Fraudulent Conversion

Contributed by Alex Steel and current to 17 May 2018.

The common law offence of larceny, as has already been discussed, contained a number of lacunae. The major one related to when somebody, through a false pretence, induced the owner to willingly part with the goods. This was overcome by the statutory enactment of the false pretences offences. However there were also a number of other areas where the common law was considered to have developed in an inadequate way. These areas can be described as situations in which the defendant legitimately gained possession of the property but then dealt with the property in an unauthorised and dishonest way. There are also a number of forms of larceny that have been considered to be more serious and as a result have received special treatment in the Crimes Act. These offences are often described as offences of fraudulent conversion.

Note that as all of these offences are statutory, and refer to property, they encompass the broader definition of property set out in s4 and are not limited to choses in possession. This potentially makes these offences much more flexible than their foundation offence of larceny.(1)

Larceny as a bailee

One of the most important problems with the common law of larceny, in a commercial setting, was the problem of bailment. If the defendant had entered into a bailment of the goods and thereby had legally and lawfully gained possession of the goods there could be no larceny of the goods by the defendant. This was because the concept of larceny is based on possession not on ownership. Consequently there was no taking of possession.

Carrier’s case (1473) Y.B. pasch, 13 Edw IV f9 pl5, 64 Selden Society 30 (1945)

In order to overcome this problem the judges in the Carrier’s case (1473) Y.B. pasch, 13 Edw IV f9 pl5 created the legal fiction of “breaking bulk”. In that case the carrier had been instructed to deliver some bales of wool to Southampton. Instead, the carrier took the goods to another location and on arrival broke open the bales and sold the wool inside. Although a very old and confusing case, it became a precedent for the doctrine that while the defendant had been granted a bailment over the bales, he had not been given one over the contents of the bales. Therefore there was no larceny in taking the bales, unopened, to another destination - but the moment he broke open the bales and took the wool out of them there was then a larceny. A major limitation of such a doctrine was that a bailee could only be guilty of larceny if he or she made off with packaged goods. One could not be guilty, for example, of breaking open and stealing the contents of a horse.

This sort of legal sophistry was eventually replaced by a much more workable statutory enactment, s125 of the Crimes Act 1900.

125 Larceny by bailee
Whosoever, being a bailee of any property, fraudulently takes, or converts, the same, or any part thereof, or any property into or for which it has been converted, or exchanged, to his or her own use, or the use of any person other than the owner thereof, although he or she does not break bulk, or otherwise determine the bailment, shall be deemed to be guilty of larceny and liable to be indicted for that offence.

The accused shall be taken to be a bailee within the meaning of this section, although he or she may not have contracted to restore, or deliver, the specific property received by him, or may only have contracted to restore, or deliver, the property specifically.

The elements of this offence are:
  • Bailment of property to the defendant (as defined)
  • Taking or conversion of the property bailed, or any property into which it has been converted to his or her own use or another’s
  • With fraudulent intent

Note that the defendant is convicted of larceny.

Bailment

Slattery v R (1905) 2 CLR 546

In that case Slattery had been employed to collect the rents of a number of houses. He was then to put the money into his own bank account and after deducting legitimate expenses for the maintenance of those properties, pay the balance every three months into the landlord’s own bank account. The money was never paid to the landlord. The High Court held that bailment constituted the following:

A definition was read during the argument from Pollock and Wright on Possession in the Common Law, which we are prepared to accept as a correct definition. It occurs at page 163, and is as follows: "Upon the whole, it is conceived that in general any person is to be considered as a bailee who otherwise than as a servant either receives possession of a thing from another or consents to receive or hold possession of a thing for another upon an undertaking with the other person either to keep and return or deliver to him the specific thing or to (convey and) apply the specific thing according to the directions antecedent or future of the other person."

Mr. Hamilton in his very able argument admitted that bailment implies three things: first the delivery of some specific article by one person to another; second, that the thing delivered should remain the general property of the bailor; and third, that it, or some specific thing into which it is converted under the terms of the bailment, is to be returned to the bailor or delivered to some person for him. That is substantially correct.

There are then three elements - a specific thing is delivered, the thing delivered remains the property of the bailor, or at least does not become the property of the bailee, and the thing itself or something for which it has been exchanged under the contract of bailment is to be restored or delivered. If the thing is applied under the instructions given by the bailor, as for instance, if an animal is entrusted to another to be sold and the proceeds applied in a particular way, the question whether the proceeds are or are not at common law the subject of a bailment, is a question of evidence, as appears from the case of R. v. De Banks (1).

However in this case what was claimed to have been bailed was in fact not property, but money. As this money was not held by Slattery in specie, but in a form of mixed funds in his own bank account it was a case of debt rather than bailment. He was therefore acquitted. As a direct result of this acquittal, the NSW Parliament passed s178A dealing with fraudulent conversion of money and valuable securities. This section is discussed below.

Delivery

It is an essential requirement of bailment that the property be delivered by the owner to the bailee. However such a delivery can, in some circumstances, be evidenced by a token act, as explained in R v Bennie [1953] VicLawRp 31; [1953] VLR 583.
R v Bennie [1953] VicLawRp 31; [1953] VLR 583

In that case the defendant had executed a bill of sale over his car in favour of a company and then, before the car had been redeemed, sold it to a third person. The question was whether following the sale of the car to the company his continued possession of it was in the form of a bailment and that he was therefore guilty of larceny by a bailee. Apart from signing the bill of sale, nothing had been done to pass possession to the company. Lowe ACJ held:

I am dealing with a criminal and not a civil case and in criminal law at any rate words have to be construed with strictness. In my opinion it is essential to constitute a bailment that there should have been a delivery of the chattels made by the bailor to the bailee. That delivery may, in certain cases, be a token delivery and, as at present advised, in the case of a motor car, I think it would be a sufficient delivery for the bailor to deliver the ignition keys or the door keys of the car to the bailee and that would constitute a delivery. It may be that it would be sufficient evidence of delivery that there was some other action indicating a transfer of delivery taking place, such as placing one's hand on the car coupled with words which in substance indicated that the bailor was delivering the car to the bailee.

However, Bennie had not done anything to pass possession of the car to the company, even in a tokenistic way. Thus there was no basis on which the company could have bailed the property back to Bennie and consequently there had been no larceny by bailee.

Need for a genuine bailment

But not only must there be a delivery, there must also be a delivery by the bailor.
R v Rigbey (1863) 2 SCR (NSW) 176

Thus in R v Rigbey (1863) 2 SCR (NSW) 176 the defendant found “a man insensible from drink” and took money from him, merely with the bona fide intention of keeping it for the man. The defendant later converted the money to his own use. Stephen CJ held:

...the authorities show that to create a bailment there must be a bailor as well as a bailee; and as I do not see how the prosecutor, being in a state of hopeless intoxication, could entertain any specific intention as to the return of this specific money, I do not see how he could be a bailor, or the prisoner, therefore, a bailee within the Act.

