O'Brien v The Queen - [2004] WASCA 107

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : COURT OF CRIMINAL APPEAL

CITATION: O'BRIEN -v- THE QUEEN [2004] WASCA 107

CORAM: MURRAY J
STEYTLER J
MCLURE J

HEARD: 10 MAY 2004

DELIVERED : 20 MAY 2004

FILE NO/S: CCA 164 of 2003

BETWEEN: KENNETH FRANCIS O'BRIEN
Applicant
AND
THE QUEEN
Respondent

Catchwords:

Criminal law and procedure - Charges of fraud - Applicant was a finance broker who raised money from investors to be loaned to another on the security of a first mortgage - Representation made to potential investors as to value of property - Investment induced by representation understood to be as to value of property without regard for strata title potential - Representation could not be objectively so understood - Falsity of representation not proved - Deceit or fraudulent means not established - Verdicts set aside - Turns on own facts

Legislation:

Criminal Code 1913 (WA), s 409(1)(d)

Result:

Leave to appeal granted
Appeal allowed
Convictions quashed

Category: B

Representation:

Counsel:

Applicant: Mr S W O'Sullivan
Respondent: Mr S E Stone

Solicitors:

Applicant: Sean O'Sullivan
Respondent: State Director of Public Prosecutions

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

Dyers v The Queen (2002) 210 CLR 285
Jones v The Queen (1997) 191 CLR 439
Lewis v The Queen (1998) 20 WAR 1
M v The Queen (1994) 181 CLR 487
Mathews v The Queen (2001) 24 WAR 438
MFA v The Queen (2002) 77 ALJR 139

Case(s) also cited:

