Chew v The Queen; Edwards v The Queen

[1991] HCATrans 348

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Perth No P37 of 1991

Between:

STEPHEN CHEW

Appellant

and

THE QUEEN

Respondent

Office of the Registry

Perth No P40 of 1991

Between:

KEVIN JOHN EDWARDS

Appellant

and

THE QUEEN

Respondent

MASON CJ

BRENNAN J

DEANE J

DAWSON J

TOOHEY J

GAUDRON J

MCHUGH J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON TUESDAY, 10 DECEMBER 1991, AT 10.15 AM

Copyright in the High Court of Australia

Chew(3) 1 10/12/91

MR D.R. WILLIAMS, QC:  May it please Your Honours, I appear

with my learned friend, MR I.L.K. MARSHALL, for the

appellant, Chew. (instructed by Smith Williamson)

MR J.R. McKECHNIE, QC: If Your Honours please, with my

learned friend, MR A.N. HOPE, I represent the

Crown. (instructed by the Crown Solicitor for

Western Australia)

MR L.W. ROBERTS-SMITH, QC:  May it please the Court, with my

learned friend, MR M.T. RITTER, I appear for the

appellant, Edwards. (instructed by Messrs Dwyer

Durack)

MASON CJ:	Mr Williams?
MR WILLIAMS:	Your Honours, we hand up copies of an outline

of submissions. We have put together a collection

of legislative and extrinsic materials to which we

propose to refer the Court, in separate volumes.

Your Honours, in paragraph 3 of the outline of

submissions, we set out what, in our submission, is

a proper analysis of section 229(4). It comprises

five components:

1. The accused was at the relevant time an

officer or employee of a corporation.

2.       He used his position as such an officer or

employee.
3. His use of his position was improper.

4.       He made that improper use in order to

gain, directly or indirectly, an

advantage .....

5. The advantage was either for himself or

for another person -

It can be seen, on that analysis, the question of

whether the use of position was made in order to

gain a relevant advantage is a different question

to the question whether the use of the position was

improper.

In our submission, difficulties and confusions

have arisen not only in this case, but in others,
because often those questions relate to overlapping
events, facts or circumstances. In our submission,
the question whether the officer used his position
in order to gain a relevant advantage is one which

raises a question of subjective intention. The

question whether the use of the position was

improper is a descriptive or objective question.

Chew(3) 2 MR WILLIAMS, QC 10/12/91

Now, before going to the argument, the

difficulties, I think, are demonstrated by the

analyses by the three different members of the

Court of Criminal Appeal in the Chew case.

In volume 4 of the appeal book,

Chief Justice Malcolm concluded his analysis at

page 983 - that is page 70 of the original

transcript of the reasons. He said:

In my opinion what is required by way of

mens rea under s.229(4) is a deliberate act or

combination of acts by a director as such,

with knowledge that what is being done is not for the purpose of furthering any interest of the company, but to achieving a collateral

purpose which will gain an advantage for

himself or another, or cause a detriment to

the company. This is, of course, less than a

specific intent, which requires an intention

to bring about a specific result. The gaining

of the advantage or the causing of the
detriment are respectively elements of the

offence.

His Honour referred to section 23 of the Criminal

Code of Western Australia and indicated that:

Unless excluded expressly or by necessary

implication by the relevant statute s.23 is

applicable -

and he then set out the text of section 23 at the

bottom of the page. The first two paragraphs of

that are relevant:

Subject to the express provisions of this

Code relating to negligent acts and omissions,

a person is not criminally responsible for an

act or omission which occurs independently of

the exercise of his will -

and then, secondly: 

Unless the intention to cause a particular

result is expressly declared to be an element

of the offence constituted, in whole or part, by an act or omission, the result intended to

be caused by an act or omission is

immaterial .•.•.

The relevant act is the making of

improper use of the position and does not

comprehend all of the elements of the offence

charged •.••. The requirement that the act be

done "to gain an advantage" or "to cause a

detriment" is not, in my opinion, an express

Chew(3) 3 MR WILLIAMS, QC 10/12/91

declaration that an intention to cause a

particular result is an element of the

offence. What is required is a willed act

with knowledge, that what is being done is not
for the purpose of furthering the interests of
the company, but for a collateral purpose
which will probably gain an advantage for

himself or another or cause detriment to the

company.

