The Queen v Fong

[2007] NZCA 467

IN THE COURT OF APPEAL OF NEW ZEALAND

CA35/07
[2007] NZCA 467

THE QUEEN

v

JOHN FONG

Hearing:19 September 2007

Court:Ellen France, John Hansen and Wild JJ

Counsel:D J Allan for Appellant

R L Mann for Crown

Judgment:29 October 2007 at 11 am

JUDGMENT OF THE COURT

The appeal is dismissed.

REASONS OF THE COURT

(Given by Ellen France J)

Introduction

[1]       Following a Judge alone trial before Heath J, the appellant was convicted on 15 December 2006 on one charge of altering a Land Transfer Act document with intent to obtain a benefit by deception (s 259(1)(a) of the Crimes Act 1961).  The particular charge was that:

[The appellant] on or about the 30^th day of March 2004 at Hamilton knowing a document namely a transfer instrument executed by ANZ Banking Group on 1 March 2004 to have been altered with intent to obtain by deception a benefit namely the registration of the transfer of fee simple used it with intent to obtain by deception that benefit.

[2]       The appellant was sentenced on 15 December 2006 to 300 hours community work.  He appeals against conviction on the basis of s 385(1)(a) of the Crimes Act, namely, that the verdict was both unreasonable and could not be supported having regard to the evidence. 

Background

[3]       The appellant was charged along with three others in relation to dishonesty offences detected during a police operation known as Operation Allsorts.  The charges arose out of four separate transactions.  The transaction in which the appellant was involved was known as the Te Miro transaction. 

[4]       By the time the appellant and the three others came to trial, the major participants in the various fraudulent transactions, including Miles McKelvy, had pleaded guilty to various charges.  The issue at trial was whether each of the accused was complicit in the offending.

[5]       The particular factual background to the charge against the appellant is set out in more detail by Heath J at [283] to [357] of the reasons for verdict: HC HAM CRI 2006-419-134.  We summarise what occurred below.

[6]       The appellant, an experienced conveyancing practitioner, received instructions from Mr McKelvy as Trustee of the T & R Trust to act on a purchase of a rural property at 232 Te Miro Road, near Cambridge.  The agreement for sale and purchase, which was dated 13 February 2004, showed the vendor as South Waikato Developments Limited and the purchaser as T & R Trust.  The appellant became aware that South Waikato Developments had been struck off the register of companies but the appellant was asked by Mr Warburton, acting for South Waikato Developments, whether the name of the vendor could be changed to Avalon Leasing Limited.  Mr Warburton also advised that the sale to Avalon Leasing was by way of a mortgagee sale. 

[7]       A search of the title of the property obtained by the appellant on 25 February 2004 showed that the title to the property was at that time registered in the name of Thomas Fatu and was subject to mortgages in favour of ANZ and Halifax Finance Limited.  Thomas Fatu is the son of Arden Fatu who the appellant knew had an association with Mr McKelvy.

[8]       The transaction in which the appellant was acting would normally have required him to prepare a transfer from, by then, Avalon Leasing to T & R Trust and to attend to the documentation associated with T & R mortgage finance on the purchase.  That mortgage finance was to be from ASB.

[9]       However, in the meantime, what had been decided was that a Mr Newlands  would buy Thomas Fatu’s ANZ mortgage and that the fee simple in the property would be transferred from Mr Newlands to Avalon Leasing by way of mortgagee sale.  Avalon Leasing would then transfer the property to the T & R Trust subject to a mortgage executed by Mr McKelvy (T & R Trust) in favour of ASB.  Mr Fong accordingly received from Mr Warburton the original transfer of the ANZ mortgage to Mr Newlands. The appellant’s staff then prepared documentation to enable the various transactions to be registered.

[10]     What happened next was that the appellant altered the transfer of the ANZ mortgage.  He altered that document by adding wording referring to the proposed mortgagee sale to be conducted by Mr Newlands.  He crossed out Mr Warburton’s signature in the certificate of correctness and added his own.  The effect was to suggest ANZ was transferring not the mortgage but the fee simple as if ANZ were the one exercising its mortgagee’s power of sale.

[11]     The details of the alterations made to the transfer by the appellant are summarised in the following way by the Registrar-General of Land in a facsimile dated 5 May 2004:

While the transfer form itself appears to contemplate a transfer of the interest of ANZ as mortgagee under Mortgage No 5547754.3, the annexure schedule recites various matters relating to a supposed mortgagee sale.  The “Transferor” panel of the transfer form has been altered to include a reference to the annexure schedule.  That alteration and the annexure schedule itself do not appear to have been authorised or initialled by or on behalf of ANZ.  There is a further irregularity in that the signature originally entered in the certificate of correctness appears to have been crossed out and replaced with [the appellant’s] own.