Chan v The Queen [2002] WASCA 50
Peters v The Queen (1998) 192 CLR 493

MURRAY J: This is an application for leave to appeal against conviction. There were in fact 28 convictions, all of fraud, contrary to the Criminal Code (WA), s 409(1)(d), which defines the offence committed by a person "who, with intent to defraud, by deceit or any fraudulent means causes a detriment, pecuniary or otherwise, to any person". Each count in the indictment was substantively in identical terms, alleging that the applicant, with intent to defraud, by deceit or fraudulent means caused a detriment to a named natural or corporate person in the form of the investment of a nominated sum of money in a loan secured by a joint first mortgage.
There are nominally 13 grounds upon which the application is pursued, but in truth they are generally not grounds at all, but a narrative of the argument presented for the applicant, as a result of which it is contended that in certain respects, to which I shall come so far as is necessary in dealing with the arguments raised, the convictions are not supported by the evidence and are unsafe and unsatisfactory.
Presented in that way the application for leave relies upon that part of s 689(1) of the Code which requires this Court to allow an appeal against conviction where the verdicts of the jury should be set aside on the ground that they are unreasonable or cannot be supported having regard to the evidence. The question thus posed may be formulated as the question whether the verdicts are unsafe or unsatisfactory, but there is no need to adopt that formulation. The question is whether the appellate court considers that upon the whole of the evidence it was open to the jury to be satisfied of the guilt of the accused beyond reasonable doubt.
It will be observed that to put the question in that way preserves to the jury its role as the finder of fact and the appellate court is not to lose sight of the fact that the jury saw and heard the evidence and may, in that way, have an advantage which an appellate court cannot overcome. Nonetheless, the appellate court is to examine all the evidence, guided to appropriate areas by the parties. If at the end of that process there appears to be a significant possibility that the guilt of the accused could not be established beyond reasonable doubt the conviction will be quashed. Unless the jury may have been in a better position, a doubt experienced by the appellate court will generally be accepted to be a doubt which a reasonable jury ought to have experienced: M v The Queen (1994) 181 CLR 487, 493‑4; Jones v The Queen (1997) 191 CLR 439, 450‑2; Dyers v The Queen (2002) 210 CLR 285, 308 [62] – [63]; and MFA v The Queen (2002) 77 ALJR 139, 144 [25] – [26], 148‑9, [52] – [58].
On 25 September 2003 a global sentence of 4 years imprisonment with eligibility for parole was imposed on the applicant. He has been serving that sentence since then. The notice of application for leave initially referred also to the sentence and, upon a very generally expressed ground, made the assertion that the sentence was manifestly excessive. Before us, this application, although not abandoned, was not pressed. In light of the conclusion to which I have come in respect of the appeal against the convictions, I need say no more of the application for leave to appeal against sentence.
The applicant was tried jointly with one Kennedy, who initially also faced 28 charges and was acquitted of all charges. They were related charges, but separate counts were brought against the two men in relation to particular investments because each was alleged to have perpetrated a separate fraud, causing the detriment in the form of the making of the particular investments in a joint first mortgage.
The applicant was the general manager of a firm which operated as a licensed finance broker, Blackburne & Dixon. Kennedy was a borrower of moneys through the agency of the finance broker, the funds loaned being secured by a fixed term first mortgage over the particular property being acquired by a company operated by Mr Kennedy and his wife. The property was a motel in Busselton, originally known as the Willow Motor Inn, which came to be called the Vasse River Resort.
The company operated by Kennedy and his wife required finance to continue the process of the acquisition of the motel. The applicant was approached to act as a broker. He offered investors, including ultimately all those named in the 28 counts of the indictment, the opportunity to invest money in the property, to be mortgaged by Kennedy's company, upon the security of a joint first mortgage. The original valuation obtained to support the proposal for investment valued the property at $3.5M as at 17 October 1995. The mortgage was entered into for the term of a year as from 14 December 1995, and the amount raised was $2.4M.
That exercise was repeated the following year and again in the year after that, but on that occasion it was sought, in refinancing the motel, to borrow an extra $320,000, making the total amount of the loan $2.72M. This is the proposal put to existing and new potential investors which is at the heart of the charges laid in the indictment.
The applicant obtained a further valuation from the licensed valuer who had originally been consulted, a Mr Olifent. Mr Olifent's valuation was dated 9 June 1997. It describes the property and the motel in detail. The valuation refers to the approval of strata title lots in relation to the manager's unit, the restaurant and various accommodation units, some of which were yet to be built. It commented:
"The valuation of the Vasse River Motel has been conducted on the basis of 34 separate short stay strata title accommodation units, 14 vacant survey strata lots, a strata titled restaurant and strata titled manager's residence/office/reception area as per the attached plan. This is the highest and best use of the property as per normal valuation practice."
The valuer then discussed in some detail the method of valuation employed in respect of the various elements of the property, advising in the process that planning approval had been received for the project and expressing the view that formal approval by the Shire of Busselton, subject to connection to deep sewerage, "appears to be a formality". Ultimately, the opinion expressed was that the property "has an unencumbered freehold current market value as a proposed strata title development of $4 million as at 3 June 1997." The valuations attributed to the various component parts of the property were then set out and a total of $4,007,000 was arrived at, rounded off to $4M.