We challenge substantially the conclusions

reached by His Honour the Chief Justice and I

think, at this stage, can make two general

comments. One is that he has rolled the two

questions which we seek to separate together, and
secondly, he has not really applied the Criminal

Code provisions relating to criminal responsibility

at all . ...,,,He has started from a common law mens rea

position and then sought to rationalize the

conclusion against section 23. In our submission,

that attempt fails.

Mr Justice Murray took a completely different

approach. He avoided any reference or

consideration of any sort in relation to common law

mens rea. In volume 5 his discussion of the point

in question is extensive. At page 1076, transcript

page 10, he says in the first complete paragraph:

In my view, it matters not for the

purpose of the offence defined bys 229(4),

what the precise result created by the
offender's improper conduct is. What is being

said is that the impropriety will not be

penalised unless it causes a result, directly

or indirectly, which may be described as an

advantage or a detriment. It matters not to
whom the advantage accrues, or that without

advantage to anyone a detriment occurs to the

corporation.

At 1095 he says, second sentence in the

paragraph commencing in the middle of the page:

I have already expressed the view that the

criminal offence created by those

sub-sections -

that is (1), (3) and (4) -

has as an element, the need to establish that

the relevant improper conduct of the accused

as an officer or employee of the corporation,

had the direct or indirect result that an
advantage was gained or a detriment caused

within the meaning of the section. I think that to be consistent with the way in which

Chew( 3) 4 MR WILLIAMS, QC 10/12/91

civil liability is imposed in such

circumstances and with the compensation or

recovery provisions within sub-ss 229(6) and

(7). In that sense therefore, the word "to"

ins 229(3) and (4) is clearly used in the

sense "so as to", to describe what, within the

meaning of the Criminal Codes 23, would be an

"event" or the result caused by the offender's

proscribed act.

So he also rejects the "in order to" interpretation

and adopts a "so as to" interpretation. Then

at 1103 at about point 4 on the page, he raises the

question of impropriety,	He says, among other
things:

the impropriety emerges and is established,

not by reference to the nature of the conduct

itself, but by reason of the collateral or

improper purpose which is attendant upon the

commission of the acts.

And then says in a paradoxical statement that:

a mental element of that character will be

factually involved.

His conclusion then is at the bottom of that page.

The elements he sees are, firstly, the accused as

an officer and then secondly:

He or she must have engaged in the commission

of an act, whether one act or a series
properly to be regarded as one act, which
conduct is deliberately and consciously

performed -

that is his reaction to section 23. Then thirdly:

Having regard to the position of the officer	or employee, the act in question was improper	in the ordinary commercial sense of the word,
having regard to the accused's powers, duties
and obligations and in an appropriate case, to the collateral purpose or motivation for the act;

and fourthly:

As a result of the act impugned, there must be the gain of an advantage for the accused or

another or the causation of a detriment to the

corporation.

Now, His Honour's concept of impropriety is

not markedly different from that for which we would

Chew( 3) 5 MR WILLIAMS, QC 10/12/91

contend, but his mental element is distinctly

different in that he has identified the minimum

act, namely the use of the position, as being the

act which is relevant, and has seen the gaining of

an advantage or causing of detriment as being

simply a result in fact. It would seem therefore

it is independent of an intention, in that respect.

Mr Justice Wallwork dissented. He adopted a

view consistent with that the appellant now submits

is correct. In volume 5 at page 1046, at about

point 9 on the page:

In my opinion the words in the

sub-section imply an intent in the same way as

sentences such as "he broke into the house to

steal"; "he shot at the man to kill him", etc.

Over the page, 1047, he says, at about point 3:

However, in view of the differences of opinion

which have been expressed, I am satisfied that

there is an ambiguity in the wording of the

section.

And then, at 1048 point 7:

In my view, as there is an ambiguity ins

229(4), it should be resolved in favour of a

person who is alleged to have breached the

sub-section.

TOOHEY J:  Mr Williams, what is the ambiguity that

His Honour finds?

