The State of Western Australia v Merrin - [2013] WADC 39

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CRIMINAL

LOCATION: PERTH

CITATION: THE STATE OF WESTERN AUSTRALIA -v- MERRIN [2013] WADC 39

CORAM: GOETZE DCJ

HEARD: 8 MARCH 2013

DELIVERED : 14 MARCH 2013

FILE NO/S: IND 1242 of 2012

BETWEEN: THE STATE OF WESTERN AUSTRALIA
Applicant
AND
DAMIEN MARC MERRIN
Respondent

Catchwords:

Application to lead propensity evidence pursuant to s 31A of the Evidence Act  Alleged offence of intent to defraud, by deceit or fraudulent means and gaining a benefit - Turns on own facts

Legislation:

Evidence Act 1906

Result:

Application allowed

Representation:

Counsel:

Applicant: Mr J G Nicholls
Respondent: Mr K P Bates

Solicitors:

Applicant: State Director of Public Prosecutions
Respondent: Ken Bates

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

APC v The State of Western Australia [2012] WASCA 159
Bennett v The State of Western Australia [2012] WASCA 70
Bolitho v The State of Western Australia [2007] WASCA 102
Buiks v The State of Western Australia [2008] WASCA 194
Dair v The State of Western Australia [2008] WASCA 72
Donaldson v The State of Western Australia [2005] WASCA 196
Graham‑Helwig v Western Australia (2005) 30 WAR 221
Mansell v The State of Western Australia [2009] WASCA 140

GOETZE DCJ:

Introduction

By an indictment dated 5 December 2012, Damien Marc Merrin is charged with one offence, namely that on 27 June 2011 at Perth, he, with intent to defraud, by deceit or fraudulent means, gained a benefit for himself, namely $73,003.70 in money.
The trial is listed for hearing on 15 April 2013.

The application

The State of Western Australia has applied for an order that propensity evidence be admitted at trial pursuant to s 31A of the Evidence Act 1906.
The proposed propensity evidence concerns Mr Merrin's three prior convictions that on 23 June 2008, 28 August 2008 and 15 September 2008, he, with intent to defraud, by deceit or fraudulent means, gained benefits for himself, namely $15,000, $10,000 and $30,000 in money respectively. On 14 October 2011, Mr Merrin pleaded guilty to each of those three previous offences. He was sentenced to a total term of imprisonment for three years and made eligible for parole.

The State case

The State case against Mr Merrin can be summarised as follows:
1.Mr Merrin purchased a time share membership at a resort in Thailand owned by Absolute Resorts and Hotels.
2.That membership entitled Mr Merrin to refer other people to the resort using what is termed a third party contracted agent agreement. In essence, the resort owner was not so concerned about generating income from hotel room rentals, rather it was concerned with selling time share memberships. Therefore, members could refer potential time share membership purchasers to the resort for a short stay, charge such potential purchasers a referral fee for such short stay, of which the resort owner would have no knowledge, and receive a commission on any subsequent sale. The resort charged only a small administration fee for the short stay. There were however, certain conditions which attached to any potential purchase of such a time share facility.
3.Deals.com Pty Ltd is a company selling vouchers on the internet for various businesses, most commonly accommodation providers, restaurants, salons and spas. It is based in Victoria, but employs sales representatives throughout Australia.
4.Mr Merrin applied to Deals.com for employment as a salesman. He was so appointed on a salary of $60,000 per annum, plus a commission of 10% from any sales made by him.
5.Mr Merrin proposed to Deals.com that it sell holidays at the resort being seven nights accommodation for two adults and two children, daily breakfast, massages and airport transfers. The sale price was $499. Deals.com would retain 30% commission from the offer and the resort was to be paid the other 70%.
6.As part of this arrangement, Mr Merrin required that Deals.com only contact the resort through Mr Merrin and that the contract with the resort was not to list Deals.com as the other party, but one of Mr Merrin's other entities, DMR Property Group Pty Ltd.
7.Mr Merrin did not reveal to Deals.com the fact of his ownership of the time share membership in the resort.
8.Deals.com stipulated with Mr Merrin, that, the packages being offered by it were purely for holiday accommodation and not for any prospective purchases of a time share arrangement.
9.Deals.com advertised such holidays. Two hundred and eight vouchers were sold totalling $103,792.
10.Mr Merrin then sent an email to Deals.com purporting to be from Jason D'souza at Absolute Resorts requesting payment to the resort of its 70% share of the sale proceeds and providing bank account details for payment by Deals.com. The account name and number given by Mr Merrin related to Innovative Group (Australia) Pty Ltd.
11.Deals.com made a payment of $73,003.70 to Innovative Group as requested.
12.Jason D'souza was a fictitious person who had no involvement with the resort. Innovative Group was a company which had been incorporated but, deregistered and was connected with Mr Merrin, not the resort.

