R v Barry Johnston Scc [1986] ACTSC 110 (5 December 1986)

SUPREME COURT OF THE ACT

R. v. BARRY JOHNSTON
S.C.C. No. 22 of 1986
Criminal Law - Procedure - Jury

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Miles C.J.(1)

CATCHWORDS

Criminal Law and Procedure - accused charged with fraudulent misappropriation of moneys received under s.178A of the Crimes Act 1900 of New South Wales in its application to the Australian Capital Territory - jury trial - application by accused for acquittal by direction at conclusion of prosecution evidence.

Criminal Law and Procedure - fraudulent misappropriation of moneys received - intention of parties - nature of relationship between assured and broker - whether any fiduciary element.

Jury - application by accused for acquittal by direction at conclusion of prosecution evidence - charge of fraudulent misappropriation of moneys received - questions for jury - direction to acquit

Williams, C.R. and Weinberg, M.S., Property Offences 1986 Law Book Co.

Sutton, K.C.T., Insurance Law in Australia and New Zealand 1980, Law Book Co., Sydney

Stephens v. R (1978) 139 CLR p.315

Re Colin Williams (Insurance) Pty. Limited (in Liq.) (1975) 1 NSWLR 130

Con-Stan Industries of Australia Pty. Ltd. v. Norwich Winterthur Insurance (Australia) Ltd. [1986] HCA 14; (1986) 64 ALR 481

Insurance (Agents & Brokers) Act 1984

HEARING

CANBERRA
5:12:1986

DECISION

Mr. Horler, senior counsel for the accused, moves for an acquittal by direction at the end of the prosecution evidence. Each of the charges in the indictment alleges that the accused received a valuable security upon certain terms and that he did fraudulently misappropriate the balance of the proceeds of the security in violation of the terms upon which he received the balance of the proceeds of the security, contrary to s.178A of the Crimes Act 1900 (NSW).

2. The evidence is that in late 1983 and early 1984 the accused had sole control of a company, Title Nominees Pty. Limited, now in liquidation, which carried on business in the Australian Capital Territory as an insurance broker under the name of Canberra Motor Insurance, ("CMI"). Between January and April 1984 each of a number of people paid CMI by way of cheque or credit card voucher an amount equivalent to the premium required by a particular insurer for insurance on a motor vehicle.

3. Where the insurance was being sought for the first time the insured completed the insurer's proposal form and delivered it together with the cheque for the premium to CMI. Where the insurance was being renewed, the insured delivered the cheque to CMI accompanied by a renewal notice originating from the insurer. There were three insurers concerned in these transactions. They were: Stronghold Insurance Australia Limited ("Stronghold"), QBE Insurance Limited ("QBE") and Swann Insurance Limited ("Swann"). Clearly, each of the assured knew the identity of the insurer from which insurance was to be sought. Otherwise, however, the evidence relating to the contractual relationship between the broker and the assured was slight in the extreme.

4. Counsel for the prosecution argued, and indeed conceded, that the terms upon which the assured paid the premium to the broker had to be spelt out from the circumstances. Although the circumstances would themselves be a matter for the jury to decide, the evidence relating to the relevant circumstances did not go beyond that which has already been outlined. I have taken into account in particular the oral evidence of Messrs. Cassimaty, Odell, Stonestreet, Abbott and Fitzgerald and of Mrs. Cahill and the documentary evidence.

5. In the event, because the broker did not pay the premium over to the insurer, the insurer in each case did not issue or renew the policy, or if it did, it either cancelled the policy leaving the assured without insurance cover despite the payment of the premium to the broker, or it sought and obtained the premium from the assured.

6. In the light of the above factual material available for the consideration of the jury, I turn to a consideration of relevant legal principle. S.178A of the Crimes Act, provides for an offence shortly described as fraudulent misappropriation of moneys collected or received. In the present case, the prosecution charges a receiving and not a collection.