MR WILLIAMS:  It is the alternative between using a position

so as to gain an advantage, as distinct from using

a position in order to gain an advantage; one

expressing an issue relating to subjective

intention, the other expressing a concept of

causation.

I will now refer to paragraph 5 of the outline

of submissions. The analysis which, in our

submission, is correct is consistent with a number

of relevant statutory directions and is also

consistent, in our submission, with the proper

application of relevant principles of construction.

The first thing is to have regard to the

language of the Act. In that respect, the passage

to which we referred from the judgment of
His Honour Justice Wallwork, at page 1046, is

correct: to use a position to gain an advantage is to use a position in the same sense as intending to

Chew( 3) 6 MR WILLIAMS, QC 10/12/91

achieve a result of another kind in the criminal

context. That is, it gives it a natural meaning.

In the light of the alternative interpretations

that have been adopted, we cannot, however, say
that that is not without some doubt and that

ambiguity does arise.

We would submit, secondly, that the approach

of looking at the language of the section is

consistent with the requirements of the established

principles of construction of a code. Section 229

appears in what is called the Companies Code, what
is based on the Companies Act 1981 of the

Commonwealth and, for all intents and purposes does

constitute a statement of, together with the other

legislation with which it forms a package, a

complete statement of the principles applicable in

relation to the administration of companies.

It is accepted it does not state all of the

duties that affect persons who are directors and

have fiduciary obligations but that point, I think,

is picked up by the statute itself. In

subsection (10) it is provided that:

This section has effect in addition to, and

not in derogation of, any rule of law relating to the duty or liability of a person by reason

of his office or employment in relation to a

corporation -

In our submission, none of the reported decisions

which have considered section 229 or any part of it

have given appropriate weight to the words, "in

addition to". It highlights the fact that this was

not intended to be a restatement of fiduciary

duties. It was intended to be something additional

to the civil law duties.

The primary purpose of section 229 in that

context is to create an offence, it is a penal

provision, and the civil consequences that flow

from parts of the section are, in our submission,
to be seen as ancillary to that primary purpose.

The fact that the subsection is a penal provision enables the invocation correctly, as we

would submit Mr Justice Wallwork has done, of the

canon of construction that penal provisions are to

be interpreted in the case of any ambiguity in the

manner most favourable to a person accused of

breaching the subsection. I think it is not unfair

to say, of the judgments of Chief Justice Malcolm

and Mr Justice Murray, that neither of them really

paid any heed whatever to that particular canon.

Chew( 3) 7 MR WILLIAMS, QC 10/12/91

DAWSON J: What is the relationship between section 229(4)

and section229(1)?

MR WILLIAMS:  What is the relationship?

DAWSON J: Yes, because obviously a dishonest exercise of

powers, or discharge of duties, would be an

improper use of position.

MR WILLIAMS:  I do not think I can make a definitive answer

to that by way of submission in this case, but

there are authorities in which it has been

suggested that the effect is the same.	However, it
is to be observed that in relation to
subsection (1) there is provision for an

aggravating circumstance where there is an intent

to deceive or defraud and that suggests that absent

an intention to deceive or defraud, subsection (1)

can be breached. Now, subsection (1), in its own

terms, referring only to honesty, does not have an express declaration for the purposes of section 23 of the Criminal Code of any intention.

DAWSON J: But it would be odd, if under subsection (1) a

dishonest act on the part of the director only

incurred a penalty of $5000 because there was not

the other intent, and yet under subsection (4)

because, in fact, it was detrimental to the
corporation the director could incur a penalty of

$20,000 which is reserved under subsection (1) for

a case in which there was an intent to deceive or

defraud.

MR WILLIAMS: That juxtaposition, in our submission,

supports the - - -

DAWSON J: Yes, I am not putting it against you.

MR WILLIAMS:  Yes, it is something to

which Mr Justice Wallwork also made express

reference in his judgment. In the other judgments

of the court I do not think any particular weight

was given to that point. But the relationship,

ultimately, between subsection (1) and
subsection (4) may be a complex one rather than a

simple one.

