R v Cruse [2003] NZCA 448; (2003) 20 CRNZ 271; [2003] BCL 590 (14 May 2003)

Last Updated: 4 December 2019

IN THE COURT OF APPEAL OF NEW ZEALAND

CA9/03

THE QUEEN



v



THOMAS JOHN CRUSE

Hearing: 27 March 2003

Coram: Anderson J Baragwanath J Gendall J

Appearances: A J Ryan for Appellant
K Raftery for Crown

Judgment: 14 May 2003

JUDGMENT OF THE COURT DELIVERED BY GENDALL J

[1] This is an appeal against conviction, entered in the District Court at Hamilton on 16 August 2002, of the crime of using a document with intent to defraud. The trial was on indictment before a Judge alone pursuant to s361B Crimes Act 1961.
[2] The grounds for appeal are that the verdict is unreasonable and cannot be supported having regard to the evidence; secondly, that the Judge erred in law by failing to deal adequately with the issue of intention to defraud; and thirdly, that evidence adduced at the trial raised a reasonable doubt as to guilt.
[3] The trial encompassed eight days and a decision with reasons was delivered orally on 16 August 2002. Two other counts in the indictment, namely theft and using a document to obtain a pecuniary advantage, were dismissed.
[4] The essential background facts are that the appellant had a business venture involving the purchasing and processing of deer velvet for the health product market. The appellant was an experienced deer farmer in the Waikato region, and his venture partners were local medical practitioners, Dr Butcher and Dr Kempthorne, the latter also having separate deer farming interests. A company, Velvet Health International Ltd (“VHI”), was created with the three men as shareholders and directors. That company engaged a separate company, Tom Cruse Deer Products Ltd, through which the appellant operated his individual business, to manage the processing of the velvet and to obtain green deer velvet from suppliers to manage its production. To that extent it was paid a management fee. The velvet was acquired from various sources and sent to processing factories.
[5] The charge upon which the appellant was convicted related to a tax invoice that he created in the name of Tom Cruse Deer Products Ltd and sent to VHI on 5 November 1999. In that invoice the appellant records a debt owing for supply by him of deer velvet as follows:

For the supply of

426 kilograms green velvet to VHI @ $80 per kg $34,080.00

plus drying, chucking [sic] and dehairing (processing)

