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State v Bai [1980] PGLawRp 584; [1980] PNGLR 77 (15 May 1980)

Papua New Guinea Law Reports - 1980

[1980] PNGLR 77 - The State v Wilfred Timon Bai

[1980] PNGLR 77

N219

PAPUA NEW GUINEA

[NATIONAL COURT OF JUSTICE]

THE STATE

WILFRED TIMON BAI

Waigani

Miles J.

12-13 May 1980

15 May 1980

CRIMINAL LAW - Particular offences - Stealing - Signing of cheque and depositing to personal account for unauthorized use - Dishonest use of credits in development fund - Not strict larceny - Not stealing by fraudulent conversion - Criminal Code s. 377, s. 384(5).

The accused as Commissioner of Corrective Institutions together with help from other persons employed by the Public Service of Papua New Guinea, established what became known as a development fund system for the purposes of running development projects out of some of the correctional institutions: under the system revenue from sales from a particular institution was paid into its development fund account and expenditure for materials and the like was withdrawn from the same account. Three cheques drawn on a particular development fund and countersigned by the accused were deposited to a bank account of the accused and the amounts on the cheques were credited to his account and subsequently used for a building project in the village of the accused, who maintained his intention of repaying the amounts so used.

The accused was charged on three counts with stealing the sums of K600, K900, and K600 which had come into his possession by virtue of his employment.

Held:

N1>(1) The fraudulent signing of the cheques and the depositing thereof to the personal bank account of the accused did not amount to “stealing”, in the common law sense, the sums of money alleged in the indictment.

John Kasaipwalova v. The State [1977] P.N.G.L.R. 257;

R. v. Jamieson [1975] P.N.G.L.R. 257;

R. v. Davenport [1954] 1 W.L.R. 569; [1954] 1 All E.R. 602, and

Croton v. The Queen [1967] HCA 48; (1967) 117 C.L.R. 326 followed and applied.

N1>(2) The fraudulent signing of the cheques and the depositing thereof to the personal bank account of the accused did not amount to “stealing”, by reason of a fraudulent conversion, within the meaning of s. 377 of the Criminal Code.

R. v. Jamieson [1975] P.N.G.L.R. 216 at pp. 222, 223 followed.

Croton v. The Queen [1967] HCA 48; (1967) 117 C.L.R. 326 at p. 331, and

R. v. Davenport [1954] 1 W.L.R. 569 at p. 571; [1954] 1 All E.R. 602 referred to.

Sawiris v. Scott [1979] W.A.R. 39 distinguished.

N1>(3) Semble: There had been a stealing of the cheques in specie within the meaning of s. 377 of the Criminal Code; but the allegation in the indictment that the accused stole three sums of money would not be satisfied by a finding that the accused stole three cheques.

Trial.

This was the trial of an accused on three counts of stealing specified sums of money which had come into his possession by virtue of his employment; the charges being laid under s. 384(5) of the Criminal Code.

Counsel:

T. D. Kitchin, for the State.

D. S. Awaita, for the accused.

Cur. adv. vult.

15 May 1980

MILES J.: The accused pleaded not guilty to three counts under s. 384(5) of the Criminal Code. It is alleged that on 13th March, 1979 in Papua New Guinea whilst employed by the Public Service of Papua New Guinea he stole the sum of K600.00 which had come into his possession by virtue of his employment. He is charged further that he similarly stole sums of K900 and K600 on 30th March and 27th April, 1979 respectively.

The case for the State was somewhat circumstantial but it was supplemented by the evidence of the accused. The following facts appear from the evidence to be common ground and I find them proved beyond a reasonable doubt.

The accused became the Commissioner of Corrective Institutions in 1976, having held an acting appointment to that position. He continued as Commissioner during the events leading to the present charges.

Some of the correctional institutions in Papua New Guinea run what are called development projects. These are aimed no doubt at the rehabilitation of prisoners but also apparently have contributed towards the self-sufficiency of the particular institutions. The prisoners use and develop occupational skills whereby they grow vegetables, raise chickens, and pigs and the like and even construct boats. The results of their labours are then made available for sale. The accused said that sales are made to correctional staff. The income thus generated could, so it was hoped, be put back into the projects themselves for the further purchase of equipment and materials and so the projects might gain a self developing momentum.

