Manolas v The Queen

[2019] HCATrans 17

[2019] HCATrans 017

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Darwin  No D8 of 2018

B e t w e e n -

GEORGE THEO MANOLAS

Applicant

and

THE QUEEN

Respondent

Application for special leave to appeal

NETTLE J
EDELMAN J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 15 FEBRUARY 2019, AT 1.58 PM

Copyright in the High Court of Australia

MR S.J. ODGERS, SC:   May it please the Court, I appear for the applicant with my learned friend, MR A.E. ABAYASEKARA.  (instructed by Northern Territory Legal Aid Commission)

MR D.J. MORTERS, SC:   Your Honours, I appear for the respondent in this matter.  (instructed by Director of Public Prosecutions (NT))

NETTLE J:   Mr Odgers.

MR ODGERS:   Your Honours, under the Criminal Code (NT), you intend to deprive an owner of property so as to steal it if there is either an intention to permanently deprive, or, in cases where you borrow it, intending to return the property the person has “an intention to treat the property as his own to dispose of regardless of the rights of the owner”.

NETTLE J:   Yes.

MR ODGERS:   There are similar provisions in a number of other Australian jurisdictions.  In this case, the complaint in the Court of Criminal Appeal was about the directions given to the jury regarding that alternative basis, requiring proof of intention to treat the property as his own to dispose of regardless of the rights of the owner.  The owner in this case was a company called Coronation Drive, of which the applicant was a director and 50 per cent shareholder.

In final address – we have extracted that in our written submissions – the Crown Prosecutor submitted that if the applicant did intend to repay the money he would nonetheless be acting regardless of the rights of the owner because he knew there was a risk that he would not be able to pay the money back.  That was how the prosecutor put his case to the jury about this element of the offence.

The defence case was that he was not guilty because, while he intended to repay it – that was the first part of the case – and that while he was lending the money to another company to benefit that other company, he believed, on his case and his evidence, that to do so would serve the interests of both companies, on the reasoning that, if the second company collapsed and he became bankrupt, that would hurt the interests of Coronation Drive because he would not be in a position to manage the company Bar Zushi and that would case financial detriment to Coronation Drive.  That was the defence case.  Lending the money would serve the interests of both companies.

The judge’s written directions on this element were uncontentious and very largely repeated the statutory language, but it was after the judge, in his oral summing‑up, had summarised the prosecution and defence cases that – as I say, the defence case was that the applicant believed he was acting in the interests of both companies, and the judge referred to that in the summing‑up.  The judge then gave the two directions extracted at application book 25 which were the subject of complaint in the Court of Criminal Appeal. 

If I can take you to those two directions - the first one at page 25, line 10.  There is a reference to the written directions and the aide‑mémoire that the company had a right to have its property applied for its purposes, which is uncontentious.  Then the learned trial judge proceeded.

The prosecution does not have to prove that the accused did not make a subjective assessment and somehow took into account in that assessment the interests of Coronation Drive as he saw them.  That is not what the prosecution has to prove beyond reasonable doubt. 

The complaint that was made about that passage in the Court of Criminal Appeal was that in the circumstances of this case the prosecution did have to prove that the applicant did not believe that he was acting in the interests of Coronation Drive, that is, it is a subjective assessment and he would not be treating the property as his own to dispose of regardless of the rights of Coronation Drive if he believed that the loans were in the interests of Coronation Drive.

The Court of Criminal Appeal quite properly rejected a general proposition that it would always be enough for an accused person to have some regard to the interests of the owner.  We accept, generally speaking, that proposition will not always hold good.

EDELMAN J:   Once you accept that, does that not mean that the word “rights” cannot be read as “interests”?

MR ODGERS:   Our submission is that in the circumstances of this case, if he honestly believed that he was advancing the interests of the company then he would not be guilty.

NETTLE J:   Not that he honestly believed that he was authorised by the company but that it was enough that he believed it was in the interests of the company?

