 in the following passage:
Circumstantial evidence is evidence of a basic fact or facts from which the jury is asked to infer a further fact or facts. It is traditionally contrasted with direct or testimonial evidence, which is the evidence of a person who witnessed the event sought to be proved. The inference which the jury may actually be asked to make in a case turning upon circumstantial evidence may simply be that of the guilt of the accused. However, in most, if not all, cases, that ultimate inference must be drawn from some intermediate factual conclusion, whether identified expressly or not. Proof of an intermediate fact will depend upon the evidence, usually a body of individual items of evidence, and it may itself be a matter of inference. More than one intermediate fact may be identifiable; indeed the number will depend to some extent upon how minutely the elements of the crime in question are dissected, bearing in mind that the ultimate burden which lies upon the prosecution is the proof of those elements.
Sometimes, it is necessary to identify intermediate facts which constitute indispensable links in a chain of reasoning towards an inference of guilt, in which event those intermediate facts will need to be proven beyond reasonable doubt. However, not every possible intermediate conclusion of fact is of that character (Shepherd v The Queen per Dawson J at 579).
In the present case, it was sufficient for the jury to be satisfied beyond reasonable doubt of the guilt of Mr Ferris, but if any inference consistent with his innocence was reasonably open on the evidence, the jury must have entertained a reasonable doubt as to guilt. The same test applies in this court's consideration of the circumstantial evidence which was relied upon by the prosecution to establish Mr Ferris' guilt.
For the purposes of the appeal, Mr Ferris accepts that there was evidence to establish all elements of the charges against him to the requisite standard other than the element which required the State to prove, beyond reasonable doubt, that he counselled or procured Mr O'Brien to make false representations to the effect that:
(a)there were already approvals to subdivide (when in fact there were not); and
(b)that the valuation provided by Mr Marr was a current valuation (when in fact the valuation depended upon completion of the proposed subdivision).
It is convenient to deal first with the State's case in relation to the Marr valuation.