One element of the property separately valued was four vacant surveyed strata title lots at an upper level. These therefore represented accommodation units which were as yet unbuilt. The evidence of the applicant, unchallenged by other evidence, was that he considered the value attributed to these units to be inflated because he took the view that to build them would interfere with the units below them and so their present value was debatable. The value attributed to these lots was $128,000. The applicant said in evidence that he thought it proper to deduct this sum when advising potential investors of the valuation obtained. That achieved a final valuation of $3,879,000.
The applicant devised a standard form of letter by which he proposed an investment in this project to the various investors who were the complainants in the counts contained in the indictment. It was the issue of this proposal which allegedly constituted the deceit or fraudulent means by which, with intent to defraud, the detriment in the form of the investment made was caused to the complainants.
The letter sent to these people introduced as the borrower the company operated by Mr and Mrs Kennedy, of which Mr Kennedy was clearly presented as the driving force. The existing loan was referred to, as was the increase of $320,000 which was sought to allow Mr Kennedy, as it was put, "to continue the upgrading of the motel premises and fitout." The total amount of the loan sought was given as $2.72M to be secured by a first mortgage over the property for a term of two years.
The buildings comprising the motel were referred to. The letter of proposal continued:
"Since purchasing the motel, Mr Kennedy has improved and refurbished the restaurant, installed a swimming pool, improved and reticulated the grounds. He now intends improving the furnishings in most of the units and connecting the motel to the sewer which is the only item outstanding for the complex to be strata titled. The strata approval includes provision for a further 19 motel units to be constructed.
Since purchasing the motel in 1995, Mr Kennedy has increased the occupancy rate from a low 37% to 63.2%. The restaurant is now one of the most popular in Busselton. Consequently, the value of the motel has increased. South West Valuations valued the property on June 9, 1997 at $3,879,000.00. The connection to sewer and completion of strata title requirements will increase the value to $4M. The proposed loan represents 70% of $3,879,000.00."
It will be observed that the applicant did not, as the proposal suggests, deduct the sum of $128,000 from the valuer's calculation of value totalling $4.7M because this represented the cost of connection to sewerage and completion of the strata title requirements. As has been seen, he did that for a different reason. Mr Olifent, in his valuation, had made the point that the valuation did not take into account any costs associated with strata titling and the cost of connection to deep sewerage. So they might be regarded as being costs incurred in reduction of the total value. As it turned out, the requirement for connection to deep sewerage was not pursued by the authorities and the only cost to be incurred in relation to the strata titling process was the sum of $77 for the process of registration.
The investments having been made by the complainants nominated in the respective counts of the indictment, the mortgagor defaulted and the mortgagee investors decided to go into possession of the motel and run it themselves. This they did for some years and, although no doubt the process of strata titling could have been completed during this period, it was not. Ultimately, on 5 April 2002 a mortgagee sale was held and the property sold for $1.4M. On that same day the purchaser completed the strata titling process and commenced to sell the strata titled lots. A number were sold but the value which was or might ultimately in total have been achieved on sales made in this way is really irrelevant.
It is not the loss which was ultimately sustained by the investors upon which, in the counts in the indictment, reliance is placed, but the making of the investments by individual complainants themselves, no doubt because the making of those investments might be said to constitute a detriment to the individual investors because they parted with the sums invested, regardless of what return on their investment they ultimately did achieve or might have achieved if matters had been handled differently. The appeal requires no consideration of the validity of that approach in the context of the offence created by s 409 of the Code.
It is necessary to identify the conduct relied upon as the deceit or fraudulent means employed by the applicant, allegedly with intention to defraud, so as to cause the detriment particularised in the indictment, the investment made by the particular investor, the subject of a particular count. The Crown case was opened as follows:
"What then is the Crown case against O'Brien insofar as the deceit or fraudulent means and the causation element is concerned? The case against O'Brien arises out of the way in which he represented the value of the property in the letters that he prepared and that were sent out to potential investors offering them the opportunity to invest in the $2.7 million.
You recall that I told you that in those letters, all of which the Crown says were prepared by O'Brien even if they were not ultimately signed by him, the statement was made that South West Valuations valued the property on 9 June 1997 at $3.879 million and that the connection to the sewer and completion of the strata title requirements would increase the value to $4,000,000.
What the crown says about that statement is this: that the clear meaning of the statement or at least the impression created by it was that the current walk in, walk out value of that property as at 9 June 1997 was $3.879 million and that upon completion of strata titling and connection to sewer the value would be $4,000,000. Secondly, the Crown says that that statement or impression was false and it was false because South West Valuations did not value the property at $3.879 million, they valued it at $4,000,000, and the crown says it was also false because as at 9 June 1997 the true walk in walk out market value of that property, given that it had not actually been strata titled, was nothing like $4,000,000 or even $3,897,000. It was in the vicinity of $2.2 million."
