R v H HC Dunedin CRI 2007-012-4181
[2008] NZHC 1848
•25 November 2008
This case has been anonymized
IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY
CRI 2007-012-4181
THE QUEEN
v
H
S
Hearing: 17 November 2008
Appearances: R Bates & A Killeen for the Crown
J Haigh QC & B Boyd for accused S
G King for accused H
Judgment: 25 November 2008
JUDGMENT OF STEVENS J
(Section 344A application to determine admissibility of challenged evidence)
This judgment was delivered by me on Tuesday, 25 November 2008 at 4pm pursuant to r 540(4) of the High Court Rules.
Registrar/Deputy Registrar
Solicitors/Counsel:
Crown Solicitor, PO Box 803, Dunedin 9054J Haigh QC, PO Box 1614, Shortland Street, Auckland 1140
G King, PO Box 24086, Manners Street, Wellington 6142
A Killeen, Serious Fraud Office, PO Box 7124, Wellesley Street, Auckland 1141B Boyd, PO Box 37139, Parnell, Auckland 1151
R V S AND ANOR HC DUN CRI 2007-012-4181 25 November 2008
Introduction
[1] The accused, S (Mr S ) and H (Mr H ) are each charged with two counts of using a document with intent to defraud contrary to s 229A(b) of the Crimes Act 1961. Each accused also faces a further charge of using documents to obtain a pecuniary advantage or valuable consideration contrary to s 228(b) of the Crimes Act. The Crown contends that the amount of money dishonestly obtained as a result of the use of the documents concerned exceeds $16.9 million.
[2] The prosecution of the accused follows an investigation by the Serious Fraud Office. The Crown proposed to lead evidence from a senior investigator for the Serious Fraud Office. Mr David Osborn is designated Supervising Senior, Investigations. Much of his evidence is not challenged in terms of admissibility. But Mr Haigh QC, counsel for Mr S , signalled an objection to evidence being led by the Crown as to the utilisation of monies received by Computer South Ltd pursuant to contracts entered into between Sonnford Solutions Ltd (and its predecessor) and the Otago District Health Board (ODHB). Counsel challenged the relevance of the evidence of how the monies received by Computer South Ltd (or any person acting for and on behalf of that corporate entity, particularly the accused Mr S ) were spent (the challenged evidence).
[3] Mr King made a similar objection on behalf of Mr H . He objected to evidence being led by the Crown concerning the utilisation of certain funds which were received for the acknowledged personal benefit of Mr H . Mr King submitted that the destination of some of the monies, namely, those paid to the Inland Revenue Department and those dispersed for accounting services, was admissible. However, he also contended that the destination of the balance of the funds, comprising in excess of $1.4 million spent on vehicles, boats, property and other personal items, was not relevant and should not be referred to by the Crown. In the alternative, defence counsel submitted that the evidence of sources of spending should be excluded because of its prejudicial value.
[4] Mr Bates, for the Crown, supported the admissibility of the challenged evidence on the grounds of its relevance to proving or disproving certain facts at issue in the trial, including the motive of the accused. Mr Bates submitted that the challenged evidence was admissible under s 7 of the Evidence Act 2006 (the Act) and ought not to be excluded under the provisions of s 8 of the Act. The application under s 344A of the Crimes Act was filed by the Crown to determine the admissibility question.
Applicable legal principles
[5] Matters of relevance and admissibility are now dealt with under the Act. Relevant to this application is s 7 which provides:
Fundamental principle that relevant evidence admissible
(1) All relevant evidence is admissible in a proceeding except evidence that is—
(a) inadmissible under this Act or any other Act; or
(b) excluded under this Act or any other Act.
(2) Evidence that is not relevant is not admissible in a proceeding.
(3) Evidence is relevant in a proceeding if it has a tendency to prove or disprove anything that is of consequence to the determination of the proceeding.
