Graeme Ronald Hoy v The Queen
[2016] VSCA 75
•19 April 2016
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCR 2015 0221
| GRAEME RONALD HOY | Applicant |
| v | |
| THE QUEEN | Respondent |
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| JUDGES: | WEINBERG AP and KYROU JA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 12 April 2016 |
| DATE OF ORDERS: | 12 April 2016 |
| DATE OF REASONS: | 19 April 2016 |
| MEDIUM NEUTRAL CITATION: | [2016] VSCA 75 |
| JUDGMENT APPEALED FROM: | [2011] VSC 95 (T Forrest J) |
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CRIMINAL LAW – Conviction – Application for extension of time to file application for leave to appeal against conviction – Over four and a half years’ delay - Total of 47 charges comprising obtaining financial advantage by deception, obtaining property by deception, carrying on financial services business without licence, dishonest conduct in carrying on financial services business, dishonestly making improper use of position of director with intent to gain advantage – ‘Ponzi scheme’ - Nearly $16m dishonestly procured from investors – Nearly $6m dishonestly procured from financial institution - Guilty plea – Whether applicant overborne – Whether applicant appreciated nature of guilty plea – Whether applicant’s alleged hope that investors would be repaid relevant – Application refused.
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| APPEARANCES: | Counsel | Solicitors |
| The Applicant appeared in person | ||
| For the Crown | Ms K Breckweg | Mr M Pedley, Solicitor for Public Prosecutions (Cth) |
WEINBERG AP
KYROU JA:
On 12 April 2016 the Court made orders refusing the applicant, Graeme Ronald Hoy, an extension of time within which to file an application for leave to appeal against conviction. We said that we would publish reasons at a later time. These are those reasons.
Background
In March 2011, the applicant pleaded guilty, before T Forrest J in the Trial Division, to a total of 47 charges. Forty four of these charges involved State offences, pursuant to the Crimes Act 1958, and three charges involved Commonwealth offences contrary to various provisions of the Corporations Act 2001 (Cth).
Breaking the charges down, there were 34 of obtaining financial advantage by deception under s 82(1) of the Crimes Act 1958, and 10 of obtaining property by deception under s 81(1) of that Act. Most of the State charges were characterised as Continuing Criminal Enterprise offences for the purposes of Part 2B of the Sentencing Act 1991. Accordingly, the maximum term of imprisonment that could be imposed in relation to any one of those charges was 20 years, twice that ordinarily prescribed for offences of that nature. Fifteen of the State charges were ‘rolled up’, involving more than one dishonest receipt of money, with the offending being expressed as having occurred between nominated dates.
The sentencing judge was provided with an agreed statement of facts. It was made crystal clear, on the plea, that the applicant took no issue with any of the facts set out in that statement.
The applicant committed these offences through the auspices of a company, Chartwell Enterprises Pty Ltd (‘Chartwell’), of which he held a half share through his family company, Black Swan Pty Ltd. The applicant was the sole director of Chartwell.
His Honour summarised the nature of the applicant’s offending in the following terms:
The bald figures that can be calculated from your offending are breathtaking. Over a period of 15 months the deceptions you practised upon the public garnered Chartwell nearly $16m of investor funds. During that period, and also as a result of your dishonesty, you procured for Chartwell credit from the Commonwealth Bank in the sum of $5.83m. Those figures alone give some indication as to the scale of your dishonest conduct but say little about the lives that you have diminished in the process.
The deception you practised on investors is sometimes known as a Ponzi scheme, named after the notorious criminal Charles Ponzi who operated an early example of it in the 1920’s. In the agreed statement of facts it is so described at paragraph 9. You attracted money from investors by offering extraordinarily high interest rates. During the offending period the money was not used for investment at all. Some of it was used to make payments to existing investors of what was called ‘interest’ on their investments. Some of it was used to prop up the facade of Chartwell’s prosperity and some of it was used to fund your lavish lifestyle. In the 15 month offending period Chartwell received nearly $22m from investors who were led by you to believe their money would be pooled and invested on financial markets. In reality only $429,130 was so invested. Ninety-eight percent of the funds Chartwell received were simply stolen from investors, and you, by your pleas admit responsibility for dishonestly dealing with nearly $16m of those funds.
It is apparent from the various witness statements that victims of your conduct were small family investors either attracted directly to the inflated returns offered or who were introduced to Chartwell through Syndicate Leaders who were so attracted. Typically a Syndicate Leader would be advised by you of even higher returns available if a really large sum were invested. He or she would then approach friends or family and their funds would be pooled in order for the investment to be made.