The reference to $2.2M on a "walk in walk out" basis is a reference to a later valuation, dated 30 September 1999, done by a certified valuer, Mr Rowe, who, while noting that the property currently had an approved strata plan in place without individual titles having been issued, valued the property without regard for that fact because it was then proposed that it was shortly to be sold at auction as a going concern in its existing state. As Mr Rowe put it, he was required to estimate the market value of the freehold interest "on a walk in walk out basis".
As at 9 September 1999 his estimate of its value was $2.2M. In giving evidence at trial, Mr Rowe said that the value would not have changed significantly from 9 June 1997 and Mr Olifent, in his evidence, agreed. He thought that as at 9 June 1997 the value of the property upon that basis was in the vicinity of between $2.1M and $2.3M. But it will be noted that in each case the basis of valuation adopted assumed, in contra‑distinction to the basis of Mr Olifent's original evaluation, that the strata title potential of the property made no contribution to its value.
I return to the letters of proposal of which the applicant was the author. When the applicant gave evidence at the trial he was cross‑examined on the document, particularly that portion which I have quoted and more particularly again, the two sentences:
"South West Valuations valued the property on June 9, 1997 at $3,879,000. The connection to sewer and completion of strata title requirements will increase the value to $4M."
I pick up the cross-examination at the point of counsel's reference to the deduction of $128,000. The following questions were asked and answers given.
"So if you deducted the $128,000 off it to deal with the situation where the strata title requirements weren't complete what impression do you think those two sentences give about the current walk-in walk-out value of the resort?---I didn't consider a walk-in walk-out valuation of the property. It wasn't a term we used at all.
You would agree, wouldn't you, that on any ordinary reading of those two sentences what it's saying is the value of the resort as it currently stands as a resort is $3.879 million and when it's strata titled it will be worth $4,000,000?---Yes.
And that wasn't right, was it?---Yes, it was.
Well, you've already told us that you accept that the resort as a whole would never have sold for $3,879,000. You've agreed with that, haven't you?---Yes, but once it was strata titled it was worth $4,000,000.
Yes, but if you accept - - -?---That's the – what the valuation states.
- - - if you accept that those two sentences indicate that the current walk-in walk-out value of the resort is $3,879,000 and that when it's connected to strata titling it will be $4,000,000, that's just not right, is it?---I didn't mention walk-in walk-out valuation.
That's what you intended to convey, isn't it?---No. Not at all.
You intended to give the impression to potential investors that that property as it stood as at 9 June 1997 was worth $3,879,000. That's the truth, isn't it?---Not using – not using the term that you just used on a walk-in walk-out basis.
All right. What about as a whole; the value of the resort as a whole motel not strata titled? You intended to give investors the impression that the value of the resort as a whole was $3.879 million?---No, it's not because I made comments in the letter stating that it would be strata titled."
The act by which an offender commits the offence of fraud under s 409 occurs when he causes a proscribed result specified in any of par (a) – (f) of s 409(1) "by deceit or any fraudulent means". When Chapter 40 of the Code, the chapter dealing with fraud, was rewritten in 1990 a number of offences were repealed. One of those was s 412, the traditionally formulated offence of conspiracy to defraud. That was an offence committed by a person who conspired "by deceit or any fraudulent means" to achieve particular proscribed results. Of course, a conspiracy to commit a fraud remains an offence known to the law. But the point of mentioning the former s 412 is that the description of the proscribed act was imported into the new s 409 from s 412, which in turn drew heavily on the concepts involved in the common law offence, therefore enabling the courts to draw upon that wider body of judicial learning.
There is no complaint about the manner in which the trial Judge directed the jury. The phrase "deceit or any fraudulent means" is a composite one, not expressly defined in the Criminal Code. It describes conduct which is dishonest, and in that concept there are the notions that the victim is deceived by the act or acts of the offender or that a proscribed outcome is achieved dishonestly, whether or not the victim is duped. The concept involves a mental element, apart from the requirement of an intention to defraud, as to which see such cases as Lewis v The Queen (1998) 20 WAR 1 and Mathews v The Queen (2001) 24 WAR 438 and the cases discussed therein.
In this case that meant, as her Honour told the jury, that it was for them to determine if the means used to cause the investors to make their investments satisfied the requirement of "deceit or any fraudulent means" in that there was dishonesty involved, according to their judgment whether ordinary, decent people in the community would consider the means used by the accused whose case they were considering to be dishonest. Again, in this case, so far as the applicant was concerned the question resolved itself, as her Honour put it to the jury, into the question whether the statements made by the applicant in the letters by which the proposal for investment was put to the various potential investors (those being the statements identified by the prosecutor in opening the case) were false to the knowledge of the applicant. Falsity was an ordinary concept which required no further explanation and the mental element was adequately described by reference to the actual knowledge of the applicant as the jury found it to be.

