Rex v Sefesi [2013] TOSC 14; CR50 of 2011 (1 August 2013)

IN THE SUPREME COURT OF TONGA
APPELLATE JURISDICTION
NUKU'ALOFA REGISTRY

REX

V

SOSAIA VILIAMI SEFESI

BEFORE THE HON. JUSTICE CATO

Mr Sisifa and Ms Macomber for the Crown
The Accused unrepresented

RULING

[1] The accused had been charged with five counts of fraudulent misappropriation under section 162 (b) of the Criminal Offences Act This section provides;
Every person who –

(b) "being entrusted with anything capable of being stolen in order that he may retain the same in safe custody or apply, pay or deliver for any purpose or to any person such thing or any part thereof or any proceeds thereof,..."

[2] Shortly after the opening of the trial, I inquired of the Crown prosecutor, Mr Sisifa, the basis upon which it could be said that the accused under section 162 (b) of the Criminal Offences Act Act had committed an offence. At that point, I had thought that he had claimed that the accused had fraudulently acted by debiting one customer's account in favour of another which turned out to be the essence of the Crown case. I was concerned that under the provisions of the section anything capable of being stolen which is further defined in section 144 (2) of the Act could not include a customers' credit in a bank account which is a chose in action. R v Bennitt [1960] NZPoliceLawRp 21; [1961] NZLR 452; Croton v the Queen [1967]117 CLR 326; R v Davenport [1951] 1 All ER 600.

[3] Thing capable of being stolen is defined in section 144 as;

(1) Every animate thing which is the property of any person is capable of being stolen.

(2) Every inanimate thing which is the property of any person is capable of being stolen;

(3) Provided that –

• (a) It is moveable; or
  
• (b) It is capable of being made movable and has been made moveable only in order to steal it.
  

[4] The legislature at the time of drafting this provision plainly treated property and things capable of being stolen as tangible items. They had to have a physical presence. The examples in the Tongan legislation of what things may be stolen are plainly tangible. Thus the commentary reads;

"A horse, dog or fowl is capable of being stolen by reasons of subsection one.

Money, a boat, or coconuts lying on the ground are capable of being stolen by reason of subsection 2 paragraph;

(a) Coconuts growing on a tree, yams growing in the ground are capable of being stolen under subsection paragraph

(b) As soon as the coconuts are detached from the tree of the yams are dug up even though the detaching or digging was done by the thief in order to steal them."

[5] However, Mr Sisifa stated that his case was that the accused had been entrusted with the bank's money for safe keeping as an employee of the bank and he had fraudulently converted to the use of others moneys belonged to the bank and this was represented by a credit in the account of another customer. Mr Sisifa acknowledged that he would be unable to construct a case based on fraudulent conversion from a customer's account since the customer enjoyed a mere chose in action, but he suggested that what was being converted was in reality not a chose in action of the customer but the bank's own money. He said that what the accused had done by electronic transfer was to have applied the property of the bank namely its money representing deposits held by the bank to the credit of the customer without any authorization to do so, either from the bank or the debited customer and hence dishonestly. The electronic transfer had the effect of shifting this money although not in any physical sense. The debit in the customer's account was merely an illustration of the accused's modus operandi with neither the bank nor the debited customer agreeing to what had been done.

[6] Initially, in the short time I had to consider the matter with the jury absent, I was attracted to the argument Mr Sisifa had presented to me, although the apparent absence of any apparent tangible property concerned me. It seemed to me that there should be no difference in principle between the position of a person who, being entrusted with money in a bag, had converted it to his own use or the use of another and one who being employed by a bank fraudulently converted the bank's money by electronically transferring money that belonged to the bank to his or another's account. The exchange in at least money's equivalent was affected by the electronic transfer, although this was not a physical transfer.

[7] Rather than rule there was no case to answer at that very early stage, when I had heard nothing of the evidence, I allowed the case to proceed. I had intimated to Mr Sisifa, however, were the accused to have been convicted I intended to refer the matter to the Court of Appeal. The problem as I saw it was that the section relating to misappropriation referred to things capable of being stolen and that definition spoke only in terms of tangible property. Although in a sense, as Lord Goddard CJ explained in Davenport, credits in bank accounts are regarded as equivalent to cash, in reality the law is different - a credit in a bank account reflects no more than a chose in action which at most could only be regarded as intangible property.

[8] I was advised that the Tongan provisions contained in section 162 of the Act followed the English Larcency Act 1916, and were enacted about a hundred years ago, although the English definition of property seemed wider than the Tongan being described as anything that has value and is the property of any person. Banking with its system of electronic debits and credits has, however, moved well beyond coin and banknotes passing hands and tangible property in that sense.

[9] After I had allowed the case to proceed, R v Preddy [1996] UKHL 13; [1996] AC 815 came to my notice. That was a decision of the House of Lords quashing a conviction for obtaining property by deception namely an advance from a mortgage institution contrary to provisions in the Theft Act, 1968. Section 4 (1) of the Act defined property much more broadly than section 144 of the Tongan Act, as including money and all other property, real or personal, including things in action and other intangible property.