I have referred earlier to the returns that Chartwell offered. In cases where a fixed return was offered it was never less than 20% p.a.; more often 30% p.a. or more, and on several occasions 50% p.a. or above. These fantastic returns were given some verisimilitude by the outward signs of prosperity that Chartwell exhibited. The wages bill for a company that was not trading was enormous. During the offending period you employed approximately 40 market analysts who studied trends and made predictions. Charts were displayed on the walls. The room was alive with apparent activity. Prospective investors were shown through the trading room and they were told of the Chartwell system — that it was based on the methodology of W D Gann and that profits were high and assured regardless of market trends. In many cases investors were told that sophisticated risk management systems were in place. You made most of these representations. By your pleas you admit the falsity of the representations particularised in the indictment. I consider your conduct in this respect quite disgraceful.[1]
[1]R v Hoy [2011] VSC 95, [7]–[10] (‘Sentence’).
Throughout the offending period, the applicant was well aware that Chartwell was not, in fact, engaged in any significant trading. Yet he continued to pursue new investments. To every prospective investor, he made the same core misrepresentation, namely that any funds invested would be used for trading, and for no other purpose. He knew at all times that this was not the case. As indicated, Chartwell did not trade, to any significant degree or at all, during the relevant period.
The applicant was represented by senior counsel on the plea. That counsel submitted that throughout the offending period, the applicant had encouraged investment in the hope, and belief, that Chartwell could trade its way back to profitability.
However, it seems that Chartwell never at any stage prepared formal financial statements, and did not lodge income tax returns. The company incurred continuing operating losses and had already accumulated large net asset deficiencies, well before 2006.
Not surprisingly, the sentencing judge rejected the submission that the applicant had, in 2007 and 2008, a genuine hope, still less belief, that Chartwell could trade out of difficulty. At best, his Honour said, the applicant may have hoped to raise, by dishonest means, sufficient investor funds to enable the company to trade out of its difficulty at some time in the future. However, as his Honour rightly observed, that was hardly a mitigating factor.
The applicant continually assured investors, throughout the relevant period, that things were fine and that their funds were safe. Indeed, he continued to give such assurances until almost immediately before Chartwell’s final collapse.
The applicant also deceived the Commonwealth Bank into approving business loans to Black Swan Pty Ltd, by falsely representing that Chartwell had an excess of assets over liabilities. He knew, at all material times, that this was not the case.
For the State offences, the applicant was sentenced to a total of 13 years and nine months’ imprisonment. A non-parole period of nine years was fixed. With regard to the Commonwealth offences, he received terms of 12 months, nine months, and 18 months’ imprisonment respectively, all of which were to commence on the date of sentencing. The effect of that order was that the Commonwealth sentences were subsumed by the State offences.
Having been sentenced on 23 March 2011, the applicant failed to lodge any application for leave to appeal against sentence within time. It was not until 26 October 2011, some seven months later, that he filed an application for an extension of time within which to seek leave to appeal against sentence. That application was refused by the Registrar.
On 28 December 2011, the applicant filed a completed renewal application seeking to have his application for an extension of time determined by the Court of Appeal. The application was listed for hearing on 7 March 2012. However, before that date, Galbally and O’Bryan, the applicant’s then-solicitors, notified the Court that they had ceased to act for him in December 2011. Defteros Lawyers had taken over his legal representation.
On 17 February 2012, Defteros Lawyers wrote to the Registry seeking leave to withdraw from the matter. On 28 February 2012, that leave was granted.
On 6 March 2012, Galbally and O’Bryan filed a notice indicating that they, once again, acted for the applicant in relation to his renewal application.
On 7 March 2012, the Court of Appeal heard the renewal application. It delivered judgment that day, refusing the extension of time that was sought. That was the end of the matter so far as sentence was concerned, and that remains the case.
However, on 17 November 2015, some three and a half years later, the applicant filed an application for an extension of time within which to seek leave to appeal, this time against conviction. Together with that application, he filed some supporting material.
On 14 December 2015, the Registry refused that application. The applicant then sought to renew his application for an extension of time before this Court, and it was that matter that is the subject of this judgment.
Proposed grounds and parties’ submissions
The grounds upon which the applicant relied in support of the renewal application are not altogether clear. The applicant was self-represented and, although intelligent and articulate, has clearly prepared his documentation without legal assistance.
As set out in his notice of application for leave to appeal against conviction, the grounds upon which he proposed to rely were as follows:
1. That at the time of entering the plea the appellant did not appreciate the nature of the charges he faced under sections 81 and 82 of the Crimes Act 1958, and did not intend to admit he was guilty of them.