MR ODGERS:   Yes, your Honour.  As I say, the Court of Criminal Appeal rejected the general proposition that it is not always enough to have some regard to the interests, but we say completely failed to address the question of whether in the circumstances of this case the direction would have or might have misled the jury.  We say the principle in Alford v Magee is apposite.  There is little use in giving a direction that is correct in general terms; it must be formulated in a way that applies to the circumstances of the particular case and assists the jury to determine the real issues in the case. 

The real issue was the applicant gave sworn testimony that he believed what he was doing was in the interests of the company.  We say, as a matter of law, if the jury accepted that, he should have been acquitted, but the question is:  did the judge’s direction at the passage I have just taken your Honours to deflect the jury from a proper assessment of that issue?

There is no doubt, as the Court of Criminal Appeal said, that a person can act without regard to the rights of someone while believing they are acting in their interests.  They can as a general proposition.  But in this case, because he was a director of the company, because he had authority to make loans, the question was whether or not he was acting in a way regardless of the rights of the owner if he believed honestly that the loan would benefit the company.  Our submission, as I say, is that in those circumstances he would not be guilty.

NETTLE J:   But his defence was not that “I believed I had been authorised by the company to make these loans to my company”.  His defence was:  “Put aside any question of authorisation, I thought it was enough that it was in the interests of the company whose money I was using”.

MR ODGERS:   I am not sure I can accept that, your Honour.  I do not think there was any issue about authorisation here.

NETTLE J:   It was all about authorisation.  The Crown was contending he had no right to do it; you were saying, or at least those who represented him were saying that it was enough that he believed subjectively that it was in the interests of the company to do it.

MR ODGERS:   Can I put it this way, your Honour.  If it was in the interests of the company to do it, there was no question that he, as director of the company, had authority to do it.  There was no question that he had, as director, the authority to engage in transactions for the company.  The question whether or not he was stealing the money was whether, at the time that he engaged in these transactions, which, if it was in the interests of the company, would plainly be authorised, in truth he was not motivated by acting in the interests of the company but was motivated by acting in the interests of himself and the other company and not in the interests of the first company.

My answer to your Honour is this is a case that did not turn on authorisation.  The question in this case turned on - assuming you did not reject his whole account out of hand and concluded that he intended to permanently deprive, putting that to one side, assuming it was possible he was telling the truth when he said he intended to repay the money and therefore it was not an intention to permanently deprive, the case turned on the central issue:  was he telling the truth, or is it reasonably possible he was telling the truth, that he believed that to do what he was doing was in the interests of the company.  I stand by the proposition, your Honour, as a matter of law in the Northern Territory that that would be enough.

EDELMAN J:   But I do not really understand that.  If he was authorised to make loans and if his position was that he was authorised to make a loan of this nature then why does one ever get to any of these questions?  The answer simply is there is a lawful excuse.

MR ODGERS:   Your Honour, I am struggling to deal with the corporate law aspect of this; I am focusing on the criminal law aspect.  The way in which the case went to the jury was that the issue was what was his state of mind, if he was making a loan, at the time he made the loan?  That turned on the statutory requirement that he had to have an intention to treat the property as his own to dispose of regardless of the rights of the owner. 

The judge told the jury that the rights of the owner were to do things for the purposes of the owner – the purposes of the company.  That is clearly right.  But in this case, if he believed that what he was doing was in the interests of the company, then he was doing it for the purposes of the company and he would not be committing an offence of stealing under the Northern Territory Code.  That was the issue at the trial in substance.  As I say, authorisation did not really enter into it. 

EDELMAN J:   Yes, but that must have been the issue because it must have been assumed that he did not have authority to engage in that transaction.  At one point I think the judge asked, “Is there going to be any question about lawful excuse, including authority?” and counsel said, “No, we are not relying upon authority”.