McHUGH J: I must say that the relationship between (1) and

(4) made me wonder whether (4) was ever intended to

deal with a case such as this; (1) deals with

exercise of powers, (4) deals with improper use of

position as such an employee. One would have

thought, prima facie, the paradigm case was, say,
the case of a purchasing officer who says "Give me

a holiday and I will ensure that the company buys its goods from you". In that way he is using his

position to obtain an advantage. It does seem

Chew(3) 8 MR WILLIAMS, QC 10/12/91

strange that (1) talks about acting honestly in the exercise of his powers and (4) talks about improper

use of the position. This is really a case about

wrongful use of authority, is it not? It seems to

more naturally come under (1) rather than (4).

MR WILLIAMS:  Your Honour refers to the paradigm case. intend to go back to the development of section 229
in order to make a point about the proper
interpretation of it, but the paradigm case, I I

think, would have to be seen in the context of a
director rather than an employee, because

originally there was no reference to "employees".

The paradigm case seems to have been historically

the insider trading where a director, or directors,

for example, having information use their position

to gain an advantage such as by allotting shares to

themselves. In fact that particular example seems
to be historically what prompted the original

enactment of subsection (3) in its original form.

Subsection (4) is a recent development from

subsection (3). The development seems to have

taken place without any evidence of there being any

different end in view.

On the question of ambiguity in the penal

provision canon of construction, we invite specific
attention to the judgments of Your Honours

Justices Deane, Dawson and Gaudron in Murphy v

Farmer at page 28. This was a case on section 229

of the Customs Act, which relevantly provided that

"all goods in respect of which any entry, invoice,

declaration, answer, statement or representation

which is false or wilfully misleading in any

particular has been made or produce should be

forfeited to the Crown". It is a forfeiture

provision but it also has penal operations and in

that respect it is the same. At the bottom of

page 28 it is said:

The above arguments and presumptions favouring one or other of the permissible

meanings of the word false are, in our view,

fairly evenly balanced. If it were necessary

that we decide the matter by reference to them

alone, we would incline to the view that the

word "false" in s.229(l)(i) should be read as

meaning "purposely untrue". However, we find

it unnecessary to dispose of the appeal on

that basis. It seems to us that, regardless

of what view one takes of the comparative

weight of the competing arguments and

presumptions, the latent ambiguity of the word

"false" remains.

In our submission, there is a latent ambiguity

in the expressions "to gain" and "to cause" in

Chew( 3) 9 MR WILLIAMS, QC 10/12/91

section 229(4). Then the long established

principle is applied over the page.

TOOHEY J:  I am just having some difficulty with the notion of ambiguity, Mr Williams. I know that

Mr Justice Wallwork spoke of an ambiguity, but in a

sense he did not really think there was an

ambiguity. It was simply that there were other

views expressed contrary to his own which caused

him to describe or refer to this section as being

ambiguous, but is it your argument that the

subsection is ambiguous? I rather thought that the

argument - this is casting the net very broadly -

was the extent to which section 23 operated upon

the subsection ·r common law principles of mens

rea Are you: 1gesting that this appeal can be

determined by reference to notions of ambiguity?

MR WILLIAMS:  We would submit in the first place that the

meaning is clear enough, and that that construction

for which we contend should be adopted. On the

other hand, if it is accepted that there is

ambiguity, we would say the penal provision

construction should be applied. There is another

question that arises in the context of section 23

of the Criminal Code, and that is whether there is

an express declaration. It may be there is more of

an element of ambiguity in applying that provision

than there is in construing the words themselves.

TOOHEY J:	So it is your primary argument that as a matter of construction of the subsection, it is necessary
for the Crown to establish an intent to bring about the particular result?

MR WILLIAMS:  Yes. The history of section 229 is, in our

submission, instructive. In the materials we have

provided, the original form appears as section 107

of the Companies Act 1958. At the time it was

enacted - it is at page 2 of the materials - there

was no equivalent in any other jurisdiction.

Subsection (1) ran together the duties of honesty

and diligence in one subsection. Then in

subsection (2) it is provided that:

Any officer of a company shall not make use of

any information acquired by virtue of his

position as an officer to gain an improper

advantage for himself or to cause detriment to

the company.

