R v Balnaves No. Sccrm-00-125, Sccrm-00-172

R v BALNAVES
[2000] SASC 370

Court of Criminal Appeal: Duggan, Nyland and Martin JJ

1................ DUGGAN J....... The appellant, an accountant, was found guilty by a jury of 22 counts of fraudulent conversion. He has appealed against conviction on each count. There is also an appeal against the sentence imposed by the learned trial judge.

At all relevant times, the appellant practised as an accountant in the business Balnaves, Cooper and Co. It was alleged at the trial that, at various times between September 1996 and June 1997, he fraudulently converted proceeds from cheques made out to clients and entrusted to him. In broad terms, the prosecution asserted that, in each case, the appellant received refund cheques on behalf of his clients from the Australian Taxation Office. He was authorised by the clients to deduct accountancy fees from the proceeds of the cheques but, on the prosecution case, he went further and fraudulently converted the balance of the proceeds. It is claimed that the total sum converted was slightly in excess of $100,000. In due course all clients received the amounts due to them.
In August 1986, the practice opened an account with Bank SA in the name “Balnaves, Cooper and Co. Trust Account: Peter John Balnaves”. It was part of the business of the practice to prepare tax returns for clients. The clients referred to in the counts in the Information dealt with the appellant and, in the case of each of them, an authority was given to Balnaves, Cooper & Co to receive from the Australian Taxation Office any refund cheques which might be payable to them and to deduct from the proceeds of the cheques the fees charged by the practice for the work done in relation to the returns. The balance of the proceeds was to be paid to the clients. All but three of the cheques were paid into the account to which I have referred. The cheques in the transactions referred to in the last three counts were paid into an account entitled “Peter John Balnaves Access Account”.
The prosecution established that, in the case of each count on which the appellant was convicted, the cheque was paid into one or other of the bank accounts and, before the client was paid the balance of the proceeds, there was a period when the account was without sufficient funds to meet the client’s entitlement. The prosecution used this evidence to establish that the proceeds of the cheques were not retained in the account into which they were paid. In a number of cases the clients received the proceeds due to them only after delays and repeated requests. It was the prosecution case that, by reference to cheques drawn on the accounts after the balance of the proceeds were paid in, cheques were drawn to pay various financial obligations associated with the appellant’s own interests or to pay refunds to other clients. In some cases the cheques were made payable to the appellant’s wife, Jane Balnaves, who worked in the practice. Most of the cheques were signed by Jane Balnaves, but it was the prosecution case that the appellant controlled the practice and that it was to be inferred from the circumstances that the appellant’s wife was acting under his instructions. The conversion relied upon in each case was the drawing of the cheque and the paying of it for the purposes to which I have referred.
The appellant asserted in evidence that there was an overdraft facility on the trust account which was withdrawn in March 1997. In the case of a number of instances from that time on, the cheques made payable to clients to pay the balance of the refunds were dishonoured. The cheques drawn on the Access Account which were connected with the last three counts were not dishonoured, but there was no overdraft facility in relation to that account.
The appellant was unrepresented at the trial. He stated in evidence that he did not exercise control over the accounts into which the cheques were paid. He said that, for the most part, his wife had control over that aspect of the practice. He said that for a time she was the trustee of a trust which controlled the practice. In addition, he denied that he intended to act dishonestly in relation to the transactions.
Before dealing with the arguments advanced on the appeal, it is appropriate to consider the nature of the statutory offence of fraudulent conversion. Section 184 of the Criminal Law Consolidation Act provides as follows:
“Any person who -
(a).... being entrusted, whether the instructions are written, verbal or implied, either solely or jointly with any other person, with any property in order that he may retain in safe custody, or apply, pay or deliver for any purpose or to any person, the property or any part thereof or any proceeds thereof; or
(b)having, either solely or jointly with any other person, received any property for, or on account of, any other person,
fraudulently converts to his own use or benefit, or the use or benefit of any other person, the property or any part thereof or any proceeds thereof, or fraudulently destroys the property or any part thereof or any proceeds of the property or part thereof, shall be guilty of an offence and liable to be imprisoned for a term not exceeding seven years.”
In a case such as the present it is necessary to prove an entrustment of property to the accused for a specific purpose and a conversion of that property for a purpose unauthorised under the entrustment which is carried out with fraudulent intent.
It was not disputed on appeal that, in the case of each count, there was a relevant entrustment of the proceeds of the refund cheque less the amount deducted for fees. The contentious issues were whether the appellant could be held responsible for any conversion of the funds and whether, in any event, he acted with fraudulent intent.