@ $27 per kg $11,502.00

“Plus Last Lot of 488.4 kil Green” @ $27 per kil $13,186.80

$58,768.80

GST $7,346.10

$66,114.90

[6] Simply put, the Crown’s case was that the claim for payment for supply of 426kg of green velvet, and its processing, was fraudulent as such was never supplied by the appellant and he had no intention of supplying it. The charge turned upon whether the appellant had in fact supplied the 426kg of deer velvet, or had an honest belief that it was velvet of his, comprising that weight, which had been used in the processing of an order for 500kg of dried “chunk” velvet to a Taiwan customer.
[7] The appellant’s defence at trial was that he believed his velvet had been utilised by the processors (Oxford Deer Products) from other stocks of his held by that company, in order to make up shortfalls for the Taiwan order. The evidence was that he had given a different explanation when questioned by the police, namely that the 426kg had been sent by him to a totally unrelated company, Canterbury Antler. Further, the evidence was that he gave a different explanation to Dr Kempthorne, namely that the deer velvet had been sent to a different plant. Evidence was given by the Crown and defence concerning the operation of processing deer velvet. Some shrinkage occurs varying in degree. The industry guidelines was for a final product of about 33% of original weight, but the range of estimated loss varied between 27%-33%. As usual, weight loss occurred in the processing of “green” deer velvet supplied by VHI to Oxford Deer Products. The manager of that company, Mr White, found it necessary to access further product so as to meet the Taiwan order. He said in evidence: “I was a little bit short ... and we did take some extra but I don’t recall the quantities or anything.”
[8] Separately, VHI supplied an additional 488kg from the companies of Mr Cruse and Dr Kempthorne (recorded as 462kg in the Oxford Deer Products records), and it is that which is referred to as “Plus Last Lot” in the tax invoice. The Judge found that it was that 488 (462) kg which was supplied to make up sufficient weight to eventually meet the Taiwan order.
[9] At the trial the appellant’s case was that the 426kg of green velvet for which he had obtained payment over $51,000, the subject of the invoice of 5 November 1999 was supplied, and processing paid, by him. He said that he believed that that product had been taken from a separate stock of deer velvet at Oxford Deer Products by Mr White in order to make up shortfalls in the processing of the Taiwan order. His case was that he learnt of this after the order had been filled and it was for that reason that he then created and sent the invoice on 5 November 1999.
[10] The evidence of Dr Kempthorne was that the invoice, created after the Taiwan order had been met, arose in an entirely different way and was totally unrelated to the Taiwan order. He said that the appellant had telephoned him seeking to sell to him this green velvet which was quite unrelated to any product going to Taiwan. He did not accept such offer, either on his own behalf or on behalf of VHI. But he said it was that 426kg to which the invoice referred, and it was that which was not supplied. The reference in the invoice to “Last Lot of 488.4 kil Green” was the amount of velvet in fact required to make up the Taiwanese order, as the Judge ultimately found.
[11] There were introduced into evidence two significant documents. The first, (Exhibit 48 p16) was the contemporaneous record of deer velvet received by Oxford Deer Products, and the weight of the processed product sent by it for sterilisation. The other document (Defence Exhibit “B”), was a letter dated 24 July 2001 sent by Mr White to the appellant containing his mathematical calculations, done at the then request of the appellant, working backwards from the product delivered after processing to obtain – using certain calculating factors – an original kilogram weight of deer velvet said to be supplied to Oxford Deer Products. The appellant relied upon those calculations to support his contention that he in fact supplied 426kg of velvet and that his invoice was correct, and believed by him to be correct. We examine that letter later in para [17].
[12] The Judge found that in 1998/99 three tonnes of velvet was sent to Oxford Deer Products and then after further processing, the end product was transported to Auckland to meet the order. Whilst there were differing estimates by witnesses as to what amount of the final product could eventually be obtained from 100kg of green velvet, varying between 28 and 33kg, the Judge came to the view that there were simply too many variables for any exact assessment to be made outside the range he had already described. He referred to the evidence of the proprietor of Oxford Deer Products who developed a practice of topping various VHI batches with small amounts held in store for the company VHI so as to achieve the order that were required. But the Judge found as a fact that the appellant did not supply the product to make up any shortfall as claimed in the appellant’s invoice, nor did he have stored at the Oxford Deer Products plant any velvet to which access to such an amount could have been had. The Judge said that he did not accept the evidence of the appellant that 426kg were ever supplied by him to the company or, it follows, to the processing plant. The Judge said that he did not believe the appellant’s version of his discussions with Dr Kempthorne over the 426kg and accepted the doctor’s evidence as credible, that is the appellant had offered to supply him with 426kg but nothing eventuated, and that reference to it did not relate to the Taiwan order. He accepted Dr Kempthorne’s evidence that the reference in the invoice to 488.4kg was only to that amount required to make up any shortfall.
[13] Grounds for allowing an appeal against conviction on indictment are limited by s385(1) of the Crimes Act 1961, whether or not it arose after trial by jury or by a Judge sitting alone. The only two grounds capable of covering challenges to factual findings or reasoning are:

• (a) That the verdict of the jury should be set aside on the ground that it is unreasonable or cannot be supported having regard to the evidence; or
• (b) ...;
• (c) That on any ground there was a miscarriage of justice; or
• (d) ....