Your Honours will observe that the word "improper"

qualifies advantage rather than use. Then

subsection (3):

Any officer who commits a breach of the

foregoing provisions of this section shall be

Chew(3) 10 MR WILLIAMS, QC 10/12/91

guilty of an offence •.... and shall in addition

be liable to the company for any

profit ..... any damage -

Subsection (4) provides that:

Nothing in this section shall prejudice the

operation of any other enactment or rule of

law relating to the duty or liability of

directors or officers of a company.

That formulation is also different and it does not

refer specifically to the section being "in

addition to". That provision was then incorporated

in the uniform Companies Acts of 1961. At page 4

in the materials, Your Honours will observe that it

is transposed virtually identically;

subsection (1) is the same, subsection (2) is the

same with the word "improper" still qualifying

advantage. (3) is changed only in form. Then (4)

has added to it these words, "in addition to", not
previously there - "in addition to" and not "in

derogation of".

In 1973 there was a re-enactment which is at

page 7 of the material, and it was at this time that the word "improper" was moved. The reason

seems to be related to the addition in

subsection (2) of the words "or for any other

person". Up to that point, it had only been an

officer requiring an advantage for himself. This

added a reference also to an advantage for another

person. On reflection, the word "improper"

qualifying advantage might have a very limited
operation in relation to another person, as

distinct from the director. The word is moved so

that it now since then has continued to qualify the

use of the position.

In 1975 the Securities Industry legislation

was enacted, and because of a possible overlap

subsections (4) and (5), as they became, were added

and the non-derogation provision became

subsection (6), and at that time, another provision dealing with insider trading was repealed - that is

section 124A. The historical background to the

original 1958 legislation seems to have been a

well-publicized event relating to a company called investigation under the Companies Act by

Mr PD Phillips, QC, and which was then referred to

Parliament, and the complaint seems to have been

something in the nature of insider trading

activities.

Now, 1975 - I think the Companies Act 1961 form settled and there appears at pages 12 and 13 a

Chew( 3) 11 MR WILLIAMS, QC 10/12/91

composite form, incorporating the amendments.	The
next event was the Co-operative Companies and
Securities Scheme of 1981 in which section 229
appeared. Section 229 starts at page 16 and in
this legislation its operation was expanded.to
encompass officers or employees, as well as

directors, but otherwise subsections (1), (2) and

(3) were not relevantly different, but

subsection (4) was at this time introduced for the

first time. The civil consequences were amended

and the penal consequences were also amended.

Subsection (1) had the aggravating circumstance

added for the first time. Subsection (6) provides for a civil remedy in aid of a conviction and then

subsection (7) provides for a separate civil remedy
independently of a conviction. In this copy
subsection (10) is accidentally omitted and

subsection (9) is not complete.

Subsections (8) and (9) simply continued the

provisions that were necessary because of the

overlapping of provisions of the Securities

Industry Act following the prior legislation. At

page 21, there appears a copy of the explanatory

memorandum for the Companies Bill 1981, dealing

with the relevant section. Paragraph 552, it is

said somewhat concisely that:

The effect of CB s-cl. 229(3) has been widened

to include a prohibition on an officer or

employee making improper use of his position

as such, i.e. it is not restricted to

information acquired by virtue of that

position (CB-cl. 229(4)).

So, the legislature, at least, saw

subsection (4) as simply being an extension of
subsection (3), in the sense that they are cognate
provisions and also for the reason that the

language of the two subsections is very similar.

It is appropriate, in our submission, that each

should be given the same interpretation as far as

the mental element is concerned.

If the current form of section 229(4) is seen

in its historical context, in our submission it is

appropriate to relate it back to its origins as

being directed towards the improper activities of a

director to gain an advantage in the insider
trading type context, but widened to encompass
other activities, including that, for example,

Justice McHugh referred to, of the employee who

takes a kick-back. It is seen, in that light, as
involving, we would say, an element of an intention

to gain an advantage and not merely the use of a

position which has a result that an advantage is

acquired.

Chew( 3) 12 MR WILLIAMS, QC 10/12/91

I have mentioned section 23 of the

Criminal Code - - -

BRENNAN J:  Have you finished your argument with respect to

the construction of section 229?

MR WILLIAMS:	Except insofar as I wish to refer to section 23 of the Criminal Code and the question of
uniformity, yes.