The proposed propensity evidence

The State proposes to lead evidence relating to the facts behind the previous convictions. First, that in 2008, Mr Merrin contacted a friend asking him to invest in a property group of which he was supposedly a director and promised large returns on his investment concerning a property development at Scarborough. It was claimed that an investment of $15,000 would return $45,000 within 90 days, including the return of the initial investment.
Secondly, two months later, Mr Merrin contacted the same friend advising of the prospective purchase and subdivision of property in South Perth into four separate blocks for on‑sale to return a 15% net profit.
Thirdly, prior to the 90 days from the Scarborough matter elapsing, Mr Merrin advised his friend that there was a delay in that development due to a planning amendment but, there was another development opportunity at Hammond Park in which the friend could invest, being units to be built, seeking an investment in the sum of $30,000, returning a further $30,000 in 90 days.
Mr Merrin had no interest or involvement whatsoever in any of the Scarborough, South Perth or Hammond Park developments.
The State's purpose in leading the proposed propensity evidence is designed:
1.to show that Mr Merrin is the type of person who will misrepresent the true state of affairs in order to obtain money for himself. His modus operandi was to falsify his role by claiming an interest in such developments when in fact he had no such interest; and
2.to rebut the foreshadowed defence of the innocent referral of customers to the resort in Thailand on the basis that he was able to do by reason of his ownership of a time share membership at the resort.
In Donaldson [118], Roberts‑Smith JA said:
Other than similar fact evidence, propensity evidence as defined in s 31A is clearly now admissible precisely because it shows the propensity of an accused to commit offences of the kind charged (in the sense that he or she is a person who has committed other offences).
Further, it is well established that propensity evidence can be used to negate possible defences, as to which see, for example, Bennett v The State of Western Australia [2012] WASCA 70 [35].

Elements of the alleged offence

In order to establish guilt, it will be necessary for the State to prove beyond reasonable doubt each of the following elements of the offence:
1.that the offender was the accused;
2.that the accused gained a benefit;
3.that he did so with intent to defraud; and
4.that he did so by deceit or any fraudulent means.
At the hearing of this application, Mr K P Bates, counsel for the accused Mr Merrin, outlined the defence position regarding the elements of the offence in the following terms:
If your Honour pleases, the critical issue in the trial is the issue of intent to defraud. It's not in dispute that the accused gained a benefit by deceit or fraudulent means, namely by holding himself out to Deals.com as Jason D'souza of Absolute Group. So he utilised deception or dishonest means to gain a benefit of $73,000 on the relevant date. But what is in dispute is whether he had an intention to defraud.
Although Mr Bates conceded that Mr Merrin gained a benefit from Deals.com by deceit or fraudulent means, he nonetheless disputed that this was with the required intent to defraud, following Bolitho v The State of Western Australia [2007] WASCA 102 [152] and [154] per McLure JA and [174] ‑ [177] per Buss JA to the effect that, in this case, Mr Merrin's acts of engaging in deceit and fraudulent means are quite separate from any intention to defraud.

Section 31A Evidence Act

Section 31A of the Evidence Act provides:
(1)In this section ‑
propensity evidence means ‑
(a)similar fact evidence or other evidence of the conduct of the accused person; or
(b)evidence of the character or reputation of the accused person or of a tendency that the accused person has or had;
...
(2)Propensity evidence or relationship evidence is admissible in proceedings for an offence if the court considers ‑
(a)that the evidence would, either by itself or having regard to other evidence adduced or to be adduced, have significant probative value; and
(b)that the probative value of the evidence compared to the degree of risk of an unfair trial, is such that fair‑minded people would think that the public interest in adducing all relevant evidence of guilt must have priority over the risk of an unfair trial.
…
It was conceded by Mr Bates, that, the proposed propensity evidence has relevance and that it is probative, as to which see Donaldson v The State of Western Australia [2005] WASCA 196 [118] and Dair v The State of Western Australia [2008] WASCA 72 [260]. What is in issue, he said, is whether the proposed propensity evidence is of such a character that it can be described as having 'significant probative value'. If it does, then Mr Bates further conceded that the fair‑minded public interest test would also be met and that any prejudice that would follow from the reception of such evidence could be met by an adequate direction from the trial judge.

Does the proposed evidence have significant probative value?