[14] This court is not authorised to retry the case on the facts. A Judge sitting alone must give reasons for the verdict, stating relevant rules of law applied and a concise account of the facts with a plain statement of the essential reasons for the findings; R v Taffs [1991] 1 NZLR 69 (CA). But it has to be kept in mind that a verdict does not need to be supported by elaborate reasons in an extensive judgment. As this court observed in R v Connell [1985] NZCA 34; [1985] 2 NZLR 233, 237-238:

To require the Judge to set out in writing all the matters that he has taken into account and to deal with every factual argument would be to prolong and complicate the criminal process to a degree which Parliament cannot have contemplated. There are cases where a point or argument is of such importance that a Judge’s failure to deal expressly with it in his reasons will lead this Court to hold that there has been a miscarriage of justice. A demonstrably faulty chain of reasoning may be put in the same category. But it is important that the decision to convict or acquit should be made without much delay. Careful consideration is an elementary need, but not long exposition.

In practice, if the reasons are of some length it has sometimes been found fairest to announce the verdict at the outset. There can be no invariable rule; the Judge will wish to take into account the implications case by case. If necessary the reason can be delivered later in writing, although preferably they should be given with the verdict.

... whether the verdict is guilty or not guilty, it is obviously impossible to work out a formula covering all circumstances. But in general no more can be required than a statement of the ingredients of each charge and any other particularly relevant rules of law or practice; a concise account of the facts; and a plain statement of the Judge’s essential reasons for finding as he does. There should be enough to show that he has considered the main issues raised at the trial and to make clear in simple terms why he finds that the prosecution has proved or failed to prove the necessary ingredients beyond reasonable doubt. When the credibility of witnesses is involved and key evidence is definitely rejected, it will almost always be advisable to say so explicitly.

[15] The appellant challenges the Judge’s findings of fact, contending that he did not understand the evidence adduced as to “weight loss”. Nor did he properly apply the uncontradicted evidence of Mr White, a Crown witness, on that crucial issue as contained in his letter of 24 July 2001 to the appellant, (Exhibit “B”). Mr Ryan submitted that there was evidence from Mr White that from time to time he supplemented product from other sources, that there was no evidential basis upon which the Judge could conclude that the 426kg of deer velvet was not supplied, and there was evidence to show that it was supplied corroborated by the mathematical calculations in Exhibit “B”. He argued that the Judge erred through overlooking or failing to understand the mathematical calculations.

The flow chart analysis

[16] This shows that the first three batches of 600kg each were utilised in producing ultimate product for a different customer. The last two batches finally produced 383.2kg to meet the Taiwan order, and the final 462kg produced 116.8kg to complete that order. The figures in the flow chart total 500kg. (They do not exactly equate with the “sent weights” in Exhibit 48, which aggregate 515kg, but small weight loss was possible in later movements).

The calculation of Mr White on 24 July 2001 – Exhibit “B”

[17] In this letter he says that he is calculating backwards from a final weight of the product taken as 1138.09kg. That is the total taken from Exhibit 48 records except for 15.31kg made up of a minor transposing error (.01kg), an additional 3.30kg supplied and the 12kg referred to as being the difference between 100kg and 88kg recorded as sent on 10 September 1999. Those differences are immaterial to the calculation process adopted by Mr White. His letter records the following calculations.

1138.09 x 3.3 : 3755.70
3755.70 x 1.15 : 4319.05
22.00 x 3.3 x 1.15 : 83.49 Returned to Cant. Antlers
4402.54
24.34
4426.88

On the face of it therefore he provides an opinion that 1138.09kg, ultimately actually produced, would have required 4426.88kg of green deer velvet. Based on that, the appellant says he created the invoice for 426kg.