BRENNAN J: Could I ask whether you draw any distinction

between specific intention and the purpose for

which an act is done.

MR WILLIAMS:  We say that what is involved here is a

specific intention in order to gain an advantage

and not seen objectively as involving a purpose or

effect of gaining an advantage. If Your Honour is

suggesting there is a half-way house between an

objective view and a specific intent, well, it is

not part of our submissions to make that

suggestion.

BRENNAN J: Your proposition is that if there is any

ambiguity, it lies only between the specific intent

on the one hand and a result, whether unintended or

unforeseen, on the other?

MR WILLIAMS: Well, the ambiguity lies in determining

whether there is a specific intent or anything

else. The "anything else" that has so far been

identified is simply a "so as to" type result,

which is a consequence or effect.

BRENNAN J: What role, if any, is the gaining of the

advantage to play in the determination of

impropriety?

MR WILLIAMS:  That is a very important question to which I would propose to come. If I might deal with it

later on, I will. That is the crux of this case, I

think, in the way that the court below has dealt

with the matter.

I mentioned section 23. Section 23 applies by

virtue of section 36 of the Criminal Code, subject

to two points. One is that - section 36 appears at

page 112 in the materials:

The provisions of this chapter apply to all persons charged with any offence against the

statute law of Western Australia.

The chapter contains provisions which were

originally drafted by Sir Samuel Griffith to
replace the common law principles relating to mens

rea.

Chew( 3) 13 MR WILLIAMS, QC 10/12/91

The two exceptions which appear to be relevant

which would result in section 23 not applying is,

one, that the Companies Code is not seen as part of

the statute law of Western Australia. I mention

that without pursuing that at this point, and the

other is that by necessary implication the
operation of section 23 of the Code is excluded.

Now, leaving those points aside - and I will come

back to those alternative submissions in due

course - section 23, in its terms, requires that:

Unless the intention to cause a

particular result is expressly declared to be

an element of the offence constituted, in

whole or part, by an act or omission, the

result intended to be caused by an act or

omission is immaterial.

That seems to raise the two alternative

constructions of the words "to gain" and "to cause", using a position to gain and using a

position to cause.

From the point of view of the criminal

responsibility created by section 229(4), it is our

submission that there is an express declaration.

It might have been in language that is abundantly

clear, like using the words "specific intent", but

it is an express declaration that what is required

is that the use of the position is "to cause" or

"to gain".

The final point we make - this is

paragraph (g) on page 5 in relation to the

construction - is that the construction that is

proposed by the appellant is consistent with an

overall legislative intention that the Companies Code operate uniformly with counterpart codes in

all Australian jurisdictions. In our submission, a

proper application of the common law principles of

mens rea to section 229(3) and 229(4) would result

and I will come to those in due course. in this being seen as involving a specific intent, There are surprisingly few reported decisions

on sections 229(3) and (4), while there are a

greater number on subsection (1) or its

counterparts, the honesty obligation. There is one

judgment of Mr Justice Mcinerney in the Supreme

Court of Victoria as long ago as 1978, a Corporate

Affairs prosecution which was unsuccessful in that

His Honour referred to an analysis undertaken by

Mr Hedigan of counsel, as His Honour then was, at

page 510 in the report. At about point 7, he says:

Mr Hedigan analysed this sub-section into eight ingredients taking them in the order in

Chew( 3) 14 MR WILLIAMS, QC 10/12/91

which the words appear in the sub-section. I

think it is more convenient if the section is

treated as requiring proof of the following

facts, taking them in chronological order;

(1) That the respondent was at the relevant

time an officer of the corporation.

(2) That the respondent acquired the relevant

information.

(3) That he acquired that information by

virtue of his position as officer of the

corporation.

(4) That he made improper use of that

information.

(5) That he made that improper use in order

to gain directly or indirectly an advantage.

(6) That such advantage was either for

himself or for some other person.

(7) Alternatively to (5), that he made that

improper use to cause detriment to the

corporation.

Your Honours will see that there is a distinct

similarity between the analysis, we submit, is

appropriate for subsection (4) and that for

subsection (3) in that judgment.