For some time after the establishment of the development projects the cash obtained from sales was paid into the local area finance office and found its way into consolidated revenue. This procedure was said to meet the requirements of the Department of Finance, but it resulted in the loss of the moneys to the development projects, which were not reimbursed.

In about 1976-1977 soon after his appointment as Commissioner, the accused, together with the two assistant commissioners and three or four inspectors met to discuss this “negative response from the Finance Department”.

It was proposed then to establish banking accounts to be known as development fund accounts which could be used to bypass the area finance office. The revenue from sales from a particular institution was to be paid to its development fund account and expenditure for materials and the like was to be withdrawn from the same account. In fact four such development fund accounts were established around the country and they related to corrective institutions at Bomana near Port Moresby, Buimo near Lae, Baisa near Mount Hagen and Boram near Wewak.

There was opened at the Lae branch of the Papua New Guinea Banking Corporation a banking account entitled “Buimo Development Fund”. The persons authorized to operate this account were the accused, an assistant commissioner Mr. Andrew Dambui (both stationed at Bomana) and the then superintendent of Buimo. It was sufficient for two of the three signatories to sign any cheque. Moneys were paid into this account from sales of livestock and the like and were used to purchase further feedstuffs and materials as intended. The accused took no part in the depositing into the account of moneys received from sales. That was apparently done by the superintendent.

It is not clear how far the accused, his assistant commissioner, and the superintendent appreciated that they were in breach of the proper practices in public accounting. I see no reason however to doubt their good faith in seeking to promote the interests of the corrective institution and the inmates by the establishment of this development fund system.

In early 1979 the assistant commissioner Mr. Dambui was leaving for overseas and somewhat unwisely prior to his departure signed a number of blank cheques in the Buimo development fund cheque book. It is not clear why he found it necessary to do this as the other two signatories remained in Papua New Guinea, the accused at Bomana and the superintendent at Buimo.

The cheque book came into the possession of the accused. The accused added his own signature to three of the cheques which already bore the signature of Mr. Dambui. How the cheque book came into the possession of the accused was not stated. I do not conclude that there was anything dishonest about his obtaining it. There is no evidence as to who completed the details as to amount and payee.

These cheques were in evidence. They are each made out to cash and numbered 979637, 979638 and 979639. They are thus seen to be in sequence in the cheque book.

On 13th March, 30th March and 27th April, the accused deposited the cheque bearing the respective date to his own account at the Boroko branch of the Australia & New Zealand Banking Group (P.N.G.) Ltd. and the bank credited his account with the appropriate amount on that date. Those dates and the amounts drawn and credited correspond with the allegations in the three counts in the indictment.

The accused subsequently used the credits so acquired towards “a small building project” in his village near Lae. That had apparently been his intention at the time he countersigned the cheques.

Those facts, as I say, are not substantially in dispute and provide the essentials of the case for the State. The prosecution relies on the countersigning of the cheques together with the deposit into the accused’s own bank account as constituting stealing within the meaning of the Criminal Code.

[His Honour then dealt with certain additional evidence for the State relative to the establishment of the development fund accounts, and continued ... ]

The accused himself gave evidence. He spoke of his becoming a cadet in the Corrective Service in 1969, being commissioned as an officer in 1972, being appointed Acting Commissioner in 1973, and finally being appointed Commissioner in 1976. He outlined the circumstances leading to the establishment of the development fund accounts and added that he spoke to the Minister at the time who approved their establishment. Whether such Ministerial approval was in fact given is not necessary to determine.

The accused maintained that about a year after the development funds were established a practice grew whereby they were used for loans to members of staff of the particular institution. He said that the purpose of loans was not discussed when the funds were set up. He claimed to be aware of loans being made to members of staff in all four institutions, the procedure being for a member of staff to approach his superintendent to obtain approval. It seemed that at Boram and Baisu the superintendent, according to the accused, had authority to refuse or grant the loan whereas the Bomana and Buimo funds were administered from Bomana itself, that is “at headquarters, the finance section of the Corrective Services Department”.