However, it was also argued on appeal that there could be no conversion of the proceeds of a cheque if the moneys due to the client could be paid back through an overdraft facility on the account or by resort to other funds which might be made available to the appellant, such as a loan.
Reliance was placed on an obiter dictum of Asche CJ in Mumford v The Queen (1989) 95 FLR 358. In that case the owners of a caravan arranged for the appellant to sell it on the undertaking that he would account to the owners for proceeds amounting to $6,000. The appellant was told he could retain the proceeds in excess of this amount. He failed to remit the amount of $6,000 to the owners. It was submitted that the particular relationship between the owners and the appellant was no more than that of creditor and debtor. The argument was rejected and it was held that the appellant was obliged to deal with the caravan or its proceeds in a particular way. Asche CJ then went on to say:
“I do not think this means that the cheques received from Mr Candida [the purchaser of the caravan] had to be kept separately until the $6,000 was accounted for. It is not necessary, in my view, to indulge in any tracing exercise. The only relevance of the appellant paying the proceeds of those cheques into his bank account and mixing them with his own funds or indebtedness to the bank is that such actions, deliberately undertaken by him, may have made it impossible for him to carry out his fiduciary duty to preserve $6,000 of the proceeds and might be evidence going to his intent to permanently deprive the owner of the caravan of the sum of $6,000. The fact that he may have, by his own act, deprived himself of the means of preserving a fund of $6,000 can surely not be relevant to his duty to preserve that fund. There was otherwise, in my view, no reason why he should not pay the cheques or moneys therefrom into his bank account provided that he could extract therefrom the requisite amount to pay Mr or Mrs Kassman. What he had to do was keep in existence, for immediate payment when requested, the sum of $6,000. I do not think it matters even that he may have had to borrow that sum, provided he was certain that he could make that provision. If, for instance, he had an arrangement with the bank which permitted him to draw the money on overdraft at all material times that would in my view suffice. The obligation is to have $6,000 immediately available. The breach is failing to preserve it in some way, when the arrangement was that he should preserve it. When the property is the proceeds of dealing with a chattel in a particular way, I do not think it is necessary to have the very money which was paid over. If, for instance, Mr Candida had paid the appellant in cash it would not be necessary in my view that he had to keep those very notes which he had been paid. He had to keep available a fund of $6,000. He could put the money into a bank and mix it with his own. But $6,000 had to be always available to him for Mrs Kassman.” (emphasis added)
The underlined comments were not necessary for the decision in the case and the other members of the court did not refer specifically to this aspect of the learned Chief Justice’s judgment in their judgments.
I cannot, with respect, agree with the learned Chief Justice’s view that the capacity to borrow an amount equivalent to the proceeds would satisfy the requirement to retain the proceeds for the purposes of the owner. The nature of an entrustment under the section and the duty which is imposed upon the person entrusted with the property was considered by Gibbs J in Stephens v The Queen (1978) 139 CLR 315 at 333 when he said:
“It is accepted that there can only be an offence under this sub-section if there was a fiduciary element in the relationship of the accused person to the property alleged to have been fraudulently converted by him: see R v Jones (1948) 33 Cr. App. R. 11 at p 13; Russell on Crime, 12th ed. (1964), vol. 2, p 1120; Weinberg and Williams: Australian Law of Theft, p 191. In R v Hotine (1904) 68 J P 143 at p 144, and in R v Cuffin (1922) 127 L T at p 565, the court went so far as to suggest that there must be a trust. Nevertheless it does not seem to me necessary that either the jury or the Court of Criminal Appeal should inquire whether the accused received the property in circumstances giving rise to a trust. Such a construction would lead to undesirable complexity in the administration of the criminal law and is not made necessary by the words of the section. One of the ordinary meanings of the word ‘entrust’ is ‘to confide the care or disposal of’ (see Shorter Oxford English Dictionary) and it is in that sense that the word is used in the section. To bring the case within the section the property must have been entrusted to the accused either for safekeeping or to be applied, paid or delivered for a particular purpose or to a particular person. In other words it must have been earmarked for certain purposes which are not purposes of the accused himself (see Smith and Hogan: Criminal Law, 1st ed. (1965) p 433; Weinberg and Williams, op cit., p 191). It is necessary to consider the terms on which the property was received. If money were given to the accused on terms that he might use it as he wished, but must later return it (for example if an ordinary loan were made to the accused) the case would not be within the section. This of course does not mean that the section only applies where the accused was obliged to keep the money in specie. For example money deposited as security for the honesty of the payer, on terms that the payee will pay it into a bank account and return it at the end of a specified period, will come within the section: R v Donald Smith [1924] 2 K B 194. Professor Smith, in an article ‘The Scope of Fraudulent Conversion’, [1961] Crim. Law Review 797, at p 800, suggests the following test where the ownership in money is transferred:
‘Was the transferee permitted, under the terms of the contract, to use the money as he thought fit; or was he obliged to apply it in a particular way or to retain an equivalent sum, either in his possession or in a bank? Only in the latter event can the transferee commit fraudulent conversion.’