The question of the intention, if any,

involved in section 229(3) and (4) seems to have

arisen only in three reported cases where a

conviction has been sustained. Two of them are

South Australian decisions, one is Western

Australian and one is Tasmanian. South Australia is a non-Code State and the other two, of course,

are Code States.

Because the question of intention was not

really in issue in any of those cases, it is very

difficult to pick up what the courts have said

about it but it can be gleaned from the reasons.

Grove v Flavel was a case in which a director of a

group of companies undertook a number of exercises

to shift liabilities of a company and assets within

the group because it was imminent that one of the

companies would fail.

MASON CJ:  Mr Williams, it would be of assistance if you

gave the complete references so they are

incorporated in the transcript of your address.

Chew(3) 15 MR WILLIAMS, QC 10/12/91

MR WILLIAMS:  Yes. I referred to Grove v Flavel,

(1986) 43 SASR 410. The case involved a director

manipulating the assets and liabilities within a

company group in order to let one company, in

effect, bear all the burdens while he retained the

other companies as solvent.

At 420, in the judgment of the Supreme Court

in Banco, Mr Justice Jacobs, effectively speaking

for the court, said, at point 7:

We are here concerned with a statutory

offence. The word "improper" is not a term of

art. It is to be understood in its commercial

context to refer to conduct which is

inconsistent with the "proper" discharge of

the duties, obligations and responsibilities

of the officer concerned.

And then he says:

No question appears to arise on the case

stated as to the "use" of information for the

inference has been drawn that the appellant
did what he did by reason of and immediately

following the refusal of the bank to provide

further funds to Constructions; nor is there

any suggestion that he would have done what he

did if that decision had not brought home to

him the serious implications for the group

companies if Constructions went into

liquidation.

And over the page, His Honour does a brief analysis

of the facts against a law, and it is consistent

with the finding to which reference was just made. Next is McNamara v Flavel, a judgment again of

the Full Court of the Supreme Court of South

Australia, (1988) 13 ACLR 619. In this case,

another company was about to go "down the tube", as

the expression is, and the director simply

transferred the business name and with it the

goodwill to a newly incorporated company and

carried on business, without having regard to the

interests of the original company.

Again, it is very difficult to see any

consideration of intention, because it was
evidently all done so deliberately. At page 620 in
the judgment of Chief Justice King, he refers at

point 1 to the controversial points which the

prosecution was required to prove as being, first:

The information that the company was

experiencing serious financial difficulties

Chew(3) 16 MR WILLIAMS, QC 10/12/91

was acquired by the appellant by virtue of his

position as director.

2. He used that information to procure the business name for himself and his new company

Shengli Pty Ltd.

3.      The procurement of the business name

gained an advantage for the defendant or

Shengli Pty Ltd or both.

4.      The use of the knowledge for that purpose

was improper.

His Honour says, missing a paragraph:

There is a conceptual difficulty about

the second point. The financial difficulties

of the company, however, provided the

motivation and, in a sense, the opportunity

for the acquisition of the business name.	The
appellant acted in consequence of the
motivation and took the opportunity.
In the judgment of Mr Justice Millhouse, at

page 624, he says, very obliquely, at point 9:

The appellant took the action he did

because he saw the financial crash coming.

Now the fourth case is the Supreme Court of

Tasmania decision, Mr Justice Cox, in

Castrisios v McManus, 4 ACSR 1. This involved

multiple complaints of offences against section

229(3) and in addition section 556, that is

incurring debts without reasonable cause to

anticipate the company would pay them.	The finding
of relevance is at page 10, line 5:

He found that the appellant, aware that

liquidation was imminent, acted to protect

himself and his associates from the

consequences of the liquidation to the

detriment of the creditors of the company.

A combination there of being aware and acting

for a purpose constitutes, in our submission, a
specific intent.

There are two other South Australian cases to

which reference could be made. They both primarily

involved subsection (1). The first is Australian

Growth Resources Corporation Pty Ltd (Recs and Mgrs apptd) v Van Reesema, (1987-1988) 13 ACLR 261. At

page 272, in the judgment of Chief Justice King, at

point 1, he refers to the claim as being a civil

case under section 229(1), and says:

Chew(3) 17 MR WILLIAMS, QC 10/12/91

The penalty provision distinguishes between

acts done "with intent to deceive or defraud

the company, members or creditors of the

company or creditors of any other person or

for any other fraudulent purpose" and other

acts, thereby recognising that an officer may

fail to "act honestly" within the meaning of

the section without fraud. The section

therefore embodies a concept analogous to

constructive fraud, a species of dishonesty

which does not involve moral turpitude.

