R v Hendon
[2015] NZHC 48
•2 February 2015
ORDER PROHIBITING PUBLICATION OF THE JUDGMENT AND ANY PART OF THE PROCEEDINGS (INCLUDING THE RESULT) IN NEWS MEDIA OR ON THE INTERNET OR OTHER PUBLICLY AVAILABLE DATABASE UNTIL FINAL DISPOSITION OF TRIAL. PUBLICATION IN LAW REPORT OR LAW DIGEST PERMITTED.
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CRI 2013-085-3520
CRI 2013-085-10823
CRI 2013-085-10822 [2015] NZHC 48
THE QUEEN
v
ANTHONY JOHN HENDON JOHANNES HENDRIK MARIA MIDDELDORP NOELENE KAY BANTON
Hearing: 10 December 2014 Appearances:
G J Burston, P W Gardyne and M J Ferrier for the Crown
C Nicholls for Mr Hendon
No appearances for Mr Middeldorp and Ms BantonJudgment:
2 February 2015
JUDGMENT OF MALLON J
Introduction
[1] Mr Hendon and his co-accused are to stand trial this month on charges of reproducing documents with intent to cause loss1 and alternative charges of dishonestly using documents.2 The trial is to take place in the High Court before me
in a Judge-alone trial. The Crown applies for an order that evidence of Mr Hendon’s
1 Crimes Act 1961, s 258.
2 Section 228.
R v HENDON [2015] NZHC 48 [2 February 2015]
2002 convictions and sentencing under the Fair Trading Act 1986 are admissible as propensity evidence at trial. The application is opposed by Mr Hendon.
[2] The Crown contends that the evidence is relevant and highly probative in relation to the likely trial issue, namely whether the Crown has proved the mens rea of the offences beyond reasonable doubt. The evidence is said to demonstrate a propensity for Mr Hendon to act in a particular way or to have a particular state of mind, namely to operate a fraudulent scheme in circumstances which mirror and underpin the methodology employed in the current charges. The probative value of that evidence is said to outweigh any risk of illegitimate prejudice, the prospect of which is limited, if not removed, in the context of a Judge-alone trial in any event.
The charges
[3] A draft summary of facts provided by the Crown gives an overview of the circumstances of the alleged offending. The overall allegation is that Mr Hendon and his co-accused sought financial gain under the guise of legitimate businesses by dishonestly using fax proof documents as part of a pro-forma invoicing scam for fictitious advertising.
[4] There are 24 representative charges relating to 1,732 document reproductions in the period between October 2009 and October 2012. Mr Hendon sought approximately $1,077,000 from multiple victims and the alleged pecuniary advantage obtained was approximately $786,000.
[5] Pro-forma invoicing involves issuing an invoice for goods or services without the buyer having agreed to purchase them. The buyer is then tricked into paying for goods or services they did not order. It is alleged that Mr Hendon created fax proof documents purporting to be associated with a legitimate business. The document would reproduce an advertisement, usually a genuine advertisement the buyer had placed in a legitimate magazine. The fax would bear a magazine name created by Mr Hendon and would contain instructions on how to approve the advertisement, a timeframe for providing confirmation, the cost, and a place for the buyer (the victim) to sign.
[6] The transmission of the fax proof would often be accompanied by telephone discussions with the victim. Mr Hendon or his co-accused would typically suggest that someone else from the victim’s business had previously agreed to the advertisement, or that they had advertised in the past with the (fictitious) magazine, and that this was part of the on-going relationship. On occasion Mr Hendon would deceitfully state the number of copies of the magazine that would be published and its circulation figures. On occasion a very small number of magazines were printed (being a small fraction of the numbers earlier represented).
[7] The Crown has prepared a preliminary and very draft outline of the elements it is required to prove in respect of the charges. For the reproducing charges these are identified as being:
(a) Mr Hendon made a document which is, in whole or in part, a reproduction of another document; and
(b)in making the reproduction, Mr Hendon dishonestly intended to cause loss to another person.