This seems to me a satisfactory practical test to apply.”
In the case of money which is entrusted, it need not, as a general rule, be retained in specie. However, there must be an earmarking of funds, as indeed there was to begin with in the present case. The balance of the cheques were paid into a bank account and the prosecution was able to prove that those proceeds were used for purposes other than the purposes of the clients.
In my view, the duty to retain a sum equivalent to proceeds which have been entrusted will not be met by spending all the moneys in the account into which they have been paid and placing reliance on the granting of a loan to render payment to the owner of the proceeds. I am also of the view that an arrangement between the person entrusted with the proceeds and his or her bank to be permitted to overdraw on the account is not an answer to the requirement to retain a sum equivalent to the proceeds to meet an immediate demand. The protection afforded by the section lies in the requirement to retain the proceeds for the stipulated purpose.
A number of the grounds of appeal complain of inadequate directions by the learned trial judge on specific issues which arose for the consideration of the jury. I think it is appropriate to say at the outset that cases of this nature present particular difficulties for trial judges. Where offences of this type are charged, the trial judge is required to explain a number of concepts which are likely to be unfamiliar to the jury. In Andrews v The Queen (1968) 126 CLR 198 at 205 the court pointed out that the precise concepts inherent in a statutory offence of this nature must be lucidly and accurately explained to the jury. Furthermore, the appellant was unrepresented and it was necessary for the judge to direct on all matters which might fairly be said to give rise to a defence, irrespective of whether the appellant relied upon or stressed these matters in the presentation of his defence.
The learned trial judge identified the elements of fraudulent conversion and then proceeded to elaborate on each of them. However, counsel for the appellant has complained that the directions were deficient in that they dealt inadequately with two elements which were of particular relevance to the case, namely, the requirement of a conversion of the proceeds of the refund cheques by the appellant and the further requirement that the conversion be carried out fraudulently.
I deal first with the requirement that the prosecution prove a conversion in each instance by the appellant. All but seven of the cheques relied upon as constituting the acts of conversion were signed by the appellant’s wife. She was not called to give evidence and the prosecution relied upon circumstantial evidence to establish that the appellant was in control of the practice to such an extent that it could be inferred that the cheques were drawn at his direction or with his acquiescence. The appellant denied such control.
The evidence which was given by the appellant as to his wife’s control of the practice was in fairly general terms. He said that at a time prior to the period of the alleged offending a new trust deed in relation to the practice was executed and that from then on his wife was appointed “controller of that trust and controller of the practice, the controller of her beauty therapy business and controller of all the bank accounts”. He said she was the person in control of everything to do with the practice. She would decide whether cheques would be drawn on the bank accounts. He agreed that there were a few occasions when he signed the cheques which were the subject of some of the counts in the information, but he said he obtained his wife’s authority to sign the cheques on these occasions. The appellant said he had nothing to do with the actual running of the practice and he was unaware of the existence of many of the cheques which were drawn on the Balnaves, Cooper & Co account.
The learned trial judge commenced his explanation of the elements of the offence of fraudulent conversion with a brief summary of the principal elements without reference to the issue of control. He then dealt with each of the elements in more detail. When elaborating on the requirement that there be an entrustment, the learned trial judge alluded to the issue of control. He said:
“Property is said to have been entrusted or received by a person when it either, physically comes into his possession or comes under the control of that person. The Crown here allege that at the time of the commission of these offences the accused was in control of what happened to the proceeds of these cheques. Though the cheques were neither made out to him personally, nor delivered to him personally, he, the Crown says, had effective control of them, in the sense that he obtained, or assumed control of their fate, notwithstanding the network of entities involved, because he, in fact, controlled those entities. The accused denies that, and says that Jane Cummings, as trustee of the trust, had that control.
I tell you as a matter of law, ladies and gentlemen, a person may be entrusted with property, notwithstanding that it’s not delivered directly by him to the owner, and even if the owner does not know of his existence and has no intention of entrusting the property to him. If a person has obtained or assumed control of the property of another person under circumstances whereby he becomes entrusted, and he fraudulently converts all or part of that property, then he has committed the offence of fraudulent conversion.