I have raised these matters with Shieff Angland, the lawyers acting on behalf of ANZ.  They are very concerned about these alterations and have confirmed that they were not made with the authorisation of the bank.  They are adamant that the transfer when executed by ANZ did not include the annexure schedule and was intended to operate as a transfer of the mortgage interest only.

[12]     The appellant gave evidence at trial.  He accepted that he had altered the mortgage transfer document and that he had tried to register the documentation in its altered form.

[13]     The defence was essentially that this was not a deception because, given the exigencies of a busy practice, the appellant honestly but mistakenly thought that ANZ was intending to send him a transfer of the fee simple rather than a transfer of a mortgage. 

[14]     The Crown case was that the evidence was entirely inconsistent with the belief that this was ANZ carrying out a mortgagee sale.  The matter was put in the Crown closing in this way:

[The appellant]  can’t have believed that it was a mortgagee sale from the ANZ to the man Newlands and if [he] can’t have believed that, when [the appellant] nevertheless changed the transfer and attempted to register it, [he was] intending to obtain that benefit of registration by deception.  It matters not, actually whether it could have been done the other way, because the registration would have in fact provided a benefit, and if he didn’t believe it was a mortgagee sale by the ANZ, then it’s a deception.  He did that and the intent must have been to obtain that benefit by deception because that’s a necessary consequence.  So the whole focus is on whether or not there’s a reasonable possibility that [the appellant] actually believed this was a mortgagee sale and he was simply reflecting the truth.

Judgment of the High Court

[15]     After a careful analysis of the transactions, the background circumstances, the appellant’s knowledge at various points of time and the appellant’s acceptance that he had altered the document with the intention that it would be acted upon, Heath J concluded that the Crown had proved beyond reasonable doubt that the appellant lodged the document for registration with the intent to obtain that benefit by deception.  The Judge inferred that the appellant had done so on the instruction of Mr McKelvy. 

[16]     The Judge reached his conclusion against the background of a finding at [391] that if ANZ had effected a mortgagee sale, the transactions between Mr Newlands and Avalon Leasing, and Avalon Leasing and T & R Trust could have been registered as simple transfers thereby avoiding Mr Newlands assuming obligations as mortgagee under s 103A of the Property Law Act 1952.  (Section 103A provides that a mortgagee who exercises a power of sale of land or other mortgaged property owes a duty to the mortgagor to take reasonable care to obtain the best price reasonably obtainable as at the time of sale.)

[17]     The following factors were relevant in Heath J’s reasoning:

(a)The appellant knew that the transaction was being effected through related parties;

(b)The documentation made it plain that the transfer was of the mortgage, not the fee simple;

(c)The appellant knew that he should not alter the document and indeed the Judge found (at [394]) that this was such a fundamental matter that it should have set “alarm bells” ringing;

(d)The appellant was an experienced conveyancer and had spent from 1969 – 1997 working in the Public Trust Office as a solicitor.  Indeed, Heath J took the view at [419] that the appellant was attempting to “feign a level of incompetence” that was difficult to accept for a solicitor in practice for such a period and holding himself out as specialising in conveyancing;

(e)The appellant had acted for Mr McKelvy (whom the Judge at [423] described as manipulative), for some years although the appellant sought to downplay that period;

(f)There was an opportunity for Mr McKelvy to instruct the appellant to alter the document and there was evidence of Mr McKelvy exerting influence over the appellant.  The Judge noted that the appellant had been persuaded to draw $1800 out of an ATM machine to help Mr McKelvy to pay some unspecified bills.  That money was not repaid until the transaction was settled.  The Judge at [422] placed some reliance on the fact that a client, apparently not a close acquaintance, could “exert sufficient influence” over a solicitor to persuade him to draw $1800 of his personal money out of a bank for the client’s purpose; and

(g)The appellant gave a different explanation as to his actions to that given at trial in an affidavit in the negligence proceedings brought against him by ASB.

[18]     The Judge concluded, contrary to the appellant’s evidence, that Messrs Newlands, Findlay and McKelvy all attended together on the appellant to execute the relevant documents.  As the Judge put it, this was a related party transaction and there was no reason to have all parties attending at different times.  Heath J said that there were a number of other factors that ought to have put the appellant on enquiry as to the nature of the transaction, including the fact that the vendor had been struck off the register; that the overall effect of the transaction was to transfer from Mr Fatu’s son to Mr McKelvy, the fee simple in the Te Miro Road property; and that no money from the ASB mortgage advance was paid to anyone not associated with Mr McKelvy or Mr Findlay (Avalon Leasing).