In my opinion, the difficulty in this case is concerned with the proof of this element of the offences charged. It is abundantly clear that the terms of the letters of proposal were drawn by the applicant from Mr Olifent's valuation of 9 June 1997, a valuation which the applicant said in evidence he understood. The evidence, does I think, establish that he did understand the basis of the valuation.

The property was valued on the conventional basis that its highest and best use was as strata titled motel accommodation, restaurant, and manager's residence, office and reception area. The valuation was self evidently of the property as it then existed without the strata title development having occurred, but upon the basis that such development was proposed and could readily occur, as the valuation said. Having given a value of $4M it did not take into account costs associated with the process of completing the strata titling of the motel and the cost of connection to deep sewerage. Nonetheless, it was Mr Olifent's opinion that the values he gave to the strata titled units were what could be realised on the market as at 3 June 1997.
The applicant's letter of proposal referred to the strata titling process and its approval together with the requirement, as it was then understood to be, to connect the motel to deep sewerage. The reference to South West Valuations valuing the property on 9 June 1997 at $3.879M was, of course, strictly untrue because the value given was $4.007M rounded off to $4M. The applicant reduced the value for the reasons I have discussed. In my opinion, to the extent that there was any falsity, it was not that relied upon by the Crown and it was not falsity of a kind material to causing the investors to make their investments. The letter of proposal did not present the value of $3.879M as the value of the motel on a "walk in walk out" basis without regard for its potential as a strata titled development. Quite the contrary.
In my opinion, the evidence was incapable of establishing beyond reasonable doubt that the applicant employed deceit or any fraudulent means to induce the investments made. The convictions are not supported by the evidence. I would grant leave to appeal. I would allow the appeal and quash the convictions. In the circumstances, there can be no question of a new trial.
STEYTLER J: I have had the advantage of reading the judgment to be delivered by McLure J. I agree with it and with her Honour's conclusions that leave to appeal should be granted, the appeal should be allowed and the convictions quashed. I also agree that it would be inappropriate to order a retrial.
MCLURE J:

Introduction

The applicant seeks leave to appeal his convictions on 28 counts of fraud contrary to s 409(1)(d) of the Criminal Code 1913 (WA). Each

count alleged that the applicant, with intent to defraud, by deceit or fraudulent means, caused a detriment to a named investor being the investment of a specified amount of money in a joint first mortgage.

At the material time the applicant was the general manager of a licensed finance broker carrying on business under the name "Blackburne & Dixon". In 1995 Blackburne & Dixon brokered a transaction whereby a group of investors advanced the sum of $2,400,000 to Unit Shelf Company No 51 Pty Ltd ("the borrower") for the purpose of purchasing a motel property in Busselton known as the Vasse River Motel ("the property"). Mr G Kennedy, with his wife, owned and controlled the borrower. The loan was secured by registered joint first mortgage of the property. That investment was for a period of 12 months. The loan (and mortgage) was extended for a further 12 months in 1996. In 1997 Mr Kennedy wanted to increase the borrower's loan by $320,000 to $2,720,000. A new loan and security was negotiated. The applicant wrote, or caused to be written, letters to each of the 28 complainants offering them the opportunity, if they were existing investors, to continue with the investment or, if new investors, to participate in it ("the proposal letter"). All of the proposal letters were in materially the same terms.
Mr Kennedy was also charged with multiple counts of breaching s 409(1)(d) of the Code although the deceit or fraudulent means relied on related to the purpose for the additional borrowing of $320,000. Mr Kennedy was jointly tried with the applicant. He was acquitted on all counts.
Prior to the applicant preparing and dispatching the proposal letters, he was provided with a valuation dated 9 June 1997 from South West Valuations ("the 1997 valuation"). The 1997 valuation was prepared by Mr S A Olifent, a licensed valuer. The 1997 valuation was referred to, but not enclosed, in the proposal letters. Mr Olifent of South West Valuations also prepared a valuation dated 17 October 1995 in support of the borrower's application for the original loan.

