R v Walker CA128/01 [2001] NZCA 441 (24 July 2001)

Last Updated: 3 June 2023

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IN THE COURT OF APPEAL OF NEW ZEALAND CA 128/01

THE QUEEN

V

[ ] WALKER

Hearing: 19 July 2001

Coram: Gault J

Panckhurst J Potter J

Appearances: J Ablett Kerr QC and T J Shiels for Appellant J C Pike and D R F Gardiner for Crown

Judgment: 24 July 2001

JUDGMENT OF THE COURT DELIVERED BY PANCKHURST J

Introduction

[1] This application for leave to appeal concerns a decision of the District Court at Dunedin in which severance of counts was declined. The appeal is based upon the argument that the Judge erred in concluding that severance was not conducive to the ends of justice in the particular circumstances of this case : s340(3), Crimes Act 1961.

Crown Case

[2] In order to appreciate the relevant issues it is necessary to briefly sketch the Crown case. The indictment as presently framed contains ten counts, three of obtaining by false pretences and seven of using a document with intent to defraud. The first six counts relate to the purchase by the appellant of a Queenstown business known as the “Red Rock Cafe and Bar”. The time-frame covered by these charges is from May to August 1997. It is alleged that the Bank of New Zealand was variously defrauded by the appellant.

[3] In essence it is said that the cafe and bar was for sale for approximately $1m, being the value of land, buildings and the business itself. It is further alleged that the appellant arranged an intermediate sale through a purpose-formed company, Thompson and Ware Partnership Limited, in order to “hydraulic” the price to

$1,650,000. By reliance upon this purchase price the Crown maintains the appellant induced the Bank of New Zealand to advance $910,000 by way of mortgage when in reality the true value of the business was only about $1m. Hence count one charges that the appellant obtained the mortgage advance by falsely representing that the true purchase price for the business was $1,650,000.

[4] Count two, by way of alternative, charges that the appellant used the intermediate agreement for sale and purchase (which contained the allegedly inflated price) to secure a pecuniary advantage. Counts three and four, again alternatives, concern a source of funds which the appellant claimed to be available to him from his mother. It is alleged he falsely represented that a fund of $410,000 was available or, alternatively, that he used a document to the same end. We infer the bank was concerned to ensure the availability of working capital.

[5] Likewise, counts five and six were alternatives. They relate to the availability and source of the appellant’s cash contribution to the business purchase. Again it is alleged that the appellant falsely represented that funds of $740,000 were available to him or, in the alternative, that he used a document fraudulently for that purpose.

[6] In August 1997 the Bank of New Zealand indeed advanced $910,000 and the purchase of the business was settled. The land and buildings were thereafter owned by Red Rock Partnership Limited. The business operation, however, was conducted by Red Rock (1997) Limited another newly formed company. Perhaps unsurprisingly the business did not fare well. In late April 1998 the bank appointed a receiver and by early the following month both companies had been placed in liquidation. The appellant faced serious personal financial problems as a result.

[7] Mrs Ablett-Kerr QC accepted that the six counts relevant to the business purchase must be tried together. She sought severance of the remaining counts in the indictment which concerned events in the period May to September 1998. Before turning to the financial transactions in question, it is necessary to note that, in early May 1998, the appellant changed his name by deed poll to Michael Diamond. This circumstance assumed significance in the course of counsel’s argument.

[8] Count seven concerns a mortgage loan application to AMP/Ergo Mortgage and Savings Limited. The gist of the allegation is that on 14 May 1998 the appellant (using the name Michael Diamond) applied for a loan of $64,800, subsequently increased to $114,000. In support of the loan application the appellant provided a letter on the letterhead of Thompson and Ware. Persons of those names were the original vendors of the Red Rock Cafe and Bar. Moreover, the sale and purchase of that business was effected through the medium of Thompson and Ware Partnership Limited at the increased price of $1,650,000. (Refer paragraph [3]). The letter recorded that Mr Diamond was employed by Thompson and Ware as “our Southern Regional Manager” at a salary of $88,000. In addition two salary advice forms from Thompson and Ware were provided as evidence of periodic salary payments.

[9] Security for the loan was offered with reference to properties at Hindon Road and Sinclair Road, Taieri, and subsequently, Arthur Street, Dunedin as well. With reference to each property an agreement for sale and purchase was produced wherein Mr Diamond was shown as the purchaser, but at prices which the Crown alleges were significantly inflated. In the event, although an advance of $114,000 was eventually offered, the transaction did not proceed.

[10] Counts eight and nine relate to a loan application made to AVCO Financial Services Limited on 31 July 1998. On this occasion Mr Diamond sought to borrow

$50,000 towards the purchase of a motor vehicle costing $100,000. The same letter, on Thompson and Ware letterhead, recording a salary of $88,000 per annum was produced in support of the application. Subsequently, matters developed to the point that the application was for finance of $350,000 to build a house property. Security was again offered against Hindon Road and Arthur Street. As with AMP the transaction did not proceed. There are two counts because in addition to the Thompson and Ware letter concerning the appellant’s alleged salary, a further similar letter, on different letterhead, was provided. Again, it is the Crown case that such letter contained erroneous information.

