R v Gauci

[1993] QCA 215

IN THE COURT OF APPEAL [1993] QCA 215

SUPREME COURT OF QUEENSLAND

C.A. No. 97 of 1993

Brisbane
[R. v. Gauci]

BETWEEN

T H E Q U E E N
v.
GEORGE GAUCI

(Appellant)

The President
Mr Justice McPherson

Mr Justice Demack

Judgment delivered 11/06/93
Reasons for judgment by the Court

APPEAL ALLOWED. VERDICT AND CONVICTION BE SET ASIDE; AND IN LIEU, JUDGMENT OF ACQUITTAL BE ENTERED IN FAVOUR OF THE APPELLANT.

CATCHWORDS CRIMINAL LAW - Misappropriation of property - Money received for another - No issue raised about the matter of ownership - Whether corruptly receiving a commission - Sections 395, 408C, 442B Criminal Code (Qld)

Counsel:	A. Glynn for the appellant P. Nase for the Crown
Solicitors:	Price & Roobottom for the appellant
Director of Prosecutions for the Crown

Hearing Date: 1 June 1993
THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

C.A. No. 97 of 1993

Brisbane

Before The President
Mr Justice McPherson
Mr Justice Demack

[R. v. Gauci]

BETWEEN

T H E Q U E E N
v.
GEORGE GAUCI

(Appellant)

REASONS FOR JUDGMENT - THE COURT
Judgment delivered 11/06/1993

The appellant was found guilty at his trial in the District Court at Southport of misappropriation of property contrary to s.408C of the Criminal Code. This is an appeal against his conviction for that offence.

The circumstances leading to the offence were that in 1988, the appellant and a Mr Kenny agreed to join in developing land at Labrador for a building project. For this purpose money was borrowed from Elders Lensworth Finance Ltd. by Angsea Investments Pty Ltd., which was a company controlled by Kenny and his wife. The arrangement was that the parties should share equally once the appellant or his company Rincono made their financial contribution; but the contribution was never received and the project proceeded in the name of Angsea.

For much of the time during the relevant period Kenny was absent through illness, and the appellant acted as manager or supervisor of the development project. The land required filling, and the project engineers placed an advertisement inviting tenders for supply of the fill. Mr Stan Wade of S.T. Wade Earthmoving made an offer, which was accepted, to supply to the site. At first, there was only an informal agreement, and the fill came mainly from Wade's own quarries. Later, however, Wade was able to arrange a contract to excavate and remove fill from another site in the area that was being prepared for a Colgate factory. Using fill taken from that site would enable him to supply more cheaply, but he needed the assurance of a contract binding Angsea to take the fill that would come from the Colgate site. A written contract dated 5 December 1988 was executed between Wade and Angsea by which he agreed to supply and Angsea agreed to take fill at a rate of $4.50 per cu.metre.

The contract document was signed by the appellant on behalf of Angsea, which was described in the agreement as "the principal". Over the following months Wade supplied fill under the contract, submitting regular weekly or periodic invoices at the rates agreed. Payment was made by cheque drawn by Angsea on its bank account, which was credited with the money lent by the mortgagee Elders Lensworth. Independent valuers certified to the value of the work being done by Wade and others, and Elders credited Angsea's bank account with the amount certified or a proportion of it.

The evidence shows that not long after the written contract was made the practice was adopted of paying the amount of each of Wade's weekly claims using not one but two cheques drawn on Angsea's bank account. In each instance the total amount of the two cheques was equal to the amount of the particular claim in question, but one cheque was for one third and the other for two thirds of the total. The larger of the two cheques was handed to Wade by the appellant. It was always for an amount calculated at the rate of $3.00 per cu.metre of the fill supplied. The other cheque for an amount calculated at $1.50 per cu.metre was cashed by the appellant, who kept two thirds of the proceeds himself and paid the balance to Wade in cash. The effect was that out of the cash proceeds the appellant retained $1.00 per cu.metre, and Wade received .50 cents per cu.metre. Overall Wade was paid only $3.50 of the agreed rate of $4.50 per cu.metre.

According to Wade, this arrangement resulted from pressure exerted by the appellant. Wade's contract to remove fill from the Colgate site subjected him to a heavy penalty of $1500 per day if he fell behind in the work. The appellant led Wade to think he would close down the Angsea site. He knew Wade needed that land as a place to deposit the fill. If he had closed it Wade would have been left with vast quantities of fill from the Colgate site and nowhere to put it. The upshot was that Wade agreed to pay the appellant $1.00 out of each $4.50 per cu.metre he was earning from Angsea by supplying fill. It was the total of these $1.00 amounts (which over time added up to a very large sum of money) that the appellant was charged with misappropriating.

