R v Hoch[2023] QCA 179

SUPREME COURT OF QUEENSLAND

1. [1]
   THE COURT:  The appellant was found guilty after trial before a jury of three counts of fraud (counts 1, 3 and 4) contrary to s 408C(1) of the Criminal Code (Qld) (Code) with count 1 having the circumstance of aggravation of the fraud being to the value of $30,000 or more, one count of general dishonesty (count 2) contrary to s 135.1(1) of the Criminal Code (Cth) (Commonwealth Code), four counts of flying an aircraft without a licence (counts 5, 6, 8 and 9) contrary to s 20AB(1) of the Civil Aviation Act 1988 (Cth) (Act) and five counts of operating an aircraft in contravention of s 27 of the Act as the operation of this aircraft was not authorised by an Air Operator’s Certificate (AOC) (counts 10-14) contrary to s 29(1) of the Act.  The appellant was acquitted of one count of flying an aircraft without a licence (count 7).  He is pursuing his appeal against conviction only in relation to counts 1-4.
2. [2]
   The grounds of appeal are:

3. (1)
   A miscarriage of justice was occasioned by a direction that the appellant was not entitled at law to receive the payments the subjects of counts 1-4.

3. (2)
   A miscarriage of justice occurred because the directions about how the jury was to determine whether the appellant’s conduct was dishonest were inadequate.

3. [3]
   In relation to ground 2, the respondent accepts the correctness of the appellant’s argument in respect of count 2 that the learned trial judge failed to direct the jury correctly on the element of dishonesty as defined in s 130.3 of the Commonwealth Code and that the Court should allow the appeal in relation to count 2 and order a retrial for that count.  Ground 2 remains to be considered in relation to counts 1, 3 and 4.  It is unnecessary to consider ground 1 in relation to count 2 as a new trial will be ordered for count 2 in any case.
4. [4]
   The appellant also applies for leave to appeal against sentence in respect of the sentences imposed on counts 5, 6 and 8-14 and subject to the outcome of the conviction appeal.

Background

5. [5]
   The appellant was a pilot who at the relevant times held a private pilot’s licence.  He was a director of two companies The Flying Fitters Pty Ltd and Hoch Air Pty Ltd.  Count 1 concerned the operation of flights for the transportation of Shane Knuth MP and/or his staff between 12 November 2011 and 25 November 2015.  Count 3 concerned one flight for the Electoral Commission of Queensland for the transport of voting material between 1 and 10 February 2015.  Count 4 concerned the operation of flights for the transportation of Robbie Katter MP and/or his staff between 25 October 2014 and 6 November 2015.  Count 2 concerned the operation of flights for the transportation of Bob Katter MP and/or his staff between 2 December 2011 and 17 December 2015.  Evidence was adduced that if one of the members of Parliament needed to be transported for electoral or parliamentary business a member of staff contacted the operator of planes such as the appellant.  An arrangement was made for transport and after the flights an invoice issued on behalf of one of the two companies of which the appellant was a director for the flight that was undertaken.  A staff member of the relevant Member of Parliament sent the invoice to the relevant authority in Brisbane (for counts 1 and 4) or Canberra (for count 2) and the authority paid the invoice.  For the ballot material (count 3), the process was much the same and the Electoral Commission paid the invoice.
6. [6]
   It is sufficient to set out in full the particulars of count 1 as the particulars for each of counts 1, 3 and 4 followed the same pattern:

“Mr Hoch dishonestly gained a benefit from the Queensland Government when he issued invoices, or caused invoices to be issued, and he and/or The Flying Fitters Pty Ltd and/or Hoch Air Pty Ltd received payment, either directly or indirectly, for the operation of commercial flights that related to the transportation of Shane Knuth MP and/or his staff, in circumstances where he knew that he and/or The Flying Fitters Pty Ltd and/or Hoch Air Pty Ltd were not entitled to receive payment, either directly or indirectly, because he did not hold an appropriate Air Operator’s Certificate.”