Similarly, if the defendant gains possession of the property by a false pretence that he or she is willing to be a bailee, but with no genuine intention on his or her part to accept the bailment, there is no larceny by bailee. Instead it is either larceny by a trick or obtaining by false pretences. (R v Pear (1779) 2 East PC 685; R v Parker (1863) 2 SCR (NSW) 217; R v Ward [1938] NSWStRp 5; (1938) 38 SR (NSW) 308. These cases are discussed below.)

Taking or Conversion

The defendant’s actions will only constitute larceny if the defendant deals with the goods in a way that is inconsistent with the terms of the bailment. For the purposes of s125, there must be either a taking or a conversion. Taking has already been discussed in relation to larceny where it was suggested that the taking must amount to a conversion because of the additional requirement that there be an intention to permanently deprive. Similarly, in s125 it would seem that the section requires that the taking (or converting) must also be to the defendant or another’s use and so consequently taking or converting are synonyms. Mere trespass by a bailee is insufficient.

For the purposes of the criminal law conversion has a slightly different meaning to that under civil law.

Rogers v Arnott [1960] NZPoliceLawRp 7; [1960] 2 QB 244

Arnott had borrowed a tape recorder from his flatmate and had therefore become bailee of the tape recorder. He was apprehended attempting to sell the tape recorder to an undercover police officer. Arnott was convicted of attempting to steal the tape recorder (as a bailee), but in his appeal he argued that he had already completed the conversion when apprehended, and had therefore been wrongly convicted of attempt. On appeal Donovan J held:

It is contended by the prosecutor that there was no such fraudulent conversion in the present case, but simply an attempt at it, because in the events which happened the true owner was deprived of nothing, and, as in the case of the civil tort of conversion, some detriment to the owner is essential to the commission of the wrong. I think the proposition is doubtful and the analogy in any event misleading. Conversion per se has been defined in a civil action as an act intentionally done inconsistent with the owner's right: see Lord Porter's speech in Caxton Publishing Co. v. Sutherland Publishing Co. The analogy is misleading because no civil action is possible unless the true owner has suffered damage; but this is not so in the case of a criminal prosecution for fraudulent conversion. One cannot, therefore, determine for the purpose of the criminal law whether there has been a conversion simply by asking whether the true owner has suffered damage. He might, indeed, recover the article intact, but this would not of itself prevent a prosecution of the dishonest bailee.

The defendant contends that there was a fraudulent conversion here when he, having dishonestly assumed to himself the rights of ownership in the property, endeavoured to exercise it by offering the property for sale.

There appears to be no reported judicial decision directly in point.....

It would be rash, I think, to attempt a definition of the term “converts ... to his own use" which would cover every possible case. A sale of the property by the bailee, contrary to the terms of the bailment, and for his own benefit, is clearly such a conversion. The reason is that the bailee in such a case has usurped the rights of the owner for his, the bailee's, benefit. Is the position any different in the case of an attempted sale? I think not. If I am lent property, and then determine in my own mind to sell it for my own benefit contrary to the terms of the bailment, I have determined that in relation to the property I will no longer be a borrower but an owner, and an owner who wishes to sell. When I proceed to carry that intention into effect by offering the property for sale, I am standing in the owner's shoes in relation to that property and exercising an owner's right. In these circumstances I have, in my view, already converted the property to my own use whether the attempted sale takes place or not; and if I have acted dishonestly in the matter, as the defendant here is found to have done, then the offence of larceny is committed..

It is a little strange, perhaps, if the defendant should succeed on the grounds that he has committed the full offence and not merely attempted it, and it is said for him that in these circumstances he cannot be tried for the full offence. I express no opinion upon that. The point is not raised in the case, and may yet arise for decision. In the meantime I would dismiss this appeal.

These findings were approved by Gibbs CJ in Ilich v The Queen [1987] HCA 1; (1987) 162 CLR 110. It therefore seems clear that for s125 a conversion need not require any damage to occur to the property, nor that any disposal of the property occur. All that is required is a dishonest intention on the part of the defendant to deal with the property as if it was their own, and some action in fulfilment of that intention. Whether or not they do in fact successfully dispose of the property appears to be irrelevant.

Examples of acts which have been held to be conversion under sections equivalent to s125 are: including a borrowed boat in a schedule of chattel securities to secure a bank loan (R v Dunbar [1962] NZPoliceLawRp 29; [1963] NZLR 253; painting a hired air compressor a different colour (R v Russell [1977] 2 NZLR 20) and refusing to return a loaned bicycle (R v Wakeman (1912) 8 Cr App R 18).

Broom v Police [1994] 1 NZLR 680

In Broom v Police [1994] 1 NZLR 680 a mountain bike had been stolen from a Mr Filer by a person known to Broom. When Filer offered a reward for the bike, Broom obtained the bike and contacted Filer. In order to keep his identity secret he proposed that the bike be returned in parts and the reward be paid in instalments. Filer reluctantly agreed. Broom was arrested attempting to effect the procedure. He was convicted of larceny by conversion but his conviction was overturned on appeal. Tipper J held:

The difficulty, as I see it, with Mr Pilcher's submission is that although Mr Filer was not attracted to the cloak and dagger rigmarole proposed by Mr Broom, he did not at any stage withdraw his consent to Mr Broom's continued possession of the bike. Albeit reluctantly, he decided that he would go along with the rigmarole. Indeed it was Mr Filer on Friday 2 July who indicated that the transaction could not take place that night. It was he who said that he wanted to defer the exchange until the following week. It was clearly implicit, if not explicit, in that stance that he was consenting to Mr Broom's continued possession and was consenting to the method of exchange being proposed. Whatever mental reservations he may have had about the necessity for or the wisdom of Mr Broom's rigmarole his natural anxiety to recover his bike led him ultimately to agree.

The learned authors of Adams on Criminal Law (2nd ed) say at para 220.05 that what constitutes conversion for the purposes of theft is not entirely clear. They then go on to say that any act inconsistent with the rights of the owner of the goods will be a conversion. A number of cases are cited. I do not think it necessary to discuss any of the cases which are referred to. Their facts are well removed from the facts of the present case. The key to the actus reus of conversion in the present context is conduct, whether active or passive, in derogation of the rights of the owner. An example of such active conduct is a bailee who mortgages a borrowed chattel as his own: R v Dunbar [1962] NZPoliceLawRp 29; [1963] NZLR 253. Examples of passive conduct are retention when the original acquisition was innocent (Police v Subritzky [1990] 2 NZLR 717) and retention beyond the agreed period. The actus reus must of course be accompanied by the necessary mens rea … but without an actus reus the crime has not been committed. In the present case Mr Broom was not in substance acting in derogation of Mr Filer's rights. He was simply proposing a rather peculiar method of returning the bike for the reward, which method Mr Filer ultimately accepted. I am therefore of the view, contrary to that of the Judge below, that there was in this case no actus reus of conversion by Mr Broom.