The appellant did not give evidence at the trial. Wade did. In relation to the foregoing arrangement he said:

"I had to go along with it. I would say this: I did agree to it. It was in my opinion unfair and that sort of thing, but I agreed to him deducting $1 per cubic metre from my pay."

He said that the "message" he got, even if the appellant had not said it in so many words, was that if he didn't agree to the deduction, the appellant would close down the Angsea site. On the other hand, he did not think it was extortion and, having made the arrangement, he was "quite happy to go along with it".
Elsewhere in his evidence Wade said or implied that for the $1.00 per cu.metre payment he was receiving benefits in return, such as having the fill compacted or the site access road maintained by Angsea. He also said that all along he believed the appellant to be the principal of Angsea.
Because the appellant gave no evidence at his trial, we do not have his version of the arrangement. The only direct evidence about it came from Wade. At the committal proceedings Wade claimed privilege from testifying about these matters. The claim was not maintained at the trial. We are nevertheless left with the faint impression that perhaps the full story has yet to be told. Subject to that consideration, Wade's testimony was uncontradicted, and is the only evidence of some matters that were critical elements in the prosecution case.
Section 408C(1) provides, so far as material, that any person who "dishonestly applies to his own use ...

(a) property belonging to another; or

(b) property belonging to him, which is in his possession or control ... subject to a trust, direction or condition or on account of any other person"

is guilty of the crime of misappropriation of the property. The appellant was charged with having between 5 January and 15 June 1989 dishonestly applied to his own use property -

"namely money belonging to Angsea Investments Pty Ltd or belonging to yourself which was in your possession on account of the said Angsea Investments Pty Ltd ...".

In order to succeed on an indictment charging the appellant in those terms, it was incumbent on the prosecution to establish that he had dishonestly applied either money that belonged to Angsea or money that belonged to the appellant but which was in his possession on account of Angsea.
The money to which the indictment refers is evidently the total of all the amounts calculated at $1.00 per cu.metre that were retained by the appellant after cashing the smaller of the two cheques drawn by Angsea to pay Wade for the fill. Originally, the cheques were drawn in favour of S.T. Wade "or bearer". Either the appellant himself or his wife Ms. J.L. Fox took the smaller cheques to the bank and cashed them before distributing the cash proceeds in the proportions described.

Later the bank began to use printed cheque forms that were crossed "Not negotiable". After that, it became necessary to "open" the cheque, which was done by writing the words "please pay cash" on them. In most instances this was done by the appellant's wife, Ms. J.L. Fox, who worked in the office of Angsea and was a frequent signatory of the Angsea cheques. She did not sign all of the relevant cheques, and at least one was signed by Kenny himself after his return; but he knew nothing about the payments the appellant was receiving, and the instruction to pay cash was indorsed on the cheque after he had signed it.

Having regard to the form in which the charge was stated, it was essential to determine to whom it was that the money received by the appellant belonged. In the comparable context of the Theft Act 1968 in England, it has been said that the question is one to which the criminal law offers no answer and which can only be resolved by reference to civil law principles : see Dobson v. General Accident Fire & Life Assurance Corporation PLC [1990] 1 Q.B. 274, 289, per Bingham L.J. The same applies here, subject to the qualification that in Queensland the Criminal Code itself contains some provisions that appear to bear directly on the question of ownership.

The starting point is that the cheques drawn to pay Wade originally belonged to Angsea. Although cheques, they were also "money" within the terms of the wide definition in s.1 of the Code. Whether as cheques or as money they must have continued to belong to Angsea after coming into the appellant's possession until they were delivered to Wade in payment of his claim, or otherwise applied as he directed. Angsea would have had no further interest in the cheques or money once Wade's claim for payment was discharged.

It can scarcely be doubted that once the larger of the two cheques was delivered to Wade it belonged to him. It is, however, with the smaller cheques, or the money proceeds of their encashment, that we are concerned here. It does not appear from Wade's evidence whether he expressly agreed to the procedure by which the appellant cashed those cheques and passed on to Wade only the balance after deducting $1.00 per cu.metre for himself. But Wade had agreed to allow the appellant to have that money, and he unquestionably acquiesced in the procedure that was followed even if he did not expressly agree to it. In allowing the process to be repeated without protest on his part, Wade can only be regarded as having consented to the appellant's action in cashing the cheques and deducting the amounts it had been agreed he should be paid.

Given Wade's consent to the course adopted by the appellant, it is difficult to see how it can be maintained that the proceeds of the cheques when cashed, or even the cheques themselves that were being cashed, continued to belong to Angsea. Had the cheques for the smaller amounts, like those for the larger amounts, also been delivered to and cashed by Wade before the $1.00 sums were paid to the appellant, there could be no doubt at all that on delivery to him they would have ceased to belong to Angsea. Why should it make a difference that, instead of delivering the smaller cheque to Wade, the appellant with Wade's consent cashed the cheque and applied the proceeds as those parties had agreed?

