The Queen v McGrouther [2004] NZCA 23; [2004] 2 NZLR 450 (22 March 2004)

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The Queen v McGrouther [2004] NZCA 23 (22 March 2004); [2004] 2 NZLR 450

Last Updated: 18 December 2011

IN THE COURT OF APPEAL OF NEW ZEALAND

CA349/03THE QUEEN

v

DEBORAH ISABEL MCGROUTHER

Hearing: 11 March 2004

Coram: Glazebrook J John Hansen J Ronald Young J

Appearances: J J McCall for Appellant
A C Hughes-Johnson QC for Crown

Judgment: 22 March 2004

JUDGMENT OF THE COURT DELIVERED BY RONALD YOUNG J

[1] The appellant was convicted in the District Court at Christchurch on three counts of conspiring to defraud and four counts of using a document with intent to defraud (s229A(b) Crimes Act 1961 prior to the1/10/03 amendment). She was sentenced to 12 months imprisonment. She appeals against her conviction on three of the four counts of using a document. These are counts 11, 12 and 13 in the indictment. They state:

Section 229A(b)

Crimes Act 1961 11. The Solicitor-General further charges that DEOBORAH ISABEL McGROUTHER `and BERNARD JACKSON, on or about 5 October 1998, at Christchurch, with intent to defraud used a document capable of being used to obtain a pecuniary advantage, namely a Mortgage Solutions Loan Application on their behalf, for the purpose of obtaining for themselves a pecuniary advantage of $356,800 in relation to Units 1 and 2, 174 Clarence Street, Christchurch.

Section 229A(b)

Crimes Act 1961 12. The Solicitor-General further charges that DEOBORAH ISABEL McGROUTHER and BERNARD JACKSON, on or about 5 October 1998, at Christchurch, with intent to defraud used a document capable of being used to obtain a pecuniary advantage, namely a Mortgage Solutions Loan Application on their behalf, for the purpose of obtaining for themselves a pecuniary advantage of $353,600 in relation to Units 3 and 4, 174 Clarence Street, Christchurch.

Section 229A(b)

Crimes Act 1961 13. The Solicitor-General further charges that DEOBORAH ISABEL McGROUTHER and BERNARD JACKSON, on or about 5 October 1998, at Christchurch, with intent to defraud used a document capable of being used to obtain a pecuniary advantage, namely a Mortgage Solutions Loan Application on their behalf, for the purpose of obtaining for themselves a pecuniary advantage of $176,800 in relation to Unit 5, Clarence Street, Christchurch.

Facts

[2] The appellant’s involvement in these three counts can be simply stated. The Crown allege that the appellant and her co-accused completed and signed a false loan application form. The application form was given by the appellant to Mortgage Solutions Ltd, a mortgage broker with the intention that it be given to lenders to raise finance. In fact, Mortgage Solutions did not pass the loan application form on to any prospective lender.
[3] The appellant applied pre-trial to a District Court Judge pursuant to s347 Crimes Act 1961 to discharge her on the three fraud counts. The appellant alleged that in the particular facts of this case the loan documents were not “used” by her to obtain a pecuniary advantage because they were never received by any prospective lender. Judge Doherty refused the application. He concluded that “used” in the context of s229A has its ordinary meaning. He said:

The word “used” in the context of s229A of the Crimes Act 1961 has its ordinary meaning. To use a document simply means that to employ it as part of a process to achieve a desired end, knowing that it will assist you in achieving that end. In the context of this case, that end was to obtain mortgage finance. . . .

The words “capable of being used” import a potential. In the context of this case, for example, if it is used in a certain way the loan application form could be instrumental in producing a tangible benefit, namely mortgage finance.

[4] He distinguished both R v Baxter [1998] 3 NZLR 144 and Adams v R [1994] 12 CRNZ 379 which the appellant had relied upon. He concluded:

Applying those principles to those of s347 the question is whether a jury directed as to the meanings of “used” and “capable of being used” could find that by completing the document and providing it to Mortgage Solutions, with instructions to get finance, the accused used it with appropriate intention. The jury could clearly draw the proper inference that the accused provided the application form to the broker with the intention that it assist the obtaining of finance. The fact that the original intention was countermanded by an instruction (deposition evidence of M R Manton page 337) does not matter.