Or any property into or for which it has been converted, or exchanged

Slattery v R (1905) 2 CLR 546

The importance of this additional element of the offence is explained in Slattery v R:

That clearly made this change in the law, that, whether the conversion of the article bailed was authorized by the bailor or not, the bailee was equally guilty of larceny if he made away with the substituted property. But these words, as to which the difficulty arises, were added to the section: " And the accused shall be taken to be a bailee within this section although he may not have contracted to restore or deliver the specific property received by him or may only have contracted to restore or deliver the property specifically." What we have to do is to construe these words. It is said that they have entirely altered the law of bailment so far as regards larceny....

The first point arises on the words: “The accused shall be taken to be a bailee within this section.” Of what is he taken to be a bailee? It must be of something. You cannot have a bailee in the abstract, any more than you can have, for instance, a husband in the abstract. There must be some property of which he is a bailee.

[The court examined one possible construction of the words and continued ...] Let us turn now to the second possible construction; the accused shall be taken to be a bailee of the substituted property within the meaning of this section, (and bear in mind that the legislature had in its mind that they were dealing with bailees of goods, and larceny by such persons of those goods), although he may not have contracted to restore or deliver the specific property, that is, the original property, received by him.

Now that would make a material change in the law, because under the common law, if the bailee had not contracted to restore or deliver the specific thing received by him, it might be that he would not be a bailee of the goods substituted for them, for the reasons already pointed out [ie the lack of such a condition in the contract of bailment]. The property in those goods could not then have been laid in the bailor, and under these circumstances the words in the first part of the section would be inapplicable, because the offence is converting property "to the use of any person other than the owner thereof;" and, as there would in that case be no bailment of the particular goods in question, and consequently no bailee, the person who converted them would be the only owner known to the law. If the bailment was on the terms that he was to give the property back to the bailor, and he did not do so, but wrongfully converted it to or exchanged it for something else, he might not at common law be a bailee of the property put in its place. Hence arose a difficulty in laying the property in the thing substituted. That difficulty is removed by the second construction of the words of the section, and a full mean¬ing is thereby given to them. In that sense it relates only to the ownership of the substituted article, and in that respect alters the third condition or element referred to by Mr. Lamb and Mr. Hamilton, that the thing, or some specific thing into which the thing bailed has been converted or exchanged under the terms of the bailment, is to be returned to or applied under the directions of the bailor. It becomes no longer material to consider whether the thing into or for which the original article was converted or exchanged was so converted or exchanged under the terms of the contract or not. But in all other respects the statute leaves the law unaltered. An essential condition in all cases is that the thing first delivered remained the general property of the bailor.

As the property in this case was money, and the money had not been handed over on condition that it be held in specie by Slattery, there had been no original bailment and so the extended definition had no role to play.

Mens Rea: fraudulent intention

In order for there to be larceny by bailee the dealing with the property must be fraudulent. This appears to have the same meaning as it does in the common law element of larceny, namely that of dishonesty. However there are two points of importance which separate the mens rea required for larceny by bailee from simple larceny.

Firstly, there is authority that suggests that there is no requirement in the section that the defendant have any intention to permanently deprive the owner of the goods.

R v Hann [1883] SALawRp 18; (1833) 17 SALR 119

In R v Hann [1883] SALawRp 18; (1833) 17 SALR 119, the defendant had been given a bill of exchange in order to have the bill discounted. Instead of discounting it according to his instructions, the defendant had fraudulently given the bill to a third party as security for a loan. In his defence he had argued that he had no intention to permanently deprive the owner of the bill and that he fully intended to repay the loan and regain the bill. The Supreme Court of South Australia found that such an intention was irrelevant to a charge of conversion by bailee. All that was necessary was that the defendant was a bailee, that he converted the bill to his own use, and that he had done so fraudulently.

Secondly, as a bailee gains possession of goods lawfully, and only later decides to convert the goods to his or her own use, there is not a requirement that the mens rea exist at the time of delivery. Instead the mens rea must coincide with the act of conversion. Indeed if in taking the goods as a bailee the defendant were to have the mens rea to dishonestly deprive the possessor of the property this would amount to either obtaining by false pretences or larceny by a trick (see eg R v Millard (1906) 23 WN (NSW) 8).

Claim of right

Liristis v Director of Public Prosecutions (NSW) [2016] NSWCA 66

In November 2009, a 2004 Mercedes Benz motor vehicle driven by White broke down near Brighton-Le-Sands. White rang Liristis, who he knew, to come and look at the car. Liristis said he was a mechanic, the engine had seized, and he could fix it. A tow truck took the car to Liristis’ house in Penshurst. Liristis did not repair the car, but moved it to an undisclosed location and removed the engine, which Liristis claimed took 11 hours. White initially paid Liristis $1500 but refused to pay more without a tax invoice, which Liristis never provided.

In the Local Court Liristis argued that White had wanted the car ‘disappeared’ for a bogus insurance claim, and that Liristis also had a repairer’s lien for unpaid repair costs. The Magistrate rejected both arguments (she termed them a ‘claim of right’). Liristis appealed to the District Court, but failed. He appealed again to the Court of Appeal.

Sackville AJA: Section 125 of the Crimes Act provides as follows:

“Whosoever, being a bailee of any property, fraudulently takes, or converts, the same, or any part thereof, or any property into or for which it has been converted, or exchanged, to his or her own use, or the use of any person other than the owner thereof, although he or she does not break bulk, or otherwise determine the bailment, shall be deemed to be guilty of larceny and liable to be indicted for that offence. The accused shall be taken to be a bailee within the meaning of this section, although he or she may not have contracted to restore, or deliver, the specific property received by him or her, or may only have contracted to restore, or deliver, the property specifically.”

The elements of the offence relevant to the present application are that the accused:
  • was in possession of property as a bailee;
  • took or converted the property to his or her own use; and
  • did so fraudulently.

In Ilich v The Queen (2) Wilson and Dawson JJ explained that s 371 of the Criminal Code (WA), a provision with some similarities to s 125 of the Crimes Act, dealt with the question of whether a person in lawful possession of something could steal it, by expressly providing that a person could steal not only by fraudulently taking something but also by fraudulently converting it to his or her own use.(3) Their Honours pointed out that a person may convert something that is in that person’s possession by dealing with it in a manner inconsistent with the rights of the owner.(4) The language of s 125 of the Crimes Act implies that a person may also fraudulently take property already in his or her possession.

The term “fraudulently” is not defined in the Crimes Act. In R v Kastratovic,(5) King CJ said that the:

“essential notion of defrauding is dishonestly depriving some person of money or property, or depriving him of, or prejudicially affecting him in relation to, some lawful right, interest, opportunity or advantage which he possesses.”

This statement has been treated in Australia as authoritative.(6) A claim of right made by an accused is relevant to whether an offence under s 125 of the Crimes Act has been committed. That is because a bona fide claim of right to the property in question is inconsistent with the mens rea that is an essential element of the offence.(7) The relevant principles were summarised by Wood CJ at CL in R v Fuge_(8): [His Honour set them out]...
 