7. S.178A further provides that any money, valuable security and so forth shall be deemed to be the property of the person who authorised the receipt or from whom the money was received, notwithstanding that the accused may have been authorised to make a deduction therefrom on his own behalf or to make payment thereout to another person or to mix the money received with his own moneys.

8. This latter provision that the money received is deemed to be the property of the person who authorised the receipt or from whom the money was received supports the view of the authors of Williams and Weinberg in their book, Property Offences 2nd ed. 1986 at p.232, that there is no essential difference between fraudulent conversion as provided for in certain South Australian legislation and fraudulent misappropriation as provided for in s.178A, except that the South Australian provisions apply to property generally, whereas 178A applies only to property in the form of money or a valuable security or the proceeds thereof.

9. The South Australian provisions were considered at length in the judgment of the High Court in Stephens v. R. (1978) 139 CLR p 315. The Chief Justice Sir Garfield Barwick, dissenting on the construction of the agreement itself, stated as a matter of principle at p.328 that the question was whether:

". . . the common intention was that the moneys paid

over should remain the property of the owners
until there was default on his part, or finance
was obtained."

His Honour went on to conclude:

"It could not properly be concluded, apart of
course from some specific contrary term of a
contract, that there was a common intention that
the deposit money in such a case should remain
the property of the purchaser until occasion arose
under the contract of sale and purchase for the
vendor to resort to the deposit."

Further, on p.329 his Honour continued that:

". . . upon consideration of all the terms of the
writing, it cannot properly be said, in my
opinion, that it evidences a mutual intention that
the deposit moneys remain the property of the
owner so that the builder came under a fiduciary
obligation to maintain intact a fund equal in
amount to them."

In the judgment of Gibbs J., as he then was, his Honour said on p.333:

"It is accepted that there can only be an offence
under this sub-section if there was a fiduciary
element in the relationship of the accused person
to the property alleged to have been fraudulently
converted by him."

His Honour went on to cite authority. He later cited with approval, it would seem, a suggested test appearing in an article written by Professor Smith in 1961 Criminal Law Review at p.797. That test was propounded in the following terms:

"Was the transferee permitted under the terms of
the contract to use the money as he thought fit;
or was he obliged to apply it in a particular way
or to retain an equivalent sum, either in his
possession or in a bank? Only in the latter event
can the transferee commit fraudulent conversion."

10. Bearing in mind, as the Chief Justice emphasised, and what is implicit if not express in the judgment of Gibbs J. that it is the mutual intention of the parties, payer and recipient, express or implied that provides the test, I do not think that it is to the point to consider for the purpose of a charge of fraudulent misappropriation of moneys received to inquire as to any arrangement, contractual or otherwise, between the initial recipient, that is to say in this case the accused, and any other person intended as the ultimate recipient, that is to say in this case the insurer.

11. If the charge were one of fraudulent misappropriation of moneys collected, then the relevant mutual intention would be that of the initial recipient and the person on whose behalf or at least for whose purposes the money was collected, but that is not the charge in the present case.

12. I deal briefly with the submission renewed at the end of the prosecution evidence which was put unsuccessfully at the end of the prosecutor's opening address to the jury. It was that the evidence permitted of the finding that the moneys in question were received by the broker company Title Nominees Pty. Limited, but not by the accused. I ruled then that if the accused had sole control of the company, which is now the undisputed evidence, then the receipt by the company, or receipt by an employee of the company, did not necessarily exclude receipt by the accused himself. I adhere to that ruling. In accordance with that ruling and in the light of the evidence, I refer in these reasons to the accused and to the company and to the broker interchangeably.

13. In a charge of fraudulent misappropriation of moneys received under s.178A of the Crimes Act 1900, the questions for the determination of the jury are as follows: 1. Did the accused receive the valuable security upon terms requiring him to pay the balance of the proceeds to someone else, that is to say, in the present case, the insurer? 2. If so, did the accused deal with the proceeds in contravention of those terms? 3. If so, was the conduct of the accused dishonest? The jury may convict only if the answer to each of these questions is yes.