[8] The Crown says that the documents were the fax proofs and that these contained advertisements that were in part reproductions of advertisements previously placed in bona fide publications. The Crown says that Mr Hendon had a dishonest intent to cause loss to potential advertisers. It says that this was because Mr Hendon intended that the potential advertiser would have a false expectation as to the value which the reproduced advertisement would have if published, sufficient to induce the potential advertiser to make the payment requested in the fax proof. It also says that Mr Hendon did not honestly believe that his actions in reproducing the advertisement would give the potential advertiser the benefit it expected in return for the payment sought.
[9] For the alternative charges of dishonestly using documents, the elements are identified as being:
(a) Mr Hendon used a document;
(b) in using the document he intended to obtain a pecuniary advantage; (c) in using the document he acted dishonestly; and
(d) in using the document he had no claim of right.
[10] The Crown says that Mr Hendon used a document by transmitting each fax proof. The intended pecuniary advantage was the amount Mr Hendon sought from the potential advertiser in the fax proof. The pecuniary advantage was obtained dishonestly because it was payment on the basis of fraud (as I understand it, including that the potential advertiser had already requested the advertisement, and as to the extent and nature of the magazine in which the advertisement would be placed). Mr Hendon did not believe at the time of transmitting each fax proof that his actions were lawful.
The Fair Trading Act 1986 convictions
[11] The proposed propensity evidence is Mr Hendon’s 55 convictions on charges of false representations pursuant to ss 13 and 40 of the Fair Trading Act 1986. Mr Hendon pleaded guilty to the charges and was sentenced in the North Shore District Court on 11 July 2002 to a fine of $20,000.
[12] The summary of facts in relation to those charges explains that Mr Hendon and others on his behalf identified potential advertisers and made cold calls aimed at persuading them to advertise in a nominated publication. False representations were made that the prospective advertiser had previously discussed and agreed to the advertisement and had previously provided Mr Hendon with a draft advertisement for placement, and that the call was being made on behalf of the publication in which the advertisement would be published. Mr Hendon would then forward to the prospective advertiser draft advertisements for proofing, together with a confirmation statement and invoice. Most of the advertisements were a photocopy of an earlier advertisement legitimately placed by the advertiser in another publication.
[13] The information before me does not indicate which particular sub paragraph of s 13 the charges concerned. The most likely is s 13(c). That provides that:
[n]o person shall, in trade, in connection with the supply or possible supply of … services … make a false or misleading representation that a particular person has agreed to acquire … services[.]
[14] A false representation is one which is untrue. It does not require that the defendant knows that it is incorrect.3 A misleading representation is one which may be literally true but which may lead a person into error.4
[15] Section 40 provides that a contravention of s 13 is an offence and an individual or body corporate is liable on conviction to a fine. At the relevant time the maximum fine for an individual was $30,000.
Mr Hendon’s opposition to propensity evidence
[16] Counsel for Mr Hendon submits that the proposed propensity evidence is not propensity evidence at all.5 I do not accept that submission. As counsel acknowledges, the definition of propensity evidence is a wide one. The proposed evidence is evidence tending to show that Mr Hendon makes false or misleading representations to induce potential advertisers to pay for advertisements. Those false or misleading representations include telling potential advertisers that they had already agreed to the advertisement (or similar) and using legitimate advertisements obtained from other publications.
[17] The real issue is whether the proposed propensity evidence is probative of any trial issue. Counsel for Mr Hendon submits that it is not. He says that Mr Hendon accepts that misleading or dishonest sales techniques were used to obtain business from potential advertisers but, having obtained their business in that way, the advertisers either got what they bargained for and/or Mr Hendon intended to publish the magazines in which the advertisements were to appear. Counsel for Mr
Hendon submits that the proposed propensity evidence does not assist because the
3 Thomas Gault (ed) Gault on Commercial Law (online looseleaf ed, Brookers) at [FT13.08(1)].
4 At [FT13.08(2)].
5 That is, as defined by the Evidence Act 2006, s 40.
summary of facts in relation to the Fair Trading Act convictions does not indicate whether any magazines were published or not.
