On appeal from the Supreme Court of New South Wales
Representation:
P L G Brereton SC with J C Papayanni for the appellant (instructed by Jeffreys & Associates)
T A Game SC with D Jordan for the respondent (instructed by Commonwealth Director of Public Prosecutions)
Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.
CATCHWORDS
Macleod v The Queen
Criminal law – Property offence – Fraudulent application of company property by director or officer – Accused also sole beneficial shareholder of company – Whether consent of accused, as sole shareholder, cures what would otherwise be a breach by accused, as director or officer, of s 173, Crimes Act 1900 (NSW).
Criminal law – Property offence – Fraudulent application of company property by director or officer – Directions – Whether trial judge misdirected jury in failing to identify the use of dishonest means as an essential element of s 173, Crimes Act 1900 (NSW) – Whether trial judge erred in failing to direct that it was necessary for accused to have realised that his impugned conduct was dishonest by the current standards of ordinary, decent people.
Words and phrases – "fraudulently", "claim of right".
GLEESON CJ, GUMMOW AND HAYNE JJ. This appeal from the New South Wales Court of Criminal Appeal[1] concerns an offence created by State law which comprises the fraudulent taking or application, by a company director, officer or member, of property of the company, for the use or benefit of that person, or for any use or purpose other than the use or purpose of the company. Here, the sole beneficial shareholder of the company was the appellant.
At a trial in the District Court of New South Wales (Rummery DCJ, sitting with a jury), the appellant was convicted on 10 March 1999 of 18 counts on an indictment containing 25 counts. Five of the counts upon which the appellant was convicted charged contravention of s 173 of the Crimes Act 1900 (NSW) ("the Crimes Act"). They are the only charges which are the subject of the present appeal.
At the relevant time[2], s 173 of the Crimes Act provided:
"Whosoever, being a director, officer, or member, of any body corporate, or public company,
fraudulently takes, or applies, for his own use or benefit, or any use or purpose other than the use or purpose of such body corporate, or company, or
fraudulently destroys any of the property of such body corporate, or company,
shall be liable to penal servitude…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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Details
AGLC
Macleod v the Queen [2003] HCA 24
Case
[2003] HCA 24
Decision Date
CaseChat Overview and Summary
Robert James Macleod appealed to the High Court of Australia against his convictions for fraudulent application of company property under s 173 of the *Crimes Act 1900* (NSW). The charges arose from an investment scheme where Macleod, as a director of Trainex Pty Ltd, used investor funds for purposes other than film production, including personal benefit and repayment of his loan account with another company. Macleod contended that as the sole beneficial shareholder and controlling mind of Trainex, his consent to the application of funds precluded a finding of fraud.
The High Court was required to determine whether a person who is the sole beneficial shareholder and controlling mind of a company can be guilty of fraudulently applying the company's property contrary to s 173. Further issues included whether the trial judge had adequately directed the jury on the meaning of "fraudulently" and whether Macleod's conduct required the realisation that it was dishonest by the standards of ordinary, decent people. Macleod also argued that the use of funds was contemplated by the company and that consent by the victim (in this case, himself as shareholder) negated fraud.
The Court reasoned that a director or officer could be convicted of fraudulently applying company property even if they were the sole beneficial shareholder. The Court held that the consent of a shareholder, particularly when that shareholder is also the director alleged to have acted fraudulently, does not necessarily cure what would otherwise be a breach of s 173. The Court found that the trial judge's directions, when read as a whole, adequately identified the necessary dishonest intent and instructed the jury to assess the appellant's conduct against the standards of ordinary, decent people.
The appeal was dismissed.
Orders
Orders of the court
Appeal dismissed.