Grounds of appeal

[19]     There are three grounds in the notice of appeal, namely:

(a)There was no evidence to support the Judge’s adverse inference at [421] of the reasons for verdict, namely that the appellant was instructed by Mr McKelvy and others to alter the ANZ transfer documents;

(b)The Crown did not negative beyond reasonable doubt an inference of honest mistake by the appellant that was available on the evidence before the Court; and

(c)The Judge found the appellant guilty on a basis different from the Crown case.

[20]     Mr Allan developed the submissions on these three points, although the third one was not pursued in the way it is put in the notice of appeal.

[21]     The starting point is that the appellant accepts that Heath J correctly directed himself as to the law on s 259(1)(a).  The Judge said at [47]:

In relation to the s 259(1)(a) charge the Crown must prove beyond reasonable doubt that an accused:

a)        Used a document

b)Knowing that the document had been altered with intent to obtain property by deception

c)With intent to obtain property by deception.

[22]     Similarly, there is no direct challenge to the Judge’s credibility findings per se.  The Judge at [54] accepted that the appellant was truthful as to the surrounding events but “in denial” as to his involvement in the alteration of the Land Transfer Act document.

[23]     The appellant then says essentially that the Judge could not infer that there was an instruction to alter especially as the documentary evidence was of an instruction to lodge the transfer unaltered.  If the appellant was being instructed or persuaded to alter the document, the appellant argues that would have occurred before the ANZ transfer was received.  But, in fact, he says that the document came after what the Judge found was a meeting between the appellant and the relevant other men.  In this context, the appellant also says that the Judge should have expressly considered the documentary evidence.

[24]     Further, the appellant submits that even if the appellant’s evidence could be put to one side, the inference of honest mistake could not be ignored.  It is said that the Judge needed to expressly say why he had rejected the appellant’s explanation that he thought it was a mortgagee sale.

[25]     In relation to the submission that the Judge could not have reached the conclusion he did, the appellant relies on a number of factors:

(a)The documentary evidence which includes the instruction to lodge an unaltered document;

(b)This was not a very good alteration and there were errors in the document;

(c)There was no benefit from altering the documents – the appellant’s client was Mr McKelvy and Mr McKelvy could have got title from the documents in their unaltered form;

(d)Mr McKelvy was not exposed to risk under s 103A because Mr Newlands did not purchase the property at an undervalue so the interests of Halifax were not prejudiced; and

(e)Far from being beneficial, the alteration had adverse downstream consequences for the appellant and the others.  In particular, the appellant was subsequently sued for negligence by the ASB.

Discussion

[26]     The factual matrix is fairly complex but Heath J is right when he says at [357] and [392] that there is only one issue.  That is, whether the appellant lodged the document for registration with an intention to obtain that benefit by deception.  The benefit sought to be obtained was an apparent transfer by ANZ of the fee simple under its exercise of a power of sale as mortgagee in circumstances where ANZ had never agreed to that.  The appellant accepted he had altered the document.  He accepted also that he knew this was to obtain the benefit of registration and what occurred was used to obtain that benefit.  He said that he did try to register the document in the altered form and thought that a mortgagee sale would thereby be achieved, and that he expected the registration would go through.

[27]     There is some dispute as to exactly what test should be applied when s 385(1)(a) of the Crimes Act is relied on and in particular whether the test in R v Ramage [1985] 1 NZLR 392 at 393 (CA) should still apply. The issue of the approach to s 385(1)(a) is currently under consideration by the Full Court in R v Munro CA33/07 and by the Supreme Court in O v R [2007] NZSC 49. Whatever test is ultimately adopted, however, this case would not come near to meeting it.

[28]     This is one of those cases where the appellant’s credibility was central.  Unless his explanation as to his mistaken belief was accepted, the only available conclusion was that the charge had been proven.  Further, even if the appellant’s evidence could be put to one side, the documentary evidence relied on by the appellant in fact supports the conclusion that the charge was proven.

[29]     Heath J’s rejection of the appellant’s explanation as not credible was inevitable.

[30]     The explanation the appellant gave at trial was as follows:

I was very busy and I never got round to checking the, ah, abstract, ah, documents for registration which my staff have prepared and lodged in my pigeonhole checking for registrations.  I kept on taking it back home every time at lunch and finally on the 29^th or 30^th I realised that I had better get on to it, so at the time I opened the bundle I saw the ANZ and my first thought was “Oh, this is wrong” it was an ANZ mortgagee sale and I quickly then got it changed, um, when I got back to the office got my staff to type this (inaudible) and then, um, sign it but I didn’t really check enough because the, to make it a mortgagee sale it wasn’t really effective at all.