My assessment
[18] The Crown has provided a signed brief of evidence of Mr James Burns. He was a co-accused in respect of the present matters and pleaded guilty to 14 charges of dishonestly using a document. He worked for Mr Hendon in making calls to potential advertisers during the period that is the subject of the present charges. In his brief of evidence he sets out the methodology employed. He describes the kinds of things that they would say in the cold calls to potential advertisers to trick them. He says that it was never intended that magazines would be published in the numbers they represented to potential advertisers. He says that they would only invoice those who signed and returned the fax proof and had therefore agreed to pay the invoice. Mr Hendon explained to him that as long as they printed off a few magazines then what they were doing was a matter for the Commerce Commission and not a crime.
[19] Mr Burns’ proposed evidence is relevant to whether the business operated by Mr Hendon was a dishonest one. His evidence is that there was never an intention to print and distribute magazines as was represented in the calls to potential advertisers. If his evidence is accepted, it supports the Crown’s case that Mr Hendon did not honestly believe that potential advertisers would obtain the benefit they expected for their payment (that is, he dishonestly caused loss or dishonestly obtained an advantage). Mr Burns’ proposed evidence is also relevant in setting out the methodology employed. It was similar to but had evolved from the methodology employed in relation to the Fair Trading Act convictions and Mr Burns’ proposed evidence assists in explaining that. The Fair Trading Act convictions are therefore relevant background to how the present methodology came about.
[20] At this stage it is difficult to come to a firm decision on the probative value of the proposed propensity evidence. On the information before me it is not clear whether, in relation to the earlier Fair Trading Act convictions, magazines were or were not published and, if so, how many. However, the Fair Trading Act convictions
do appear to be highly probative of whether dishonest statements were made to potential advertisers. As indicated by the summary of facts and Mr Burns’ brief, the kinds of false or misleading statements made in the calls to potential advertisers appear to be very similar to the kinds of statements that were the subject of the Fair Trading Act 1986 convictions. While I am told that Mr Hendon admits making those statements, I have not been directed to any formal admission about that and therefore do not know with any certainty the scope of what is or is not admitted.
[21] If the evidence is admitted, whether as relevant background to how the business operation came about or as establishing a propensity to make dishonest representations to obtain money from victims, the risk of unfair prejudice is essentially non-existent in the context of a Judge-alone trial. It is better that the parties have the opportunity in the context of all the evidence in the trial to make submissions on the relevance of the Fair Trading Act convictions and sentencing and the weight I should give to it, if any. If the evidence is not particularly probative of any trial issue then I will not be influenced by it in determining whether the charges are proven. Nor will evidence of the Fair Trading Act convictions and sentencing unduly lengthen the trial.
Result
[22] In these circumstances I consider it appropriate to decline to rule inadmissible the Fair Trading Act convictions and sentencing. Rather I rule it provisionally admissible. The parties will be able to make further submissions in the course of the trial or in their closing submissions as to its relevance and the weight that should be given to it, if any.
[23] I note that the Crown originally proposed to adduce, as part of the proposed evidence, that the District Court Judge said to Mr Hendon at the time he was sentenced on the Fair Trading Act convictions “[i]f you come back before me in relation to any further serious fraudulent offending, I will send you to prison”. At the hearing on this application the Crown accepted that these comments were not properly propensity evidence. I also understand that the sentencing remarks of the Judge are not available and that this comment is based on information from the
prosecutor in the Fair Trading Act proceeding. It is not known if Mr Hendon accepts that this was in fact said. Be that as it may, any such comment does not seem to me to be relevant to any issue I will have to decide in considering whether the Crown has proven the charges. I rule that part of the purposed propensity evidence inadmissible.
Mallon J
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