In Mansell v The State of Western Australia [2009] WASCA 140 [37], Miller JA said that:
For evidence to have significant probative value, it must be such as could rationally affect, directly or indirectly, the assessment of the probability of the existence of a fact in issue in the proceeding. This was made clear by Steytler P in Dair, at [60] - [61], where his Honour said:
'The evidence in question must obviously be relevant before it can be admitted into evidence. That is to say, it must be such as could rationally affect, directly or indirectly, the assessment of the probability of the existence of a fact in issue in the proceeding: Goldsmith v Sandilands (2002) 76 ALJR 1024 at [2] per Gleeson CJ; Phillips v The Queen (2006) 225 CLR 303 at [50]. It could otherwise have no probative value, let alone "significant" probative value.
Before evidence can have significant probative value it must be such as "could rationally affect the assessment of the probability of the relevant fact in issue to a significant extent: ie, more is required than mere … relevance": Zaknic Pty Ltd v Svelte Corporation Pty Ltd (1995) 61 FCR 171 at 175 - 176. Heydon (at [21245]) suggests that significant probative value is something more than mere relevance but something less than a "substantial" degree of relevance and that it is a probative value which is "important" or "of consequence". He makes the point that the significance of the probative value of tendency evidence must depend on the nature of the facts in issue to which it is relevant and the significance or importance which that evidence may have in establishing the fact: R v Lockyer (1996) 89 A Crim R 457 at 459; R v Lock (1997) 91 A Crim R 356 at 360 - 361; R v Fordham (1997) 98 A Crim R 359 at 370; Jacara Pty Ltd v Perpetual Trustees WA Ltd (2000) 106 FCR 51 at [77] - [82]; Western Australia v Osborne [2007] WASCA 183 at [13].'
In APC v The State of Western Australia [2012] WASCA 159, Mazza JA said [88]:
By the inclusion of the adjective 'significant', Parliament has clearly intended that the evidence sought to be adduced must be more than merely relevant. In Dair [61], Steytler P noted this and referred to Heydon, J D, Cross on Evidence (7^th Aust ed, 2004) par 21245, which suggested that 'significant' means 'important' or 'of consequence'. This coincides with the way the word 'significant' was treated by Wheeler JA in The State of Western Australia v Osborne [2007] WASCA 183 [13]. Whether evidence is significant depends upon the fact in issue and the importance that the evidence in question has to the proof of that fact.
Further, Pullin JA said [12]:
… the legislature has put probative propensity evidence into a special category. It will not be admitted merely because it has probative value, it must be more than that. It must have 'significant' probative value. As Mazza JA points out in his reasons, the word 'significant' means 'important' or 'of consequence'. However, even that is not enough. McHugh J in Pfennig (528) explained why this is so:
'Plainly, [such evidence] cannot be admitted merely because it has probative or even strong probative value. The risk of an unfair trial through the use of propensity reasoning is too great to allow such a low threshold of admissibility. Consequently ... as a matter of law and not discretion the probative value of the evidence must outweigh or transcend its prejudicial effect.'
The defence case is that the proposed evidence is not of significant probative value because:
1.the offending alleged in the present indictment is a different type of offending from that to which Mr Merrin has previously admitted; and
2.the only issue in the trial of this indictment will be whether Mr Merrin had the necessary intent to defraud and the jury will not be assisted in its determination by what he may have done in a different context in a different way on prior occasions.
In the 2008 matters to which Mr Merrin pleaded guilty, he obtained money for what can be loosely described as the development of building projects or property work in which he had no interest whatsoever. His admitted intention was to fraudulently take his victim's money for his own purposes. He did so by deceit or fraudulent means.
In the present case however, the defence is that Mr Merrin was innocently seeking to exercise his time share membership rights by referring to the resort those people who responded to the advertising by Deals.com. Thus it is said that he had an innocent state of mind without intention to defraud Deals.com.
It is not disputed that Mr Merrin acted in a position of employment, as to which see Graham‑Helwig v Western Australia (2005) 30 WAR 221 (Pullin J) [28] ‑ [29]. The State did not raise the issue of Mr Merrin's fiduciary duty of good faith as an employee of Deals.com. I will therefore not deal with that issue.
In short, the defence submission is that the proposed propensity evidence does not deal with Mr Merrin's state of mind in this matter and it is his intention which will be the sole issue at trial.
In resolving the outcome of this application by the State, it is necessary to bear in mind the nature of this sole issue. The proposed propensity evidence is relevant to, and probative of, that issue. The proposed evidence goes beyond mere relevant evidence of probative force. It is significant because:
1.Mr Merrin has previously acted by deceit or fraudulent means on three separate occasions in 2008, in respect of one victim, albeit in different circumstances to the present matter. He had the necessary fraudulent intent on each occasion.
2.In each of the 2008 matters and the present indictment, Mr Merrin's conduct arose out of a relationship. In 2008, Mr Merrin's offending against his victim arose from friendship. In the present matter, Mr Merrin's conduct arises in the context of his position as an employee of Deals.com.
3.In each case, Mr Merrin brought an external factor into his relationship with his friend and his employer in order to gain a benefit by admitted deceit or fraudulent means.
4.In 2008, the external factor was each of the three property deals in which he did not have any interest or involvement. In the present indictment, Mr Merrin brought the resort holidays into his employment relationship when he did not have any right to sell pure short term holidays at the resort. It was only by reason of Mr Merrin's time share membership that Absolute Resorts did not question his apparent referral of what it no doubt understood to be potential purchasers of time share arrangements.
5.In the 2008 matters, Mr Merrin misrepresented the truth to his friend by falsely claiming an interest or involvement in the building projects or property work in which the friend might invest money.
6.Mr Merrin's actions in 2008 on three separate occasions reflected his then state of mind in his then circumstances. He had an intent to defraud, as manifested by his actions, ie, deceit or fraudulent means which were appropriate for, and relevant to, his intention to defraud his friend. He simply took his friend's cash on three separate occasions.
7.In the present indictment, Deals.com had sought Mr Merrin's assurance that it would not be sending its customers to a time share proposal. Mr Merrin falsely represented to Deals.com that the resort was selling holidays. He did not have any interest in the resort which he could simply rent out for short term holidays in return for rental moneys. Rather, he only had a time share interest which enabled him to refer potential time share purchasers to the resort for short stays so that those people referred by him could consider purchasing their own time share membership.
8.In the present matter, Mr Merrin has again admittedly acted by deceit or fraudulent means. He has misrepresented the truth to Deals.com regarding what the readers of its advertisements were purchasing. He submitted a false invoice for payment to Absolute Group of 70% of their rent but, requested that it be paid to Innovative Group. He accepted that payment.
9.In matters of fraud, the possible range of deceitful or fraudulent means is probably unlimited. The 2008 offences and the acts alleged in the present indictment are both characterised by admitted deceitful or fraudulent means, in circumstances arising from a relationship pertinent to Mr Merrin in each of 2008 and 2011 respectively, and in both 2008 and 2011, he was paid in consequence of his deceit or fraudulent means.
10.The facts behind Mr Merrin's prior convictions could therefore rationally affect the assessment of the probability of the existence of the intent in issue to a significant extent both by regard to the 2008 facts themselves and also by having regard to the admitted 2011 deceit or fraudulent means. That however is a matter for the jury.
The proposed propensity evidence is capable of showing that the accused is the type of person who will misrepresent the true state of affairs to obtain money for himself. If and how it may do this is a matter for the jury.
The facts behind the 2008 convictions, with their inherent intention to defraud, might also aid the jury in determining whether the State has proved beyond reasonable doubt the relevant issue of intent to defraud in the present case in that it may negate an innocent explanation of the facts to be put forward by Mr Merrin and in the absence of the evidence concerning his prior misconduct, the jury will be operating in a vacuum when determining its verdict.