The accused rely on R v Baxter and R v Adams. R v Adams was a conspiracy case. It is an essential ingredient in conspiracy to defraud that the conspirators have agreed to practice a fraud on somebody. For that reason the Courts have found that “the somebody” must possess some right or interest “which is capable of being prejudiced whether by actual loss or by being put at risk” (Adams page 391). There is a fundamental difference between conspiracy and fraudulent use of a document. In the latter the emphasis is on intention of the accused at the time, notwithstanding the potential outcome. Whereas in the former, the emphasis is upon the proof of an agreement to defraud a particular person in a particular way.

R v Baxter can also be distinguished. In Baxter it was held that a letter to investors seeking funds was not “used” until it was received by those being solicited. In other words the offending document was put into the hands of those the user intended to act upon it. In this case the application form was put into the hands of Mortgage Solutions, the entity the accused intended to act upon it for the ultimate purpose of obtaining finance from a lender.

The concept of use of a document specifically relates to the knowledge and intention that the dishonest provision of the document has the potential to produce an advantage. In this case, by giving it to Mortgage Solutions the accused have created that potential. This can be contrasted with an action such as creating the document and then leaving it in a drawer and not providing it to the broker. Those actions are clearly outside the ambit of s229A as the potential or capability of producing the benefit has not arisen.

[5] Judge Abbott was the trial Judge. He directed the jury on the question of “use” in this way:

It will be apparent from what I have just said that the signing of a loan application does not constitute using it but that presenting the application to a broker with the intention that it then be used by him or her in an attempt to obtain finance constitutes the use of that application. The application does not have to be presented by the broker to a bank for it to be used by the applicant for finance in the context of a using a document charge. Indeed, an applicant for finance may or may not be aware when or to whom a broker may submit an application which has been given to him or her.

The appellant’s case

[6] The appellant submitted the issue for this Court could be framed as the following question:

For the purposes of s229A(b) of the Crimes Act 1961, is a loan application form (being the document relied on in these particular circumstances) used when the mortgage broker client, being the Appellant, gives the form to the mortgage broker, or is the form used when the mortgage broker passes it to a lending institution, being the entity against whom the possible pecuniary advantage may be obtained?

[7] The appellant submits that the Judge erred in failing to follow R v Baxter (supra) which she says is authority for the proposition that a document is not used in terms of s229A until received by the person intended to be deceived.
[8] The facts in Baxter (supra) were somewhat complicated. The accused had been involved in attempts to raise finance to support the recovery of gold from the wreck of the ship General Grant in the Auckland Islands. An initial prospectus failed to raise sufficient funds. A modified scheme was proposed to investors who were required to confirm interest by 21 April 1995. On 21 April Baxter wrote to the investors who had signified interest inviting cheques. Earlier the accused had used investor funds by transferring money to his personal account. The s229A count alleged use of a document between 1 March and 21 April including a letter of 21 April. The Court concluded at p152:

At the hearing of the appeal it became apparent that the Crown faced an insuperable difficulty in sustaining the conviction on the s 229A count arising from the wording of the indictment and the directions given by the Judge, in particular his written directions which were handed to the jury.

It will be recalled that although the count charged use of “a document”, it actually specified both the letter of 27 March and the letter of 21 April. It charged a use of the document (ie the combination of the two letters) “between 1 March 1995 and 21 April 1995”. But the later date was of course the date of one of the component letters. As it was presumably sent out on 21 April it is unlikely to have been received by any investor, and certainly would not have been received by all, within the period of the alleged fraudulent use. It cannot be said to have been used until received. It was the 21 April letter which asked for money to be sent.

[9] The appellant submitted that the Judge erred in distinguishing Baxter (supra) because:

In Baxter the document was put into the hands of those who the user intended to act upon it, with an intention that it be used to obtain a pecuniary advantage. The intention to defraud was present, but the action effectively never took place, because the documents were never received within the timeframe appearing in the indictment.

[10] The appellant says that in this case as with Baxter (supra) the person whom it was intended would advance the funds did not receive the document therefore the document could not have been used.
[11] The second submission of the appellant is based around the proposition that where allegations of fraud are part of a charge before such a charge can be proved the economic interest of another must be put at risk. And so in this case the appellant argues that the economic risk of a lender was never placed at risk because the loan documents were never forwarded to any potential lender. Counsel, in support of this proposition, relies upon Adams v R [1994] 12 CRNZ 379.