The Marr valuation

The evidence established beyond reasonable doubt that Mr Ferris commissioned the valuation provided by Mr Marr, and relied upon it to sustain his application for a renewal of the loan. Because he was aware that any loan funds would come from investors approached by Blackburne and Dixon, it follows that he must also have been aware that Mr O'Brien was likely to place reliance upon the Marr valuation when approaching prospective investors.
There are a number of aspects of the reliance placed by Mr Ferris upon the valuation by Mr Marr which could have sustained a count of fraud. For example, the valuation falsely asserted that an additional 17 stalls were to be constructed (when there was no proposal at that time to that effect), and the estimate of rental income likely to be received after this hypothetical construction was a gross exaggeration (as Mr Ferris must have known), which resulted in a valuation which was plainly excessive. However, the State particularised its case, and the trial and this appeal were conducted on the basis of those particulars. The State's particulars confine the allegation of fraud relating to the use of the Marr valuation, to the proposition that Mr Ferris counselled or procured Mr O'Brien to represent the valuation to prospective investors as a current valuation, when in fact it depended upon completion of the proposed subdivision. The evidence established unequivocally that Mr O'Brien used the valuation in that way. The critical question is therefore whether there was evidence from which the jury could infer, beyond reasonable doubt, that Mr Ferris counselled or procured him to do so.
The evidence that bears directly on that topic must be viewed in the context of the facts established by the evidence as a whole. Those facts sustained an inference that Mr Ferris had consistently acted dishonestly so as to procure the provision of loan funds through the agency of Blackburne and Dixon at a time when he knew that the value of the property offered as security for the loans was not sufficient to bring the proposal within the normal requirements of Blackburne and Dixon. The evidence which sustains that view includes:
(a)the circumstances surrounding the original loan in 1997, when Mr Ferris procured from Mr O'Connor a valuation substantially in excess of the price he had just agreed to pay (and which he knew would be insufficient to sustain a loan of the magnitude sought);
(b)his failure to disclose the dire trading conditions encountered by the markets;
(c)his failure to disclose the rejection of the subdivision proposal by the other strata owners;
(d)his reliance upon the letter of 4 January 1999 from Annette Lawrence which he must have known seriously misstated the position in relation to both subdivisional approval and the profitability of the markets; and
(e)his reliance upon the Marr valuation which he must have known to be seriously flawed in the respects I have identified.
In the context of the Marr valuation there are two aspects of the evidence which, in particular, sustain beyond reasonable doubt the conclusion that Mr Ferris intended and caused Mr O'Brien to represent the Marr valuation as a current valuation which was not dependent upon completion of a future subdivision.
The first is his execution of the loan application form dated 24 February 1999, which in two places asserts that the estimated value of the property is $4,050,000. The form does not qualify that estimate of value in any way. Any reasonable reader of the form would take it to embody a representation to the effect that the current value of the property was $4,050,000. Of course, that amount coincides exactly with the value at which Mr Marr arrived. The coincidence in those values, and the terms of the application form are capable, in themselves, of sustaining an inference that Mr Ferris intended, and caused, Mr O'Brien to represent the Marr valuation as a current valuation of the land (which is what Mr O'Brien did).
The other particular aspect of the evidence which sustains the necessary inference is the evidence which establishes that Mr Ferris knew that if the loan which he sought exceeded 70% of the value of the land which he offered as security, Blackburne and Dixon would not recommend the loan to its clients. That requirement could only be met if Blackburne and Dixon treated the Marr valuation as a current valuation. This is another reason why there is a clear inference open to the effect that Mr Ferris intended, and caused, Mr O'Brien to represent the Marr valuation as a current valuation of the land.
On appeal it was argued on behalf of Mr Ferris that the events surrounding the loan in 1997 precluded the drawing of the requisite inference beyond reasonable doubt. Reliance was placed in argument upon the letter to investors which, in 1997, drew their attention to a valuation by Mr O'Connor which depended upon completion of an additional 17 units. The first difficulty with that argument is that there was no evidence that Mr Ferris ever saw such a letter. However, even if he had seen the letter, it would be of limited assistance to his argument, because the letter contained the additional representation to prospective investors to the effect that construction of the additional units would take only four to six weeks from settlement, and that funds would be retained on trust to pay for the cost of that development. In other words, the development of the additional units was presented to prospective investors as a virtually accomplished fact. On the evidence, that appears to have been a significant misrepresentation.
Notwithstanding the lack of any evidence to the effect that Mr Ferris had ever seen the letter sent to investors in 1997, it was nevertheless argued that his reliance upon the valuation provided by Mr O'Connor precluded a finding to the effect that he was aware that the loan to value ratio required by Blackburne and Dixon depended upon a current valuation. However, when the evidence is viewed in its totality, it was open to the jury to conclude that the reliance placed by Mr Ferris upon Mr O'Connor's valuation, with knowledge that it depended upon the completion of development work, was simply the first step in a continuing course of dishonest conduct by Mr Ferris by which he attempted to, and did in fact overcome, the restraints imposed by the loan to value ratio required by Blackburne and Dixon.
The argument advanced on behalf of Mr Ferris is further weakened by a comparison of the circumstances in 1997, with those known to Mr Ferris in 1999. Mr Ferris knew that Mr Marr's valuation was dependent upon completion of the subdivision. He also knew that completion of the subdivision faced very significant hurdles in that the strata owners whose approval was a prerequisite had rejected the proposed subdivision. It was open to the jury to conclude that he must have been aware that any disclosure of the fact that the valuation of Mr Marr was dependent upon completion of the subdivision, accompanied by disclosure of the true position in relation to the prospects of achieving subdivision, would have precluded any significant reliance upon the Marr valuation by either Blackburne and Dixon or investors. This comparison illustrates another valid process of reasoning by which the jury could arrive at the conclusion, beyond reasonable doubt, that Mr Ferris intended that Mr O'Brien represent the Marr valuation to potential investors as a current valuation.