The 1997 Valuation

On Mr Kennedy's instructions, the 1997 valuation, like the 1995 valuation, valued the property as a proposed strata title development. At the time of the 1997 valuation, the borrower had obtained (at least) conditional approval from all relevant authorities to the strata titling of the property in accordance with a strata plan which had been lodged on the title to the property. The only outstanding condition was said to be connection of the motel to deep sewerage. Although there appears to have been some confusion as to whether the connection to deep sewerage was ever a condition of approval, it was subsequently not required.
The 1997 valuation materially states:
"The Vasse River Motel ... has approval to be strata titled into separate strata title lots (see attached plan). The following is a schedule describing each of the strata lots, as approved by the Minister of Planning.
STRATA LOT 1 - existing manager's accommodation/office/reception area, with a small area to the front of the manager's residence incorporating the patio and further courtyard facility.
STRATA LOT 2 - existing restaurant and kitchen.
STRATA LOT 3‑26 inclusive - existing two level motel complex of 24 units.
STRATA LOT 27 - a proposed two‑storey motel block, with 14 motel suites.
STRATA LOTS 28‑32 - existing single level five motel units.
STRATA LOT 33 - existing five units, with an allowance for four vacant strata lots above the existing five units and this particular building will therefore, on completion, be nine motel units.
The redevelopment, when built, will result in 52 separate Strata Title units with separate restaurant and manager's residence/office/reception ...
...
The valuation of the Vasse River Motel has been conducted on the basis of 34 separate short stay strata title accommodation units, 14 vacant survey strata lots, a strata titled restaurant and strata titled manager's residence/office reception area as per the attached plan. This is the highest and best use of the property as per normal valuation practice.
...
... Minister for Planning approval has been received and formal approval by the Shire of Busselton, subject to connection to deep sewerage, appears to be a formality.
VALUATION:
In consideration of the foregoing facts and comments and in the knowledge of the available sales evidence, I am of the opinion that the subject property has an unencumbered freehold current market value as a proposed strata title development of $4 million as at 3rd June 1997, calculated as follows.
SUBJECT TO: Formal, Shire of Busselton approval for the subject strata title development.
STRATA LOT 1 (Manager's unit)  $  93,000
STRATA LOT 2 (restaurant/kitchen)  $ 280,000
STRATA LOTS 3 - 26
- 22 standard units @ $91,000 per unit                   $2,002,000
- 2 family units @ $95,000 per unit  $ 190,000
STRATA LOT 27
- 14 vacant survey‑strata lots @ $28,000 each          $ 392,000
STRATA LOTS 28 - 32
- 3 standard motel units @ $91,000  $ 273,000
- 2 family units @ $95,000  $190,000
STRATA LOT 33
- 4 units (located on the Vasse River) @ $91,000      $ 364,000
- 1 family unit @ $95,000  $  95,000
- 4 vacant survey‑strata upper level lots @ $32,000    $ 128,000
TOTAL VALUE  $4,007,000
Adopt rounded value of $4 million for Vasse River Resort
The subject valuation does not take into account any costs associated with strata titling of this motel complex and the cost of connection to deep sewerage. The separate strata titled units as described are what I consider would sell for on the market as at 3rd June 1997. ...  "
Thus, in Mr Olifent's opinion the value of the property as at 3 June 1997 as a proposed strata title development was $4 million gross that is, without deducting the costs of strata titling.

The Proposal Letters

After stating the amount and purpose of the proposed increase in the loan and other relevant terms and conditions, the proposal letters identify the security for the loan as a first mortgage over the property. The proposal letters thereafter materially provide:
"Since purchasing the motel, Mr Kennedy has improved and refurbished the restaurant, installed a swimming pool, improved and reticulated the grounds. He now intends improving the furnishings in most of the units and connecting the motel to the sewer which is the only item outstanding for the complex to be strata titled. The strata approval includes provision for a further 19 motel units to be constructed.
Since purchasing the motel in 1995, Mr Kennedy has increased the occupancy rate from a low 37% to 63.2%. The restaurant is now one of the most popular in Busselton. Consequently, the value of the motel has increased. South West Valuations valued the property on June 9, 1997 at $3,879,000. The connection to sewer and completion of strata title requirements will increase the value to $4 M. The proposed loan represents 70% of $3,879,000."
The italicised sentences in the above passage ("the words complained of") were said by the Crown to contain false representations. During the course of the trial, the Crown identified two representations (described as the "first representation" and the "second representation") flowing from the words complained of. Special verdicts were sought and obtained in relation to each representation. The jury verdicts of guilty were based solely on the first representation. To sustain a verdict of guilty in relation to the first representation, the Crown had to prove that the first representation was false; the applicant knew it to be false; and he made the first representation with the intention of causing, and did cause, the investor complainants to suffer a detriment.