[6] It is clear that satisfying the test of relevance in s 7(3) of the Act requires only that the evidence have a “tendency” to prove or disprove a material issue or anything that is of consequence in the proceeding. It is not required that the evidence prove or disprove the issue or fact absolutely. In other words, the test sets a low threshold: see The Evidence Act 2006: Act & Analysis Mahoney, McDonald, Optican and Tinsley EV7.04 at 39. The Court of Appeal made a similar point in R v Smith [2007] NZCA 400 at [16]. Robertson J, giving the judgment of the Court, noted that the test of “substantial helpfulness” for the admissibility of veracity evidence under s 37(1) of the Act “creates a higher threshold than mere relevance” under s 7(3) of the Act. Whether the statutory test for relevance has been met is a
legal question for the trial Judge. If the evidence is admissible (and not excluded under any other statutory provision) all questions of weight are for the jury.
[7] Section 8 of the Act deals with possible exclusion of relevant evidence in the following circumstances:
General exclusion
(1) In any proceeding, the Judge must exclude evidence if its probative value is outweighed by the risk that the evidence will—
(a) have an unfairly prejudicial effect on the proceeding; or
(b) needlessly prolong the proceeding.
(2) In determining whether the probative value of evidence is outweighed by the risk that the evidence will have an unfairly prejudicial effect on a criminal proceeding, the Judge must take into account the right of the defendant to offer an effective defence.
[8] Any question of exclusion under s 8 of the Act requires that the party seeking exclusion must establish that there is a credible risk of “unfair” prejudice and that such a risk outweighs the probative value of the particular evidence. This is a balancing exercise for the Judge, which must turn on the circumstances of the case. Counsel in the present case did not argue the point relating to needlessly prolonging the proceeding, set out at s 8(1)(b) of the Act.
The challenged evidence
[9] The passages of Mr Osborn’s evidence to which objection was taken were those in italics in the following paragraphs:
42. On 10 November 2005, Sonnford paid $178,843.75 to Armstrong Prestige in part payment of the purchase of a Porsche 911 purchased in the name of Michael S .
45. On 22 November 2005, Computer South paid $80,000 to Armstrong
Prestige in further payment for Porsche 911.
53. 90% of the money ($79,582.50) was paid by Sonnford to Computer South on 31 January 2005, and thereafter used for various purposes including the purchase of property, purchase of a Harley motorcycle and purchase of a display cabinet, all in the name of Michael S .
57. In respect of the disbursement of funds, of significance:
• $388,000 was paid to IRD
• $324,000 was paid on vehicles and boats
• $51,000 was spent on property matters
• $550,000 was transferred to other H and Sonntag accounts
• $352,000 was paid on credit card and personal expenditure
• $23,000 was paid for accounting assistance
59. Personal spending for S was principally transacted through Computer South and Checketts McKay, with additional boat and vehicle expenses coming through Sonnford.
60. Of significance:
• $7.818m spent on cars and boats
• $3.7m spent on property (some of this financed by way of Checketts
McKay nominee company finance)
• $1.081m on food, liquor, household and credit card
• $1.12m on cash withdrawals at ATMs
[10] The defence objection also extended to portions of the documentary evidence. These comprise schedules and charts prepared by the Serious Fraud Office. Essentially, the same aspects as those contained in Mr Osborn’s oral evidence were objected to. An example of a chart to which strong objection was taken by the defence was document 13331.
Grounds of relevance
[11] Mr Bates had signalled in earlier correspondence that the relevance of the challenged evidence was “at least” threefold. The reasons were:
a) First, it indicated the extent to which Mr S had control of the funds which he was allegedly generating from the Hospital Board;
b)Secondly, the evidence showed that he personally did receive 90% of the funds from the relevant invoices; and
c) Thirdly, the evidence illustrates there were no business operational costs – purchases, expenses related to the provision of services and so on – and that all the money was available for expenditure by Mr S for lifestyle purchases.
[12] During the argument, Mr Bates added a fourth ground, namely, that this evidence was relevant to the context of the alleged offending and to the question of the intent of the accused. Further, the degree of spending, amounting to $15.116 million by Mr S and $1.784 million by Mr H , was relevant to motive in that it demonstrated greed and a desire on the part of each accused to live lavish lifestyles.
Grounds of challenge
[13] The detailed aspects of Mr Osborn’s evidence to which objection was taken relate largely to the use of monies received or available to be used by Mr S personally or through Computer South Ltd. Such funds were generated from the contractual arrangement between Sonnford Solutions Ltd and ODHB or Healthcare Otago. Counsel noted that Mr Osborn recorded in paragraph 28 of his evidence that:
Through all of these avenues [referred to in preceding paragraphs] S had full access to 90% of the ODHB funds.