Background
Background to the litigation
In accordance with a grant of special leave to appeal, Macleod now appeals to this Court against his convictions on counts 14, 16, 18, 20 and 22 ("the fraud counts"). The material facts The charges arose out of an enterprise conducted by Macleod over the period from 1989 to 1994[56]. The enterprise purported to take advantage of taxation concessions offered by Div 10BA of Pt III of the Income Tax Assessment Act 1936 (Cth). Macleod was a director of three companies, Trainex, Starlight and Communications Entertainment Network Ltd ("CEN"). Trainex was entirely under the control of Macleod. There was no evidence that any other person had any beneficial interest in Trainex.[56]Because of limitation provisions, the only matters charged were those committed from 1991. Through these companies, Macleod purported to make films and videos in which he invited others to invest. Trainex was to receive the funds on the basis of standard documentation that emphasised the secure retention of the investors' funds in trust, pending expenditure on film production. Several thousand investors accepted this invitation, contributing more than $6,000,000. The money raised by Trainex was held in what the Investor's Deed referred to as "Trust Accounts" with Chase AMP Bank. Macleod's investment scheme offered substantial tax advantages. An investment of $3,000 received a "subsidy" of $7,000. For an outlay of $3,000, an investor received a tax-deductible expense of $10,000. Macleod claimed that this subsidy was funded by overseas finance. There was no evidence of this finance in the company's records. Investors were furnished with "income statements". They created the illusion that films were being made and were returning profits. Macleod determined the amount of income that was to be paid to investors. There was, however, no income derived from film production. The amounts remitted to investors as income came directly from investor funds. Of the $6,000,000 invested, only $718,249.27 was used to make films. More than $2,000,000 was applied for Macleod's benefit, including purchasing a home unit on the Gold Coast in his own name and making payments to the credit of his loan account with Starlight. The Australian Securities Commission investigated the enterprise in late 1991 or early 1992. Significantly, Macleod directed David Staume, Trainex's office and account manager, to store company records in a storage facility in the Sydney suburb of Ultimo to ensure that they would be hidden from the Commission. This was evidence of Macleod's consciousness of guilt. The Crown contended that the entire enterprise was a "sham" which Macleod practised upon investors to mislead them into believing that their funds were being used in accordance with the terms of the documents which Macleod had provided to them.Macleod's case Macleod contends that the evidence did not sustain the fraud counts because the use of the funds was "contemplated" by Trainex. He argues that "[i]t is essential to a fraudulent taking or application of property that the property be taken or applied with the intention of dealing with it in a manner not intended contemplated or understood by the victim". Macleod contends that, if the victim consents to the taking or application, no fraudulent taking or application occurs.
The judge's directions, when read as a whole, (i) identified the knowledge, belief or intent which was said to render the conduct of the appellant dishonest, and (ii) instructed the jury to decide whether the appellant had that knowledge, belief or intent and, if so, to determine whether, on that account, the act was dishonest, by reference to the standards of ordinary, decent people. The submission that the Court of Criminal Appeal erred in holding that these directions were adequate in the circumstances should be rejected.Conclusion The appeal should be dismissed. Mc Section 173 of the Crimes Act 1900 (NSW) made it an offence for a director or officer of any body corporate to fraudulently take or apply any of its property "for his own use or benefit, or any use or purpose other than the use or purpose of such body corporate". The principal question in this appeal is whether a person can be guilty of fraudulently applying property contrary to s 173 if that person is the controlling mind of and the only person beneficially interested in the company. If such a person can fraudulently apply property of the corporation, further questions arise in the appeal as to whether the trial judge misdirected the jury in respect of the term "fraudulently" and the appellant's "claim of right" to the property. In my opinion, a person may be convicted of fraudulently applying a company's property although that person is the controlling mind of and the sole beneficial shareholder in the company. Further, the directions of the trial judge were adequate in relation to the term "fraudulently" and the appellant's "claim of right".Statement of the case In the District Court of New South Wales, a jury convicted Robert James Macleod of 18 offences arising out of his conduct as an officer of a corporation[55]. Five of the 18 offences (counts 14, 16, 18, 20 and 22) were breaches of s 173 of the Crimes Act. Counts 14, 16 and 18 charged that Macleod, being a director of Trainex Pty Ltd ("Trainex"), "fraudulently applied for his own use property owned by Trainex", being three substantial sums of money owed to Trainex by Chase AMP Bank. Macleod used the funds to purchase a home unit on the Gold Coast. Counts 20 and 22 charged that Macleod, being an officer of the company, "fraudulently applied for a purpose other than for the purposes of" Trainex property owned by Trainex by applying the property to pay off his loan account with another company, Starlight Film Studios Ltd ("Starlight"). He appealed to the New South Wales Court of Criminal Appeal (Mason P, Simpson J and Newman AJ) against his conviction. That Court dismissed the appeal. It rejected Macleod's submission that the evidence did not constitute the offences charged because there was a consensual transaction that precluded conviction under s 173. It also rejected his submissions that the prosecution evidence did not establish that he had acted "fraudulently" and that the trial judge had misdirected the jury in relation to the fraud and to the "defence" of a "claim of right".[55]Macleod was charged with 25 counts, six of which (counts 15, 17, 19, 21, 23 and 25) were alternatives to six primary charges (counts 14, 16, 18, 20, 22 and 24).
Ratio Decidendi
Legal Principle Established
Established by:
GLEESON CJ, GUMMOW AND HAYNE JJ,
HUGH J,