R v Mclachlan No. DCCRM-01-1306

[2003] SADC 100

R v HAMISH BOYD MCLACHLAN

[2003] SADC 100

Judge Bishop

Criminal

Reasons for ruling as to the admissibility of “similar fact” evidence

1. Hamish Boyd McLachlan (“the accused”) is charged upon an information of the Commonwealth Director of Public Prosecutions (“the DPP”) with having committed 58 offences during 10 months between 10 April 1996 (count 3) and 26 February 1997 (count 50) at Adelaide, in that, being an employee of the stockbroker Thompson Brindal Ltd (“Brindal”) he, “did knowingly, and dishonestly [my italics] and intending to gain an advantage for himself [or another person] make improper use of his position as such an employee to gain an advantage for himself [or another person]” by causing specified share options to be transferred from his [or another] account to an account in the name of another person thereby diverting the risk of a loss to the account in the name of that other person.  In 46 counts of the information, he is alleged to have made improper use of his position to gain an advantage for himself (counts 1 to 46), in two counts to gain an advantage for Adelaide Rowing Club Incorporated (counts 47 and 48), in three counts to gain an advantage for I’Zingari Pty Ltd (counts 49, 50 and 51) and in seven counts to gain an advantage for Mr L. H. Gardiner (Counts 52 to 58).  In every count of the information, the persons to whose accounts with Brindal the risk of a loss was diverted were clients of an investment company named RetireInvest.

2. Upon his arraignment on 9 July 2003, the accused pleaded not guilty to the 58 alleged offences.  For the purpose of establishing the requisite dishonesty of the accused in relation to each alleged offence, the prosecution indicated that it would seek to prove an additional 36 uncharged transactions.  Of those 36 additional transactions, I was told that 33 transactions occurred during the time when the 58 alleged offences were committed and that those transactions are similar to the first 46 alleged offences, wherein the accused is alleged to have made improper use of his position to gain an advantage for himself by transferring “losing” or unprofitable share options from his account to the accounts of persons who were clients of RetireInvest.  (In the last 12 alleged offences, the accused is alleged to have made improper use of his position to gain an advantage for Adelaide Rowing Club Incorporated, I’Zingari Pty Ltd and Mr L. H. Gardiner, respectively, by transferring “losing” share options from those accounts to the accounts of persons who were clients of RetireInvest.)  In the other three uncharged transactions, the accused is said to have made improper use of his position to gain an advantage for Adelaide Rowing Club Incorporated by transferring “winning” or profitable share options from the accounts of three clients of RetireInvest to the account of Adelaide Rowing Club Incorporated.

3. In opposing the reception in evidence of the 33 additional transactions, Mr Braithwaite, counsel for the accused, accepted that those transactions were “roughly contemporaneous” with and of “a similar nature” to the 58 alleged offences, in that losing positions were transferred from the accused’s account to the accounts of RetireInvest clients.  In his submission, there is ample evidence in the 58 alleged offences to establish “a pattern” so that, “the only practical effect of leading uncharged conduct in this case is to really prejudice the accused” and prolong the trial.

4. In opposing the reception in evidence of the other three additional transactions, Mr Braithwaite submitted that those transactions “were certainly not similar fact evidence”; that those transactions were “different”, in that profitable share options, which had been purchased on account of RetireInvest clients, were transferred to Adelaide Rowing Club Incorporated; that those three transactions were remote or isolated in time (by about 10 months) from the first of the 58 alleged offences; and that “that irregularity” was detected fairly promptly and the transfers were reversed.  Those three transactions, he submitted, did not share, “that most salient feature of all of the other counts or transactions, that is, a passing through the account of the accused”.  (As previously indicated, while that feature did exist in relation to the first 46 counts of the information and 33 of the additional transactions, that feature did not exist in relation to the last 12 counts of the information, where losing share options were transferred from the accounts of Adelaide Rowing Club Incorporated, I’Zingari Pty Ltd and Mr L. H. Gardiner to the accounts of RetireInvest clients.)  Mr Braithwaite submitted that those three ‘aberrant transactions’ did not assist in establishing “a pattern” and could only be regarded as impermissible evidence of “a propensity criminally to help the Adelaide Rowing Club.”

