Over the past four years, Queensland’s Court of Appeal has allowed five appeals in criminal fraud cases because of insufficient directions to the jury on the defendant’s “knowledge, belief, or intent” that is alleged to have caused the defendant’s conduct to be dishonest. Fraud trials are often long, making the burden of a retrial on prosecution witnesses, the Court, and the defendant significant.
Is it that hard to articulate what knowledge, belief, or intent held by the defendant rendered her conduct dishonest? Well, it just requires careful thought about the elements of the offence, the particular facts that are said to satisfy each element, and the evidence said to prove those facts. That is often easier said than done.
This article will summarise the facts and issues that resulted in retrials being ordered in each of these matters in an attempt to identify common mistakes and how they might be avoided.
But first, it is useful to review some of the basics of fraud offences.
Knowledge, belief, or intent
An essential element of a criminal fraud is that the defendant acted dishonestly.
Some fraud offences (including s 408C of the Criminal Code (Qld)[1] and dishonesty offences under the Corporations Act 2001 (Cth)) use the test for dishonesty articulated by the High Court in Peters v The Queen (1998) 192 CLR 493 (“Peters”). Under the Peters test, the prosecution must prove:
- The defendant had acted dishonestly according to the standards of reasonable and honest people.
Dishonesty offences under the Criminal Code (Cth) (by reason of legislative intervention) use the older common law test articulated in R v Ghosh [1982] QB 1053 (“Ghosh”).[2] Under the Ghosh test, the prosecution must prove two things:
- The defendant had acted dishonestly according to the standards of reasonable and honest people; and
- The defendant realised that that his/her conduct was dishonest according to the standards of reasonable and honest people.
A common mistake, in the writer’s experience, is for the Peters test to be misunderstood as being ‘objective’ in the sense of not requiring the defendant’s mental state to be established. This is not so. The additional element under the Ghosh test is proof that the defendant realised that the conduct was dishonest according to the standards of reasonable and honest people. On both tests it must be shown that the defendant’s conduct was ‘subjectively’ (that is, as a mental state of the defendant) dishonest.
For an act to be done dishonestly (whether on the Peters test or the Ghosh test), there must have been some knowledge, belief, or intent on the part of the accused person rendering the act dishonest.
The phrase “knowledge, belief or intent” is found in Toohey and Gaudron JJ’s judgment in Peters: [3]
In a case in which it is necessary for a jury to decide whether an act is dishonest, the proper course is for the trial judge to identify the knowledge, belief or intent which is said to render that act dishonest and to instruct the jury to decide whether the accused had that knowledge, belief or intent and, if so, to determine whether, on that account, the act was dishonest.(footnotes omitted)
This was recently applied by Bond JA in R v Mirotsos [2022] QCA 76:[4]
Yet the law is clear that in a case of this nature, the Crown must articulate clearly the relevant aspect of the accused’s knowledge, belief or intent which, on the Crown case, rendered the accused’s conduct dishonest and the trial judge must:
- identify for the jury the knowledge, belief or intent of the accused which was said to render the impugned conduct by the accused dishonest; and
- instruct the jury to decide whether the accused had that knowledge, belief or intent and, if so, to determine whether, on that account, the conduct was dishonest by the standards of ordinary honest people.
A simple example is this: Gomez tells Morticia that, if she gives him $20,000, he will invest it in shares on her behalf. Morticia gives Gomez the $20,000 on this basis. Gomez knows that Morticia has given him the $20,000 on this basis. However, when he told Morticia that he would invest her $20,000, Gomez knew he would use it to buy cigars for himself. Once he had received Morticia’s $20,000, he bought the cigars for himself.
Applying the language in paragraph (a) of Bond JA’s formulation in Mirotsos, the “impugned conduct” is Gomez’s purchase of the cigars. The “knowledge belief or intent” that the Crown would rely upon to render Gomez’s conduct dishonest is Gomez’s knowledge that Morticia gave him the $20,000 on the basis that he would invest it in shares on her behalf.