The Issue of Fraud
 
Mr Glissan submitted that the District Court Judge had fallen into jurisdictional error by failing to refer to or make a specific finding that the applicant’s conversion of the vehicle was fraudulent. Mr Kell, who appeared for the DPP, correctly accepted that a fraudulent conversion (or taking) is an essential element of the statutory offence of larceny as a bailee. [Sackville AJA found the lower judgments had not erroneously overlooked this requirement.]

The Existence of a Lien

The applicant’s second contention was that the District Court Judge erred in failing to find that, regardless of the applicant’s subjective beliefs, he in fact had a lien over the vehicle. Mr Glissan’s submissions did not make the significance of the alleged error entirely clear. The existence of a lien arising by operation of law would not necessarily prevent a finding that an accused person acted in a manner inconsistent with the title of the person otherwise entitled to possession. Nor would it necessarily be inconsistent with the accused acting fraudulently with the intention of permanently depriving the person entitled to possession of his or her interest in the property, although the existence of a lien as a matter of law might add plausibility to a claim of right.

As I understood the submission it was to the effect that if a lien had arisen by operation of law at the time the applicant refused to return the vehicle to Mr White, the applicant could not be said to have converted the vehicle. ...

Mr Glissan relied on the decision of the Full Court of the Supreme Court in Bolwell Fibreglass Pty Ltd v Foley (9)(Bolwell Fibreglass). In that case, Young CJ (with whom Kaye J agreed) held that where the owner of a chattel prevents another person completing work on the chattel, the person has a lien over the chattel as security for the work actually done.(10) Mr Glissan submitted that this principle should have been applied by the District Court Judge and, if it had been, his Honour would have held that the applicant had a lien over the Mercedes Benz vehicle for the unpaid work he had performed, even though the work was incomplete. ...

[I]nsofar as a claim of right can be discerned from the applicant’s evidence, it appears to have been a claim to retain the vehicle as security for work done under what the applicant described as “the Motor Vehicle Repairers Lien Act”.(11) The District Court Judge quoted the passage where the applicant made this claim(12) and rejected it on two grounds. The first was that the applicant did not hold a motor vehicle repairer’s licence and thus could not lawfully carry out repairs.(13) The second reason was that the applicant admitted that he had not carried out any repairs.(14) It is difficult to discern any error, legal or factual, in this reasoning.

Mr Glissan also submitted that the District Court Judge should have considered whether the applicant had a claim of right arising out of the work said to have been done in removing the engine from the vehicle. Mr Glissan pointed to the applicant’s record of interview with the Police in which he asserted that he had spent about 11 hours on that task. Again, it is not clear how this submission amounts to anything more than a challenge to a factual finding by the District Court Judge.
 
The Court was not taken to evidence capable of indicating that the applicant based his claim of right on the work done in removing the engine from the vehicle. His evidence is not easy to follow, but his claim was apparently that he had carried out extensive, albeit unspecified, repairs on the vehicle. There is nothing in his evidence suggesting that he was entitled to retain the vehicle to secure payment simply for removal of the engine from the vehicle. For example, there is no evidence that he made a demand on Mr White for payment of any amount specifically referable to the dismantling of the engine.
 
As the District Court Judge found, the applicant never sent a tax invoice to Mr White, despite requests to do so. The applicant’s own evidence was that he demanded and received $1,500 from Mr White to pay for parts to be purchased from a supplier. There was nothing to suggest that the applicant ever accounted for this sum. Further, there is no evidence that even if the applicant was entitled to charge for dismantling the engine, the charge would have exceeded $1,500. ...
 
In my view, therefore, this contention cannot succeed.
 
Reasonableness of Belief
 
Mr Glissan submitted that the Magistrate had wrongly regarded the unreasonableness of the applicant’s claim of right as determinative of whether he had a bona fide belief in the claim of right. Mr Glissan further submitted that the District Court Judge’s agreement with the Magistrate on the question of a bona fide belief meant that his Honour committed the same error.
 
The short answer to this submission is that the Magistrate did not reason in the manner attributed to her. She said in her reasons that the claimed belief must have been genuinely held and that the belief:
“need not be reasonable but the reasonableness of the belief goes to its plausibility”.
 
The Magistrate’s statement is consistent with the authorities. In R v Lawrence,(15) for example, Callaway JA said that:(16)

“If a person has a belief inconsistent with dishonesty, he cannot be convicted of an offence of which that is an element even if his belief is unreasonable. The reasonableness of the belief goes to its plausibility … [A] bona fide claim of right may be both unreasonable and unfounded, although, if it is, it is less likely to be believed or, more correctly, to engender a reasonable doubt.”
 
There is no substance to this contention.

Emmett AJA and Adamson JA agreed.

Larceny by clerk or servant

The concept of constructive possession in relation to employers and employees has already been discussed. Consequently most unlawful taking of goods by servants or employees can be prosecuted as a case of simple larceny. However because of the degree of trust which is inherent in an employee/employer situation, s156 of the Crimes Act 1900 enacts an aggravated form of larceny for theft by clerks or servants.

156 Larceny by clerks or servants
Whosoever, being a clerk, or servant, steals any property belonging to, or in the possession, or power of, his or her master, or employer, or any property into or for which it has been converted, or exchanged, shall be liable to penal servitude for ten years.

This offence, in using the word “steals” incorporates all the elements of larceny. It is thus an aggravated form of larceny where the maximum penalty is doubled if the defendant falls within the definition of a clerk or servant.

Thus the elements of the offence are those as for larceny, but with an additional requirement that the defendant be a clerk or servant.

Actus reus
  • A clerk or servant
  • Larcenable property
  • Belonging to, in possession or power of master or employer, or into which it has been converted or exchanged
  • Takes and carries away
  • Without consent of the master or employer

Mens rea
  • With intent to permanently deprive the master or employer
  • Without claim of right
  • Fraudulently

Property of master or employer

The offence also extends the relevant scope of larcenable property beyond property that was in the possession of the employer to any property into or for which it has been converted or exchanged. This has been discussed above in relation to larceny by bailees. The fact that the section uses the word property also means that the definition of property in s4 applies. This includes both tangible and intangible property. However the fact that the dealing with the property amount to a stealing may have the effect of restricting the relevant property to tangible forms of property.

Clerk or servant

The meaning of clerk or servant is given an expanded meaning in s155 of the Crimes Act 1900, which mirrors the common law development and expansion of the terms.

155 Definition of clerk or servant

Every person employed for any purpose, as, or in the capacity of, a clerk, or servant, or as a collector of moneys, although temporarily only, or employed also by other persons, or employed to pay as well as receive moneys, or although he or she had no authority from his or her employer to receive money, or other property, on his or her account, shall be deemed a clerk, or servant.

However, “clerk or servant” itself is not defined in s155. The traditional test at common law for whether a person is a clerk or servant is a test of control.

R v Negus (1873) LR 2 CCR 34

In R v Negus (1873) LR 2 CCR 34 Bovill CJ expressed the test as follows.

A test used in many cases is, to ascertain whether the prisoner was bound to obey the orders of his employer so as to be under his employer’s control...