MR ODGERS:   But the way I understood that, your Honour – perhaps I am wrong about this – was that if the jury were satisfied he was not motivated to act in the interests of the company then of course his conduct was not authorised.

NETTLE J:   I do not think it was ever put that way, Mr Odgers.  He steadfastly avoided ever saying, “I had authority,” or, “It is not satisfied beyond reasonable doubt that I had it”.  He always put it on the basis that “it was enough that I had a subjective belief that it was a good deal for the company and that I was not committing theft”.

MR ODGERS:   I have said what I can say about that, your Honours.  We do say that this case raises a question of general importance regarding the interrelationship between a company’s rights, the purposes of the company and the interests of the company.  We do say, respectfully, that an intention by a director to further the interests of the company means that the company’s money is being used for the purposes of the company, and there is no intention to treat the property as the director’s own to dispose of regardless of the rights of the company.  We say that was the issue in the trial.  We say that the judge’s direction effectively misled the jury about that.

The second aspect of the direction – I will deal with it fairly briefly – is also on page 25 of the application book, and that is the next passage to the one I have just read from.  His Honour said:

The prosecution has to prove, to succeed on this prosecution, that the accused did not have appropriate regard for the rights of the company as owner of the property.

The complaint that was made in the Court of Criminal Appeal was that, while the judge was no doubt intending to emphasise that the statutory question was whether the applicant was acting to protect the rights of the company by making the loan for the purposes of the company, in the context of the preceding passage that it was not a question of subjective assessment and in the context of the Crown Prosecutor’s address to the jury in which he told the jury that the applicant did not have the right to put the company’s money at risk, which we say is plainly wrong as a matter of law, there was an obvious risk that the direction may have misled the jury to believe that there was an objective component to the test so that the applicant would not be giving appropriate regard to the rights of the company if, for example, there was a risk that the money would not be repaid or the jury thought his actions did not give an appropriate level of regard to the rights of Coronation Drive. 

We submit that the Court of Criminal Appeal simply failed to address this argument in holding that the direction was not apt to mislead the jury.  We understand that the respondent argues that what he said in final address was unduly favourable to the applicant.  We say that is just simply not correct.

At the end of the day our complaint is that the directions given by the trial judge were misleading and the applicant did not receive a fair trial.  The Court of Criminal Appeal failed to engage with the complaints made about the summing‑up and as a result we respectfully submit that there should be a grant of special leave to appeal.  May it please the Court.

NETTLE J:   Thank you, Mr Odgers.  Mr Morters, we would like to hear you on whether it was in issue at trial that the accused had authority of the company to make the loans or whether the only question was whether it was enough to constitute a defence that, regardless of authority, he subjectively believed it would be in the interests of the company to make the loans.

MR MORTERS:   Your Honour, it was not in contest at the trial that the applicant had authority to act on behalf of the company.  He was the manager of the company and he was entrusted with the responsibility of managing the company by his partner in that business and co‑owner of that business.  It was never the proposition of the Crown that he was not empowered to act on behalf of the company, but certainly ‑ ‑ ‑

EDELMAN J:   Do you accept that he had the power to make loans, including a loan of this nature, putting aside for one moment whether or not the making of this loan was in the best interests of the company?

MR MORTERS:   Your Honour, yes, it could not be said that there was any basis for a prohibition on him dealing with company funds in a variety of ways which might have included lending moneys but such loans would necessarily have to be in the interests or in accordance with the objectives of the company and not in the manner that he committed those funds or the way that he committed those funds.

NETTLE J:   The Crown disputed that in those circumstances it would not be enough to constitute a defence or at least a basis for acquittal that he honestly and reasonably believed that to make the loans would be in the best interests of the company.

MR MORTERS:   The applicant disavowed any defence in relation to either the lawfulness of his acts or a mistake of fact.  That never was agitated during the course of the ‑ ‑ ‑

EDELMAN J:   I appreciate that, which may be an insurmountable obstacle for the applicant, but what I am a little concerned about is whether the Crown accepts that the actions that were taken were authorised.  It would be very, very odd to say that someone could commit the offence of stealing by performing an authorised action.