The judge must identify Gomez’s alleged knowledge for the jury and then instruct the jury to decide whether they are satisfied that Gomez did in fact have that knowledge. If they are so satisfied, the jury must then consider whether Gomez’s obtaining of Morticia’s $20,000 by saying it was for investment in shares, but then using it to buy cigars, was dishonest by the standards of ordinary honest people.
Trials involving both Criminal Code (Qld) and Criminal Code (Cth) frauds
In trials where a defendant is charged with frauds against both the Commonwealth and Queensland Criminal Codes, the jury must apply the Peters test when determining whether the defendant was dishonest for the State count, and apply the Ghosh test when deciding whether the defendant was dishonest for the Commonwealth count. The trial judge must direct them accordingly.
An example of this is the case of R v Hoch [2023] QCA 179, where the defendant (amongst other offences) was on trial for one offence against s 408C Criminal Code (Qld) and one offence of general dishonesty against 135.1(1) Criminal Code (Cth). The trial judge directed the jury adequately in relation to the State count but failed to direct the jury on the definition of dishonesty for the Commonwealth count. A retrial was ordered for the Commonwealth count.
The Court of Appeal’s consideration of knowledge, belief, or intent
With that background in mind, I will now turn to consider the relevant cases in Queensland where problems directing juries on dishonesty have arisen. In these cases, the Court of Appeal has repeatedly identified a failure by the prosecution to particularise what they say the defendant’s state of mind (knowledge, belief or intent) was at the time of the conduct, which rendered the conduct dishonest. The trial judge, in turn, has failed to direct the jury on the knowledge, belief or intent that, on the Crown case, the defendant must have held at the time of the conduct to render the conduct dishonest.
R v Lyons [2021] QCA 136
Lyons is an interesting case because the Court of Appeal split on the question of adequacy of directions in relation to knowledge, belief or intent.
The appellant in Lyons was the director of a company whose business included arranging sea freightage of boats purchased overseas. She was charged with eight counts, each involving a different complainant. The Crown alleged that, in each count, she received monies from the complainant for a specific purpose, and dishonestly used those funds for unauthorised purposes.
In Counts 1-3, the complainants transferred funds into an account the appellant used for currency conversion to assist with their boat purchase. The Crown alleged the appellant then used the funds for unauthorised purposes such as supporting her business.
In Counts 4-8, the appellant engaged a company to freight boats to Australia. The complainant in each of those counts gave her funds for the freighting. The appellant paid the freighting company a 30% deposit for the freightage, but failed to use the funds given to her by the complainants for this purpose to pay the balance, meaning the five complainants had to pay part of the freight cost twice.
The trial judge’s summing up of the prosecution case on the appellant’s dishonesty was brief. In relation to Counts 1 and 2, his Honour summed up the prosecution’s case as “the defendant used the moneys handed over by the complainants for purposes other than that which was authorised by the complainant”.[5] In relation to Count 3, his Honour referred to the defendant’s evidence, which was that she paid the money because of an administrative error. His Honour did not outline the Crown’s case when summing up Counts 4 – 8.
Mullins P, McMurdo JA, and Wilson J all agreed that the trial judge did not direct the jury regarding the appellant’s alleged knowledge, belief or intent for Counts 4 – 8. Mullins P and Wilson J shared the view that the directions in relation to Counts 1-3, while better than Counts 4 – 8, were still insufficient. McMurdo JA disagreed on this point. His Honour observed that “more detailed directions might have been given”,[6] but concluded the trial judge’s summing up of Counts 1-3 was sufficient for the jury to understand their task.[7]
The trial judge’s directions in Lyons complied with the Supreme and District Court Bench Book as it was at the time.[8] Wilson J noted that, at the time of the trial and appeal, the Bench Book entry on fraud did not refer to Peters. [9] This Bench Book entry has since been amended and includes reference to Peters.