The grant of subdivision approval

On behalf of Mr Ferris, it was also submitted that there was insufficient evidence to sustain an inference, to the requisite standard, that he counselled and procured Mr O'Brien to falsely represent to investors that all approvals to enable the subdivision to occur had been given.
The question for the jury was whether the only reasonable inference to be drawn on the whole of the evidence was that Mr Ferris counselled or procured Mr O'Brien to make the false statement to the investors that subdivision approval had been obtained. The prosecution case was that Mr Ferris had actually counselled or procured Mr O'Brien to commit this fraud. It was not a question of Mr O'Brien acting as an innocent agent of Mr Ferris in representing that subdivision approval had been obtained, but one of criminal complicity on his part.
I have already mentioned, at [62], that it was open to the jury to draw adverse conclusions against Mr O'Brien about his motives. Those conclusions could be drawn because of the evidence of the three payments of $5,000, $5,000 and $10,000 in December 1997, April 1998 and November 1998 respectively by Mr Ferris to Mr O'Brien. Although it was made clear to the jury that this was not evidence to implicate Mr O'Brien in the commission of the offences, the evidence was led to establish the relationship between Mr Ferris and Mr O'Brien and, in particular, to establish that Mr O'Brien was likely to be favourably disposed to assisting Mr Ferris in his business affairs. Thus, when Mr O'Brien represented to investors that all approvals to enable subdivision to occur had been given, that representation had to be considered in the light of the history of the relationship between Mr Ferris and Mr O'Brien.
In considering this aspect of the case, it is important to look carefully at the evidence. In addition to the elements of dishonesty which I have already identified, the evidence established particular conduct by Mr Ferris from which an inference of dishonesty in relation to the issue of approvals could be drawn, being the steps which he took in 1997 to procure Mr Dufty to amend his letter to delete any reference to the requirement for the approval of the strata owners.
On behalf of Mr Ferris, reliance is placed upon Mr O'Brien's note which suggested that in July 1998, Mr Ferris told Mr O'Brien that the approvals had not been obtained. However, given that the State case was advanced on the basis that Mr Ferris and Mr O'Brien had colluded to present a false picture to investors, oral disclosure by Mr Ferris of the true position to Mr O'Brien is not at all inconsistent with the State case.
There are three particular aspects of the evidence which appear to me to sustain beyond reasonable doubt an inference to the effect that Mr Ferris intended and caused Mr O'Brien to falsely represent to prospective investors that all necessary approvals had been obtained. The first is his failure to disclose that the strata owners whose approval was a prerequisite to the subdivision had, at an extraordinary general meeting, rejected the proposal. Mr Ferris must have known that this rejection of the proposal for subdivision placed it in serious doubt. The second particular aspect of the evidence is that, with this knowledge, Mr Ferris relied upon the letter of 4 January 1999 from Annette Lawrence which falsely represented that the consultant engaged to procure the subdivision was 'hopeful of having everything in place before the end of the month'. Of course, that month had expired before Mr Ferris completed the loan application form on 24 February 1999. The third aspect of the evidence which bears particularly upon this issue is the reliance placed by Mr Ferris upon the valuation prepared by Mr Curry, which was based upon the

prices to be achieved from the sale of the subdivided units. Those prices could only be achieved after subdivision. Accordingly, the provision of that valuation to Mr O'Brien supports an inference that Mr Ferris intended that it be used to solicit funds from prospective lenders on the basis that the approvals necessary to enable sales to occur had been obtained - especially when read with the disingenuous letter from Annette Lawrence of 4 January 1999 upon which Mr Ferris also relied.

It is necessary for this court to be satisfied beyond reasonable doubt that the only inference open is that Mr Ferris procured Mr O'Brien to make the false representation to the investors in relation to the question of subdivision. Given the history of the relationship between Mr Ferris and Mr O'Brien, and the three particular aspects of evidence to which I have referred, I am satisfied beyond reasonable doubt that, in the circumstances of the case, the only inference that can be drawn is that when Mr O'Brien (falsely) represented to investors that all approvals to enable subdivision to occur had been given, he did so in collusion with Mr Ferris and Mr Ferris procured Mr O'Brien to make that representation.
For these reasons, ground 2 must be dismissed.

Conclusion

The issue of the grant of leave to appeal was referred to the Court of Appeal to be dealt with in conjunction with the appeal itself. In my opinion, each of the grounds advanced was sufficiently arguable to justify the grant of leave. However, for the reasons I have given, each ground should be dismissed, and the appeal dismissed.
MILLER JA: I agree with Martin CJ.
BEECH AJA:

Introduction

I have had the advantage of reading in draft the reasons to be published by the Chief Justice. I agree with the Chief Justice, for the reasons he gives, that grounds 1 and 3 should be dismissed. I would uphold ground 2 in part. My reasons are as follows.
I adopt the Chief Justice's outline of the state case [2] ‑ [5] and summary of the evidence [6]‑ [54].