7. [7]
   The particulars for each of counts 1, 3 and 4 were therefore that the appellant gained the benefit from the State Government (counts 1 and 4) and the Electoral Commission (count 3) in the form of payments to either himself or one of the two named companies by issuing invoices for the flights or causing those invoices to be issued.  There was no dispute at the trial about the appellant’s having issued or having caused to be issued invoices for the operation of flights as particularised (being the fact of the flights) and there was no dispute that either the appellant or one of the two companies received payment for each invoice issued.  The matter in issue for each of these three counts was dishonesty.  For each count, the prosecution’s case for dishonesty was particularised in the same terms that the appellant dishonestly gained a benefit when he issued invoices for the operation of commercial flights “in circumstances where he knew that he and/or The Flying Fitters Pty Ltd and/or Hoch Air Pty Ltd were not entitled to receive payment, either directly or indirectly, because he did not hold an appropriate Air Operator’s Certificate”.
8. [8]
   At the commencement of the trial, each member of the jury was provided with the “jury bundle” that comprised copies of relevant documents including a chronology, the particulars of the charges, the appellant’s licences, AOC documents and invoices.
9. [9]
   There was no dispute about the absence of an AOC and the appellant’s counsel at the trial conceded the appellant knew he did not have one.  An AOC is required under s 27 of the Act to operate an aircraft in Australian territory.  Section 27 of the Act is within Part 3 of the Act.  Section 29(1) of the Act which is also within Part 3 relevantly provides:

3. “The … pilot of an aircraft commits an offence if he or she:

3. (a)
   operates the aircraft …; and

3. (b)
   the operation of the aircraft results in:

3. (i)
   …; or

3. (ii)
   the aircraft being flown or operated in contravention of a provision of this Part (other than subsection 20A(1) or 23(1)), or of a direction given or condition imposed, under such a provision.

3. Penalty: Imprisonment for 2 years.”

10. [10]
    An AOC for Hoch Air Pty Ltd was not issued until 12 January 2016 (exhibit 21) and all the invoices the subject of counts 1, 3 and 4 were issued for flights prior to January 2016.  The appellant’s defence was that regulation 2(7A) of the Civil Aviation Regulations 1988 (Cth) (CAR 2(7A)) permitted the appellant who had a private pilot’s licence to operate without an AOC, if what he invoiced was the share of the cost of the flight.  Each of the subject invoices was endorsed with the following note:

“The below flight was carried out as a private operation within the meaning of CAR 2(7A) with the informed consent of all persons on board.”

11. [11]
    CAR 2(7A) provided:

“An aircraft that carries persons on a flight, otherwise than in accordance with a fixed schedule between terminals, is employed in a private operation if:

1. public notice of the flight has not been given by any form of public advertisement or announcement; and

2. the number of persons on the flight, including the operating crew, does not exceed 6; and

3. no payment is made for the services of the operating crew; and

4. the persons on the flight, including the operating crew, share equally in the costs of the flight; and

5. no payment is required for a person on the flight other than a payment under paragraph (d).”

12. [12]
    The appellant had made a no case submission in respect of counts 1-4 which did not succeed.  The basis for the no case submission was that the prosecution could not prove beyond reasonable doubt that the appellant knew he was not entitled to payment, if as a matter of law he (or one of his companies) was entitled to payment.  In ruling on the no case submission, the trial judge concluded that, as a matter of law, the appellant was not entitled to payment, unless CAR 2(7A) applied.  If CAR 2(7A) did not apply, the trial judge concluded that neither the Act nor the Civil Aviation Regulations 1988 expressly or impliedly prohibited the contracts for flights without an AOC, but the contracts were unenforceable at the suit of the appellant for public policy reasons and the appellant therefore could not have an entitlement to payment.  The trial judge also ruled that, were it necessary to consider the point, he would have held there was an implied term in each of the contracts that the contract would be performed lawfully by the appellant which was an alternative basis for finding that neither the appellant nor his companies were entitled to payment on the invoices.