MR MORTERS:   Your Honour, when I said “authorised” what I meant was that there was no prohibition on the applicant managing the company in the way that he thought was appropriate, but to use the money in the way that he did, the Crown submitted that such conduct was not authorised, could never be authorised, because nobody who had an interest in that company would want to see money used in the way that the applicant was using that money. 

There were 20 counts before the jury, the jury heard evidence in relation to transfers of funds in excess of $500,000, more in the vicinity of $700,000, well beyond the amount of moneys that were the subject of the charges.  That evidence was adduced as a demonstration of a course of conduct by the applicant as to his use of company moneys.

The Crown’s case was put on two bases.  The first basis was that none of these advances to Dymocks, or the various other places the money was advanced to, was a loan in the first place.  It was a straight‑out appropriation.  But if the jury could not be satisfied in relation to ‑ and evidence in relation to that included that there was no documentation kept in relation to the money that was advanced, there was no interest paid on any of the money that was advanced, all these other factors which the Crown submitted clearly demonstrated that these were not loans. 

However, if the jury was not satisfied that it was an intention to permanently deprive in that way they could be satisfied on the alternative basis, on the extended definition of “appropriation” as found in section 209, that it was a use of company moneys which placed those moneys at risk.  The placing of those moneys at risk in that manner, even if you had some misguided belief that at some point in time he was going to pay the moneys back, constitutes a deprivation in accordance with the definition provided by section 209.

The point on appeal, as I understand it, is that the Crown was obliged to prove a subjective belief on the part of the applicant that he was acting regardless of the rights of the owner of the property.  The definition that appears in the Criminal Code derives from the extended definition contained in the UK theft provision, section 6, which is conveniently reproduced at the beginning of the UK Court of Appeal decision of Fernandes, which is referred to in my authorities.  It is from that decision that the various iterations of the definition of “permanent depriving” or “depriving” appears in the legislation that my learned friend has referred to in his submissions.

I do not press the argument that any decision that your Honours might make with respect to that clause might not have some application in relation to those other jurisdictions, but there are significant differences in the drafting of the definition of “depriving” between the jurisdictions which might impact on the extent to which any definition which is provided for with respect to our provision matters for these other jurisdictions.

Your Honours will see in that theft provision definition that there is a reference on a couple of occasions in both subsection (1) and subsection (2) to disposing of property regardless of the other’s rights.  Fundamentally, the respondent’s submission is that that does not require proof of subjective belief on the part of the accused.  As his Honour the trial judge said at page 25, paragraph 10 of the application book:

the prosecution does not have to prove that the accused did not make a subjective assessment and somehow took into account in that assessment the interests of Coronation Drive as he saw them.  That is not what the prosecution has to prove beyond reasonable doubt.

The respondent’s submission is that is an accurate reflection of the law.  This is not a subjective factor that needs to be proven before the jury can be satisfied beyond reasonable doubt.  It is a circumstance which the jury has to be satisfied about.  That is the approach that has been taken in the various other decisions, including Fernandes¸ that the respondent has drawn your Honours’ attention to in the response. 

For instance, in Fernandes, at page 188F the court said - Fernandes was a case where the accused was a lawyer who came into possession of moneys from clients and, in relation to the first count, invested that money in a speculative activity and that money was never returned to the owner of that money.  The Crown put its case that it was either lost through the investment or it was returned by the broker and then appropriated, but the real focus in relation to this matter was whether it could constitute permanent deprivation in circumstances where it was put at risk by being lent to the broker for investment on the short‑term money market.  The Court of Appeal found unanimously yes, it could.  At F the court said:

In the circumstances alleged here, an alleged dishonest disposal of someone else’s money on an obviously insecure investment, we consider that the judge was justified in referring to section 6.  His direction, looked at as a whole, did not water down the requirement that the jury should be sure of an intention permanently to deprive as illustrated by that provision.