Ground 2: Principles

The principles relevant to ground 2 are not in dispute. Relevant passages from M v The Queen [1994] HCA 63; (1994) 181 CLR 487 are set out in the Chief Justice's reasons.
I would add reference to the following statement by Mason CJ, Deane, Dawson and Toohey JJ in M:
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. (494)
The case against Mr Ferris was circumstantial. In such a case a jury could not properly convict unless the circumstances relied upon by the state excluded any reasonable hypothesis consistent with innocence: R v Hillier [2007] HCA 13; (2007) 228 CLR 618 [46]; Plomp v The Queen [1963] HCA 44; (1963) 110 CLR 234, 243. In considering a circumstantial case, all of the circumstances are to be considered in deciding whether there was an inference consistent with innocence reasonably open on the evidence: R v Hillier [46] ‑ [48].
On this appeal it was not in dispute that the evidence sustained the inference that Mr O'Brien committed the fraud alleged by the state. As the Chief Justice says in his reasons, Mr Ferris accepts, for the purposes of the appeal, that there was evidence to establish all elements of the charges against him, to the required standard, other than that he counselled or procured Mr O'Brien to make false representations to the effect that:
(a)approvals to subdivide the Stock Road Markets had already been obtained (when in fact they had not); and/or
(b)the valuation provided by Mr Marr was a current valuation of the property in its then state (when in fact the valuation related to the property upon completion of the proposed subdivision).
I begin with the part of the state case that relied upon the Marr valuation.

Ground 2: The Marr valuation

The state emphasised that Mr Ferris signed the loan application form dated 24 February 1999. That form states, in an unqualified way, that the estimated value of the property is $4,050,000, thereby suggesting, the state submits, a statement of the current value of the property in its then state.
However, in my respectful opinion, taking into account two circumstances, the loan application form of 24 February 1999 is of limited significance. First, the loan application form was directed to Mr O'Brien at Blackburne & Dixon, not to the investors. It is not a document which would be expected to be provided to investors. Secondly, the use of the figure derived from the Marr valuation in the loan application form must be placed in the context of the letter of 5 January 1999 from Mr O'Brien to Mr Ferris. That letter requested a current valuation of the proposed new strata lots created by the subdivision of lot 25. Thus, the reference in the loan application form to a value which had been arrived at on the basis that the property was subdivided could be explained by the letter of 5 January 1999. The terms of the letter of 5 January 1999 seem to me to give rise to the question whether the use of a valuation on an 'as subdivided' basis arose from Mr O'Brien without any counselling or procuring from Mr Ferris.
For the reasons which follow, in my opinion, the evidence sustained the inference that Mr Ferris counselled or procured Mr O'Brien in this respect.
There was evidence (outlined in the Chief Justice's reasons) that Mr Ferris knew that if the loan that he sought was for an amount exceeding 70% of the value of the land offered as security, Blackburne & Dixon would not recommend the loan to its clients. On the $4.05 million valuation derived from the Marr valuation, the proposed loan was just under the 70% loan valuation ratio (LVR) limit. Counsel for Mr Ferris on the appeal accepted that it would have been clear to Mr Ferris that the value of the property on an 'as is' basis was not insubstantially less than the figure in Mr Marr's valuation and, consequently, that if the property was valued on an 'as is' basis the 70% LVR limit would have been exceeded.
Mr Ferris submitted that the events relating to the loan in 1997 undermined the force of those facts as they related to the loan the subject of this appeal. I agree with the Chief Justice's reasons at [89] for rejecting that submission. There was no evidence that Mr Ferris saw the letter to investors in 1997. Further, although the letter referred to a valuation based on completion of an additional 17 units, the letter also stated that construction was expected to take only four to six weeks from settlement. Thus, in practical terms, completion of the development was presented as something certain to occur and which would occur imminently.
Mr Ferris had experience in commercial property transactions. In my opinion, it is commercial common sense, and it could be inferred that Mr Ferris knew that:
(a)the purpose of security is to protect lenders in the event of default by the borrower;
(b)default by the borrower can occur at any time; and
(c)consequently, what is of primary interest to lenders is the value of the security at the time of the loan and in its then state, not its value at some later time in a different state when (and if) various steps have occurred.
In this regard, the position may be different in some cases if contemplated changes to the property offered as security are perceived to be sufficiently imminent and certain to occur.
In this case, there was ample evidence to sustain the inference that Mr Ferris knew that:
(a)the proposed subdivision faced significant hurdles;
(b)at the least, those hurdles meant that any subdivision was not imminent and would not occur for a substantial period of time; and
(c)those hurdles meant that there was significant uncertainty as to whether the subdivision would occur at all.
In the circumstances of the case and given the true state of progress of the proposed subdivision, it was open to the jury to infer that Mr Ferris knew that if the investors were told that the Marr valuation was done on an after subdivision basis, investors may well not have been prepared to rely on it or may have asked problematic questions as to the state of progress of the subdivision.
Counsel for Mr Ferris on the appeal conceded that there was evidence to establish a motive for Mr Ferris. That motive derived from the financial position of Markets International, its apparent inability to repay the loan in early 1999, and its consequent need to refinance the loan. While there was evidence capable of establishing a motive on the part of Mr O'Brien, the jury were entitled to take into account that Mr Ferris had a much more clear and direct motive than did Mr O'Brien. That is relevant to whether there was a reasonable hypothesis, reasonably open on the whole of the evidence, that Mr O'Brien made the fraudulent representation to investors without having been counselled or procured to do so by Mr Ferris. There was no suggestion in the evidence that anyone else on behalf of Markets International may have encouraged Mr O'Brien to commit a fraud in order for Markets International to obtain a loan.
Although not necessary to my conclusion, it seems to me that the jury were also entitled to take into account the evidence (admitted without objection) that Mr Ferris:
(a)relied on the Annette Lawrence letter of 4 January 1999 which, for the reasons given by the Chief Justice, Mr Ferris must have known was seriously misleading; and
(b)relied on the Marr valuation which was, as Mr Ferris must have known, flawed in the respects identified in the Chief Justice's reasons.
It was open to the jury to have concluded that Mr Ferris was prepared to put forward material which he knew to be misleading in support of the proposed loan.
Counsel for Mr Ferris on appeal emphasised that there was evidence that the Marr valuation was held on the Blackburne & Dixon file and was available for inspection by any prospective investor. That was said to be inconsistent with an inference that Mr Ferris procured a fraudulent representation as to the true basis of the Marr valuation, since the basis of the valuation is readily apparent from its terms. That was, no doubt, evidence to be considered by the jury as part of their consideration of all the circumstances of the case. However, in my opinion, it was also open for the jury to have concluded that Messrs O'Brien and Ferris would have considered it extremely unlikely that the investors involved in this case would ask to inspect the Blackburne & Dixon file in determining whether to extend the loan.
In summary, in all the circumstances, in my opinion it was open to the jury to infer that Mr Ferris:
(a)knew that what investors would be most interested in is the value of the proposed security at the time of the loan;
(b)knew that the value of the proposed security needed to be high enough to meet the 70% LVR requirement;
(c)knew or believed that the only way the 70% LVR requirement could be achieved was by using the Marr valuation;
(d)knew or believed that given the true state of progress of the proposed subdivision, disclosure of the 'after subdivision' basis of the Marr valuation would create a real risk that investors would not rely upon it or would ask problematic questions about the subdivision;
(e)consequently, believed the only way to achieve a 70% LVR and to ensure that investors would rely on the Marr valuation in that regard was to present the Marr valuation as being on an 'as is' basis; and
(f)procured Mr O'Brien to do this.
For these reasons I would dismiss ground 2 as it relates to the Marr valuation.