R v Foulkes (1875) LR 2 CCR 150

An example of the breadth of the concept is found in R v Foulkes (1875) LR 2 CCR 150, an embezzlement case. In that case the father of the defendant was clerk to the local board of Whitechurch & Dodington. The defendant lived with his father and occasionally helped him out in conducting the business of the board. He was not appointed by the board nor paid any wages. In helping his father to organise a loan for the council he embezzled the money provided under the loan. Brett J held:

The prisoner undertook to do things for his father which a clerk does for his master, and to do them in the way a clerk does them. Now, assuming that there was no contract to go on doing those things, still as long as he did them with his father’s agreement, he was bound to do them with the same honesty as a clerk, because he was employed as a clerk.

Pollock B pointed out:

If it had been necessary to say absolutely that the prisoner was a clerk or a servant, I should have hesitated. But I think the words “employed as a clerk or servant” are wider, and that there is evidence to bring the case within them.

The point in time at which the larceny occurs

It may sometimes be important to know the exact point in time that the larceny by the clerk or servant occurs. Does it occur at the time that the employee first comes into possession of the property or does it occur at some later point in time?

Peter Jackson Pty Ltd v Consolidated Insurance (Aust) Ltd [1975] VicRp 47; [1975] VR 480

The issue arose in an interesting case, Peter Jackson Pty Ltd v Consolidated Insurance (Aust) Ltd [1975] VicRp 47; [1975] VR 480. In that case an employee, Jennings, had been given money to take from Peter Jackson’s Little Bourke St premises to the bank, but had instead absconded with it. Under Peter Jackson’s insurance policy with Consolidated Insurance they were indemnified for the loss of the money, provided that the theft occurred outside Peter Jackson’s premises. Crockett J held:

The crucial point being, "when was the money stolen?", the first question must be "how was it stolen?" ... In order to establish [the insurance company’s contention of a] commission of a theft whilst the money was undoubtedly in the plaintiffs' premises, it was suggested that, whether or not the offence was larceny as a servant, it certainly was larceny by a trick. As neither property in nor "legal" possession of the money was intended to be given Jennings, the offence could not, and was not, suggested to be that of obtaining money by false pretences. It is clear, of course, that Jennings possessed an intent to steal from the moment (and indeed before) the money was placed in his hands. His inquiries of and taking up a position in relation to the cashier show that he did not want her to fail to have him act as messenger as soon as she had completed the banking formalities. But she was not tricked into handing over the money. What Jennings did was what he was employed to do, and that being so, I am of the view that the offence, and the only offence, committed by him was that of larceny as a servant.

Well then, when precisely was the offence of larceny as a servant committed? The act of theft, of course, consists of the coincidence at the same moment of cepit et asportavit invito domino and animus furandi. Although the question whether the subsequent discovery of the error involved in what was an originally mistaken receipt of a thing or the finding of a thing of unknown ownership can amount to a taking so as to constitute larceny has for a very long time been a vexed one, it is clear that the conceiving by a servant of an intention to convert after delivery to him of goods by his employer does amount to larceny: R. v. Jones (1842), Cor. & M. 611; [1843] EngR 56; 174 E. R. 657.

But what of the opposite case? The servant acts animo furandi when custody of the goods passes to him in order that he dispose of them in accordance with the wishes of the master. The servant proceeds to deal with the goods consistently with the instructions of the master, choosing some later and appropriate moment to convert them, i.e. physically deal with them in a manner inconsistent with the master's command. Is it only at that moment of such unauthorized handling of the goods that the asportation (taking and carrying away) occurs so as to render the offence complete? Or is the offence committed when the servant first takes the goods apparently in conformity with the employer's instructions?

Cases are legion where on such facts the employee was found guilty of larceny as a servant see Russell on Crime 12th ed., vol. 2, p. 915; Archbold, 36th ed., par. 1506 but they do not, for the obvious reason that it was unnecessary so to do, determine precisely when the larceny was committed.

In my opinion, the taking and asportation of goods being carried in conformity with the master's instructions can only amount to an element in the crime of larceny as a servant when there is a movement of the goods that involves a departure from the master's instructions. This conclusion appears to me to be supported by a passage in Pollock & Wright's highly authoritative Essay on Possession In the Common Law (1888). It is to this effect (p. 216): "in the case of a servant who has received the custody of the thing from his master there may be a difference according as it is the servant's business to move the thing or not. If not, then as the servant's possession is the master's, it would seem that an ordinary taking and asportation is requisite and sufficient, as in the case of a mere stranger. But if the servant is charged with the duty of moving or carrying the thing. an actual and unequivocal diversion of the thing from its proper destination seems to be requisite and sufficient, as where a postman pockets a letter. (Poynton (1862), 32 L.J.M.C. 29; L. & C. 267 ... )."

Although the report of Poynton's Case does not disclose whether the prisoner formed an animus furandi at the post office or the home of the addressee of the letter, the example of a postman as an illustration of the point appears to me to be particularly felicitous. Whilst sorting the mail at the post office he sees a letter which, believing it to contain money, he decides, when the time for delivery comes, he will pocket. In the meantime, he bundles it up with all the other mail in the normal way and goes upon his delivery round. When he reaches the home of the letter's addressee he places the letter in his pocket instead of the letter box. Surely that is the act of taking and the moment of theft. Nor would it, I venture to think, ordinarily be thought that the postman had stolen the letter when he was proceeding upon his round in the normal manner notwithstanding his earlier formed fraudulent intent.

This view is consistent with the law concerning bailees. A servant entrusted with his master's property (unless it has not already been in the master's possession) never has "legal" possession of the property. Hence he is not considered a bailee in the usual sense of that term. A bailee of goods who does have possession (but not property or ownership) to be guilty of the statutory offence of larceny as a bailee must fraudulently appropriate the goods. Regardless of when the intent permanently to deprive the owner of the goods is formed, the offence is completed only, on the misappropriation of the goods. It is clear that that is constituted by a “conversion" of the goods which in law is some act quite inconsistent with the bailor's title: see Kenny's Outlines of Criminal Law, 16th ed., p. 221.

It follows that, for the reasons that I have endeavoured to express, in my opinion, the theft of the money occurred when Jennings reached the intersection of Little Bourke Street and Swanston Street and, instead of crossing the roadway to the bank, turned in a different direction and proceeded up Swanston Street to join his confederates. As it was at that point of time, and not before, that the plaintiffs' money was stolen, it follows that their loss of that money did not occur whilst the money was in the insured's premises. Nor, of course, was the theft committed whilst the money was in those premises.

This decision was confirmed by the majority on appeal (Peter Jackson Pty Ltd v Consolidated Insurance of Australia Ltd [1975] VicRp 77; [1975] VR 781):

[W]e agree with the conclusion of the learned judge that although Jennings was guilty of the offence of larceny as a servant of the money in question, he did not commit that offence until after the money had been taken by him from the plaintiffs' building in Little Bourke Street. It is unnecessary for us to decide at what particular subsequent point of time Jennings did commit the offence, in particular whether it was (as the learned judge thought) when he turned left in Swanston Street, or when he joined his confederates in Franklin Street, or at some later time, although we think that the learned judge's view may well be correct. It is also unnecessary for us to decide whether, if Jennings had been intercepted as he was about to leave the plaintiffs' building, he could have been convicted of an attempt to steal the money: cf. R v Cheeseman (1862) 9 Cox CC 100. No doubt Jennings and Griffiths were guilty of conspiracy as soon as they had made their plan to steal the money, but this does not appear to us to be relevant.