Ground 1 – Direction that the appellant was not entitled at law to receive the payments the subject of counts 1, 3 and 4

13. [13]
    The trial judge provided the jury with a handout that set out the elements of each of the offences.  The summing up in relation to counts 1, 3 and 4 was done by reference to the elements that were listed on the elements sheet.  Apart from the circumstance of aggravation for count 1, the three elements that the prosecution had to prove beyond reasonable doubt for each of counts 1, 3 and 4 were set out as:

3. “1.
   That the defendant gained a benefit;

3. 2.
   That the benefit was gained for himself; and

3. 3.
   That the gaining of that benefit was done dishonestly.”

14. [14]
    There was no issue as to the first two elements of money being paid to the appellant and the appellant receiving it and the jury were instructed appropriately that those two elements could be treated as proven.  In respect of the third element of the offence which was the element of dishonesty, the trial judge referred the jury to the particulars document (in the jury bundle) in which the prosecution particularised the prosecution case on dishonesty and explained that there were three aspects of the element of dishonesty as follows.  The first aspect was knowledge (that the appellant knew that he was not entitled to receive the payment because he did not have the AOC).  The second aspect was that, with that knowledge, the appellant issued, or caused to be issued the invoices which resulted in the payments (of those invoices).  The third aspect was that he did that (namely, issuing the invoices that resulted in payments with the knowledge that he was not entitled to the payments) dishonestly.
15. [15]
    In relation to counts 1, 3 and 4, the impugned direction was in respect of the first aspect of the third element of dishonesty:

“The Crown needs to prove that he, in fact, was not entitled to receive payment. I direct you, as a matter of law, that in respect of any of the flights represented by any of the invoices, that you accept he personally piloted as charter flight, or for charter purposes, in other words, in respect of any flights that you accept he personally piloted where the prosecution has disproven the operation of regulation 2(7A), he was not entitled to receive the payment he did.  Put very bluntly and taking some of the nice – legal niceties off the edge of this, if he flew the plane illegally, he was not entitled to claim for the flight.  Sorry, I should not say illegally.  If he flew the flight as a charter, he was not entitled to claim for the flight.  It is only if the prosecution failed to disprove the operation of regulation 2(7A), on the particular flight you are considering that he is entitled to claim the payment.  Now, that is a step ante – that is a step before, is it not?  We are looking at that as to whether he is entitled to make a payment.  But, as a matter of logic he cannot know he is entitled unless he is not in fact entitled…

So, the fact that you find, if you do, that there was one or more flights where he was not entitled to claim payment is not the end of your enquiry.  The next step is his state of knowledge, and you would have heard me emphasis[e] the word knew that he was not entitled.  The fact that the prosecution has particularised its case as a state of knowledge means that they must prove that he actually knew he was not entitled to receive payment, not that he merely suspected or even that he believed he may not be entitled to payment.  They must prove that he actually knew that he and the business entities were not entitled to receive the payment.”