5. The applicable legal principles are well established.  “We all know that when a man is charged with one offence you cannot prove that he has been guilty of another offence for the purpose of showing that he is a man of bad character, and so likely to have committed the offence with which he is charged.  But there are exceptions to that rule which are dictated by common sense” (Griffith C. J. in R v Finlayson (1912) 14 CLR 675, at 678). In cases “where a guilty knowledge or intention or design is of the essence of the offence, proof may be given that the defendant did other acts similar to those which form the basis of the charge. Such acts may be proved, whether they were done before or after the acts which form the basis of the charge, and even if they form or have formed the basis of other charges. Such evidence is admissible to show not that the defendant did the acts which form the basis of the charge, but that, if he did such acts, he did them intentionally and not accidentally, or inadvertently, or innocently, or that they formed a part of a system” (Lord Halsbury’s Laws of England (1^st Edition), Volume IX, page 380, as cited by Isaacs J. in Finlayson’s case (supra, at 680), with my emphasis).

6. The relevant principle was succinctly stated by Isaacs J. in Finlayson’s case (supra, at 680-681):

   “That principle is that the fraudulent character of the act is an essential ingredient of the charge [of larceny], and the onus of showing this is on the prosecution.  As an isolated instance the act might be innocent – even though done neither by accident or mistake.  But if shown to be part of a system in itself fraudulent its character may be found not to be innocent.  I will only add, that, if the evidence tendered does not tend to show that the offence is part of one system, it is not admissible, but if the Judge thinks the evidence is sufficient to connect the act charged with the other acts as parts of one system, then it is admissible.” (My emphasis.)

   Griffith C. J. there adopted as the applicable rule the following passage from Bray J. in R v Bond [1906] 2KB 389, at 415:

   “The ground on which in cases of this class evidence is admitted of acts not charged in the indictment is, in my opinion, that the case which the prosecution seeks to prove is that the prisoner had in his mind a scheme or plan (say) for attaining money by fraud, that the act with which the prisoner is charged is part of a planned fraud, and that the other acts of which evidence is sought to be given when proved will show the existence of the plan, and, therefore, the guilty mind of the prisoner.”  (My emphasis.)

   Griffith C. J. also there remarked (at 679-680) that,

   “It was essential for the jury to find that what the accused did was done with a fraudulent intention.  And, surely, the evidence was as relevant for that purpose at the end of the trial as at the beginning. ....  Even if it had become irrelevant there is no reason why it should have been formally withdrawn from the jury.  The Crown is entitled to anticipate several possible loopholes of escape, and naturally endeavours to close them all up.

   .... An essential element of stealing is the fraudulent intention, and any evidence to show the existence of that fraudulent intention is admissible.  It must not, of course, be too remote.  Evidence to show a system is clearly relevant.”  (My emphasis.)

7. The legal principles enunciated by the High Court in Finlayson’s case (supra) have since consistently been here applied (see R v Hayes (1986) 128 LSJS 460; Gibbs v R [1992] 58 SASR 347; R v Zoneff [2001] SASC 443, at [127]; and R v Musolino [2003] SASC 203).

8. As Gibbs J. (as he then was) observed in R v Hally (1962) QD R 214 (at 226, with my emphasis), “To be admissible, the evidence of “similar facts” must be connected in some relevant way with the crime with which [the accused] was charged.”  For that proposition, His Honour cited the following passage from the judgment of A. T. Lawrence J. (as he then was) in Bond’s case (supra, at 424):

   “In all cases, in order to make evidence of this class admissible there must be some connection between the facts of the crime charged in the indictment and the facts proved in evidence.  In proximity of time, in method, or in circumstance there must be a nexus between the two sets of facts, otherwise no inference can be safely deducted therefrom.”  (My emphasis.)