R v Davidson [2022] QCA 22
In Davidson, the appellant was the general manager of a company. She gave the company’s payroll officer a letter purportedly signed by the company’s director advising that her [the appellant’s] annual salary had been increased. The signature on the letter was an electronic signature. Based on the letter, the payroll officer increased the appellant’s salary payments, with the increased rate being paid over approximately a year. It was not in dispute at trial that the director had not signed the letter.
The Crown focussed on the state of mind of the director and whether he knew about or authorised the pay increase. While the director’s state of mind was relevant, that was not the critical issue for the jury. The critical issue was the appellant’s state of mind.[10] The appellant’s state of mind informed whether the appellant’s conduct was dishonest.
The trial judge’s directions regarding dishonesty only referred to the jury being satisfied that the appellant did the act “with a particular state of mind”. The state of mind, or the “knowledge, belief, or intent” was not identified.
Bond JA, with whom Fraser and McMurdo JJA agreed, concluded that the Crown did not clearly articulate the knowledge, belief or intent relied upon to render the appellant’s act dishonest. His Honour further concluded the trial judge did not adequately direct the jury on this issue.[11]
R v Mirotsos [2022] QCA 76
In Mirotsos, the appellant was a director and shareholder of a private property development company. The Crown alleged that he dishonestly used company money or dishonestly gained or attempted to gain company money for himself. It was alleged he did this in a variety of ways. For the purpose of this article, one example suffices.
The Crown had particularised the appellant’s conduct as dishonest because “the expenditure was not authorised by the complainant company and/or was not for a legitimate purpose of the complainant company”. The Crown had not articulated, however, what the appellant’s knowledge, belief or intent was as to whether the expenditure was authorised by the company, or as to the legitimacy of the purpose of the expenditure.[12]
The trial judge’s direction on dishonesty only referred to the fact the jury would need to be satisfied there were facts, beliefs or circumstances the defendant was aware of before deciding whether the defendant’s conduct was dishonest by the standards of ordinary people.[13]
On appeal, Bond JA, with whom Sofronoff P and Callaghan J agreed, said the trial judge’s directions were inadequate. The trial judge was required to identify the facts or belief or circumstances actually relied upon by the Crown.
R v Jayaweera [2022] QCA 103
In Jayaweera, the appellant was the director of a financial planning agency and a director of several companies involved in an abalone farm. For each count it was argued that the appellant either dishonestly made misrepresentations to clients about how he would invest their money or that he made unauthorised transfers from their self-managed superannuation accounts.
Fraser and Bond JA[14] allowed the appeal on the basis that the Crown failed to articulate the appellant’s knowledge, belief or intent relied upon to establish that the impugned conduct was dishonest.
In turn, the trial judge failed to give adequate directions on this point, including failing to refer at all to the need for the jury to reach a particular conclusion about the appellant’s state of mind.
Their Honours made the point that not all misrepresentations are made dishonestly, and not all unauthorised transactions are made dishonestly.[15]
R v Muller [2024] QCA 261
The identification of knowledge, belief or intent in Muller was complicated by the fact that the appellant was charged as a party to another, Mr King, under s 7 Criminal Code (Qld).
Mr King had already pleaded guilty to frauds. The Crown relied on Mr King’s plea of guilty to prove that Mr King had committed the offences as principal. The Crown did not, however, particularise the knowledge, belief, or intent Mr King held when doing the dishonest acts.[16] On appeal, it was argued that, even though Mr King’s dishonesty was proved by virtue of his guilty plea, the facts underlying that plea had to be articulated to the jury so they could determine whether the appellant (as party to Mr King) knew the essential facts and circumstances that established the offence committed by Mr King.[17]
Brown JA, with whom Mullins P and Flanagan JA agreed, concluded that the particulars, and in turn the judge’s directions to the jury, did not adequately address Mr King’s relevant state of mind at the time of performing the acts of which the appellant was alleged to have had knowledge.[18]
Summary of the Court of Appeal authorities
Each of the cases above involved directions that the Court of Appeal considered insufficient. Davidson, Mirotsos, Jayaweera, and Muller also had the additional failure of the Crown not properly particularising what knowledge, belief or intent they alleged the defendant had at the time of the relevant conduct. The jury must be told what the defendant knew which made their conduct dishonest.