[31]     There is nothing in the documentation that might have led the appellant to that view.  Indeed, the appellant’s own file note recorded a discussion with Mr Warburton (solicitor for Avalon Leasing) who said: “ANZ are selling mortgage to Newlands.  Newlands on-selling to Avalon Leasing Limited – Avalon (R Findlay) onselling to Miles.”  In addition, in cross-examination the appellant said that “when [I] had an early discussion perhaps with regard with why the agreement, the vendor in the agreement, somewhere along the line [I] was told somehow that it was a mortgagee sale so perhaps [I] then erroneously thought”.  He later reiterated that “somehow in the back of my mind [I] thought it was”.  When pressed further about this in cross-examination, he said it was “just a flash” and he had to get on and get it fixed. 

[32]     When asked about how credible that explanation was, the appellant replied:

Oh, well, I was very stressed, very busy, I had the two solicitors who weren’t really experienced and one was being taught since January so I was forever in her room and rushing back to my office answering phone calls or trying, so … all that, I just obviously didn’t think properly, or, or was even rational, you like to say it, and quickly just attach it.  Ah, I did this during my lunch time, knowing that, um, could be half way through and I’ve got other things to do and I’ve got to get back to the office to, um, to see an appointment, so it’s a matter of rushing.  It’s no rush that it’s not even really a good amendment.

[33]     It is however inexplicable, given the matters identified by the Judge, that the appellant altered the document other than with the requisite intention. 

[34]     In this respect, the Judge was quite right to consider that the appellant, especially given his experience as a solicitor with the Public Trust and elsewhere, did know that he ought not to do this and indeed that alarm bells would have been ringing.

[35]     The Judge was also correct to take into account the different explanation given by the appellant in his affidavit in the ASB proceedings.  In that affidavit he said:

I was informed before settlement by either Mr Warburton, the solicitor for the vendor, or Mr McKelvy, that the registered proprietor of 232 Te Miro Road, Cambridge, Mr Fatu was in default of his mortgage to the ANZ and had been served with a Property Law Act notice.  The ANZ had sold its mortgage interest to James Newlands who then sold the fee simple to Avalon Leasing Ltd.

[36]     There was, as raised with the appellant in cross-examination, no reference in that affidavit to there being an ANZ mortgagee sale.  The appellant’s explanation for his different recollection was a bit of confusion and the fact that he had not had the opportunity before swearing the affidavit to review all of his files.

[37]     By contrast, when the matter was raised with the appellant by Land Information New Zealand, the appellant in a facsimile dated 30 April 2004 said this:

1.        [I] confirm that the annexure regarding the mortgagee sale was erroneously attached by me to the Transfer from ANZ to Newlands, whereas it should have been attached to the Transfer from Newlands to Avalon Leasing Limited.

2.        My client obtained mortgage finance from ASB Bank and I have an obligation to the bank for the registration of its mortgage.

3.        I have spoken to Mr George Bogiatto who informed me that he has spoken to you and that the problem relates to the wrong attachment of the annexure.

[38]     Later, in a facsimile dated 5 May 2004, the appellant said:

After settlement my staff prepared the registration abstract and the documents were handed to me for checking before lodging in your office.  Unfortunately at that time, I thought that the mortgagee sale was by the ANZ and I was in two minds as to whether I should return the Transfer to Mr Bogiatto.  As I wished to lodge the documents without delay, I thought I would correct the defect myself and proceeded to amend the Transfer by adding the reference to the annexure in the Transferor part, attached this annexure to the Transfer, and deleted Mr Bogiatto’s signature as to correctness and signed it myself.  I realise now that I was in error and regret that I had effected those amendments.

[39]     The facts relied on by the appellant, namely, the absence of any express written instruction to alter the document, that the alterations were not very good, that there was no need to alter the documents, and that what he did attracted adverse consequences, do not detract from the Judge’s conclusion.  The fact that the ruse may not have stood much scrutiny is perfectly consistent with an intention to deceive.  The absence of any written instruction to the appellant to alter the document is hardly surprising in the circumstances. Against that background, the Judge was right to draw the inferences he did.

[40]     For these reasons, we consider that Heath J was plainly right to find the charge proven beyond reasonable doubt.  The appeal is therefore dismissed.

Solicitors:

Crown Solicitor, Hamilton