It is in this case that the English Court of Appeal accepts that putting money at risk in this way is sufficient to satisfy that extended definition of “intention to permanently deprive”.  If your Honours went over to the next page, 189A, there is a reference to a comment that the trial judge makes.  It is sort of in relation to a different appeal point.  I will just read it first:

He also pointed out that the opening words of the judge’s general direction:

“It may be that you will find that he was perhaps indifferent as to whether or not the owner was so deprived”.

There was no criticism of the comment by the trial judge in those terms about the suggestion that there could be indifference on the part of the accused with respect to the rights of the owner of the property when the accused behaved in the way that he did.

The respondent’s submission is that that clause as it appears in that definition does not require proof of subjective belief but rather is a circumstance that has to be met.  That is why there is no basis for criticism, for instance, of the trial judge’s direction in the aide‑mémoire.  The aide‑mémoire I specifically referred to.  I included the aide‑mémoire in the supplementary application book.  The relevant direction is direction 13 at page 5 of the supplementary application book at about line 25:

Further in relation to 11.2, the words “regardless of the rights of the Company” mean without due regard or consideration for the rights of the Company as owner of the property.  In this context, the Company had the legal right and entitlement to have its property applied for (its own) company purposes.

There does not seem to be any dispute that the second part of that direction is completely legitimate.  That is what the right of the company is:  to have its assets used in accordance with its interests.  But there no complaint made either about the first part where the word “due” is used.

The submission is that there is no difference between the word “due” as it appears in that paragraph.  No complaint was made to the aide‑mémoire, I might add, before the judge gave his summing‑up.  But there is complaint made about the judge’s use of the word “appropriate” at page 25 of the application book.  You will see at about line 3 that what his Honour says is that:

the prosecution, for the purposes of s 11.2, has to satisfy you beyond reasonable doubt that he did not have – that is, Mr Manolas did not have due –

which is the word that he used in the aide‑mémoire:

or, that is, appropriate regard –

Really, the trial judge was using those two words interchangeably.  He put in the aide‑mémoire, before the direction was given, the word “due”.  In this case he has moved from the word “due” to “appropriate”.  The respondent’s submission is that there is no difference in meaning between the words “due” or “appropriate”.  What he is communicating to the jury is that they have to be satisfied that the circumstance prevailed that the acts of the accused in transferring funds from Coronation Drive’s account to various other places constituted a circumstance in which that was contrary to the rights of Coronation Drive, not that the accused had to have a particular mindset in relation to that clause but that it was a circumstance that the jury had to accept existed.

It is clear in Fernandes that there is no criticism of a judge making a comment that the defendant could be indifferent in those circumstances.  It is clear in Brownlie, which is another of the cases that I have referred to.  It was a decision of the Victorian Court of Appeal where the accused and her husband pledged some diamonds to a pawn shop and were charged with theft before they had the opportunity to redeem them. 

In that case, in Brownlie, although my learned friend is critical of my mixing up of the pledging cases with cases where there is no condition imposed for the return of the items, which is a fine distinction because arguably if you lend money to somebody else there is a condition, you still have to get the money back in some way, but in Brownlie the Victorian Court of Appeal talks about the risk that the accused caused with respect to the property by pledging the property in the way that she pledged the property. 

It is not dissimilar to the decision that was made in Fernandes, where there was a lending of moneys on an insecure investment which gave rise to this risk.  That, it is submitted, is the conduct which the provision is seeking to deem as criminal.  It simply requires an analysis as to whether the circumstances which prevailed would give rise to a conclusion that it was contrary to the rights of the party, the owner of the property.