[14] Both Mr Haigh and Mr King emphasised that the defence did not challenge this evidence. Similarly, the three propositions relied on by the Crown as summarised at [11] above are not challenged by the defence. Therefore, there was no need to include the detail of what the funds were spent on.
[15] There is however a difference in the positions advanced on behalf of Mr S and Mr H . Using document 1331 as an example, Mr S sought to exclude all of the evidence in the box on the lower right of the chart. Mr H on the other hand sought only to exclude some of the evidence in the box on the lower left of the chart. He objected to the references to how the remaining portion of the $1.784 million was spent. But he was content for the Crown to lead the evidence
that indicates that some $388,000 was paid to the Inland Revenue Department and some $23,000 paid in accounting fees.
[16] The essence of the defence objection on behalf of both accused to the admissibility of parts of Mr Osborn’s evidence is twofold:
a) The challenged evidence is not relevant to the issue as to whether the accused committed the offences alleged; and
b) The challenged evidence was in any event superfluous.
[17] As an alternative submission, if such evidence is ruled to be relevant, it is more prejudicial than probative and should therefore be excluded.
[18] Counsel for the accused submitted in summary that the challenged evidence did not meet even the low threshold of the test for relevance in s 7(3) of the Act. Given that the defence was prepared to accept that each of the accused had the monies (totalling $16.9 million) available to themselves to be spent as they saw fit, it was not relevant for the jury to be told the specifics of how the total amount was spent. Further, even if relevance could be established by the Crown under s 7(3), evidence showing, for example, that a large amount of money was paid by Mr S to Armstrong Prestige for a Porsche 911 was prejudicial in the context of a fraud trial and should be excluded under s 8 of the Act. Mr Haigh was concerned that such evidence might have an “illegitimate” prejudice on the jury and might distract them from the primary issues in the case.
Elements of the charges
[19] The offence created by s 229A of the Crimes Act as it relates to both Mr S and Mr H involves proof of four elements, namely, that the relevant accused:
a) With intent to defraud;
b) Used documents;
c) Which were capable of being used to obtain a benefit or pecuniary advantage;
d)For the purpose, or with the intention, of obtaining a benefit or pecuniary advantage.
Such elements are consistent with those identified by the Supreme Court in
R v Hayes [2008] NZSC3 at [23].
[20] With respect to the term “intent to defraud”, it is regarded as being synonymous with “fraudulently” as the basic notion of dishonesty is common to both: see R v Firth [1998] 1 NZLR 513 (CA) at 519. There, Eichelbaum CJ delivering the judgment of the Court stated that the element of intent to defraud required the Crown to prove, beyond reasonable doubt, that the accused acted deliberately and with knowledge that he or she was acting in breach of a legal obligation. Further, if the accused sets up a claim of honest belief that he or she was justified in departing from his or her strict obligations, the Crown must exclude the possibility that the accused believed that he or she was acting honestly: see R v Williams [1985] 1 NZLR 294 (CA) and R v Speakman (1989) 5 CRNZ 250 (CA).
[21] With respect to the claim of honest belief, this topic was discussed by the Court of Appeal in R v Haines [2002] 3 NZLR 13 (CA). At [24], in the context of mens rea and motive, McGrath J giving the judgment of the Court stated:
We do not accept that this Court in Firth had in mind that a defence of honest belief might be made out on the basis of a moral belief that conduct which the defendant knew involved invoicing on a basis for which there was no entitlement was nevertheless justified. At the heart of this question is whether the notion of moral evaluation inherent in a judgment of dishonesty can turn on a concept of justification that transcends ordinary standards of what is honest. The observations in Firth set out in paragraphs [21] and [22] of this judgment apply where the defendant has a belief the conduct under challenge is honest and not dishonest. They do not apply, as here, where the defendant knows the conduct under challenge is dishonest but is motivated by genuine beliefs as to the justification for the known dishonest conduct. After all it seems highly inappropriate to characterise the motives of Robin
Hood as honest. (See A Halpin, The Test for Dishonesty, [1996] Crim LR
283).