2. That upon the admitted facts he could not in law have been convicted of the offences charged.
3. That these two grounds are established by precedents cited in the attached Written Case and List of Authorities.
In support of those grounds, the applicant provided a detailed Written Case in which he made the following salient points:
· even though, ‘technically’, by virtue of his guilty plea, he was ‘deemed’ to have agreed to the facts set out in the agreed summary, he ought not be bound by that plea, or those facts. That was because he had not properly read the document in question, and had not fully understood the import of ‘agreeing’ to those facts. Nor had he been properly advised by his lawyers as to the consequences of his doing so;
· in that regard, the applicant relied upon Korgbora v The Queen,[2] stipulating that there must be ‘fully informed’ consent to an agreed statement of facts if it is to bind an accused on sentence;
[2][2010] NSWCCA 176, [4] (Hulme J).
· the agreed statement of facts was selective, in that it ignored critical matters favourable to the applicant. These included the matters attested to in a witness statement attached to the written case, and marked as ‘Exhibit 2’. That exhibit consisted of an affidavit affirmed by one Steven Wayne Hutchinson, who was an investor in the unregistered managed investment scheme conducted by Chartwell and an investor relations manager employed by the company. Mr Hutchinson deposed, among other things, that the applicant may have signed relevant documents, but his co-offender, Ian Stuart Rau (with whom the applicant had jointly operated Chartwell), had made a number of important decisions associated with the company’s raising and disbursing of funds, responsibility for which had been shifted to the applicant;
· in support of ground 1, the applicant contended that the facts that were set out in the agreed statement were not ‘properly based’, and that he had only accepted them as accurate ‘under duress’;
· the applicant relied, in that regard, upon an affidavit affirmed by Christopher Philip Koch, a fellow prisoner at Loddon Prison, who met the applicant in April 2011 whilst he, Koch, was serving a term of imprisonment for deception offences. Koch claimed to have been the victim, himself, of a miscarriage of justice arising out of the failure of his own legal advisers to properly advise him. Indeed, Koch said that he was represented at the time of his trial by the same lawyers, who later represented the applicant in the Chartwell proceedings. He claimed that he too had been charged with offences under ss 81 and 82 of the Crimes Act 1958, but that his lawyers had failed to explain to him the essential elements of those offences and, in particular, the differences between them. He said that it was only as a result of his own research into the criminal law that he determined to plead not guilty to the charges brought against him. He said that the ‘legal misconception’ that led to the applicant pleading guilty was that once people had lost money by investing in Chartwell, it necessarily followed that there had to be criminal liability under those provisions of the Act;
· Koch’s affidavit went on to say that he was convicted of obtaining property by deception and gaining a financial advantage by deception after a nine week trial, and that he had since learned that he had a complete answer to the charges brought against him. That answer turned upon the mental element required for the offences;
· Koch’s affidavit also contained a series of allegations against counsel who represented him at his trial, as well as his solicitors, Galbally and O’Bryan. He sought to argue that the applicant had received the same poor quality legal representation with regard to Chartwell as he, Koch, had done with respect to his own charges;
· the applicant then relied upon a psychological report, marked as ‘Exhibit 3’ to his Written Case, which he said showed that his mental state at the time of the alleged offending could not have enabled him to form the necessary mens rea to commit these offences, and which he submitted made him ‘vulnerable … [and] easily persuaded to plead guilty’. That report dated 4 March 2011 was prepared by David Ball, a forensic psychologist, who described himself as a specialist in the forensic assessment and treatment of clients with particular reference to violent and sexual offenders. Mr Ball met the applicant once in his office on 1 March 2011, for 75 minutes, and again on 2 March 2011 for 45 minutes;
· according to Mr Ball’s report, the applicant showed significant elevations on scales measuring depressive symptoms, anxiety, dysthymic mood, and self-defeating behaviour. He presented as anxious, intelligent, and articulate. He was taking Valium for anxiety. He claimed to have been treated for depression for some 20 years, and to have been drinking excessively. He reported difficulty in sleeping. There was, however, no evidence of ‘frank mental illness’, and the applicant’s short term memory and long term memory were intact. There were no signs of thought disorder, and no evidence of cognitive impairment. The applicant was described as having shown insight into his offending. His IQ was said to be within the upper end of the normal range;
· in summary, Mr Ball said that the applicant satisfied the DSM-IV-TR diagnostic criteria for dysthymic disorder, and appeared to suffer from adjustment disorder and depression; and
· for what it was worth, Mr Ball concluded that the applicant’s trading on the stock market could be equated with the diagnostic criteria for pathological gambling. In Mr Ball’s terms:
Having been panicked by the loss of $8 million, Mr Hoy set about deceiving investors in the hope of clawing back those losses, making interest payments to investors and maintaining a semblance of normality in the hope of trading Chartwell out of its dire situation.