The Grounds of the Application

I agree with Murray J's criticism of the proposed grounds of appeal. Based on the applicant's oral and written submissions, only two grounds of appeal are pursued. They are in the alternative and depend upon the content of, and inferences to be drawn from, the first representation. The applicant's primary submission is based on the contention that the first representation as formulated by the Crown to the jury was confined to the literal meaning of the sentence in the proposal letter that "South West Valuations valued the property on June 9, 1997 at $3,879,000". In particular, the applicant contends that it was not the Crown case that the first representation stated or conveyed the impression that South West Valuations valued the property on a walk‑in walk‑out basis at $3,879,000.
If the applicant's primary contention is correct, the difficulties for the Crown case are immediately apparent once the obvious next step of identifying the relevant falsity is undertaken. The statement is literally false in that it understates the value placed on the property by South West Valuations. Mr Olifent valued the property at $4.07 million not $3.879 million. The higher the value of the property, the better the security and the greater is the protection of the investor's financial interests. I see no proper basis to conclude that an intentional understatement of value alone in this context is capable of supporting an inference that the applicant made the representation with intent to defraud the investors (that is to cause them a detriment) or that there is a relevant causal nexus between the misrepresentation and the complainants' conduct in entering into the investment. In this regard, the Crown contended at trial, correctly in my view, that causation must be determined by reference to the decision of the complainants to enter into the investment transaction. If an investor complainant was willing to enter into the investment on the basis of a representation that the property was valued at $3.879 million they would surely do so if they knew the correct state of affairs, namely that South West Valuations had valued the property at $4.07 million.
The applicant's alternative contention was that if the case left to the jury was that the first representation was in terms that South West Valuations valued the property at a walk‑in walk‑out value of $3,879,000, the evidence was incapable of satisfying the jury beyond reasonable doubt of the guilt of the applicant.

Primary Contention - No Inference of Walk‑in Walk‑out Value

What then was the Crown case as to the substance of the first representation. In relation to the words complained of, the Crown said in opening:
"What the Crown says about that statement is this: that the clear meaning of the statement or at least the impression created by it was that the current walk‑in, walk‑out value of that property as at 9 June 1997 was $3.879 million and that upon completion of strata titling and connection to sewer the value would be $4 million.
Secondly, the Crown says that that statement or impression was false and it was false because South West Valuations did not value the property at $3.879 million, they valued it at $4 million, and the Crown says it was also false because at 9 June 1997 the true walk‑in, walk‑out market value of that property, given that it had not actually been strata titled, was nothing like $4 million or even $3.897 million. It was in the vicinity of $2.2 million."
After identifying the two respects in which it was said the statement or impression was false, the Crown prosecutor went on to deal with causation. He said:
"The Crown says as to the causal element that that deceit or fraudulent means caused the detriment suffered by each of the complainants because they were induced to falsely believe the walk‑in, walk‑out value was $3.879 million and that that belief was a material cause of their decision to invest in the mortgage."
It will be seen that confusion was immediately created by referring to one respect in which the statement was said to be false (South West Valuations valued the property at $4 million not $3.879 million) yet that was not relied on as a relevant causative factor. This matter was revisited as the result of an objection taken during the course of the applicant's evidence. The Crown prosecutor made the following statement:
"The first statement which the Crown says is false is that 'South West Valuations valued the property on June 9, 1997 at $3.879 million.'
Secondly, what the Crown says is that when the second sentence, 'The connection to the sewer and completion of strata title requirements will increase the value to $4,000,000' is read in conjunction with the first sentence. It creates the impression, the false impression that the walk‑in walk‑out value of the motel as at 9 June, 1997 is $3.879 million. That is the allegation of the falsity and in order to prove the falsity of that second allegation the Crown has adduced evidence from Mr Olifent as to the walk‑in walk‑out value of the property as at 9 June 1997 and also seeks to rely upon the evidence given by Mr Rowe."
The Crown's approach was then picked up by the trial Judge in her summing up. She said:
"Turning now to the Crown's case against Kenneth Francis O'Brien, the Crown relies upon two matters to prove that the accused engaged in deceit or fraudulent means. If it proves either or both of these matters the Crown will have proved this element of the offence [emphasis added].
First the Crown says that the accused engaged in deceit or fraudulent means by stating in the letters to investors, 'South West Valuations valued the property on June 9, 1997 at $3,879,000'. Secondly, the Crown says that the accused engaged in deceit or fraudulent means by stating in the letters to investors, 'the connection to sewer and completion of strata title requirements will increase the value to $4 million.'
What the Crown says about the second statement is that read with the first statement, if you read them together, the clear impression that they give is that the current whole value of the motel on a walk‑in walk‑out basis as at 9 June 1997 is $3,879,000 and that strata titling will increase the value to $4 million. The Crown further alleges that at the time that the accused made these statements they were false and the accused knew or believed they were false."
When dealing with the requirement for the Crown to prove falsity, she referred separately to each aspect. She said:
"The Crown says that the first alleged representation, that is that South West Valuations had valued the property at $3,879,000 as at 9 June 1997, is patently false. The Crown says that that is clear from exhibit 97, which is the valuation upon which it was based; that's Mr Olifent's valuation. He never valued the property at that figure.
The Crown also says the fact that you know how Mr O'Brien arrived at that figure, that is by subtracting the $128,000, doesn't make the statement any less false. Just knowing how the falsity occurred doesn't mean its not a false statement."
In these passages the trial Judge is clearly referring to the falsity of the literal meaning of the first sentence of the words complained of. She then goes on to refer to the second alleged representation resulting from a combination of the two sentences read together being that the market value on a walk‑in walk‑out basis was $3,879,000.
Finally, there is the request for the special verdict. After the jury had handed down their guilty verdicts, the trial Judge informed the jury that she was going to require them to find a fact specifically or specially and that was whether they were satisfied beyond reasonable doubt of one or both of the representations. She continued:
"I will just remind you what they were. The first one was that the Crown says that the accused engaged in deceit or fraudulent means by stating in the letters to investors South West Valuations valued the property on June 9, 1997 at $3,879,000. That was what I call the first representation. The second representation is that the Crown says that the accused engaged in deceit or fraudulent means by stating in the letters to investors that connection to sewer and completion of strata title requirements would increase the value to $4 million. What the Crown said about the second statement is that read with the first statement the clear impression that they give is that the current whole value of the motel on a walk‑in walk‑out basis as at 9 June 1997 is $3,879,000 and the strata titling will increase the value to $4 million and I will call that the second representation.
Madam Foreperson, could you tell me whether the jury found only one of those representations proved or whether it found both representations proved in relation to all 28 counts upon which you have delivered a unanimous verdict.
THE FOREMAN: One.
JENKINS DCJ: One, and could you please tell me whether it was the first representation or the second representation.
THE FOREMAN: It was the first.
JENKINS DCJ: Right. Is that the verdict of you all?
THE FOREMAN: Yes."
It is clear from these extracts that the applicant's primary contention is correct. That is, the first representation is confined to the literal meaning of the statement that South West Valuations valued the property at June 9, 1997 at $3,879,000. As stated earlier, the consequence is that no properly instructed jury could be satisfied beyond reasonable doubt by reference to the first representation alone that the applicant intended to defraud the investors or that the misrepresentation caused the investors to act to their detriment.