In answer to questions from the court however the accused said that no loans were made to members of staff at Buimo and that at Bomana “one other officer obtained a loan”. He nominated the officer as an Andy Siure. That person was not called in evidence. The accused could not recall how much was advanced to Mr. Siure. He said that it was he the accused who signed the cheque advancing the money to Mr. Siure but he could not remember who the other signatory was. He thought that the superintendent at the titme was Mr. Sammy Wani Jopoivo. That person was not called in evidence.

The accused gave his own account of how he came to sign the cheques relating to the three charges and of what he did with the cheques, and the proceeds. In effect he seemed to be asserting a sort of claim of right or at least a belief in a claim of right which if accepted would negative the mens rea which is an essential ingredient of the offence. At least I understood this to be the submission of his counsel, Mr. Awaita.

In this regard the accused said that he visited Lae in late 1978 and asked the superintendent at Buimo, Mr. Semi, if he could borrow K3,000 which he would repay by June, 1979. He said that Mr. Semi replied “That’s all right, but take it in small amounts”. He said that he did in fact pay back K3,000 to the finance office at Konedobu in July 1979 having obtained a cheque for that amount of money from an expatriate friend and corrective officer, Mr. Jeff Hiells. An official receipt for K3,000 dated 6th July, 1979 and purporting to be signed by or on behalf of the Collector was tendered and admitted in evidence. It is expressed to be in payment of “Personal Loan (Buimo Development Fund)”. It is to be observed that the total amount in the charges is K2,100 only.

The accused was asked questions in cross-examination relating to the money in the Buimo Development Fund. The evidence was as follows:

N2>“Q. Would you agree it was Government property?

N2>A. I would think it was institutional property.

N2>Q. When property is sold, would you agree proceeds would be institutional property?

N2>A. Yes.

N2>Q. If paid into Area Finance Office, would it belong to Government?

N2>A. Correct.

N2>Q. If it was paid into Buimo Development Fund, it would belong to the institution?

N2>A. Correct.

N2>Q. Anything withdrawn would also be the property of the institution?

N2>A. Correct.

N2>Q. The property of the institution is also the property of the Government?

N2>A. It will depend as to what sort of property. Buimo Development Fund was merely for that institution as contrasted with other institutions. Buimo Development Fund is used internally there. I knew it was for Buimo projects and development. I knew I was not allowed to borrow the money but my borrowing was not an exception. Other people were doing it.

N2>Q. You had no authority.

N2>A. No I already said I discussed it with Semi.”

I understand one of the submissions for the accused to be that, the matter of an honest claim of right being fairly and squarely raised by the accused, then the onus is on the prosecution to negative it (see e.g. R. v. Whitaker[xcv]¹) and that in view of the accused’s evidence that onus has not been discharged. It might also be put in fairness to the accused that in the light of his evidence it may be argued that the prosecutor has not proved the intention to defraud required by s. 22 of the Criminal Code and implicit in the nature of the prosecutor’s case.

The evidence of the accused cannot be lightly dismissed. It was on oath, it was given clearly in the English language, and there was nothing about the demeanour of the accused to indicate that he was prevaricating. It was submitted for the State that I should reject the account of the accused as to the alleged loan for a number of reasons. There are indeed a number of unsatisfactory features in the version given by the accused.

[His Honour then dealt with certain aspects of the evidence, concluding ... ]

I therefore reject the evidence of the accused to the effect that loans from development funds to other officers had taken place prior to 13th March, 1979. I reject the evidence of the accused that he requested and obtained the approval of Mr. Semi to his borrowing money from the Buimo Development Fund.

I find in favour of the accused that he did intend to repay the money and that in fact he paid to the Collector on 6th July, 1979, the sum of K3,300 part of which was referable to the amount alleged in the charges.

I am satisfied beyond reasonable doubt that in countersigning the cheques and depositing them to his account, the accused acted dishonestly and without claim of right.

