R v Ernest William Madden
[2003] NZCA 88
•29 May 2003
IN THE COURT OF APPEAL OF NEW ZEALAND
CA433/02
THE QUEEN
v
ERNEST WILLIAM MADDEN
Coram:Blanchard J
Anderson J
Glazebrook JAppearances: P B McMenamin for Appellant
M N Zarifeh for Crown
Judgment (on the papers): 29 May 2003
JUDGMENT OF THE COURT DELIVERED BY ANDERSON J
[1] This appeal against conviction has been heard on the papers under the Crimes (Criminal Appeals) Amendment Act 2001. The relevant materials, including written submissions which have been received in accordance with r29 of the Court of Appeal (Criminal) Rules 2001, have been considered by the members of the Court who have conferred and agreed upon this judgment.
Offence and sentence
[2] The appellant was convicted on his trial before a District Court Judge alone on three counts of procuring the delivery of a bank cheque for $397,500 under false pretences with intent to defraud and one count of conspiring to defraud a lending institution and/or the Inland Revenue Department. Such acts are contrary to s246(2) and s257 of the Crimes Act 1961, respectively. The appellant was charged jointly with his solicitor, Mr Leete, who was also convicted but has not pursued an appeal. The appellant was sentenced to 18 months imprisonment in respect of the first three counts and 9 months in respect of the last, the sentences to be served concurrently. He appeals against his conviction on the first three counts only.
Relevant facts
[3] The appellant effectively controlled two companies, namely Games Machines New Zealand Limited and Ice. The sole director and shareholder of both companies was a cancer patient, Mr Mitchell, who signed documents as requested by Mr Madden. He considered himself to be Mr Madden’s ‘front man’ in relation to business matters, Mr Madden himself being an undischarged bankrupt and, as such, constrained by s62 Insolvency Act 1967. But in relation to the transactions with which these charges are concerned, Mr Madden conducted negotiations on behalf of both companies.
[4] In March 1997, Mr Douds and Mr Zehnder agreed to purchase some gaming machines from Ice at the cost of $450,000. They intended to establish an amusement centre in New Plymouth. They made no payment up front, instead entering into an Instrument by Way of Security (IWS) with Ice for the full amount. The IWS required them to make monthly payments of $18,393 to Ice.
[5] Largely due to the poor condition of the machines and the time it took to carry out repairs, the amusement centre never eventuated. Consequently, the machines generated no income and Messrs Douds and Zehnder were unable to meet any portion of their payments under the IWS.
[6] There was a company called Photogloss, which owned a block of land in Christchurch which it was sub-dividing. Mr de Vere, a Christchurch Real Estate Agent acting on behalf of Mr Egden, the managing director of Photogloss, quoted the block to Mr Madden who expressed an interest in purchasing it, but he wanted to dispose of his interest in the IWS in part exchange. Photogloss agreed to this and the purchase arrangement was made contingent upon Photogloss purchasing Ice’s interest in the IWS. Mr Madden provided Mr de Vere with a dossier of information on the amusement machines, including a photograph of the building in which the machines were to be installed and a copy of the IWS. Mr de Vere passed this information to Mr Egden. Satisfied with the alleged cashflow of the amusement machine business, Mr Egden instructed Mr de Vere to draw up a draft agreement. That agreement included a recital, contrary to the true situation, that the first two monthly payments on the IWS had been received by Ice.
[7] The Crown case was based on three alleged representations inducing settlement of the purchase of the IWS by means of a bank cheque for $397,500. The prosecution said the first representation was made in mid-May by the appellant to Mr de Vere, after Mr de Vere had received information that the first instalment under the IWS had not been made. According to Mr de Vere, Mr Madden had explained to him that there had been a problem with the May instalment, but that it had now been made and paid into his solicitor’s office. This untrue representation formed the basis of the first count.
[8] The second representation, the basis of the second count, was made at a meeting, on 23 June 1997 at Mr Leete’s offices. Present were Messrs Leete, Madden, de Vere, Egden and also Mr Cousins, Mr Egden’s solicitor. For completeness we note that in cross-examination of Mr de Vere, it was suggested that Mr Leete was not present. There is no support for that suggestion and we reject it accordingly. Mr de Vere says Mr Egden asked whether the last payment (apparently a reference to the payment of 1 June) had been made. Mr Leete replied that it had been received and deposited into his Trust account. Immediately following Mr Leete’s reply, the appellant had nodded.
[9] The third relevant representation took place at the same meeting. According to Mr Egden, the appellant told him that the machines had been delivered late but that the operation in New Plymouth was now “fully up and running”.
Grounds of appeal
[10] Similar grounds of appeal are advanced in respect of each count. Mr McMenamin, for the appellant, submitted, correctly, that the District Court Judge had to be satisfied inter alia:
· that the appellant made a false representation;
· that the appellant knew at the time of making the representation, that it was false; and
· that the false representation was an effective cause of the accused’s obtaining the property, namely the bank cheque.
[11] On the first count, in relation to the second element, counsel for the appellant submitted that the evidence suggests that Mr Madden was reliant on Mr Leete for the information he relayed to Mr Egden and that therefore Mr Madden did not know the information to be false.