Discussion

[18] The appeal essentially comes down to a consideration of whether the Judge’s findings of credibility, and other factual findings adverse to the appellant, could be said to be impugned by Exhibit “B”, and accordingly he should have been left with a reasonable doubt as to guilt.
[19] A majority of the court is satisfied that the seeming complexity and difficulty was the product of the defence tactics designed to exploit a fortuitous similarity between the invoice figure of 426kg and the last three whole digits of the notional supply figure extrapolated from Oxford Deer Product’s record on p16 of Exhibit 48.
[20] Such exhibit, created after the appellant had been charged, applied presumed loss rates to product prepared for sterilisation. The end product sent for sterilisation from 7 July 1998, amounted to 1,138kg. Extended with reference to the loss factors the assumed supply figure was 4,426kg. Coincidence of the 426 is obvious. However, when the actual amount supplied to produce the reduced amount for sterilisation is added up the figure is 3,462 (again a coincidence of some of the digits but of no significance). Mr White’s theoretical exercise therefore does not stack up against the reality of the supply recorded.
[21] At about the same time as the date on the invoice, 5 November 1999, there was a discussion between Dr Kempthorne and the appellant concerning the supply of 426kg. The invoice reference plainly relates to that discussion. Dr Kempthorne’s evidence is that he agreed to buy on the basis that the quality was the same high quality as had been supplied. No amount even vaguely comparable to 426kg of appropriate quality velvet (or any velvet) was subsequently received.
[22] In about March 2000, Dr Kempthorne asked the appellant to account for the invoiced supply and was told it was at Lowe Products. Subsequently Dr Kempthorne went to Oxford Deer Products and found there quantities of velvet, the quality of which he described as “ghastly”. There has been no suggestion by the appellant or on his behalf that this poor grade product was the subject of the invoice. Instead his proposition was that his own high quality product in store was used to make up the last component of the Taiwanese order. But p16 of Exhibit 48 coupled with Mr White’s evidence does not support that explanation. It is in fact quite inconsistent with it.
[23] This Court is not unanimously minded to disregard the possibility that the inferior quality velvet may in fact have been the subject of the invoice. And if it were, criminal fraud would not have been proved if there were a reasonable possibility either, that Mr Cruse believed the velvet to be of the quality he had represented, or, that it was in fact of such quality but had deteriorated after being appropriated to the partnership. But that was not the appellant’s case, either at trial or on this appeal. In the circumstances, if the examined product had been supplied pursuant to the invoice there would be an inevitable inference of dishonesty sufficient to support a conviction for fraud either in the raising of the invoice or in effectuating payment in respect of it. The majority of this Court is, however, satisfied that such outcome would justify applying the proviso to s385(1) of the Crimes Act, with the consequence of dismissal of the appeal in any event.
[24] The District Court Judge had Dr Kempthorne’s evidence of having been invoiced for an additional 426kg which has never been accounted for. The Court also had Mr White’s evidence which, leaving aside Exhibit “B”, could do nothing to support a reasonable doubt either about supply or honest belief as to supply by the appellant. Exhibit “B” did nothing to support the defence case for the reasons given. The District Court Judge was bound to convict unless, in reality, the appellant’s evidence raised a reasonable doubt. But he was not prepared to accept that evidence for the reasons he gives. These include conflicting accounts to Dr Kempthorne and to the police, neither of which was consistent with the appellant’s evidence at trial. There were other indications that he was a dishonest person in his dealings with the deer velvet. There is no basis for us to disagree with the Judge’s assessment of credit, on his factual findings.
[25] The Court has not been persuaded that the verdict of the trial Judge was unreasonable or could not be supported having regard to the evidence. There was an adequate evidential basis for concluding that no deer velvet to which the relevant invoice purported or was represented to relate was ever supplied. To the extent that there may be a possibility that criminal dishonesty by the appellant may have taken the form of supplying inferior quality rather than no product at all, the ingredients of the particular count would still be proved. To the extent that there may be a possibility that criminal dishonesty related not to the raising of the invoice but to effectuating payment against it, the particulars of the document rather than the ingredients of the offence might be amended, without consequence, or the proviso applied. At all events the appeal must be dismissed.

Solicitors:
Crown Solicitor, Auckland