The question remains whether on the facts as I have found them the accused is guilty of the offences charged. Although there are three offences on different dates, they stand or fall together.

The offences charged are under s. 384(5) of the Criminal Code. It is a necessary ingredient in this offence to prove, in addition to the stealing, firstly that the offender is a person employed in the public service and secondly either that the thing stolen is the property of the Government or (as is alleged here) that the thing stolen came into the possession of the offender by virtue of his employment. The prosecution does not rely on an allegation that the thing stolen was the property of the Government but on the second leg namely that it came into the possession of the accused by virtue of his employment.

Although it was not in issue, I need to be satisfied that the accused as Commissioner of Corrective Institutions was employed in the public service. With some assistance from the Bar table, I take judicial knowledge of the fact that the Commissioner of Corrective Institutions is not a departmental head appointed by the Governor-General in Council under s. 68(1) of the Public Service (Interim Arrangements) Act 1973. I note that s. 69 of that Act provides further that the Public Service Commission may appoint persons to vacant offices other than offices of departmental heads. I also note that under s. 5 of the Corrective Institutions Act 1957 “Commissioner” is expressed to mean the Commissioner of Corrective Institutions appointed under the Public Service (Papua and New Guinea) Ordinance 1963-1969. I find the employment of the accused in the public service at the relevant times proved beyond reasonable doubt.

I will deal later with the question of whether the thing stolen came into the possession of the offender by virtue of his employment, and go on now to whether the State has proved the stealing by the accused as alleged.

At the outset it must be said that even though the accused may have intended at the time of the deposit of the cheques, to repay the sums which were thereby credited to his account, this affords him no defence. By virtue of s. 377(2)(f) of the Criminal Code it is sufficient proof of fraud that the person concerned have “in the case of money, an intent to use it at the will of the person who takes or converts it, although he may intend to afterwards repay the amount to the owner”.

It was put by Mr. Awaita for the accused that “money” as used in s. 377(2)(f) of the Criminal Code means money in the strict sense of cash and not in the extended sense used in the definition section, s. 1, where it is defined to include, amongst other things, cheques. I can only say that I see no reason to restrict the meaning. In any event the State case is that the accused stole not cheques to the value of the amounts alleged but money itself, a distinction of importance to which I will later refer.

To many people it may seem a matter of common sense, that, to use an analogy, a director of a company who dishonestly draws a cheque on his company and pays it in to his own bank account for his own use can be said to have stolen the sum of money shown on the cheque. This might be particularly so in Papua New Guinea where s. 377(1) of the Criminal Code seems to define stealing so as to include fraudulent conversion. However the law is not so simple.

At common law larceny could be committed only if there were inter alia an asportation or taking away of a thing which was the property of another person. Where a person lawfully had possession of the property of another and put it to his own use, even though to permanently deprive the owner of it, he could not be guilty of larceny. In some places the statutory offences of fraudulent conversion, fraudulent failure to account and larceny by a bailee were introduced. A classic statement of the deficiencies of the common law and the distinction between larceny properly so called and these statutory offences appears in the judgment of Sir Frederick Jordan in R. v. Ward[xcvi]². It should be noted that in Papua New Guinea there is no equivalent to s. 178a of the Crimes Act, 1900 (N.S.W.) which establishes an offence of fraudulent misappropriation and which might have applied to the present case.

In Papua New Guinea one must look first and foremost at the provisions of the Criminal Code. Decisions in other jurisdictions may or may not be of assistance.

The relevant part of the section of the Code is as follows:

N2>“377 Definition of Stealing.

N2>(1) A person who fraudulently takes anything capable of being stolen, or fraudulently converts to his own use or to the use of any other person anything capable of being stolen, is said to steal that thing.”

It is essential to this definition that what is taken or converted must be a thing capable of being stolen.

It is settled that causing moneys to be withdrawn from a bank account or causing a debit to be placed against a bank account cannot amount to larceny from the person in whose name the account stands. The reason is that the credit in the account amounts to a chose in action against the bank only. Once a customer pays into an account he ceases to hold property in the funds paid in. The funds paid in become the property of the bank and the bank is the customer’s debtor.