Ground 2: The subdivision approval

The state case against Mr Ferris, as it was left to the jury, was that Mr Ferris counselled or procured Mr O'Brien to commit the frauds. That is the case the sufficiency of which is to be determined in this appeal. In particular, the jury was not asked to determine whether Mr O'Brien was an innocent agent of Mr Ferris in representing, in a letter to investors, that subdivision approval had been obtained. That seems to me to have significance for the weight to be accorded to some of the evidence relied upon by the state.
There was evidence before the jury (summarised in the Chief Justice's reasons) that in May 1997 Mr Ferris caused changes to be made to a letter written by Mr Dufty in relation to the subdivision of the property. The letter from Mr Dufty was, in its altered form, sent to Mr O'Brien at Blackburne & Dixon. The state suggests that this shows an attempt by Mr Ferris to hide from Mr O'Brien the fact that no approvals had been obtained for the subdivision of the property. However, given that the state case (as left to the jury) was not one of innocent agency but of collusion between Messrs Ferris and O'Brien, that evidence does not seem to me to be of significant assistance in relation to whether it can be inferred that Mr Ferris procured Mr O'Brien to make the false representation of subdivision approval in 1999.
For similar reasons, the evidence of the failure of Mr Ferris to tell Mr O'Brien that at the meeting of 23 September 1998 subdivision approval had been refused does not, in my respectful opinion, provide significant assistance to the state case.
The question is whether the only reasonable inference, on the whole of the evidence, is that Mr Ferris counselled or procured Mr O'Brien to make the false statement to the investors that subdivision approval had been obtained. The state case, as particularised and left to the jury, was specific. It did not relate to a representation on the general topic of the progress of the subdivision. It related to the specific proposition that the subdivision had been approved.
There was no direct evidence that Mr Ferris was asked by Mr O'Brien or anyone else from Blackburne & Dixon for information as to whether the subdivision was approved (or as to the state of progress of the subdivision generally). No such information was requested in Blackburne & Dixon's letters of 17 November 1998 and 5 January 1999.
In my opinion, the evidence did not sustain an inference that in early 1999 Mr Ferris knew or believed, by reason of what had occurred in 1997, that investors would need to be told that the subdivision had been approved in order to elicit a favourable response from them or to avoid inconvenient inquiries from them. There was no evidence that Mr Ferris knew the terms of the letters to investors in 1997.
More generally, I am not satisfied, to the required standard, that it can be inferred that Mr Ferris knew that investors would need to be told that the subdivision had been approved in order to elicit a favourable response from them or to avoid inconvenient inquiries.
Mr Ferris provided the Annette Lawrence letter of 4 January 1999 to Mr O'Brien on or about that date. The Annette Lawrence letter contained false statements as to the progress of the subdivision generally (namely that it was 'in the final throes of reaching a conclusion'). Mr Ferris also provided to Mr O'Brien the letter dated 8 January 1999 from Mr Curry to Markets International. That letter was an appraisal of the prices to be achieved by selling the subdivided units.
From that evidence, it is, I think, open to infer that:
(a)Mr Ferris intended that Mr O'Brien make use of the Curry letter in his proposal to investors;
(b)because the Curry letter was based on the sale of subdivided units, Mr Ferris knew that something might need to be said, in the proposal to investors, as to the state of progress of the process of subdivision; and
(c)Mr Ferris intended that any statement in the proposal to investors as to the progress of the subdivision would be based on the Annette Lawrence letter and, consequently, would be misleadingly positive.
However, in my opinion, that does not sustain a conclusion that the only reasonable inference, from the whole of the evidence, was that Mr Ferris procured Mr O'Brien to make a false representation to investors to the specific effect that the subdivision had been approved.
The evidence as to motive and as to other conduct on the part of Mr Ferris, referred to at [118] and [119] is also relevant in this context.
In my respectful opinion, the hypothesis that Mr O'Brien made the fraudulent representation that subdivision approval had been obtained without having been counselled or procured to do so by Mr Ferris cannot be excluded on the whole of the evidence. To my mind, the evidence sustains an inference that Mr O'Brien and Mr Ferris were engaged in a joint enterprise to deceive investors in order that investors extended the loan. That enterprise included at least the fraudulent representation as to the basis of the Marr valuation. Mr O'Brien's fraudulent statement, in the letter to investors, that subdivision approval had been obtained may have been in pursuance of that joint enterprise. However, attention must be directed to the state case as it was particularised and left to the jury. I am not satisfied, to the required standard, that it can be inferred that Mr Ferris procured Mr O'Brien to make a fraudulent representation in relation to the specific topic of whether there was an approval for the subdivision. Given the nature of the evidence on which the state case was based in this respect, the jury's advantage in seeing and hearing the evidence is not, in my opinion, capable of resolving the doubt which I hold in relation to the guilt of Mr Ferris in this respect (see M v The Queen (494)). Accordingly, for the reasons I have given, I would uphold the appeal in relation to that part of the state case which relied upon the statement that subdivision approval had been obtained.

Conclusion

The trial judge explained to the jury which representations were relied upon by the state in relation to which investors (ts 6,606). The state relied solely on the representation regarding the Marr valuation for some counts. Given the verdicts of guilty on each count, the jury was evidently satisfied in respect of both aspects of the state case. The approval to subdivide representation was the sole basis for the state case in relation to the complainants Mr Rogerson, Mr Ronald, Mr Herbert and Mr Moore. Consequently, in my opinion, the convictions in relation to the counts relating to those complainants ought be quashed in consequence of upholding ground 3 in part. However, as mine is a minority opinion it is unnecessary to formulate with precision the orders consequent upon my opinion.

[2009] WASCA 54

27 FEBRUARY 2009

Key Legal Topics

Areas of Law

Criminal Law

Legal Concepts

Fraud

Admissibility of Evidence

Motive