When Jennings was given the money by the cashier he had custody of the money, not possession, because he received the money in his capacity as servant of the plaintiffs for the purpose of taking the money to the bank in pursuance of his duties as their servant; the plaintiffs as Jennings' employers had possession of the money. Jennings could not "steal" the money until, having the intention to steal it, that is to deprive the plaintiffs of it permanently, he did something with respect to the money, which was inconsistent with the terms of his custody of it as the plaintiffs' employee, so as to convert his custody of the money into possession and thereby take possession of the money from the plaintiffs. The terms of Jennings' custody of the money required him to take the money to the bank, and therefore he did not steal the money until, at the earliest, he turned left at the corner of Little Bourke Street and Swanston Street, instead of proceeding across Swanston Street to the bank; until then, everything which Jennings had done had been entirely consistent with the terms of his custody of the money.

Reference may be made generally to Pollock and Wright, Possession in the Common Law pp. 215-6 (to which the learned judge referred); Smith and Hogan, Criminal Law, 1st ed. (1965) pp. 348, 362-4, and 369-71; Russell on Crime 12th ed. (1964) pp. 914-5; Kenny's Outlines of Criminal Law 19th ed. (1966) pp. 269-70, and Smith's Law of Master and Servant 8th ed. (1931) pp. 323-33. See too the interesting discussion in Fitch v State of Florida (1938), 125 Am L R Annotated pp. 360-7 and see ibid pp. 375-7. A decision which is of particular relevance to the present question is R v Roberts and Jackson (1848) 3 Cox CC 74. In that case the accused Roberts was employed by one Pugh. Pugh sent Roberts on a journey with a wagon and horses. Hay and bran belonging to Pugh had been placed in the wagon by Pugh's direction for the use of the horses. When Roberts had travelled about four miles with the wagon and horses, the accused Jackson was seen in the road with a cart going towards Roberts. The hay and bran were later found in Jackson's cart. Jackson and Roberts were charged with stealing the hay and bran. Counsel for Jackson submitted that Jackson could be a receiver only, because the evidence tended to show that Roberts must have entertained a design to steal the hay and bran a considerable time before they were placed in Jackson's cart, so that the hay and bran must be taken to have been stolen by Roberts at the time when they were placed in his wagon. But Patteson, J, rejected this submission. His Lordship said: "The doctrine of an animus furandi has never been applied to cases of master and servant. A servant entrusted with plate may long have had an intention to steal it, before he actually removes it, but no case has gone to the extent that such an intention, animus furandi, constituted the larceny." And his Lordship said to the jury: "A man can only be guilty of receiving stolen goods when the goods were stolen previously. In this case the act of stealing was the delivery of the hay to Jackson." Reference may also be made to Russell on Crime, supra, at p. 1147 and to two of the cases there referred to, namely_ R v Butteris_ (1833) 6 C and P 147; [1835] EngR 235; 172 ER 1183, and R v Gruncell (1839) 9 C and P 365; [1840] EngR 733; 173 ER 870. See too Glanville Williams, Criminal Law, The General Part, 2nd ed. (1961) p. 1.

Gillard J dissented, arguing that the larceny was complete when Jennings took control of the money. In upholding the conviction the majority were thus emphasising the importance of the need for actions, not just thoughts, inconsistent with the owner’s intentions.

Embezzlement

As already noted in the discussion on larceny an employee cannot be found guilty of larceny from their employer if the property that he or she takes was never in the constructive possession of the employer. To a large extent employees deal with property which has previously been in the possession of their employer, and therefore the issue does not arise. This is because in so dealing with the property the courts accept that the employer retains constructive possession.

However if the property is being transferred from a third party and is being accepted by the employee on behalf of the employer, there must be a point in time in this transaction before which it is not in the possession of the employer. What the employee does with the property at this time is critical. If the employee deals with the property in a way that can be interpreted as consistent with the employee accepting that the possession is constructively in the employer, then any subsequent taking is larceny from the employer.

However, if no such act exists, and the actions of the employee are inconsistent with the behaviour of an employee, there can be no larceny. This is because the possession of the property was consensually given by the third party to the employee and consequently the employee is in lawful possession of the property. It was because of this problem that the statutory offence of embezzlement was enacted.

157 Embezzlement by clerks or servants of the Crimes Act 1900
Whosoever, being a clerk, or servant, fraudulently embezzles, either the whole or any part of, any property delivered to, or received, or taken into possession by him or her, for, or in the name, or on the account of, his or her master, or employer, shall be deemed to have stolen the same, although such property was not received into the possession of such master, or employer, otherwise than by the actual possession of such clerk, or servant, and shall be liable to penal servitude for ten years.

The important issue then is to determine what action would move the possession of the property from the employee accepting the property, and into the constructive possession of the employer. As section 157 makes clear embezzlement can only occur if the property is “not received into the possession of such master ...”

The courts have held that acts amounting to such a receiving into possession occur when the employee does something beyond merely accepting the property, a further action that indicates that the property has been reduced into the constructive possession of the employer. Thus in Williams v Phillips, a case involving the collection of refuse by council workmen, the picking up of the refuse by the workmen moved the possession into the control of the workmen, but the placing of that rubbish into the council’s rubbish carts constituted a reducing of that possession into the constructive possession of the employer. It was therefore a larceny, not an embezzlement(17). The elements of the offence of embezzlement are as follows:
  • a clerk or servant
  • embezzles
  • property delivered to, or received or taken into possession by him
  • for, or in the name, or on the account of his employer
  • and embezzles fraudulently

Embezzles

This word describes the act of the employee. In R v Masters (1848) 1 Den 332; 169 ER 268 embezzlement was described as “fraudulent appropriation”. In the context of s 157 embezzles can be described as an act of appropriation. The implication of the cases is that it needs to be an act separate from the receiving. An act of taking is not needed, as the possession is already in the accused, but the cases would also suggest that there need not be divesting of possession by the accused. Russell on Crime describes embezzlement as the retention of property that the employee is under a duty to pass on to the employer (p1097)

The nature of the relevant act can be seen from the cases discussed below.

Clerk or Servant

This issue has been discussed above.

Delivered to, or received or taken in possession

This requirement appears to be relatively straightforward. However it is worth noting that there is no requirement that the defendant received the property from a third party. In fact, it is possible to convict a person of embezzlement in situations where they received money from a fellow employee, providing that employee has not done something to reduce the property to the constructive possession of the employer It is also possible to be guilty of embezzlement in a situation where the previous possessor of the property is unknown.

In the name, or on the account of, his employer

The important point is not the state of mind of the third party, but the nature of the receiving by the employee.