In the Court of Appeal, the court unanimously concluded that that was the proper approach; the trial judge had not erred by simply directing the jury that they had to make an assessment as to the propriety of the activity as opposed to the state of mind of the accused with respect to those circumstances.  They made the distinction between rights and interests, as is set out in that judgment, and they gave several examples where an individual might act consistent with somebody’s interests but inconsistent with their rights. 

The one that sticks out most from memory is about how the elderly occupant of a house might be tricked into transferring that house or selling that house to fund living in a retirement village.  It might well be in that person’s best interests to be in a retirement village but it is her right to remain in her house, or his right to remain in his house, if they so desire.

So there was consideration of what was meant by that clause and there was rejection of my learned friend’s submissions that it had attached to it a subjective factor.  The Court of Criminal Appeal did properly answer

the objections that my learned friend made with respect to the trial judge’s direction.

NETTLE J:   I see you are out of time, Mr Morters.

MR MORTERS:   Thank you, your Honour.

NETTLE J:   Mr Odgers, is there any reply?

MR ODGERS:   Just briefly, your Honours.  The offence required proof of an intention.  I am not sure if anything could be more subjective than that - an intention to treat the property as his own to dispose of regardless of the rights of the owner.  The prosecution had to prove he had that intention.  The defence case was he did not have that intention because his intention was to serve the purposes of the company by advancing the interests of the company.  That was his case.

On this question that your Honour has raised about authorisation, as I understand it at the trial the defence took the perfectly sensible, pragmatic view that if the jury accepted his account or at least gave him the benefit of the doubt on that so it was reasonably possible that the subjective intention was to serve the interests of the company as well as the other company then he would not be guilty.  End of story.  You do not need to look at authorisation and excuse and all of that.

If they rejected his account and were satisfied beyond reasonable doubt he did not have an intention to advance the interests of the company then it necessarily follows that he was not acting for the purposes of the company and he was not authorised to do what he did.  That is why authorisation never was an issue.  If the jury accepted his account, he was not guilty.  If they rejected it, he plainly lacked authorisation to do what he did.  That is why the issue in the trial was did he have that state of mind, did he believe that it was in the interests of the company?  If he did, on his case, it required a verdict of not guilty.

Despite everything my friend said, we stand by the proposition that, as a matter of law, that was right and there is nothing, we say – it raises clearly a question of general importance and we say that certainly the Court of Criminal Appeal did not endorse my friend’s contention that merely lending property to somebody and putting it at risk means that you are not doing it for the purposes of the company.  That would mean that if the managing director loans money out and there is risk it will not be paid he would be committing a crime of stealing.  It just cannot be right.

In my submission, this issue is one of general importance.  It is not a case where there was clearly no defence, and there are real issues about the

correctness of the directions, and we say there should be a grant of special leave.  May it please the Court.

NETTLE J:   Thank you, Mr Odgers. 

Although we are not necessarily persuaded that the reasoning of the Court of Criminal Appeal of the Northern Territory is entirely correct, in this matter it was not suggested at trial and there was no evidence that the appellant honestly and reasonably believed that he was authorised by Coronation Drive Pty Ltd to pay away its moneys to, or to the use of, the applicant’s own company, Casuarina Dymocks Pty Ltd, still less that he honestly or reasonably believed in the existence of a state of affairs which, as a matter of law, would have amounted to such authorisation. 

Thus, the only issue on appeal to the Court of Criminal Appeal was whether the words “regardless of the rights of the person to whom it belonged” in section 209(1) of the Criminal Code 1983 (NT) imported a requirement for the Crown to negative beyond reasonable doubt that the applicant subjectively believed that the payments were in the best interests of Coronation Drive Pty Ltd.  There is no reason to doubt that the Court of Criminal Appeal was correct in holding that the Crown was not required to do so. 

Accordingly, an appeal to this Court would not enjoy sufficient prospects of success to warrant the grant of special leave.  The application for special leave is dismissed.

MR ODGERS:   May it please the Court.

AT 2.38 PM THE MATTER WAS CONCLUDED