[10] Preddy concerned electronic transfers from a lending institution to the bank account of a fraudulent borrower. Lord Goff observed;

Let it be assumed that the lending institution bank account is in credit, and there is therefore no difficulty in identifying a credit balance standing in the account as representing property, ie a chose in action, belonging to the lending institution. The question remains, however, whether the debiting of the lending institution's bank account and the corresponding crediting of the bank account of the defendant and or his solicitor constitutes obtaining of the property. The difficulty in the way of that conclusion is simply that, when the bank account of the defendant (or his solicitor) is credited, he does not obtain the lending institutions "chose in action".

[11] Lord Goff further explained;

"...I do not see for myself how this can be properly be described as obtaining property belonging to another. In truth the property which the defendant has obtained is the new chose in action constituted by the debt now owed by the bank, and represented by the credit entry in his own bank. That did not come into existence until the debt so created was owed by him to the back, and it never belonged to anybody else. True, it corresponded to the debt entered into lending institutions bank account; but it does not follow that the property which the defendant acquired can be identified with the property which the lending institution lost when the account was debited. In truth, section 15 (1) is here being invoked for the purpose for which it was never designed, and for which it does not legislate."

[12] I also found very useful an article on this subject by Jacquline Lipton of Monash University entitled "Property Offences into the 21st Century". Electronic law Journals JILT, 1999(1). She reviewed the difficulties associated with trying to accommodate older legislation with new means of electronically transferring moneys as here. Importantly, she wrote, having considered the judgment of Lord Goff in Preddy;

"In contrast to cheque payments, there is no way that a payment by electronic funds transfer can be construed as involving physical, tangible property. The electronic system itself does not constitute 'Property.' It is merely a mechanism through which a payment is made. In theory, it effects the transfer of money from one persons' account to that of another. However, the 'money' in question is not tangible property in the form of notes and coins, nor even in the form of a negotiable instrument. Rather the funds are represented electronically by entries in the relevant banks accounts representing debts owed by the banks to their respective customers."

[13] To similar effect is the statement of David M Fox "Property Rights and Electronic Funds Transfer' (1996) Lloyd's Maritime & Commercial Law Quarterly 456, at p457, when it is said;

"An Electronic Fund Transfer is not a form of property. We cannot reify, and regard as property, a mere process by which instructions are communicated and debts settled between banks. The so-called transfer was only a transaction which adjusted the parties' rights to demand money from the bank. The transfer had consequences for the parties' property, without being property itself."

[14] After hearing more from the Crown's principal witness, a representative of the bank, and after considering Peddy, it seemed there was nothing on which the Crown could base a case that tangible property was involved here as is required by section 144. As such, in my view there could be no prima facie case. I readdressed my concerns to the Crown Prosecutor Mr Sisifa and referred Preddy and the Lipton article to him.

[15] The next day, Mr Sisifa fairly conceded that he could no longer maintain that the conversion counts could be sustained under the Tongan definition of property but he applied to have the indictment amended by adding an alternative to the first count relating to falsification of a document under section 159 of the Act. Evidence had been given by the bank officer in connection with count one that the accused had admitted to her forging a bank document with the debited customer's name to assist in a transfer of funds.

[16] I was concerned both with the lateness of this application and the fact that I was being asked to amend by introducing an additional count involving a different offence. Although Tongan law does not provide any amendment provision for indictments, under section 2 of the Supreme Court Amendment Act 2012, a Supreme Court Judge in Tonga has all the powers of a Judge of the High Court in England and Wales. Plainly, the power to amend indictments is inherently important to ensure that the administration of criminal justice and the trial process is fairly and efficiently conducted, and amendments to indictment in practice in Tonga are not uncommonly made. I was unsure, however, whether the power to amend included additional counts involving separate offending, and, in any event, whether, in this case, I should allow the Crown to amend given the lateness of the application. Research, however, established that the Court of Appeal (Criminal Division) in England in R v Johai [1972] 2 All ER 449 had rejected an argument that there could not be amendment of the indictment to introduce an additional count after a jury had been sworn and empanelled, although the Court said that "great care" should be taken to ensure there was no prejudice to the accused before an amendment was made.

[17] I considered there was no prejudice to the accused here in making the amendment since the evidence of admission had already been given and the accused could not be said to have been taken by surprise. The evidence was relevant to the existing first count of the indictment to which the alternative amendment was sought, and the lateness in amending has simply arisen because of the difficulty associated with resolving issues of law relating to electronic transfers and intangible property under Tongan legislation.

[18] Shortly, after making my ruling the reasons and the background which I said I would record in writing, because of the unusual nature of the issues, the accused pleaded guilty to the alternative count of false accounting and the jury were directed to acquit him on the remaining counts of misappropriation for which the Crown had accepted there was no case to answer.

[19] In my view, this prosecution illustrates an urgent need for Tonga to effect reform of the existing Criminal Offences Act to avoid the problems the Crown encountered in this case. Offences involving dishonesty such as embezzlement, theft and misappropriation generally require to be revisited because they are so important for the maintenance of probity in business and commercial dealings. Consideration is also required to be given to the concept of property itself and electronic transfers so important in banking and commerce today. Penal legislation should be fashioned to plainly meet the demands of the modern age.

DATED: 1 AUGUST 2013
JUDGE