[12] In relation to the third element, counsel submitted that the evidence indicates the complainant, Egden, was unaware that the representation had been made, but that even if he had been, subsequent advice, received prior to entering into the contract, would have disabused him of any view that the payment had been made, so that it could not be said that the cheque was obtained by that representation.
[13] On the second count, counsel submitted that the first element was not supported by an adequate finding of fact by the Judge and that the Judge’s finding that “at the very least there was clear acquiescence on his part” could not amount to a false representation. As to the second element, again the submission is that the appellant simply accepted the response of Mr Leete, and had no direct knowledge of the finances himself.
[14] On the third count, the appellant contends that representations, if they were made, were made too early to be of any consequence, as information was provided by way of due diligence which showed the true position. Further, counsel argues, the evidence does not support the words constituting the said representation (the second element), nor does it support the appellant’s knowledge of its falsity (the third element).
Crown submissions
[15] The Crown’s submissions, in summary, are to the effect that there was an adequate evidential basis for the decision and no error of law. The Crown also emphasised the Judge’s generally positive findings as to the credibility of Crown witnesses and submitted that this should be borne in mind when assessing potentially conflicting evidence.
Discussion
First count
[16] Mr de Vere’s testimony supports the possibility of a telephone call made by Mr Madden to Mr Leete to confirm his advice to Mr de Vere that a payment on the IWS had in fact been made. That, it is said, shows the appellant lacked the requisite knowledge. However, the possibility of a telephone call is not inconsistent with Mr Madden knowing the truth of the matter, especially if, as the Judge found, Messrs Madden and Leete were conspiring together to deceive Mr Egden. On the other hand, the Judge had the uncontested, credible evidence of Mr Douds that he had kept Mr Madden informed of his financial position. Mr Madden provided Mr Douds with the automatic payment forms and it was Mr Madden who offered to defer payment of the first month’s instalment, indicating a clear awareness that the machines had yet to generate the revenue relied on for the payments under the IWS. Against this background, it was entirely open to the Judge to conclude that Mr Madden knew that the payments had not in fact been made.
[17] In relation to the third element, there is ample evidence for the Judge’s finding that Mr Egden was, and was intended to be, made aware of the representation and had acted on it. Mr Egden’s evidence is supported by that of his solicitor. As to the submission that Mr Egden’s misapprehension was cured about mid-June (Mr McMenamin’s date) when he found out the payment of 1 May had not been made, the evidence establishes that Mr Egden was told only that the first payment was deferred to 1 June, from which he inferred, and was intended to infer, that it had in fact been paid.
Second count
[18] The Judge had found that the appellant:
signified his agreement with what was said. At the very least there was clear acquiescence on his part.
[19] The Judge referred to the appellant’s conduct as “acquiescence”, but we think it plain that he intended to convey that the appellant had himself made the same representation by active concurrence. The evidence was that the appellant had indicated (or “signified” as the learned Judge put it) such concurrence by nodding following Mr Leete’s statement. His conduct may have been silent, but it was not passive. This was not a case of mere silence, or an omission to act, as counsel for the appellant contends, and authorities directed to that point are therefore of no relevance.
[20] As to counsel’s second point, that the appellant lacked the requisite knowledge, we repeat our observation in paragraph [16] above, that the Judge had more than enough evidence from the appellant’s close dealings with Messrs Douds and Zehnder from which properly to infer the appellant knew that no monies had been received from them.
Fourth count
[21] The appellant’s submission that the representation about the entertainment centre was of no consequence because due diligence inquiries had disclosed the true position cannot stand. In fact, the reverse is true. As the Judge noted, the due diligence did not include a physical visit to New Plymouth. Instead, Mr Egden and Mr Cousins had relied on the information given by Mr Madden and his solicitor. In any event, it is no defence to an allegation of false representation that the representee, as intended, accepted it as true. The availability of due diligence to a victim of a fraud ought not relieve a fraudulent representor from responsibility for inducing reliance on the fraud.
[22] As to the representation itself, although the exact form of the words used to make the representation is not entirely clear, Mr Egden was asked whether the phrase “up and running” had been used, to which he had answered “I’m sure it was used”. The assurance of the inducing conduct, more than the very words themselves, is what counts in this case. We are satisfied that this, together with other evidence given by Mr Egden and the clear finding of credibility in favour of Mr Egden, justifies the Judge’s finding as to the representation.
[23] Finally, the appellant must have known the representation was false. As the appellant was aware that the payments on the IWS were to be serviced from the income to be generated from the centre and as we have already accepted that he knew no such payments had been made, we are not persuaded that there is any reasonable possibility that Mr Madden may have held an honest belief that the centre was up and running. The Judge’s finding that Mr Madden was not surprised when confronted by Mr Egden about the non-existence of the entertainment centre serves to confirm this, but is not essential to the soundness of the decision.
Result
[24] For these reasons the appeal is dismissed.
Solicitors:
Crown Solicitors, Christchurch
McMenamin & Sons, Christchurch
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