So, by way of example: if either a director of a company or a partner in a partnership, they being in control of those entities, fraudulently converts cheques sent to the company or the partnership, the director or partner is still guilty of fraudulent conversion.
The Crown, in its case in respect of this element, points to evidence which the Crown contends shows that the accused controlled the practice, Balnaves Cooper & Co, and thereby controlled the destiny of the proceeds of the Reserve Bank cheques which were paid into the practice bank account. On the other hand, of course, the accused contends that he had no control over the fate of the proceeds of the Reserve Bank cheques.
The issue of effective control is a question of fact for you. I merely direct you, as a matter of law, that the interposing of a company, partnership or trust as the entity initially entrusted, does not necessarily negate individual responsibility, as long as that individual has or has assumed effective control over the carrying out of the terms of the entrustment; in this case the application of the funds.”
At this point in the summing-up the aspect of control was discussed solely in relation to the requirement that there be an entrustment of the tax refund cheques.
His Honour then turned his attention to the requirement that there be a conversion of the proceeds of the cheques. He said:
“I now move to the third element, which is, in effect, the conversion. As to the third element - namely the conversion - the Crown must establish that the accused, having been entrusted with the money for that purpose, used the money for some other purpose. This means that the accused converted, that is changed the purpose of the original entrustment to his own purpose; that is dealt with the money in a way which breached the term of the entrustment and which denied the owner his or her entitlement to immediate possession. This conversion must be a positive act of misappropriation, which is adverse to the rights of the true owner.
Here, the Crown says that the balance of the refunds, after the deduction of fees due to particular clients, were not paid to the client, but were used, amongst other things, to pay a wide range of financial obligations associated with the Balnaves’ interests, and to pay refunds to other clients. Included in the use of funds were also payments to or on behalf of Jane Cummings [the maiden name of the appellant’s wife], or Jane Balnaves. In that sense the Crown says that there was a conversion, or a failure to comply with the terms or purpose of entrustment. So that’s the third element; conversion.”

I will mention other references made by the learned trial judge later in the summing-up to the element of conversion but, unfortunately, in this part of the summing-up where the main directions on conversion were given he said nothing about the aspect of control insofar as it was relevant to the conversion of the proceeds. As I have said, his Honour had previously remarked on general aspects of control in relation to entrustment and there is undoubtedly some overlap between the concept of control in relation to entrustment on the one hand and conversion on the other. However the question of the appellant’s control over the practice required consideration in both contexts. In view of the appellant’s evidence denying responsibility for drawing the cheques on the bank accounts of the practice, the issue of control was of crucial importance to the requirement of a conversion by the appellant in each case. It is unfortunate that at this stage of the summing-up the trial judge did not specifically point out to the jury that the issue of control was relevant to the question as to whether the appellant converted the proceeds of the refund cheques in each case.
Later in the summing-up, the learned trial judge directed the jury generally on the nature of circumstantial evidence and he then returned to the issue of control. He said:
“Now, the Crown asks you to infer that the accused was in control during the material time encompassing the charges from such things as the following evidence:
·.. The banking documents, and in particular the bank account mandates; that is who can sign etc, which you have in the bank records.
·.. Secondly, the documents, such as the trust deed, Exhibit P129. The Crown, you will remember, assert that it was the Balnaves Family Trust of which the accused was trustee, as owner of two-thirds of the practice. That is not agreed to by the accused, of course, but the Crown say the other matters that give rise to the inference that the accused was in charge and in control were the day-to-day operations of the practice, as deposed to by all the clients, such as
-   the taking instructions;
-the correspondence, in some cases the filling out an authority form. I think that may have only been in the one case of Halling;
-   the banking of refund cheques;
-   the signing of deposit slips;
-   the signing of cheques;
-   the negotiations with the bank;
-   dealing with clients who were both inquiring and complaining; and
-   the content of the explanations given;
·   and then the absence of any assertion to any person in the relevant period, including the police on 12 May, that it was Jane Balnaves who was in charge and who was responsible.
So the Crown ask you, in a broad way, to infer from all of that material, which has been the subject of evidence, that the accused was in control in this relevant period.”
It is important to note that these directions were limited to the prosecution case on control and, again, they were not directly related to the requirement of a conversion of the proceeds by the appellant.
At this point in his summing-up the learned trial judge embarked on a summary of the individual counts which was directed principally to establishing that, in relation to each count, the refund cheque was received and banked in a bank account of the practice and that the account went into debit or was reduced to a nil balance before the proceeds were paid to the client. Additional comments were made by the trial judge in relation to various aspects of the individual counts in the course of this discussion. However, there was no specific reference in this discussion to the element of conversion.