For the Crown Mr Nase of counsel submitted that even after a cheque had been cashed by the appellant the proceeds continued to belong to Angsea, and that the $1.00 amounts deducted and retained might have been recovered from him by action for money had and received. We are, however, not faced here by a claim like that in Reading v. Attorney-General [1951] A.C. 507, in which an agent is compelled to account for bribes or secret profits received. There is English authority that the retention of benefits received in circumstances like those does not constitute misappropriation or theft of property belonging to another : see Attorney-General's Reference (No. 1 of 1985) [1986] 1 Q.B. 491, 503-506, where Lister v. Stubbs (1890) 45 Ch.D.1 was applied by the Court of Appeal. The appellant here was charged under s.408C with misappropriation of property; he was not, as he might have been, prosecuted under s.442B of the Code for the offence of corruptly receiving a commission.

The legal position may in some ways be compared to that of an agent who, after accounting to his principal for money received, is then given notice by the payer demanding that the money be returned. In those circumstances the law is that the agent is protected from action at the instance of the payer because he has paid his principal without notice. Moreover, for this purpose it has been held not to affect that protection if, instead of paying the money to his principal, the agent has, with the express or implied consent of the principal, applied it in discharging a liability due by the principal to another, or even to the agent himself. See Holland v. Russell (1861) 1 B. & S. 424, 435, 436; 121 E.R. 773, 777; affd. (1863) 4 B. & S. 14; 122 E.R. 365; and also Taylor v. Metropolitan Ry. Co. [1906] 2 K.B. 55.

In this connection s.395 of the Criminal Code is also relevant. It provides:

"395. Money received for another. When a person receives, either alone or jointly with another person, any money on behalf of another, the money is deemed to be the property of the person on whose behalf it is received, unless the money is received on the terms that it shall form an item in a debtor and creditor account, and that the relation of debtor and creditor only shall exist between the parties in respect of it."

Applying this section would have the result in the present case that cheques received by the appellant for payment to Wade would be deemed to be the property of Wade, and not of either Angsea or the appellant himself. Section 395 does, it is true, form part of chap. XXXVI of the Code, whose subject matter is Stealing, whereas s.408C, under which this prosecution was instituted, is included in chap. XXVII which is directed to Offences analogous to stealing. Section 408C was derived from the English Theft Act 1968. It was inserted in the Code with little or no attention either to the structural symmetry of the Code, or to the fact that most of the technicalities of the law of larceny, which the English Act of 1968 was designed to cure, had already been addressed in s.391 of the Code. Despite the differences in chapter placements and headings, there appears to be no compelling reason why s.395 should not apply in relation to s.408C as well as s.391 of the Code. There is nothing in any of the definitions in s.408C(3) that would prevent it from doing so in the present case.

In any event, it is not necessary to reach a final conclusion with respect to any of these matters. It was for the jury, on proper direction from the trial judge on the law, to decide whether the cheques or their monetary proceeds belonged, as the indictment alleged, to Angsea or to the appellant on account of Angsea. The only relevant direction that was in fact given at the trial was that:

"our law says that persons to whom property belongs includes the owner and any person who has control of it, so if Gauci came into possession of sums of money which were the proceeds of a cheque drawn by Angsea and that money was in his possession and control for the purpose of paying it to Wade, well, then he would be in possession of the property. That's not really in issue."

Plainly this could not have conveyed to the jury that a fundamental matter for their decision was whether it was Wade rather than Angsea to whom the cheques or their proceeds belonged or for whose account that property was in the possession or under the control of the appellant. His Honour was, as counsel for the appellant candidly confirmed to us, correct in saying that at the trial there was no issue raised about the matter of ownership. Although that would ordinarily be fatal to the success of an appeal, the present case is one in which proof of the element in question is so fundamental to guilt that a trial in which that element was assumed, rather than put to and decided by the jury, cannot be said to have proceeded according to law.

The appeal must therefore be allowed. We have considered whether the case is one where a new trial ought to be ordered. In the end we have concluded that it is not. There are two principal reasons for this conclusion. The first is that the prosecution case rests largely on the testimony of a single witness, whose account of what happened reveals some shortcomings that have been noticed. The other is that, on a sober assessment of what happened, it is perhaps more likely than not that the proper inference is that the cheques or their proceeds belonged at the relevant time not to Angsea but to Wade, who was a consenting party to what took place. Angsea must be content with whatever civil remedy against the appellant the law allows it.

It follows that the appeal should be allowed. The verdict and conviction should be set aside; and judgment of acquittal should be entered in favour of the appellant.

This makes it unnecessary to consider several other grounds of appeal that were argued by Mr Glynn on behalf of the appellant.