Do not expect the proviso to assist
The Court of Appeal may dismiss an appeal, even if it considers that one or more grounds argued should be found in the appellant’s favour, if the Court considers no substantialmiscarriage of justice has occurred.[19] This is referred to as the “proviso”. [20]
In Muller, Mirotsos and Jayaweera, the Crown unsuccessfully argued that the proviso should be applied. In each case, the Court of Appeal concluded the proviso did not apply because a direction on a critical element, dishonesty, was in error and the appeal court would have to carry out an assessment of the whole of the record to decide whether no substantial miscarriage of justice had actually occurred.[21]
Conclusions
A few lessons can be taken from all of this.
First, when you receive a fraud brief, know which definition of dishonesty applies. Check both the offence provision and the relevant statute’s definitions as at the date/s the offence was allegedly committed. Frauds can be committed over lengthy periods of time. Investigations can take just as long. Ensure you know the standard that applies.
Second, prosecutors must ensure they have properly particularised the knowledge, belief or intent of the defendant that is said to give rise to the dishonesty.
Third, if confronted with inadequate particulars, defence counsel should consider whether to request further and better particulars. You must know the case against you in order to take instructions and properly prepare your own case. On the other hand, if it is apparent that there is no evidence to establish a dishonest knowledge, belief or intent, it may instead be prudent to leave the issue until the Crown has closed its case so as to avoid the Crown obtaining further evidence. A no case submission could then be made.
Alternatively, defence counsel could apply under s 590AA for a pre-trial ruling that the Crown cannot prove an element. The obvious risk in this course is that the Crown would fix its case by obtaining further evidence. A circumstance in which it might be appropriate to seek the ruling pre-trial is where the evidence is overwhelmingly documentary and unlikely to change at trial.
Fourth, both prosecutors and defence counsel are obliged to inform the Court if they consider the directions given to the jury do not properly describe the knowledge, belief, or intent relied upon by the Crown.
Finally, while the Bench Book is an excellent recourse, certain cases call for directions beyond the helpful template the Bench Book provides.
[1] R v Dillon; Ex parte Attorney-General (Qld) (2016) 1 Qd R 56
[2] Section 130.3 Criminal Code (Cth)
[3] Peters v The Queen (1998) 192 CLR 493 at 504 [18] per Toohey and Gaudron JJ
[5] Lyons at [135]
[6]Lyons at [11]
[7] His Honour concluded a re-trial was warranted for Counts 4 – 8, though, because of an omission to give the “separate consideration” direction – see [2]-[4]
[8] Lyons at [135]
[9] Lyons at [143]
[10] Davidson at [17(a)]
[11] Davidson at [21]
[12] Mirotsos at [28]
[13] Mirotsos at [31]
[14] Callaghan J would have allowed the appeal on the basis of an incompetency of counsel, but agreed with Bond JA’s judgment in R v Mirotsos and agreed “in broad terms” with the observations made by Fraser and Bond JJA in their judgment at [16]-[17] at [113]
[15] Jayaweera at [11]
[16] Muller at [16]
[17] Muller at [29]
[18] Muller at [46]-[47]
[19] s 668E(1A) Criminal Code (Qld)
[20] See R v Tahiata [2024] QCA 59, where Flanagan JA summarises the principles in relation to application of the proviso.
[21] In Jayaweera, Callaghan J identified a number of reasons why the proviso could not apply at [124]-[134]. The Crown did not argue for the application of the proviso in Lyons (see [15]).