Then, towards the end of the summing-up, the learned trial judge provided a brief outline of the prosecution and defence cases. At this point his Honour did link the concept of control to the requirement for conversion, but the main reference to this aspect was in the course of explaining the prosecution case. His Honour said:
“As to who was responsible for the conversion, or who was in control of the application of the moneys, the Crown says that the accused was in control, and points to all the signposts indicating that:
·.. bank records, particularly the bank mandate, which you have at the front of the bank statements;
·.. the client evidence as to the role played by the accused during the relevant year;
·.. the admission to clients, which the Crown characterises - it’s a matter for you - the admission to clients of wrongdoing, confessions of borrowing and the like; and
·.. admissions to the police on 12 May that he was in charge as trustee with a one-twelfth shareholder being Parsons;
·.. and then also, this is as the evidence accepted by the accused, of what he told Mansfield J in the Federal Court - he denies the impact that the Crown put to him about what he said to Mansfield J in the Federal Court. He denied for instance, that he saw it as inconsistent. Again, that’s a matter for you.
So, the Crown says for all those reasons you should conclude that it was the accused who was in control and who was responsible for the fate of those cheques. The Crown says, in relation to that, that although the second trust might have existed, the first trust was the owner of the practice, not as previously mentioned by the accused.”
A little later he said:
“As to control, ladies and gentlemen, the accused, in effect, says that if there was a conversion of any client refund moneys - and he says what I’ve already outlined to you about that, leaving a question mark over six to eight counts - he was, in any event, not responsible. He was not in control. He was not the trustee of the trust which owned and operated the practice after the departure of Cooper. He says Jane Balnaves, as trustee of the second Balnaves Family Trust, was in charge.
To support his contention he produced to you the trust deed, Exhibit D2, and the accounts, D3. Throughout his evidence, cross-examination and address he contended that steps taken by him, in the course of the practice, that is signing cheques, signing letters, dealing with clients and the like, were done on instructions and the authority of Jane Balnaves. He asserts that at material times he was not aware of the state of the accounts and, in particular, the drawing on clients’ funds.
As to the ownership of the Balnaves Cooper & Co Trust Account, the accused said Jane Cummings, as trustee, owned that account, as, he says, Mr Heaven well knew, and he reminded you he drew from Mr Heaven in cross-examination some support; namely, at some stages Heaven called the account the Balnaves Family Trust account.”
In my view, the jury should have been directed on this topic with more precision. I have said that the explanations given by the appellant as to the manner and circumstances in which his wife is alleged to have controlled the business were put in a fairly general way by the appellant, but I think there should have been more reference in the summing-up to that evidence instead of the brief comments in the last quoted passage. Furthermore, I think this evidence should have been related more directly to the aspect of conversion which involved the drawing of the cheques and further related to the individual counts themselves. In addition to explaining what the prosecution and defence cases were on this aspect, I think the judge should have directed the jury in plain terms that if, in the case of any of the counts, there was a reasonable possibility that the appellant either knew nothing of a particular conversion or that he had no control over a conversion, then he would have to be acquitted on that count. I will return to this aspect of the appeal at a later stage in the judgment.
The next criticism which is made concerns the learned trial judge’s alleged failure to give adequate directions on the issue of fraudulent intention. Some general observations on this element of the offence are appropriate before discussing the specific criticism which has been made of the summing-up.
The requirement that the property be fraudulently converted requires proof that the appellant acted dishonestly in order to convert another’s property to his own use or benefit. The section creating the offence does not contemplate that the concept of acting fraudulently or dishonestly is to be considered in some special sense. Accordingly, the test of what is dishonest for present purposes is that formulated by Toohey and Gaudron JJ in Peters v The Queen (1998) 192 CLR 493 at 504:
“In a case in which it is necessary for a jury to decide whether an act is dishonest, the proper course is for the trial judge to identify the knowledge, belief or intent which is said to render that act dishonest and to instruct the jury to decide whether the accused had that knowledge, belief or intent and, if so, to determine whether, on that account, the act was dishonest. Necessarily, the test to be applied in deciding whether the act done is properly characterised as dishonest will differ depending on whether the question is whether it was dishonest according to ordinary notions or dishonest in some special sense. If the question is whether the act was dishonest according to ordinary notions, it is sufficient that the jury be instructed that that is to be decided by the standards of ordinary, decent people.”
The state of mind which was relied upon by the prosecution in the present case was an intention to use for the appellant’s own purposes the proceeds of the refund cheques less authorised deductions which had been paid into the accounts of the practice. If that intention was proved then it fell to the jury to decide whether it was dishonest according to the standards of ordinary decent people.