16. [16]
    The appellant submits that, in particularising its case in the way that it did, the prosecution set out to prove that the appellant knew (which meant subjectively appreciated) that neither he nor his companies had an entitlement to receive payment for the flight services rendered.  This submission misstates the prosecution case to the extent it omits an important aspect of the prosecution case which, in particularising dishonesty, focussed on the issuing of the invoices and that the appellant knew that neither he nor his companies were entitled to receive payment on those invoices because he did not hold the AOC.  The relevant state of knowledge of the appellant particularised by the prosecution was in respect of the appellant’s having no entitlement to receive payment on those invoices rather than the lack of entitlement being linked merely to the flight services rendered without an AOC.
17. [17]
    Mr Copley of King’s Counsel who appears for the appellant on this appeal concedes appropriately that the appellant could not seek to show on this appeal that he or his companies had an entitlement to receive payment on those invoices, as a result of a quantum meruit claim, as a quantum meruit claim in respect of any invoice could never accord with the exact amount of that invoice.
18. [18]
    The appellant’s argument in support of ground 1 comprises three alternative submissions.  The first submission is that those parts of the direction that have been bolded in the quote set out in [15] above introduced an irrelevant matter into the jury’s consideration of whether the appellant knew he or the companies were not entitled to payment (namely that if CAR 2(7A) did not apply, they were not entitled as a matter of law to payment).  That submission can be rejected immediately, as the direction to the jury reflects the prosecution case particularised for the jury which focussed on the appellant’s state of knowledge as to his entitlement or the entitlement of his companies to payment on the invoices when he did not have an AOC.  The prosecution could not have proved that the appellant knew that neither he nor his companies had an entitlement to payment on the invoices when he did not have an AOC unless that state of knowledge reflected the position at law.  The direction also reflects the determination by the trial judge of the question of law that was put before the trial judge in the appellant’s no case submission as a question for the trial judge to determine rather than be left to the jury as a question of fact.  Even if the trial judge did not strictly have to convey to the jury his conclusion on the question of law that had been determined in the no case submission, as is submitted by Mr Power of King’s Counsel who appears with Mr Coker of Counsel for the respondent, it was appropriate for the jury to be directed on the law as to the issue of entitlement to payment where the prosecution excluded the operation CAR 2(7A) to avoid the jury speculating about or considering that question.
19. [19]
    The second submission is based on the trial judge’s ruling that the appellant was not entitled to payment which was not because the contracts were illegal but because they would have been unenforceable in a civil suit by the appellant for public policy reasons.  The appellant’s argument is that, as he had not sued for payment, the jury should not have been told that the appellant was not entitled to claim payment for the flight as a matter of law (if the prosecution excluded the application of CAR 2(7A)).
20. [20]
    For the purpose of this second submission, the appellant does not seek to challenge the trial judge’s conclusion on the no case submission, but seeks to challenge the trial judge’s reliance on the conclusion that the appellant did not have an entitlement to payment when the appellant was not a party to a civil proceeding seeking to invoke the authority of the Court to uphold his claim to payment on the invoices.  If the position at law was relevant to the jury’s consideration, the appellant submits that the trial judge should have ended his consideration of the enforcement of the contracts with his conclusion that the contracts were not illegal by virtue of the Act.
21. [21]
    In view of the manner in which the prosecution particularised its case and the question of law the appellant sought the trial judge to determine on the no case submission, it was necessary for the trial judge to reach a conclusion on whether the appellant (or his companies) was entitled to payment of the subject invoices.  The trial was conducted by both the prosecution and the appellant on the basis the issue of entitlement depended on whether the prosecution could exclude beyond reasonable doubt the operation of CAR 2(7A).  The trial judge reached a conclusion on that entitlement as a matter of law, because unless there was no entitlement to payment on the invoices as particularised by the prosecution, the prosecution could not prove beyond reasonable doubt the state of knowledge alleged against the appellant that he knew he was not entitled to payment on the invoices he had issued for the flights.  The fact that the trial judge’s ruling was made during the appellant’s criminal trial rather than in a civil proceeding whereby the appellant was seeking to enforce the payment of the invoices did not preclude the trial judge’s undertaking the consideration of whether the appellant (or his companies) was entitled to payment on those invoices by applying the law of contract.  That was the question the trial judge was asked to determine at the trial as a matter of law and could be answered only by reference to the law of contract which extends to the application of the policy of the law that precludes enforcement of a contract that is associated with the furtherance of an illegal purpose or performed in a manner which the relevant statute prohibits: Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410 at 413 and 432-433.
22. [22]
    The appellant now argues that the trial judge should have limited his consideration to the issue of whether the Act expressly or impliedly disentitled the appellant or his companies from receiving payment for commercial charter flights performed without an AOC and, upon concluding that the Act did not make the relevant contracts illegal, should not have proceeded to consider whether public policy considerations precluded enforcement.  That is in contrast to the appellant’s trial counsel’s submissions made in support of the no case submission which urged the trial judge to follow that process of decision making and consider, in accordance with the principles set out in Nelson v Nelson (1995) 184 CLR 538 at 604-605 and 613, that public policy did not preclude the appellant or his companies seeking payment of the invoices, despite the breach of the Act in undertaking commercial charter flights without an AOC.  There was no error by the trial judge in answering the question of law by considering whether public policy would have precluded enforcement by the appellant of payment of the invoices.
23. [23]
    The third submission challenges the trial judge’s conclusion that public policy precluded the enforcement by the appellant (or one of his companies) of payment of the invoices.  The appellant argues that the main legislative purpose set out in s 3A of the Act of establishing “a regulatory framework for maintaining, enhancing and promoting the safety of civil aviation” could be fulfilled without treating each contract as unenforceable for public policy reasons.  It is unnecessary to consider the third submission, as the trial judge based his ultimate conclusion that the appellant (or his companies) had no entitlement to be paid on the invoices either on the application of public policy to preclude enforcement of the invoices or that enforcement was precluded by breach of the appellant (or his companies) of the implied term in each contract that the contract would be performed lawfully.  The appellant does not challenge the trial judge’s alternative conclusion that entitlement to be paid on the invoices would have been precluded by breach of the implied term.  In any case, the trial judge’s conclusion that, if CAR 2(7A) did not apply to each contract, public policy precluded the enforcement by the appellant of each contract to recover payment of the invoices was the appropriate conclusion.  The formation of each contract may not have been illegal but the performance of the contract by the appellant as the pilot without an AOC was an offence committed against s 29(1) of the Act that made the enforcement of payment directly associated with the illegal activity.
24. [24]
    The appellant does not succeed on ground 1 in respect of counts 1, 3 and 4.