   (That passage was also cited by Avory J. in R v Porter (1935) 25 Cr App R 59, at 65.) In Halley’s case (supra), the appellant was charged with having fraudulently misapplied moneys that he had received from a third person in trust for a client.  The “similar fact” evidence related to transactions in which he had misapplied moneys that he had received from other persons on trust for other clients.  Although those moneys were received by the appellant for different purposes, the court held that that did not render them dissimilar; “all were cases of misappropriation of funds held in trust for the appellant’s clients, and since it is improbable that, by coincidence, all occurred innocently, the evidence was admissible on the issue of fraudulent intention” (per Gibbs J., at 214).

9. As previously indicated, the accused is here charged with having, in 1996 and 1997, committed 58 offences of “knowingly, and dishonestly [my emphasis] and intending to gain an advantage for himself [or another person]” made improper use of his position as an employee of Brindal to gain an advantage for himself [or another person] by causing share options to be transferred from his [or another] account to an account in the name of another person thereby diverting the risk of a loss to the account in the name of that other person.  In the first 46 alleged offences and 33 of the additional transactions, he is alleged to have gained an advantage for himself by transferring unprofitable share options from his account to the accounts of RetireInvest clients.  In the last 12 alleged offences, he is alleged to have gained an advantage for Adelaide Rowing Club Incorporated, I’Zingari Pty Ltd and Mr L. H. Gardiner by transferring unprofitable share options from their accounts to the accounts of RetireInvest clients.  In the other three additional transactions, he is alleged to have gained an advantage for Adelaide Rowing Club Incorporated by transferring profitable share options from the accounts of three RetireInvest clients to the account of the Adelaide Rowing Club Incorporated.

10. With the Adelaide Rowing Club Incorporated, I’Zingari Pty Ltd and Mr L. H. Gardiner, I was told that the accused is closely associated.  He had been the Chairman of that Club and he acted as broker for the Club.  He was a director and the principal shareholder of I’Zingari Pty Ltd, for which company he also acted as broker.  He was a friend of Mr L. H. Gardiner, who had given him $20,000 for investment, at the accused’s discretion, on the Stock Exchange or Options Market.  In each of the 58 alleged offences and the 36 additional transactions, the accused, or a person or entity with whom or which he was allegedly closely associated, gained an advantage, financially, with consequential disadvantage, financially, to a client or clients of Retireinvest.

11. In these circumstances, to my mind, the 36 additional transactions bore a close consistency with the 58 alleged offences and would provide evidence of a formulated scheme or system designed by the accused “and, therefore, [his] guilty mind” (Bray J. in Bond’s case, supra, at 415).  In “proximity of time, in method, or in circumstance” there was evident, in my view, such a close connection between the 36 additional transactions and the 58 alleged offences as to make those 36 transactions part of one chain of relevant circumstances here admissible in evidence (cf A. T. Lawrence J. in Bond’s case, supra, at 424), particularly in a case where the accused’s defence had not been indicated (cf Griffith C. J. in Finlaysons’s case, supra, at 680).  Although three of the additional transactions took place at the comparatively remote interval of time of about two years from the 58 alleged offences and the 33 other transactions, the question of time is not the only means of establishing the necessary nexus (cf Porter’s case, supra, at 65; and Halley’s case, supra, at 227).  In my view, the circumstances to which I have referred provided a sufficient connection.

12. Upon the question whether, in the exercise of judicial discretion, the proposed “similar fact” evidence, though admissible, should, in the interests of justice and as a matter of fairness to the accused, not be tendered as part of the prosecution case (cf Harris v DPP [1952] AC 694, per Viscount Simon at 707), in my view that proposed evidence was sufficiently substantial, having regard to the purpose to which it was professedly directed, to make it desirable in the interests of justice that it should be admitted. I did not consider that the prejudicial effect of that proposed evidence would be out of proportion to its true evidential value as to be excluded from evidence in the exercise of my discretion.

13. For these reasons, on 14 July 2003 I ruled that the proposed evidence relating to the 36 additional uncharged transactions was admissible and could be adduced by the prosecution upon trial of the accused.