These principles clearly emerge from R. v. Davenport[xcvii]³; Croton v. The Queen[xcviii]⁴; and R. v. Jamieson[xcix]⁵ per Prentice J. As I see it they are consistent with the majority decision in John Kasaipwalova v. The State[c]⁶.

In the present case what the accused did was to fraudulently sign the cheques and deposit them to his own account, thereby causing the account of the Buimo Development Fund to be debited. This could not, on the basis of the authorities cited above, amount to a larceny or stealing in the common law sense of the sums of money alleged in the indictment.

The question arises then whether the accused can be “said to steal” the sums of money by reason of a fraudulent conversion within the meaning of s. 377 of the Criminal Code. But the fraudulent conversion therein referred to relates to “anything capable of being stolen”. The word “stolen” in this phrase must be read subject to s. 376 of the Criminal Code which defines “things capable of being stolen”. Section 376 indeed deals only with things animate and inanimate, movable and immovable but it does not include a chose in action. I cannot see that the accused by signing and depositing the cheques can be regarded as fraudulently converting the money any more than he can be regarded as stealing in the common law sense.

Although the prosecution did not expressly rely upon the ultimate use of the proceeds (that is the putting of the money towards his small building project) as constituting the fraudulent conversion by the accused, it is necessary to look at this aspect in the light of some remarks in the cases cited to the effect that although larceny could not be proved, the facts might support a charge of fraudulent conversion.

In R. v. Davenport[ci]⁷ the secretary of a company dealt with cheques already signed by the directors. It was his duty to fill in the names of payees. In relation to some of the cheques he filled in the name of the bank of his own creditors. In relation to others he gave them to one S, with the name of the bank of S as payee, and received cash from S in exchange. Lord Goddard held that in no case could the accused be guilty of larceny but where he had received money being the proceeds of the employer’s cheque then that was received for and on behalf of the master and “therefore he embezzled it because he applied it to his own use instead of handing it over”[cii]⁸. In the opinion of Lord Goddard if he had been charged with fradulent conversion of these cheques there could have been no answer.

In Croton v. The Queen[ciii]⁹ the accused drew moneys from a joint savings bank account and put them into an account of his own. Barwick C.J. said[civ]¹⁰:

“Neither the balance standing to the credit of the joint account in this case, nor any part of it, as it constituted no more than a chose in action in contradistinction to a chose in possession, was susceptible of larceny, though it might be the subject of misappropriation.”

It was further held in R. v. Jamieson[cv]¹¹ that the disposition of the actual sum of money subsequent to its withdrawal from the bank would not amount to a larcenous dealing either but would seemingly amount at most to a fraudulent misappropriation.

In the present case there is simply no evidence that the accused, having deposited the cheques to his own account, thereafter obtained in money the sums so deposited. Had he done so it might be said as in R. v. Davenport[cvi]¹² that such money was received for and on behalf of the true owners of the Buimo development fund, and that his subsequent disposition of it was a fraudulent misappropriation.

The judgment of Prentice J. (as he then was) in R. v. Jamieson[cvii]¹³ is clearly in support of the other two authorities cited. In that case, to simplify the facts, the accused conducted a debt collecting business called Creditcheck. A debt was recovered in the form of a cheque from a debtor of a client of Creditcheck. That cheque was paid into the Creditcheck bank account and the accused drew against the account and paid into his own personal account. Prentice J. considered three questions as relevant, viz[cviii]¹⁴:

N2>“(a) does the banking of the cheque to Creditcheck’s account constitute larceny;

N2>(b) does the drawing of the cheques against the said account in the manner done, constitute larceny;

N2>(c) does the subsequent disposal of the proceeds of the latter cheques constitute or complete an act of larceny.”

His Honour concluded that none of these acts constituted larceny within the Papua New Guinea Criminal Code. His Honour observed that in relation to the third question there was nothing to relate the moneys actually withdrawn to the proceeds of the debtor’s cheque which had been paid in to the Creditcheck account. In the present case there is no evidence of how the accused Bai disposed of the proceeds of the three cheques. All we know is that he used it towards his small building project.