Ground 2 – Adequacy of direction for counts 1, 3 and 4 about how the jury was to determine whether the appellant’s conduct was dishonest

25. [25]
    Ground 2 is based on the accepted position that the meaning given to “dishonesty” in Peters v The Queen (1998) 192 CLR 493 at [15]-[18] applies to “dishonestly” in s 408C: see R v Dillon; Ex parte Attorney-General [2016] 1 Qd R 56 at [48].  The consequence for a trial judge in summing up on the element of dishonesty for the offence of fraud contrary s 408C(1) was summarised by Bond JA (with whom Sofronoff P and Callaghan J agreed) in R v Mirotsos [2022] QCA 76 at [29]:

“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:

1. 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

2. 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.” (footnote omitted)

26. [26]
    The essence of the appellant’s submission on ground 2 is that the directions did not adequately identify the yardstick against which the jury was to measure the knowledge the appellant was alleged to have had which rendered his conduct dishonest and that it was reasonably possible that the jury found him guilty on counts 1, 3 and 4 on the basis that he knew that he was breaking the law (by operating commercial charter flights without an AOC) and not on the basis that he knew he had no legal entitlement to receive the payments made on the invoices he issued for those flights.
27. [27]
    To put the trial judge’s summing up in context, it is relevant to refer to the arguments of the prosecutor and the appellant’s trial counsel addressed to the jury on dishonesty.  The prosecutor addressed the jury on the basis that counts 1-4 were “more complicated” and required more than proof that he was conducting commercial charter flights throughout the charge periods, as the jury had to consider the question “did he gain a benefit from doing so and did he do so dishonestly”.  The prosecutor addressed the jury at length on the appellant’s dishonesty concerning his knowledge and spent a large part of the address in identifying relevant facts from the invoices, the comments made by the appellant during telephone intercepts about the arrangements and other evidence to urge the jury to conclude that the appellant knew he could not operate commercial charter flights without an AOC, issued invoices that endeavoured to hide that the flights were commercial charter flights by including the note referring to CAR 2(7A) and therefore knew he was not entitled to receive payment for the invoices.  These relevant facts included that the appellant sometimes charged for pilot stand down which they would infer was waiting time at an airport, on some invoices there was a discount which was inconsistent with cost sharing, on other invoices there was a charge at a lesser rate for “Ferry” which the jury were asked to infer was for the other leg of the flight, when the charter leg was for one leg only, and that GST was charged on the rate charged for the flight services.  The focus of the appellant’s trial counsel’s address was that the prosecution was unable on the evidence to discharge the burden of excluding that the exception in CAR 2(7A) applied to the flights which were the subject of the invoices and that, even if the prosecution discharged that burden, “the real issue in relation to counts 1 to 4 is dishonesty”.
28. [28]
    In dealing with the issue of dishonesty, the appellant’s trial counsel emphasised to the jury in relation to counts 1-4 that “one of the most important aspects is in the Crown proving he knew he wasn’t entitled to payment” and expressed the issue for the jury in these terms:

“Everything he did was legit, but his licensing. Are you entitled to payment for work you do? I hope each of you say, “Yes, I am entitled to payment for work I do.” How is the Crown, in this case, saying Mr Hoch knew he wasn’t entitled to payment?”

29. [29]
    The second paragraph of the directions given by the trial judge on the first aspect of the third element of dishonesty set out above in paragraph [15] did not refer to the yardstick (that the jury had to be satisfied that the appellant’s issuing the invoices for payment for flights with the knowledge that he was not entitled to payment of the invoices was dishonest by the standards of ordinary honest people) but it was followed relatively shortly afterwards in the summing up by the express direction on the standard of dishonesty as follows:

“The third thing is that he did that dishonestly. Knowledge, issuing the invoices with the knowledge, and doing it dishonestly. The issue of dishonesty is to be determined objectively. It is not to be determined by the defendant’s standards or beliefs, but it is to be determined by the standards of ordinary, honest people. You, as randomly selected members of the community, assess whether what he did was contrary to the standards of ordinary, honest people. To prove that the defendant acted dishonestly, the prosecution must satisfy you beyond reasonable doubt that by issuing or causing to be issued these various invoices, while knowing that he and the company entities were not entitled to be paid, he was acting in a manner that was dishonest by the standards of ordinary, honest people.

So it is those three things. Remember what the state of knowledge particularised is, consider whether he issued the invoices while he had that knowledge, and thirdly, you are to determine, according to the standards of ordinary, honest people, whether acting in that manner is dishonest. So those three things must be proven beyond reasonable doubt before the prosecution can prove this element of the three State-based fraud charges, counts 1 through to 4.”

30. [30]
    This direction which refers to the manner in which the prosecution has particularised its case incorporates the appellant’s state of knowledge alleged in the particulars of counts 1, 3 and 4 that were before the jury in the jury bundle.
31. [31]
    There was no failure whatsoever on the part of the trial judge to identify the yardstick against which the jury was to measure the appellant’s state of knowledge that the prosecution asserted rendered his conduct dishonest.  The trial judge’s direction complied with the requirements summarised in Mirotsos at [29].  There was no reasonable possibility that the jury found the appellant guilty on counts 1, 3 and 4 merely on the basis that he knew he was in breach of the Act in flying charter flights without an AOC rather than on the basis that he knew when he issued the invoices and received payment of the invoices he had no entitlement to receive those payments.
32. [32]
    The appellant has failed to show that the error asserted in ground 2 was made by the trial judge in summing up on counts 1, 3 and 4.

Orders

33. [33]
    It follows that the orders are:

1. Appeal allowed in respect of count 2.
2. Conviction on count 2 set aside.
3. New trial ordered on count 2.
4. Appeal against conviction otherwise dismissed.
5. Application for leave to appeal against sentence adjourned to be decided on the papers.
6. Direct that any written submissions on behalf of the applicant on sentence be filed and served within seven business days of the publication of these reasons.
7. Direct that any written submissions on behalf of the respondent in response be filed and served within seven business days of the service of the applicant’s submissions.