The appellant gave evidence that there was money “in the system” to pay any demand which a client might make for the balance of his or her refund cheques. In particular, he referred to the availability of the overdraft facility in the case of a number of the earlier counts.
I have commented on what I have suggested is the irrelevance of this consideration to the requirement that there be a conversion. However, this evidence by the appellant did have relevance to his state of mind. If the jury rejected the appellant’s claim that he did not exercise relevant control over the drawing of cheques, it remained necessary for them to consider whether it was reasonably possible that he believed he was entitled to draw cheques on the accounts in the knowledge that his client’s entitlements could be met by the use of overdraft facilities or other funds available to him. In The Queen v Langham [1984] 36 SASR 48 at 53 King CJ held that fraud and dishonesty are negatived by a genuine belief in a legal entitlement to property which is taken. The same reasoning would apply to the use of funds in circumstances such as the present.
In my view it follows that the jury in this case were required to consider not only the intent alleged by the prosecution and whether it could be described as dishonest, but also whether fraud was negatived by a genuine belief by the appellant that there was an entitlement to use the proceeds of the cheques because of the existence of other funds out of which the appellant could account to the clients.
The trial judge commenced his directions on the state of mind required for the offence of fraudulent conversion by saying:
“The fourth element, ladies and gentlemen, requires that the conversion is proved to be fraudulent. The Crown must prove fraudulent intention; that means an intention to convert or misuse funds which is dishonest. So the Crown needs to prove, beyond reasonable doubt, that the disbursing of the clients’ moneys, contrary to the terms of entrustment - if you are satisfied that such took place - was done with a dishonest intention; that is, that the accused did it knowing it was dishonest. What is dishonest is to be determined by you, by reference to the standards of ordinary, decent people of the community, whom you represent. You, members of the jury, know what is honest and what is not.
The task for you in respect of this ingredient is to determine what was the state of mind of the accused at the time of the offences. Now, of course, there’s no direct way of discovering a person’s state of mind, unless that person is announcing his inner-most intention to a nearby witness who comes to the court to depose what he said. So it’s here that the Crown asks you to infer that the accused had this necessary fraudulent intention.
The person’s conduct, namely what he or she says or does, is often an indication of what’s in their minds at the relevant time. The best indication of what a person knows or intends is disclosed by what that person did or did not do, what that person said or did not say. The Crown asks you to infer this fraudulent intent from evidence such as:-
·.. the inherently dishonest act of using the refund moneys, if you find that act to be so; and also
·.. the admissions made to various clients about such conduct such as conversations that the accused had with, for instance, the clients Christie, Hooley, Garnham and Carbaron.
Implicit in the Crown’s submission here is an acceptance by you that it has established the other elements, in particular the accused’s control of the use of monies.
You will use your common sense and experience in considering this evidence of conduct and the like, such as to indicate dishonesty.
So in respect of this, the fourth element, the mental element, to convict the accused, you must be satisfied in respect of this element that he had the requisite fraudulent intention; put another way, that he used the money dishonestly.” (emphasis added)
It is apparent that the underlined portion of the directions was not in accordance with the test formulated by Toohey and Gaudron JJ in Peters’ case. The inquiry is not whether the accused converted the proceeds knowing it was dishonest. In Peters’ case the test adopted in R v Ghosh [1982] QB 1053 was rejected. The test in Ghosh directed enquiry as to whether the acts were dishonest according to current standards of ordinary decent people and, if so, whether the accused must have realised that they were dishonest by those standards. (Peters at para 10). This is the effect of the test proposed by the trial judge. However, the direction that the appellant must have known that his actions were dishonest was too favourable to the appellant and, by itself, would not result in a miscarriage of justice. (cf Peters at para 37).
His Honour went on to explain that conduct of a systematic or repetitious character can help to establish what was in the appellant’s mind. He also said that an intention to permanently deprive the owner of the property was not required. He continued:
“If a person formed the intention merely temporarily to use the money for his or her own benefit, or for the benefit of interests associated with him or her, and intended later to put it right, he or she would still be guilty of the offence, providing the other elements were satisfied. So you see here, ladies and gentlemen, the focus of these offences is the intentional use of the money contrary to the owner’s rights, or the terms of the authority, or entrustment, and in that sense, unlike larceny or stealing which requires an intention to permanently deprive the person of his stolen goods.”