If he had drawn cash as against the cheques as he paid them in and put that cash to his own purposes the case might have fallen within R. v. Davenport[cix]¹⁵ but there is no evidence on which such a conclusion can be based.

I note that the decision of Prentice J. in R. v. Jamieson[cx]¹⁶ was recently reported as disapproved by the Full Court of the Supreme Court of Western Australia in Sawiris v. Scott[cxi]¹⁷. The decision was handed down in 1977 and that court does not seem to have had the benefit of reference to John Kasaipwolova v. The State[cxii]¹⁸. Apart from the authority of the latter decision as a judgment of the Supreme Court of Papua New Guinea as it affects a trial judge sitting in the National Court, it seems to me that the Western Australian Criminal Code and the Criminal Code of Papua New Guinea are different in a material way. Whereas s. 377(1) of the Code here refers to fraudulent taking or conversion of anything capable of being stolen, the equivalent section of the Western Australian Code, that is s. 371, distinguishes between the fraudulent taking of anything capable of being stolen and the fraudulent conversion of any property. It seems to me that a chose in action is undoubtedly correctly described as property (see s. 1 of the Criminal Code of Papua New Guinea). As property it may be the subject of conversion, but it is not a thing capable of being stolen. With respect to the Supreme Court of Western Australia I think it failed to perceive this difference between the two Codes.

I therefore find that I cannot be satisfied beyond a reasonable doubt that what the accused did amounted to a stealing either in the sense of a larceny, or as a fraudulent conversion of the respective sums of K600, K900 and K600.

On the other hand it is clear as I see it that the signing of the cheques by the accused together with the depositing to his own account amounted to a fraudulent conversion of the cheques themselves. I therefore consider that he committed a stealing within the meaning of the Criminal Code of the cheques in specie. I have considered whether the wording of the indictment is sufficient to cover this finding and after taking into account s. 1, the definition section, and also s. 542(5), I conclude that it is not. The State has alleged that the accused stole three sums of money and it is not sufficient to find that he stole three cheques. This is not an appropriate matter for amendment of the indictment even if amendment were proper and possible at this stage.

It seems to me that the conclusion I have otherwise reached is strengthened by the fact that these charges are not allegations of simple larceny but of an aggravated larceny in which an essential ingredient to be proved is that the thing stolen came into the possession of the offender by virtue of his employment. It seems to me that one could not conclude on the evidence that any of the three sums of money alleged in the indictment to be stolen came into the possession of the accused at all. As I say, I conclude that what the accused stole was cheques, and I am prepared to find that they came into his possession by virtue of his employment. The cheque book was part and parcel of the administration of the Buimo development fund account and that fund had been fairly established for the benefit of the corrective institution. I find that the cheque book came into the possession of the accused for the purpose of the administration of the fund and would not have done so had the accused not been one of the signatories of the account in his capacity as Commissioner. I do not consider R. v. O’Donoghue[cxiii]¹⁹ to be to the point and in any event that case is somewhat remarkable among decisions of the High Court of Australia in that the learned judges give no reason for their judgment, “leaving the judicial exposition of the section for some future occasion should it arise”.[cxiv]²⁰.

It may seem strange that a person who has dishonestly stolen cheques and used the proceeds for his own benefit cannot be convicted of stealing those proceeds but I find that the law compels me to that conclusion.

I find the accused not guilty as charged.

Verdict of not guilty.

Solicitor for the State: C. Maino-Aoae.

Solicitor for the defendant: Craig, Kirke & Wright.

[xcv] Unreported, Judgment No. 516 (1969).

[xcvi] (1938) S.R. (N.S.W.) 308 at p. 315.

[xcvii] [1954] 1 W.L.R. 569; [1954] 1 All E.R. 602.

[xcviii] (1967) 117 C.L.R. 326.

[xcix] [1975] P.N.G.L.R. 216.

[c] [1977] P.N.G.L.R. 257.

[ci] [1954] 1 W.L.R. 569; [1954] 1 All E.R. 602.

[cii] [1954] 1 W.L.R. 569 at p. 571.