There are not large distinctions in the proposed propensity evidence in this case from the charged offence in the sense outlined by Buss JA in Buiks v The State of Western Australia [2008] WASCA 194 [52] – [59] where, in that case, the peripheral involvement of the alleged offender in the propensity evidence was not significantly probative of his alleged involvement in the offending described in the indictment.
The propensity evidence is admissible as part of the State's circumstantial case against the accused to prove intention to defraud when all the facts proposed to be led by the State are examined.

Prejudice

As previously noted, it is conceded that if the proposed propensity evidence is significantly probative, then, a fair‑minded jury would require to know of the proposed evidence and that any prejudice can be cured by direction.

Conclusion

For these reasons, the probative force of the propensity evidence compels its admission into evidence and notwithstanding the prejudicial effect of that evidence, it is just to admit it. The trial judge can direct the jury in respect of any prejudice on the facts as they emerge at trial.
The trial judge will no doubt be able to give a direction warning against the impermissible line of reasoning referred to in Donaldson. In my view, there is a risk of prejudice, but it is not a significant one.
In these circumstances, I am of the view that the probative value of the proposed propensity evidence, compared to the risk of an unfair trial, is such that fair‑minded people would think that the public interest in adducing all relevant evidence of guilt must have priority over the risk of an unfair trial.