The applicant submitted, in his Written Case, that even where an accused has pleaded guilty, this Court may entertain an application for leave to appeal against conviction. He recognised, of course, that significant hurdles had to be overcome before such an application could be granted. He submitted that the conduct of his defence, before T Forrest J, had been ‘flagrantly incompetent’, and that he had, in effect, been pressured into pleading guilty, although he had a perfectly viable defence to the State charges. That defence was, so he said, that he did not intend at any stage to cause investors to lose their money.
The applicant claimed, before this Court, that he had never intended to plead guilty to the State charges, although he accepted that he had committed the offence of running an unregistered managed investment scheme in contravention of the Corporations Act 2001 (Cth).
The applicant claimed that he had been further pressured into pleading guilty by some comments made by Coghlan J (as his Honour then was) at a mention of his matter, whereby he was advised to consider the advantage of a plea of guilty since that would result in a sentence of ‘some years’ less than he would otherwise be likely to receive. He claimed that he understood his Honour’s intimation to mean that he had no defence to these charges.
With regard to ground 2, the applicant submitted that the evidence available to the Crown could not, in law, have given rise to contraventions of ss 81 or 82 of the Crimes Act 1958. Of course, if that ground were made good, this Court would have no hesitation in granting the extension of time sought, and ultimately quashing the convictions on those charges.
The applicant seemed to be saying that he could not, as a matter of law, be convicted of obtaining property by deception because he never, at any stage, intended permanently to deprive the owners of their property of it. In relation to obtaining financial advantage by deception, his submission was that he could not have committed that offence because he had not acted fraudulently, given his stated belief that Chartwell’s losses were temporary and could be overcome in time. He described his own conduct as ‘foolish’ and ‘muddle-headed’, but not in any relevant sense dishonest.
The Crown opposed the application for an extension of time. It submitted that the applicant had not demonstrated special or exceptional circumstances of the kind required for an extension of time, and particularly one of this order. In addition, the Crown submitted that the proposed appeal did not meet the test of likely or probable success. Indeed, the Crown submitted that the proposed appeal was entirely without merit.
In that regard, the Crown noted that an application for leave to appeal and the accompanying Written Case must be filed within 28 days after the day on which the applicant is sentenced, unless the time for filing is extended.[3]
[3]Criminal Procedure Act 2009 ss 275 and 313.
The Crown further submitted that the authorities established the following principles with respect to applications for extension of time:
a. Time limits exist in order to provide finality to litigation. Applicants for an extension of time must put affidavit material before the Court which shows that there are special and substantial reasons for the extension;[4]
b. A longer delay will lead to the Court requiring more exceptional circumstances before it will extend time;[5] and
c. Where there is a long delay, the court will only extend time if satisfied that the appeal will probably succeed.[6]
[4]Emphasis in original. Referring to Bowling v The Queen [2013] VSCA 87 (‘Bowling’); and Smith v The Queen [2013] VSCA 310 (‘Smith’). The Crown also referred to Supreme Court of Victoria, Practice Direction No 2 – Court of Appeal: Criminal Appeals, May 2011, s 5(2).
[5]Referring to Bowling [2013] VSCA 87; and Smith [2013] VSCA 310. We note that Bowling, cited in Smith, in fact refers to the more ‘special’ the circumstances required when there is greater delay.
[6]Referring to Bowling [2013] VSCA 87, [17]–[18]; Smith [2013] VSCA 310; and Scott v The Queen [2013] VSCA 347.
In relation to these principles, the Crown submitted that the material filed in support of the application for an extension of time did not provide any adequate explanation for the extraordinary delay. The applicant was sentenced in March 2011, and it took more than four and a half years before he sought to challenge his conviction. His claim that he did not receive the report of Mr Ball until 2013 was said to ‘beggar belief’, given that the report was specifically referred to in the sentencing remarks of T Forrest J. Even so, the applicant had not provided any explanation for the further two year delay beyond 2013, when he says he first read the report.
The Crown noted that the applicant had previously failed to comply with time limits in relation to his proposed appeal against sentence, and that the delay in that application had not been excused. His claim that his solicitors had been incompetent did not sit well with his having reappointed them as his legal representatives after Defteros Lawyers had withdrawn.
As regards an attempt to challenge a conviction after a plea of guilty, the Crown submitted that the authorities made it plain that there are only limited circumstances in which such a challenge can succeed. The applicant must demonstrate one or more of the following:
a. upon the admitted facts, he or she could not in law be convicted;
b. he or she did not appreciate the nature of the charge or intend to plead guilty to that offence; or
c. there is otherwise a substantial miscarriage of justice.