[22] Thus the Court of Appeal was distinguishing the question of mens rea (or honest belief) and motive. But it is clear that the Court was not commenting on the rather different point as to whether evidence of motive might, in appropriate circumstances, be put forward as relevant evidence to support an allegation that an accused was acting out of greed or for financial gain. I will return to this topic later.
[23] The offence created by s 228 of the Crimes Act, for which Mr S and Mr H each face one count, involves proof of three elements. The Crown must prove that each of the accused:
a) with intent to obtain a pecuniary advantage or valuable consideration
(i.e. money);
b) dishonestly and without claim of right;
c) used documents (namely invoices totalling $11,607,328.16).
[24] The Crimes Act provides definitions for the terms “dishonestly” and “claim or right” as follows:
Dishonestly
In relation to an act or omission, means something done or omitted without a
belief that there was express or implied consent to, or authority for, the act or omission from a person entitled to give such consent or authority.
Claim of right
In relation to any act means, a belief that the act was lawful, although that
belief may be based on ignorance or mistake of fact or of any matter of law other than the enactment which the offence is alleged to have committed.
Motive
[25] The nature and relevance of motive is discussed in Smith & Hogan: Criminal Law (12 ed) edited by David Ormerod. At p 131-132, motive is distinguished from the mens rea and actus reus of a crime. Motive does not usually form part of the elements of a crime and will not therefore be directly relevant to criminal
responsibility. However, when it comes to evidence, Smith & Hogan considers that motive is always relevant, at 131:
As evidence, motive is always relevant. This means simply that, if the prosecution can prove that D had a motive for committing the crime, they may do so since the existence of a motive makes it more likely that D in fact did commit it. People do not usually act without a motive.
[26] This proposition is supported with reference to the decision of R v Williams (1987) 84 Cr App R 299 (CA). Hodgson J, delivering the judgment of the Court, referred to the discussion on the topic of motive in Archbold (42 ed) at para 13-29 as follows:
Similar facts and motive.
(1) A distinction should be drawn between evidence of similar facts, usually relating to offences against persons other than the alleged victim of the offence charged, and evidence of other acts or declarations of the accused indicating a desire to commit, or reason for committing, the offence charged, i.e. motive. This distinction is sometimes blurred in reported decisions.
(2) Although the prosecution do not have to prove motive, evidence of motive is always admissible in order to show that it is more probable that the accused committed the offence charged. The position is well stated in a dictum of Lord Atkinson in R v Ball (1911) 6 Cr App R 31; [1911] AC 47 (see Archbold (42nd ed), paragraphs 13-21 ante). At [1911] AC 47, 68 he said: “Surely in an ordinary prosecution for murder you can prove previous acts or words of the accused to show that he entertained feelings of enmity towards the deceased, and that is evidence not merely of the malicious mind with which he killed the deceased, but of the fact that he killed him. You can give in evidence the enmity of the accused towards the deceased to prove that the accused took the deceased’s life. Evidence of motive necessarily goes to prove the fact of the homicide by the accused, as well as his “malice aforethought”, inasmuch as it is more probable that men are killed by those that have some motive for killing them than by those who have not.” As R v Ball (supra) was a case of incest, it is clear that Lord Atkinson’s remarks were of a general application, and not confined to murder. Other authorities are Buckley (1873) 13 Cox CC 293 (see Archbold (42nd ed), paragraphs 13-20 ante), and the cases cited in the note to Dossett (1846) 2 C & K 306.
[27] The Court of Appeal judgment in Williams also referred to another rationale for the admission of evidence of motive. This concerned the necessity of placing before the jury evidence which is part of a continual background or history relevant to the offences charged in the indictment. For example, without the jury hearing about the totality of what occurred, the available material would be incomplete or
incomprehensible. Plainly, the motive of the accused may be part of the total picture that the evidence conveys. For a discussion of the use of evidence of motive as part of the background to an offence: see ss 101(1)(c) and 102 of the Criminal Justice Act
2003 (UK) and Archbold: Criminal Pleading, Evidence & Practice (2008) at paras
13-30 to 13-32.