After explaining that the fraudulent intent must exist at the time of the conversion and not the initial receipt of the moneys the trial judge gave the following directions which were the subject of particular criticism by the appellant’s counsel:
“In this case, in addition to saying he was not in control, the accused says in respect of some of the charges that there were funds elsewhere to pay the clients. In respect of some of the early charges, he contends, for instance, that there was an overdraft facility of $10,000 in both the so-called trust account and the business account, at Bank SA. In a sense, the accused is here asserting that there were equivalent sums earmarked for the clients elsewhere than in the so-called trust account.
This defence to those early charges amounts to a contention of no fraudulent intent, because the Crown case as to the conversion, which is accepted by the accused, is that to receive the clients monies into the account, deduct the fees, and then draw the money out, holding it elsewhere, is a breach of the terms of entrustment, and so, in fact, is a conversion. That is what the Crown allege.
And the Crown say that is a conversion because the terms of the entrustment were that the money was to be used for the deduction of funds and then to be returned to the client. So to do more than that, that is to deduct the funds, withdraw the monies, and hold the monies elsewhere, would be, in fact, a conversion, say the Crown. It is a matter for you.
But it will nonetheless fall short of fraudulent conversion if the monies, that is the balance of those monies due to the client, were truly held elsewhere for the clients, or that there is a reasonable possibility that such was the case, because you may conclude, if that was the case, that there would not have been dishonesty. That does not mean that the Crown have to prove that the accused, or his interests, could not cover the refund monies. In this case we know, in the end result, the clients, the subject of the charges, all received their refunds.”
This passage is confusing. Mr Gray QC, for the appellant, pointed out that the appellant did not say in evidence, as is suggested in the first paragraph of the above passage, that the funds were being held elsewhere to pay the clients. The appellant suggested that there were other sources from which it would be possible to pay back the clients. I do not think it was correct to say that this was an assertion of earmarking. The important question which the appellant’s evidence gave rise to was whether he had a belief that he was entitled to use the proceeds from the bank account for his own purposes in the knowledge that he could secure funds from other sources to meet the obligations to the clients and that it was his further belief that he was entitled to use the proceeds in those circumstances.
The second paragraph refers to a proposition which was “accepted by the accused”. Mr Gray has pointed out that this proposition was not conceded by the appellant. Again it confuses the matter by referring to the money being drawn out and held elsewhere.
In the third paragraph the learned trial judge leaves it open to the jury to find that a conversion took place if the moneys were withdrawn and held elsewhere. If the moneys were held elsewhere so that it could be said that they were earmarked by reference to a particular fund, it is my view that there would not have been a conversion.
The fourth paragraph is particularly confusing because what is said there seems to cut across the directions in the previous paragraphs. It may be that in this paragraph the learned trial judge was reverting to the element requiring an intention to defraud, but I am concerned that the jury may not have been able to follow these directions.
The appellant did not suggest that overdraft facilities were available at the time of each of the alleged offences, but he did suggest that, in most if not all instances, there were other funds available “in the system” to meet the demands of his clients. The appellant’s state of mind was relevant to each count and it was necessary for the jury to consider whether a fraudulent intent had been established in respect of each count bearing in mind the appellant’s explanation in each case as to the availability of other funds. Whether any belief which he might have held in relation to this aspect was genuine or not was a matter for the jury.
It was essential that the directions on this issue be clear and unambiguous. Furthermore I think it was also necessary to remind the jury of the appellant’s evidence as to his state of mind in relation to the circumstances of each count. It was not enough to deal with those explanations in a general way.

In my view the jury were not sufficiently equipped by the summing-up to assess the evidence in relation to the issues of control and, particularly, fraudulent intent. This has resulted in a miscarriage of justice.
Although it is my view that the appeal should be allowed by reason of this conclusion, it is appropriate to consider the other grounds of appeal. Criticism was made of the directions which his Honour gave concerning the proper approach to multiple counts. He directed the jury to consider each count separately and told the jurors that they were not to use their decision on one count to influence their consideration of other counts. He pointed out that evidence on one charge may be relevant in relation to other charges and he gave an example of how evidence of the appellant’s role in the business given by a witness in relation to one of the counts could be used as part of the case in relation to all counts. There was no error in this approach.
One of the grounds of appeal alleges that a miscarriage of justice arose by reason of the fact that the appellant’s wife and an employee of the practice, Ms Moody, were not called by the prosecution. No reason was given at trial for not calling the witnesses.
It is appropriate to recall two propositions from the leading authority of The Queen v Apostolides (1984) 154 CLR 563 at 575. In that case it was held that the Crown prosecutor alone bears the responsibility of deciding whether a person will be called as a witness for the Crown. Further, it was held that:
“A decision of the prosecutor not to call a particular person as a witness would only constitute a ground for setting aside a conviction if, when viewed against the conduct of the trial taken as a whole, it is seen to give rise to a miscarriage of justice.”