There are also considerable problems with a Crown case to the effect that the relevant misrepresentation was that South West Valuations had valued the property as at June 9, 1997 on a "walk‑in walk‑out basis".

Whether Available Inference of Walk‑in Walk‑out Value

The applicant's alternative ground is that the words complained of cannot support an inference that South West Valuations valued the property on June 9, 1997 at a walk‑in walk‑out value of $3,879,000. Mr Olifent and another licensed valuer, Mr Rowe, gave evidence on behalf of the Crown. In September 1999, on instructions from the applicant, Mr Rowe valued the property on a walk‑in walk‑out basis for the purposes of a mortgagee sale of the property.
Counsel for the respondent conceded, correctly having regard to the valuation evidence, that the phrase "walk‑in walk‑out value" as used and understood at trial is the value of the whole property as a going concern (including land, buildings, goodwill of the motel business and plant and equipment) without regard to the potential to strata title the property. That is, the value is determined by reference to the sale of the whole property to a purchaser intending to continue to carry on the existing business.
The Crown case at trial was that the applicant represented in the proposal letters that South West Valuations had valued the land on a walk‑in walk‑out basis as at June 1997 at $3.879 million; the representation was false in that South West Valuations had valued the property as a proposed strata title development; the applicant knew the representation was false; and he made the misrepresentation with the intention of causing, and did cause, the complainants to act to their detriment in entering into the investment.
The proposal letters do not expressly refer to the walk‑in walk‑out value. The Crown case is that the words complained of convey that inference. Whether or not the proposal letters support the inference is to be determined objectively. Further, in order to establish beyond reasonable doubt that the inference arises, it must be the only reasonable inference available. Having regard to the repeated references to strata titling in the proposal letters and the absence of any express reference to the walk‑in walk‑out value (or the special meaning given to it at trial) I doubt that it is open to infer from the proposal letters that South West Valuations had valued the property on a walk‑in walk‑out basis. Even assuming such an inference is open, another reasonable and in my view compelling inference is that the value of the property as a proposed strata title development net of the costs to complete the strata titling was $3.87 million and that on completion of strata titling, the property would be valued at $4 million.
The Applicant's evidence was that he did not intend to convey that inference. He deducted $128,000, being Mr Olifent's value of the four vacant survey‑strata upper level lots forming part of lot 33, from Mr Olifent's valuation of $4.07 million. He did so, he said, because he was trying to be conservative and could not see how four vacant upper strata lots had much value before the strata titles issued having regard to the disruption that would occur to the ground floor units during construction of the proposed units on the upper level. However, what the applicant intended to convey is irrelevant to the question of the objectively determined inferences capable of arising from the words complained of. I am satisfied that it was not open to the jury to be satisfied beyond reasonable doubt that the only reasonable inference available on the evidence was that South West Valuations had valued the property on a walk‑in walk‑out basis for $3.879 million. Before leaving this issue it is necessary to comment on a submission put for the respondent that the applicant had conceded that it was possible to interpret his proposal letter in the manner contended for by the Crown. I do not accept that submission. The Crown relied on part of the following exchange in cross‑examination:
"What's the clear impression given by those two sentences when read together, Mr O'Brien?---What is the clear impression?
That was the question?---Well, to me that the - once the strata title requirements were complete the property would be worth $4,000,000.
What about before the strata title requirements are complete?---Well, that's - that's why I deducted the 100,000‑odd off it.
All right?---I was trying to be conservative.
So if you deducted the $128,000 off it to deal with the situation where the strata title requirements weren't complete what impression do you think those two sentences give about the current walk‑in walk‑out value of the resort?---I didn't consider a walk‑in walk‑out valuation of the property. It wasn't a term we used at all.
You would agree, wouldn't you, that on any ordinary reading of those two sentences what it's saying is the value of the resort as it currently stands as a resort is $3.879 million and when it's strata titled it will be worth $4,000,000?---Yes.
And that wasn't right, was it?---Yes, it was.
Well, you've already told us that you accept that the resort as a whole would never have sold for $3,879,000. You've agreed with that, haven't you?---Yes, but once it was strata titled it was worth $4,000,000.
Yes, but if you accept - - -?---That's the - what the valuation states.
- - - if you accept that those two sentences indicate that the current walk‑in walk‑out value of the resort is $3,879,000 and that when it's connected to strata titling it will be $4,000,000, that's just not right, is it?---I didn't mention walk‑in walk‑out valuation.
That's what you intended to convey, isn't it?---No. Not at all.
You intended to give the impression to potential investors that that property as it stood as at 9 June 1997 was worth $3,879,000. That's the truth, isn't it?---Not using - not using the term that you just used on a walk‑in walk‑out basis.
All right. What about as a whole; the value of the resort as a whole motel not strata titled? You intended to give investors the impression that the value of the resort as a whole was $3.879 million?---No, it's not because I made comments in the letter stating that it would be strata titled.
For sure you did make comments in the letter that it would be strata titled and you told them that when those strata title requirements were done it will increase to $4,000,000?---Yes.
You see the whole reason you've constructed those sentences in that way is so you can make the investors think that as a whole value as at 9 June is $3.879 million?---No."
The essence of the Crown's case is revealed in this exchange and is based on a proposition contradicted by the expert evidence. The Crown's position was that before the strata titles had actually issued, the value of the property would be the walk‑in walk‑out value as defined that is, without reference to the potential to strata title the property, regardless of the stage it had reached or the cost or time to complete it. Such an approach is not open on the evidence as a whole including, in particular, the uncontradicted expert evidence. Mr Olifent referred to the often used practice of selling proposed strata titles off the plan (a sale conditional on the issue of strata title). He also gave evidence that the existence or approval of a strata plan would certainly add value even if the property was sold as a whole or on a walk‑in walk‑out basis (although not if the market was confined to potential purchasers who intended to carry on the existing business).
Importantly, it was not put to either Mr Olifent or Mr Rowe that Mr Olifent's 1997 valuation approach, being the proposed strata title development on a gross basis was inappropriate in the circumstances as they prevailed at the time of the valuation or inappropriate for the particular purpose for which it was supplied, that is in support of an application for finance secured by a mortgage of the property. Based on Mr Olifent's evidence, it would appear that although the issue of strata titles was, as stated in his valuation, a mere formality, titles would not issue for the 18 vacant survey‑strata lots until buildings had been constructed. It was not part of the Crown case that this matter rendered Mr Olifent's approach inappropriate. Mr Rowe's evidence was that the walk‑in walk‑out valuation approach and the proposed strata title development approach were different but equally valid approaches. He used the walk‑in walk‑out approach because he was instructed to.
Further, even if it was open to infer from the proposal letters that South West Valuations had valued the property at its walk‑in walk‑out value, there remains the need to prove the applicant intended to convey that inference. Leaving to one side his denials, the surrounding circumstances support the contrary inference, that is, he did not intend to convey the inference. He had Mr Olifent's valuation. There was no evidence that the walk‑in walk‑out approach (as defined) should have been used as the basis for valuing the property or that the applicant knew or ought to have known that was the case.
Having regard to all these matters I am satisfied that it was not open to a jury properly instructed to be satisfied beyond reasonable doubt that Mr O'Brien in his proposal letters implied, or intended to imply, that the property had been valued on a walk‑in walk‑out basis at $3.879 million.

Conclusion

For these reasons I am satisfied that the evidence was incapable of establishing beyond reasonable doubt that the applicant employed deceit or any fraudulent means to induce the investments made in the ways contended for by the Crown. I would grant leave to appeal, allow the appeal and quash the convictions. It follows from my reasons that there can be no question of a new trial.