R v Gale [1876] UKLawRpKQB 100; (1877) 2 QBD 141

Thus in R v Gale [1876] UKLawRpKQB 100; (1877) 2 QBD 141, the defendant, the Head Manager of his employer’s company, received from other employees working under him cheques which were sent to the Head Office from regional branches. These cheques were often written out to his order. It was the manager’s role to endorse to the company any cheques in his own name and hand them to the cashier who would then cash those cheques and apply them to the company’s concerns. Having received a number of cheques payable in his name from one of the branches he then misappropriated those monies by endorsing the cheques to friends. The friends in return gave Gale the cheques’ cash equivalent before cashing the cheques with their own banks, Gale kept the cash instead of delivering it to the company cashier. Although he was in fact charged with embezzling the proceeds of the cheque, the court noted that there would have been no difficulty in convicting Gale of embezzling the cheques themselves that he had received from the branch offices.

However, because he had been charged with embezzling the proceeds of the cheque a second issue as to the requisite intention of a third party was raised. The argument by the defendant was that he could not be convicted of embezzlement because his friends, in paying the money to him, were unaware that these cheques had been destined for his employer, and thus their intention on giving him the money (the proceeds of the cheques) were that the money be for Gale and not for the employer. The court saw no difficulty in this. Cockburn CJ held:

But the question is not whether these persons paid on account of his masters, but whether he received on account of his masters. That he did so because it was his duty to pay over the proceeds at once in whichever way he received them.

Lord Coleridge CJ held:

I am of the same opinion, and for the same reason. I will only add that the statute speaks not only of a receipt “for in the name of” of the master, which may contemplate knowledge in the person paying, but also of a receipt “on account” of the master, that is, where the servant is bound to account to the master.

This suggests that the question of whether the property was received “for, or in the name, or on the account of the employer” is an objective test, not a subjective one. It is a circumstance in which the act of the accused occurs, and thus part of the actus reus.

Although there is no requirement that the person passing the property be aware that the servant is accepting on behalf of their employer, there is a requirement that in such a situation the employer would be entitled to that property.

R v Cullum (1873) LR 2 CCR 28

Thus in R v Cullum (1873) LR 2 CCR 28, the defendant was found to be not guilty of embezzlement on the grounds that his employer was not entitled to the money that he had earned. Cullum was employed to captain a barge to and from London, carrying his employer’s goods. On one such trip the defendant was to bring the barge back from London empty. He suggested to his employer that on this trip he could carry manure for a customer to a location which was on his return route. His employer expressly told him not to pick up the manure but to bring the barge back empty. In defiance of these instructions, the defendant picked up the manure and delivered it. When he returned to his employer he did not account to his employer for the money he had earned in so carrying the manure. The court held that there was no embezzlement. Blackburn J held:
... the essence of the matter is, that the servant shall be deemed to have stolen the master's property, if it be his master's property, although not received otherwise than in the prisoner's capacity of clerk or servant. ... Now, in the present case, I cannot see how this was the master's property, or that the servant had authority to carry anything in this barge but the cargo he was directed to convey. He was actually forbidden to load this barge on the return voyage; he did load it, and very improperly earned money by the use of it; but in what sense he can be said to have received this sum for the use of his master I cannot understand. The test of the matter would really be this if the person to whom the manure belonged had not paid for the carriage, could the master have said, "There was a contract with you, which you have broken, and I sue you on it?" There would have been no such contract, for the servant never assumed to act for his master, and on that ground his act does not come within the statute.

Property must not have been reduced into the possession of the employer

It is crucial to the offence of embezzlement that although the property come into the possession of the clerk or servant, that possession is not the constructive possession of the employer. If there is constructive possession by the employer, then there is no embezzlement but instead larceny by a clerk or servant.

R v Hayward [1844] EngR 844; (1844) 1 C&K 518; 174 ER 919

In R v Hayward [1844] EngR 844; (1844) 1 C&K 518; 174 ER 919 the defendant was sent by his employer to collect some straw. He brought the straw back to his employer’s property, placed it on the ground and then asked his employer’s niece to open the hayloft. After she opened the hayloft, he placed some of the straw into the hayloft and misappropriated the rest of it. The court held that this was not embezzlement, but instead larceny, because in placing the straw at the stable door he had made a delivery of the property into his employer’s hands. This made any later misuse of the property a larceny and not an embezzlement.

R v Wright (1858) 7 Cox CC 413

In R v Wright (1858) 7 Cox CC 413, the defendant was employed to run a small regional branch of his employer’s bank. This branch was conducted in a room of the defendant own premises, in which he traded as a wine and spirits merchant. The bank provided the defendant with a safe in which he was to put the proceeds of the day’s business. A duplicate key to that safe was held by the bank. It was conceded that money received by the defendant and placed into the till in the defendant’s shop during the course of the day had not been reduced into the possession of the employer. But it was argued that any money which was placed into the safe at night then ceased to be in the exclusive possession of the defendant and was reduced into the constructive possession of the employer. The court upheld a conviction of larceny, rather than embezzlement. Lord Campbell CJ held:

It is found to have been the duty of the prisoner, when money was paid over the counter by customers, to carry it, when night came, to the safe, and deposit it there to remain in a state of security until it should be taken out again to be applied to the purposes of the bank; and I think that when it was so placed in the safe, the exclusive possession of the prisoner was determined, that being a box or safe furnished by the employer, of which the employee had a duplicate key.
 
In that respect the safe in this case is very much resembles the till in a shop in London, where the shop man has access to it for lawful purposes, though if he takes money from it, animo furandi, he is a thief.

The distinction between possessing the property by the servant on their own behalf, and in receiving the property and then reducing it to the constructive possession of the employer is said to be demonstrated by two cases, R v Murray (1830) 1 Moody 276; 168 ER 1270 and R v Masters (1848) 1 Den 332; 169 ER 268. However, exactly what the distinction is, is not very clear from the decisions.

R v Murray (1830) 1 Moody 276; 168 ER 1270

In R v Murray an employee received money from a third party on account of his employer. He then passed that money to a second employee so that the money could be used to pay for an advertisement in a newspaper. The second employee fraudulently misappropriated the balance of the money which was left after the advertisement was paid for. In R v Masters money was received from a third party by an employee, passed to a second employee, passed to a third employee, and then misappropriated by a fourth employee. The money had been passed through all four hands as part of an elaborate system of cross-checking to hopefully ensure that money would not be misappropriated. The court held in R v Murray that there was no embezzlement, but rather a larceny. This was because the way in which the first employee had dealt with the money meant that it had come into the possession of the employer. This was not the case in R v Masters.

R v Masters (1848) 1 Den 332; 169 ER 268

In R v Masters Pollock CB explained:

This case is quite different from that of R v Murray, 1 Moo CC 276. There the case was not within the stat. 7&8 Geo.IV.c.29, S47, because the master had had possession of the money by the hands of another servant; and when it was given to the prisoner by that servant to be paid away on account of the master, it must be deemed in law to have been so given to the prisoner by his master: the fraudulent appropriation of it being thus a tortious taking in the first instance, was not embezzlement but larceny. But here the money never reached the master at all: it was stopped by the prisoner on its way to him. The original taking was lawful, and, therefore, the fraudulent appropriation was embezzlement.