In expanding on the last mentioned proposition the court said:
“In our formulation of the sixth proposition we have omitted the reference to misconduct, intending thereby to broaden the approach so as to focus directly on the consequences, objectively perceived, that the failure to call the witness has had on the course of the trial and its outcome. It is not necessary to postulate misconduct of the prosecutor as an essential condition precedent to a miscarriage of justice. No doubt in the great majority of cases of this kind an appellate tribunal which finds a miscarriage of justice to have occurred will trace the miscarriage to a wrong exercise of judgment by the prosecutor which led to the witness not being called. In cases where there has been no error of judgment there will be less likelihood of a miscarriage of resulting from the failure to call the witness. Nevertheless the absence of testimony from a witness may lead to a miscarriage of justice without any error having occurred ... So, if a prosecutor fails to call a witness whose evidence is essential of the unfolding of the case for the Crown the essential question is not whether his decision constitutes misconduct but whether in all the circumstances the verdict is unsafe or unsatisfactory. (See also R v Kneebone [1999] NSW CCA 279).”
The prosecutor at the trial offered to provide Ms Moody’s unsigned statement to the appellant. The statement was not before this court and we were not given any indication as to what she might have been able to say apart from the fact that she was a receptionist and office manager in the practice. It is impossible to say how relevant her evidence would have been if she had been called as a witness.
In view of the evidence given by the appellant, it is clear that his wife could have given evidence which would have been relevant to an important issue in the case. It is my view for reasons already expressed that the convictions should be quashed and a retrial ordered. It is unnecessary in these circumstances to decide whether the Crown’s failure to call the appellant’s wife was, of itself, productive of a miscarriage of justice. In the event of a retrial, I think it would be appropriate, it the light of the principles set out in Apostolides, for the Crown to advise the court why the witness was not to be called by the prosecution if that was the decision at the time. The trial judge could not direct the prosecutor to call the appellant’s wife, but he or she would be entitled to ascertain why the witness was not to be called. This would place the trial judge in a better position to decide whether to invite the prosecutor to call the witness and, in the event that the witness was not called, whether to comment on such failure.
A further aspect of the trial gives rise to some concern. On 16 February 1998 the appellant was interviewed by the police in the presence of his solicitor. After the usual caution was administered the appellant said that he did not wish to answer any questions. He was then asked if he wanted the allegations to be put to him and he said “Yes”. The interview continued:
“The police officer said:..... The allegations are that in your - at your business address at 253 Sturt Street, Adelaide, you spoke to numerous clients and prepared, or were instrumental in the preparation of, their tax returns. The Australian Taxation Office subsequently sent these clients returns, assessment notices and their cheques to 253 Sturt Street. We are alleging that these cheques attached to these assessment notices were used by you for your use and your benefit. Do you understand that?
The appellant said:     Yes.
The police officer said:...... Do you wish me to itemise each particular count that we are alleging?
The appellant said:     Could you give me the number, please?
The police officer said:...... The number of the counts at this stage are in excess of 80. Do you understand that?
The appellant said:     Yes.
The police officer said:...... Is there anything further you wish to say this afternoon?
The appellant said:     No.
The police officer said:...... I’m now going to arrest you and charge you with fraudulent conversion. There will be 31 counts that I’ll be charging you with at this stage. The other counts you may be charged with at a later date, or they may be taken into consideration, and that’s a matter between you, your solicitor and the Director of Public Prosecutions. Do you understand that?
The appellant said:     Yes.”
The appellant made no response in the course of the interview which was probative of any fact in issue. Nor was it suggested at the hearing of the appeal that the fact of conveying information to the appellant during the interview was of any probative value. In these circumstances the evidence of the interview was inadmissible. (R v Ireland (1970) 126 CLR 321). The further difficulty which arises from the leading of this evidence is that the interview contained quite prejudicial information to the effect that the police had 80 charges under consideration. The information that the appellant had been under investigation in relation to a far more extensive course of criminal activity than that indicated by the counts in the information should not have been disclosed to the jury. It is not to the point that the unrepresented accused did not object to the evidence being led.
I have expressed the view that there was a miscarriage of justice by reason of the inadequate directions on the aspects of control and fraudulent intent. I would allow the appeal, set aside the convictions and sentence and order a retrial on all counts on which the appellant was convicted.

56.............. NYLAND J........ I agree that the appeal should be allowed for the reasons expressed by Duggan J.

57.............. MARTIN J......... I agree that the appeal should be allowed for the reasons given by Duggan J.

[2000] SASC 370

10 November 2000