Discussion

[12] Section 229A(b) provides:

229A Taking or dealing with certain documents with intent to defraud

Every one is liable to imprisonment for a term not exceeding 7 years who, with intent to defraud,—

(a) Takes or obtains any document that is capable of being used to obtain any privilege, benefit, pecuniary advantage, or valuable consideration; or

(b) Uses or attempts to use any such document for the purpose of obtaining, for himself or for any other person, any privilege, benefit, pecuniary advantage, or valuable consideration.

[13] This Court in R v Jordan [2003] 2 NZLR 456 identified the elements of this offence. The headnote usefully summarises the conclusions:

There were three elements to the offence under s 229A(b), namely ‘(1) with intent to defraud (2) use any document capable of being used to obtain any pecuniary advantage (3) for the purpose of obtaining any pecuniary advantage.’

[14] In this case there was no dispute the document was capable of being used to obtain a pecuniary advantage, nor is there any doubt that the document was knowingly inaccurately filled out.
[15] The appellant completed the loan document knowing it was false. She then gave the false document to the mortgage broker. The purpose in doing so was to have the mortgage broker pass the document on to the lending institutions to obtain the pecuniary advantage, i.e. the loan. We consider that the use of the document is its provision to the mortgage broker. The dishonest intent of the appellant is in giving the application to the broker knowing it is false and intending the broker to use it to give to lenders to obtain finance. Section 229A is concerned with the use of a document for the purpose of obtaining a pecuniary advantage. The appellant’s actions are to be judged at the time she handed the document over to the mortgage broker for the purpose of obtaining finance. At that time she had used the document with intent to defraud. The use was in passing the document to the mortgage broker knowing that he would send it to potential lenders.
[16] We do not consider that Baxter (supra) addresses this issue. The focus in that case was on the date in the indictment. Nor does extensive argument appear to have been made to the Court on the question of use in the context of an intermediary and it appears to be out of line with the weight of authority.
[17] In R v Fowlds (CA222/00, 13 December 2000) the appellant wrote a letter to Work and Income New Zealand Limited (“WINZ”) which he gave to one of his sub-tenants Mrs Apanui to apparently induce an advance by WINZ of the initial rental for Mrs Apanui’s tenancy of Mr Fowlds’ residence. The Court, although not part of the ratio of the case, said:

In our view the jury was entitled on the evidence before it to come to the view that when the appellant used the letter of 14 June 1999, by writing it and giving it to Mrs Apanui for the purpose of presentation to WINZ, he knew that Mr Apanui would not be residing in the premises and that the appellant’s intent in so using the letter was fraudulent.

[18] The Court were there satisfied that it would have been sufficient for a conviction under s229A that the appellant gave the letter to Mrs Apanui for the purpose of presenting it to WINZ. This proposition is directly analogous with the facts of the current case.
[19] And in R v Dakers [1980] 1 NZLR 747 the appellants had obtained a number of uncancelled win tickets from the TAB. The tickets were sent to the TAB. Before a cheque, signed by the TAB was forwarded to the defendant, the manager checked the company records and found that payment had been made on the tickets previously. The Court referred to R v Hansard (CA172/77, 17 February 1978). It said:

In R v Hansard (CA 172/77, 17 February 1978) a similar point was taken in regard to a charge under s229A(b) relating to a weighbridge docket which had been intercepted by a company manager who, suspecting it to be fictitious, did not act upon it. On behalf of the appellant in that case, it was submitted that, because the manager was suspicious the moment he set eyes upon the docket, it was not capable of being used for a pecuniary advantage ... Although the charge in Hansard’s case was one of an attempt only, as the judgment makes clear, those comments are equally applicable to this appeal in that when the appellants sent the tickets to the company, the tickets were in fact used by them. It was merely the purpose which was unsuccessful. Accordingly, the appeal on that point must fail.

[20] In Dakers (supra) therefore the Court concluded the document was “used” when the tickets were sent. This also supports the conclusion in this case.
[21] As to the proposition that in a charge under s229A(b) the economic risk of another must be put at risk we are not at all satisfied that this is a necessary ingredient. However, in this case there was a potential economic risk to lending institutions when the appellant sent the fraudulent loan form to Mortgage Solutions with instructions to send it to lending institutions.
[22] In summary, therefore, we are satisfied that when the appellant sent the false loan form to the broker intending it be sent to lending institutions to obtain finance she “used” the document in terms of s229A(b). The District Court Judge’s summing up was therefore correct. The appeal is dismissed.

Solicitors:
Papprill Hadfield & Aldous, Christchurch for Appellant
Crown Law Office, Wellington