[28] Cross on Evidence (New Zealand edition) also discusses the admissibility of evidence related to motive at para 7.6 in the following terms:
Facts which supply a motive for a particular act, such as the impending discovery by the deceased that the person who is later accused of murder had procured loans from the deceased by means of forged documents, are among the items of circumstantial evidence which are most often admitted. Further examples are afforded by more or less any murder trial at which proof is given of facts supplying a motive for revenge, financial or amatory gain, or the removal of someone who was in a position to disclose unpleasant information concerning the accused. Conversely, facts which tend to show a total absence of motive may be adduced, as where the lack of pecuniary embarrassment on his part is proved by someone accused of arson with intent to defraud an insurance company. It is, however, easy to attach two much weight to evidence of motive. The Crown is not obliged to prove that the accused had an evil motive.
Almost every child has something to gain by the death of his parents, but rarely on the death of a parent is parricide even suspected. (footnotes omitted)
Discussion
Relevance
[29] The challenged evidence in this case might be said to be relevant to prove each of the propositions advanced by the Crown as summarised at [11] above. The fact that the defence accepts each such proposition does not make the challenged evidence any less relevant. But there are further bases for relevance advanced by the Crown, namely, that the challenged evidence is relevant to the context of the charges, to the issue of mens rea generally and to the question of motive.
[30] On the question of mens rea, I am satisfied that the challenged evidence is relevant, in the sense required by s 7(2) of the Act, to prove element (a) of the charges under s 229A of the Crimes Act. In particular, it could be important to the
issue of honest belief that what was done was justified. Further, the evidence is relevant to element (b) of the charges under s 228 of the Crimes Act, namely, that the accused acted dishonestly and without claim of right.
[31] As to motive, the authorities and textbook references noted above provide support for the admissibility of such evidence. At the end of the day, I must be satisfied that the test under s 7(3) of the Act is met. Having carefully considered the submissions on behalf of the accused, I am nevertheless satisfied that the challenged evidence is clearly admissible in that it has a tendency to prove motive, being a matter that is of consequence to the proceeding. On that basis it is relevant evidence and is admissible in the proceeding unless it is excluded under the Act or any other Act.
[32] I am also satisfied that the challenged evidence is relevant to context and background. It provides the full picture regarding the disposal of the monies received by the accused. It is not appropriate for the defence to simply include the portion that assists the client, as Mr King sought to do for Mr H . Mr H wanted only some of the evidence, which closely relates to the challenged evidence, to be included. In particular, Mr H did not object to including evidence of how monies received by Mr H were spent with regard to amounts paid to the Inland Revenue Department and for accounting fees. By contrast, Mr S seeks the exclusion of all evidence relating to how the monies were spent. The inconsistency in the defence approach on this aspect demonstrates the flaw in the argument.
Prejudicial effect
[33] The second ground of opposition was based on a submission that the challenged evidence should be excluded because its probative value is outweighed by its prejudicial effect. Having considered all of the submissions put forward in support of this contention, I am satisfied that the evidence is highly probative in a number of ways. First, it is probative of the background circumstances in the case and is properly part of the total picture as discussed at [32] above. The inconsistency of the defence approach on this issue is obvious.
[34] Further, I am satisfied that the challenged evidence is potentially probative on the issues of mens rea and motive as already discussed. What weight may be given to the evidence is a matter for the jury. But, in a legal sense the evidence is clearly probative on the issues identified.
[35] The next question is whether the probative value of such evidence is outweighed by its prejudicial effect. I am satisfied that it is not. The evidence may prove to be influential to the jury as trier of fact, or it may not. That will depend on the weight ascribed to it by the jury. But in my view it is not to be characterised as prejudicial to such an extent that it should qualify for exclusion under s 8(1)(a) of the Act.
[36] In conclusion, I do not consider that the probative value of the challenged evidence is outweighed by the possibility that it will have an unfairly prejudicial effect on the proceeding.
Result
[37] The application to admit the challenged evidence is granted. Accordingly, the Crown may lead the portions of Mr Osborn’s evidence identified as covered by the challenge as part of Mr Osborn’s evidence. The same is so for the schedules and charts that were also the subject of challenge, including the chart referred to at [10] above.
[38] Mr Bates, for the Crown, indicated during the argument that he would not open on the challenged evidence or that in the chart. He indicated he would rather wait until either Mr Osborn or other witnesses had proved aspects of the chart before introducing the chart in evidence.
[39] Accordingly, the application under s 344A of the Act is granted, subject to the reservation noted.
Stevens J
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