14. On each count in the indictment, it is my view that the evidence does not permit the jury to find that the material term of the mutual agreement between the broker and the assured was other than this: that in consideration of the payment of the premium by the assured to the broker, the broker would use reasonable care and skill to secure insurance cover with the specified insurer within a reasonable time upon whatever terms as to payment as between broker and insurer as might be arranged between those two latter parties.

15. It was no concern of the assured that the insurer might require payment of the premium at the same time as submission by the broker of the proposal or renewal notice as in the case of QBE, or within seven days as in the case of Swann, or within an extended period of up to 120 days, as in the case of Stronghold.

16. I have considered some of the cases which throw light on the relationship between assured and broker. See for instance, Re Colin Williams (Insurance) Pty. Limited (in Liq.) (1975) 1 NSWLR 130; Con-Stan Industries of Australia Pty. Ltd. v. Norwich Winterthur Insurance (Australia) Ltd [1986] HCA 14; (1986) 64 ALR 481; and Sutton, Insurance Law in Australia and New Zealand 1980 edition.

17. From all this, I take the view that a broker is usually regarded as the agent of the assured and a court will be slow to infer that a broker is the agent of the insurer. However, that proposition is not decisive of the terms upon which as between broker and assured a broker receives payment of the premium. I have not been able to find any authority, nor has counsel, for the proposition, that as a matter of general law there is any fiduciary element in this relationship. In my view, if such a fiduciary relationship is to exist, it will arise from the terms of the agreement between broker and assured in the individual case and not by reason of the general broker/assured relationship in itself.

18. I note that s.21 of the Draft Insurance Agents and Brokers Bill 1980 prepared by the Australian Law Reform Commission, contains a provision that a broker is obliged to pay a premium into a trust account, but that is not the law in this Territory for the purposes of this case. The Insurance (Agents & Brokers) Act 1984, assented to on 25 June 1984 does not appear to enact the Law Reform Commission's recommendations. It provides for the registration of insurance brokers and for certain accounting procedures to be carried out by registered brokers. Failure to comply with the provisions of the Act in certain instances constitutes a criminal offence. However, the Act was not in force at the time of the events under consideration and counsel have not addressed me upon it.

19. No doubt it could be said that a person seeking insurance cover, like those who did so in the present case, might well expect that the broker would retain the premium or its equivalent in an account in order to apply it to the payment out to the insurer and that the broker would not be entitled to use the premium as he saw fit. But it must be remembered that the terms upon which the moneys were received and which the prosecution must prove are the terms mutually agreed between the person from whom the moneys are received and the person receiving them. Those terms are not constituted by a unilateral belief or expectation on the part of the person from whom the money is received. Nor, in my view, is such a term to be implied by the fact that the broker, that is to say the accused, customarily paid the cheques received from the insured into an account styled premium account. That practice is just as consistent with internal book-keeping purposes as it is with the acceptance of a fiduciary duty.

20. It is because of the lack of proof of any common intention on the part of the insured and the broker in the present case that the premium was to be ear-marked for payment to the insurer, in the sense that it was to be regarded as the property of the assured until paid to the insurer, that the relationship between the broker and the assured in the present case lacks any fiduciary element. That element, however, as I say, is necessary before the accused can be regarded as fraudulently misappropriating a premium received by him.

21. There is no evidence in this case upon which the jury could conclude that it was the mutual intention of the accused and the assured that the moneys received from the assured were to remain the property of the assured until paid by the broker to the insurer, or until the broker was called upon by the insurer to pay. Accordingly, the first question which the jury would have to answer must be answered "No".

22. Despite the industry of counsel it is not necessary for me to decide whether it is open to the jury to answer the two remaining questions in the affirmative. I propose to direct the jury to acquit on all charges.