[11] Count ten contains an allegation that on 11 September 1998 the appellant fraudulently used a loan application form in an endeavour to obtain a pecuniary advantage from the Bank of New Zealand, namely a loan of $12,000. The gist of the allegation is that it was represented to the bank that the Sinclair Road property (refer para [9]) had been purchased by Mr Diamond for $56,250 and was adequate security for the loan. In fact, it is the Crown’s case that Sinclair Road had a market value of about $5,000. In this instance the transaction proceeded in that a loan was advanced on 18 September 1998.

District Court Decision

[12] In that Court the matter was argued by both sides on a similar fact basis. That is, that whether the evidence relevant to the first six charges was admissible as similar facts in relation to counts seven to ten, was likely to be determinative of the severance application.

[13] The Judge concluded:

I have therefore reached the conclusion that there is a discernible pattern of conduct by the accused to be seen through the ten counts. There are no residual factors which convince me it would be conducive to the ends of justice to severe any counts in the indictment. The accused’s application for severance is therefore refused.

Immediately prior to this the Judge reiterated that it was not his intention to make a formal similar fact ruling, since that was a question which must be left for the trial Judge.

[14] The argument in this Court was likewise focused upon a similar fact approach. However, for reasons which we will explain, we prefer to view the matter from a slightly different perspective.

Conclusions

[15] In R v W [1995] 1 NZLR 548 (CA) this Court at 555 observed:

The general principle is that counts arising from incidents unrelated in time or circumstance are not to be tried together unless evidence as to one is relevant to another, to an extent that its probative value outweighs its prejudicial effect. That may be so in a variety of circumstances, of which similarity of the facts is one.

Later on the same page appears the further observation:

... where as here the allegations are interwoven or interconnected the desirability of presenting a case on a realistic rather than an artificial basis will usually point against severance.

[16] It follows in our view that the first inquiry is whether the separate events upon which the charges are based are unrelated in time, place or circumstance. Where they are related a number of counts may appropriately be gathered in a single indictment. Otherwise, denied the evidence of that interconnection or relationship, the jury may not have the case in its full and proper context before them. Its presentation may become unrealistic or artificial. This first inquiry, concerning whether the counts are related or interwoven, necessarily comes before any examination of similar fact considerations, should that be appropriate. Typically, the existence of similar fact evidence counts against severance in a case where otherwise, in terms of time, place and circumstance, an interrelationship between counts is absent.

[17] We are in no doubt that the counts in the present indictment should not be severed, indeed that it would be contrary to commonsense and artificial to do so.

The Crown case alleges an interconnected course of conduct on the part of the appellant over a period of about sixteen months. In such circumstances we think it is conducive to the ends of justice that a jury consider and determine the case as one.

[18] A number of features demonstrate the interrelationship between counts one to six on the one hand, and counts seven to ten on the other. As noted earlier the cafe and bar business failed in early 1998. As a result the appellant faced significant financial difficulties. That is the immediate background against which the further allegations concerning the three separate loan applications is to be considered. Moreover, when the appellant sought to raise finance from AMP/Ergo and AVCO Finance he used to establish his supposed income position a letter on Thompson and Ware letterhead, the same entity as was employed in the course of the 1997 business purchase. Hence not only does the business failure supply context, but on the Crown case a device was used which had its origin in the events of the previous year.

[19] A further aspect concerns the method of operation, or dishonest means, which it is alleged the accused employed. Reduced to its bare essentials the Crown asserts that the appellant brought into existence agreements for sale and purchase wherein the purchase prices (whether for a business in Queenstown or for properties in Taieri and Dunedin) were inflated. Thereby that there was an endeavour to dupe lenders into regarding the business, or the properties, as the case may be, as suitable security for advances of various amounts. This the Judge below characterised as a “discernible pattern of conduct”. We agree.

[20] It may be that the similarities in this regard will invite a similar fact argument from the Crown at trial. However we accept that is an issue for the trial Judge. It is not a matter about which we heard argument and nor in the circumstances need it be confronted in the present severance context.

[21] Mrs Ablett-Kerr argued that in the absence of severance there was an unacceptable risk that the jury’s consideration of counts one to six may be influenced by illegitimate prejudice, which may follow from evidence only properly referable to the 1998 counts. The highpoint of her argument was that the appellant’s change of

name in May 1998 may be visited upon him in relation to the 1997 counts, which of course represent the most serious allegations.

[22] We do not accept this. It is hardly plausible that the jury will bring to account evidence of an event in 1998 in their consideration of whether the appellant acted with honesty of purpose in 1997. In this regard we agree with the Judge below that clear directions will be necessary concerning the use to which evidence may be put and with reference to the non-availability of a propensity approach. But in our view the case is conventional in this respect and we are confident any risks are manageable.

[23] For these reasons the application for leave to appeal is dismissed.

Solicitors:

Crown Law Office, Wellington