The distinction that Pollock CB seems to be making is that property that is still “on its way in” to the employer can be embezzled, but not property that having been already received is now being put to a use of the employer’s (and thus “on its way out”). The difficulty is that it would seem that the actions of the other employees in Masters would seem to have already reduced it to the possession of the employer.

Mens rea: fraudently

Fraudulently in this section has the same meaning that fraudulently and dishonestly means throughout the Act. It has already been discussed above.

Proof by general deficiency

Both those charged with larceny as a clerk or servant, or embezzlement, may be convicted in the absence of direct evidence of the taking of the property, if it is money. Section 161 of the Crimes Act 1900 inserts a provision which deems that a general deficiency of actual money held in comparison to the records in a book of account, can constitute proof of the taking of specific sums of money.
161 Proof of general deficiency in accounts
On the prosecution of a person for larceny, or embezzlement as a clerk, or servant, or as a person employed in the Public Service, where the charge is in respect of money, it shall not be necessary to prove the larceny, or embezzlement, by the accused of any specific sum of money, if there is proof of a general deficiency on the examination of the books of account, or entries kept, or made by him, or otherwise, and the jury are satisfied that he or she stole, or fraudulently embezzled the deficient money, or any part thereof.

This is a statutory enactment of the common law doctrine of general deficiency, a common law doctrine that is also available to prove fraudulent conversion under s178A in exactly the same way.

R v Rich [1997] SASC 6153; (1997) 68 SASR 390

The development of this common law principle was outlined by Bleby J in R v Rich [1997] SASC 6153; (1997) 68 SASR 390:
249. The ability to charge with larceny or embezzlement of a general deficiency was firmly established at common law with the decision in R v Tomlin [1954] 2 QB 274. That was a case of embezzlement where it was impossible to trace the individual items of property or sums of money embezzled over a period of time. It was notorious, of course, particularly in the case of larceny as a clerk or servant or embezzlement, that the taking of small sums continually over a period of time, and often with an adjustment to books of account to hide these defalcations, made it almost impossible to prove individual misappropriations. It was therefore permitted to charge larceny or embezzlement of the general deficiency thus calculated upon a reconciliation of the accounts or upon a stocktake as the case required. The amount or volume and nature of the money or goods taken was thereby identifiable but not when each component was taken. Whilst it was a method of facilitating proof, it also enabled a compendious fraud to be alleged even though it might be comprised of many individual thefts or appropriations. The ability to proceed in that manner was not dependent on there being a mixed fund owned by or in trust for a variety of people. ... The application of the principle relieves the Crown from proving fraudulent conversion of any specific item or sum of money, and enables it to allege and prove fraudulent conversion of the general deficiency in the account. In most cases this will require a reconstruction and reconciliation of the account in order to prove the fact and amount of the deficiency.
250. This Court recognised in Goodall [(1975) 11 SASR 94], however, that the principle is subject to an important qualification, namely that "where it is possible to trace the individual items and to prove a conversion of individual property or money, it is undesirable to include them all in a count alleging a general deficiency" (per Bray CJ at 97 quoting with approval Tomlin (ibid) at p282). See also statements to similar effect in R v Koppen (1975) 11 SASR 182 at 183-184 and R v McMullen (1990) 54 SASR 55 at 56.

The elements of general deficiency under s161 are explained in R v Carratti (1983) 10 A Crim R 328, a WA case dealing with a similar provision.

R v Carratti (1983) 10 A Crim R 328

There Brinsden J held:
That section was no doubt designed to displace the rule of the common law that where it is possible to identify individual items of property and to prove the fraudulent taking or fraudulent conversion of each of a number of such items on particular dates it is "undesirable" if not positively wrong to "lump" the items together and to charge the accused with stealing or with a fraudulent conversion of the total as a "general deficiency": see Goodall (1975) 11 S.A.S.R. 94, where the cases are discussed.
Even so, as it seems to me, the charge alleging the stealing of a sum of money being, as here, "the amount of the general deficiency" is a charge of stealing the amount of a shortfall, that being the ordinary meaning of the word "deficiency". To establish a "general deficiency" in that sense of an amount of money, the Crown must prove the amount of money that the accused had under his control and that on a date within the period charged he was unable to account for the total fund or for some part of it. In the proof of that case the Crown may prove that the shortfall consists of "any number of specific sums ... the taking or conversion of which extended over any space of time" or that the stealing or conversion of specific sums of money within the charged time span is within the shortfall although not equal to it. But, however it be done when, as here, the charge is opened to the jury upon the basis that the moneys received by the accused "were not being accounted for in the correct way and never were" and when the case is fought out on that issue it cannot at the end of the day be left to the jury upon the basis that the accused stole by a fraudulent taking of each sum of money which he received and without considering whether upon his accounting there was a "general deficiency" in the sense of a shortfall or not.

Notes

1 : There may be some issues with the application of intangibles to the requisite dealing with the property.

2 : [1987] HCA 1; 162 CLR 110.

3 : (1987) [1987] HCA 1; 162 CLR 110 at 124.

4 : (1987) [1987] HCA 1; 162 CLR 110 at 124; see also at 116 (Gibbs CJ).

5 : (1985) 42 SASR 59 at 52.

6 : See Wills v Petroulias [2003] NSWCA 286; 58 NSWLR 598 at [65]- [67] (Spigelman CJ, Handley and Santow JJA agreeing) and authorities cited there.

7 : R v Fuge [2001] NSWCCA 208; 123 A Crim R 310 at [22] (Wood CJ at CL, Heydon JA and Sully J agreeing).

8 : [2001] NSWCCA 208; 123 A Crim R 310 at [24].

9 : [1984] VicRp 8; [1984] VR 97.

10 : [1984] VicRp 8; [1984] VR 97 at 100.

11 : There is in fact no such legislation. The Motor Vehicle Repairs Act 1980 (NSW) (repealed by the Motor Dealers and Repairers Act 2013 (NSW), s 190, with effect from 1 December 2014) made no provision for a repairer’s lien. Section 3B of the Registration of Interest in Goods Act 1986 (NSW) (repealed by the Personal Property Securities (Commonwealth Powers) Amendment Act 2009 (NSW), s 3, with effect from 30 January 2012) provided for the priority of a repairer’s lien on goods over “registrable interests”.

12 : Appeal Judgment at [23].

13 : Appeal Judgment at [28].

14 : Appeal Judgment at [35].

15 : [1997] 1 VR 459.

16 : [1997] 1 VR 459 at 467 (Southwell and Smith AJJA agreeing).

17 : On the other hand in Bazeley, the case that led to the introduction of the offence of embezzlement, the fact that Bazeley put the money into his pocket rather than into the bank’s till meant that possession had never reduced to the bank and larceny was not available.