The Crown submitted that the applicant had failed to establish any of these three matters.
The Crown further submitted that, insofar as ground 1 was based upon an allegation that the applicant was incompetently represented, there was no basis for that contention. The Crown case was a very strong one. Notably, each of the investors named as prospective witnesses in the indictment was prepared to give evidence that he or she had been told by the applicant that their investment would be used for trading on the share market, and that no other purpose had been disclosed. Yet the financial analysis concerning Chartwell showed clearly that throughout the relevant period it had all but entirely ceased trading. The applicant’s assertion that he believed Chartwell could trade its way back to profitability had been rejected by the sentencing judge, and for good reason.
The Crown argued that the applicant had made an informed choice to plead guilty in the face of a strong Crown case in order to obtain the best sentencing outcome that he could. His belated assertions that he did not understand the nature of the charges, and had not intended to plead guilty to them, ought to be summarily rejected.
As regards ground 2, the Crown submitted that the applicant’s understanding of ss 81 and 82 respectively was fundamentally flawed.
As regards the s 81 charges, the Crown drew attention to s 81(3) which, read together with s 73(12), provides that an accused will be said to have an intention permanently to deprive another of property if his or her intention is to treat the thing as their own to dispose of, regardless of that other person’s rights. The 10 charges of obtaining property by deception on the indictment all related to cheques deposited into one or other of Chartwell associated bank accounts. Those cheques were provided by investors on the basis of assurances that the funds would be used for trading, and no other purpose. However, once the funds had cleared, they were dispersed for other purposes and the proceeds were never recovered. Accordingly, the Crown submitted, the requisite intention permanently to deprive could be inferred. Indeed, no other conclusion was reasonably open.
As regards the charges of obtaining financial advantage by deception, the Crown submitted that there was no need, in order to make good those charges, to establish an intention to defraud in any overall sense. All that the Crown had to prove was that the applicant had obtained a financial advantage, that he did so through deception, and that he obtained the financial advantage dishonestly. There were 34 charges under s 82 on the indictment, and all but two related to the transfers or deposits of funds by investors into Chartwell accounts. The remaining two related to lines of credit established from the Commonwealth Bank.
Moreover, so it was submitted, there was clear evidence that the applicant obtained the amounts invested by deception. In each case, he told his victims that any money invested in Chartwell would be used for trading. That was untrue, and known at the time to be untrue. Even Mr Ball’s report suggested that the applicant had been aware, at all relevant times, that he was engaged in acts of deception.
As regards dishonesty, the Crown submitted that under Victorian law[7] the Crown need only establish that the applicant had no belief, at the time of his deception, that he had a legal right to obtain the property or financial advantage in question. The trial judge had specifically rejected the applicant’s contention, on the plea, that he had a genuine belief that Chartwell could trade out of difficulty. No other conclusion had been reasonably open.
[7]R v Salvo [1980] VR 401; R v Brow [1981] VR 783; and R v Bonollo [1981] VR 633. Cf the interpretation accorded to the term ‘dishonestly’ in England, as in R v Feely [1973] QB 530; and R v Ghosh [1982] QB 1053.
The fact, as Mr Hutchinson deposed, that the applicant had told one potential investor that by investing in Chartwell he was assuming a risk of total loss, and that as a consequence that person had not invested, was of no consequence. The fact that the applicant treated one individual fairly, and outlined to him the risks associated with investing, did not negate the Crown’s contention that in all other cases giving rise to charges, the applicant obtained property or financial advantage by deception.
Conclusion
It was made clear to the applicant, during the course of argument, that the material upon which he sought to rely in support of his application for an extension of time fell far short of establishing that he did not appreciate the nature of what he was doing when he pleaded guilty, or that he had been overborne in some way.
Mr Ball’s report does not suggest any cognitive impairment on his part. Taken at its highest for the applicant, it suggests only that he was psychologically unsophisticated, and that he had been depressed for some time.
The applicant was represented on his plea by experienced criminal lawyers, including senior counsel. Nothing put forward before this Court would justify extending time to enable him now to resile from his plea of guilty.
As regards proposed ground 2, it is clear that this proceeded upon a misconception. Even if one assumed, in the applicant’s favour, that his state of mind at the time was that he both hoped and believed that the investors who entrusted Chartwell with their money would ultimately be repaid, that would be no answer to his having used that money to pay off earlier investors by way of what was clearly a classic Ponzi scheme.
It was for these reasons that we dismissed the application for an extension of time.
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