Now this has been picked up I think because

His Honour has referred not to the subsection but

to the section. In this case only subsections (1)

and (2) were relevant. Mr Justice Cox agreed with

the Chief Justice. Mr Justice Johnston, on this
point, at page 275, distinguished questions under
the Code and fiduciary duty; about point 4 he says:

I make it clear that, in my view, the question of whether the directors breached the

provisions of s 229(1) and (2) of the Code in

the manner or manners particularised is a

different question from whether they acted in

breach of fiduciary duty; the latter is a

wider duty than the duty defined by the

particulars in para 4.

Now, the second case is Southern Resources Ltd v

Residues Treatment & Trading Co Ltd, (1990)

3 ACSR 207. Again it is a civil case and again it

is in the Full Court. There is a single judgment

in this case. At page 226 at about point 4, having

referred to subsection (1), the Court says:

It is at once apparent that this section

differs from its predecessor ins 124(1) of

the Companies Act 1962 (SA) in 2 material

respects. It refers only to "acting honestly"

without any reference to "due diligence", and

the new penalty provisions indicate that the

concept of "honesty" may differ according to

the circumstances. There is no finding in the

present case as to whether the conduct of the

directors in the present case falls within (a)
or (b) of the present section, but we would
have great difficulty in concluding that the
directors who have been found to be in breach

of the section acted with intent to deceive or defraud the company or its members. What then is involved in the concept of "acting

honestly"? The learned trial judge -

that was Mr Justice Perry -

Chew(3) 18 MR WLLIAMS, QC 10/12/91

addressed the matter in this way:

"Unassisted by authority, I would have had some hesitation in equating the scope of

the duty of care (sic) owed under s 229(1) with the fiduciary duty. Section 229 is a

penal section, and must be construed strictly.

I have some difficulty in accepting that there

can be an honest breach of a duty expressed in
terms limited simply to acting honestly.

Given the clear line of authority which defines the fiduciary duty as a duty to act

bona fide in the interests of the company as a

whole, it would have been a simple matter for

the legislature to have incorporated the words

"in the interests of the company as a whole"

ins 129(1) if its intention was to equate the

statutory duty with that imposed in equity.

Continuing the quotation from the trial judge:

"However the Full Court has made it clear that the two duties are to be equated -

and he cites the passage I have read.

The learned judge regarded himself as bound by

that decision and therefore did not pursue the

matter further. This court, as at present constituted, is similarly, if reluctantly,

bound also to follow it. Having said that,

however, it seems to us, with great respect,

that the proposition of King CJ is too widely

stated. Cox J agreed with him, without giving

reasons, but Johnston J expressly dissented

from that conclusion when he said - and I have read that passage.

They then go on to refer to Marchesi v Barnes,

which is an early authority on the mental element

in subsection (1) which clearly is based on

consideration of common law principles of mens rea

and it is very difficult to relate to criminal

responsibility under the Criminal Codes. It is a

decision that has been followed in quite a number

of decisions in relation to section 229(1) or

section 124(1) but, in our submission, given the

language of section 229(1) and the differentiation

between an ordinary offence and one with the
aggravating circumstance of intent to deceive or

defraud, the interpretation of a concept of honesty

there has little or no relevance to the

subsection (3) and subsection (4) mental element.

So, while Marchesi v Barnes is not challenged

by the appellant here, we do, however, submit that

Chew( 3) 19 MR WILLIAMS, QC 10/12/91

Mr Justice Murray - and I will come to that passage in his judgment - was wrong in relying upon the

Marchesi v Barnes concept of the mental element in

subsection (1) in making his findings in relation

to subsection (4).

The question is raised by our analysis as to

what is meant by improper -

MASON CJ: What about the passage at 228, where emphasis is

given to the importance of the words "as such",

two-thirds of the way down?

MR WILLIAMS:  Yes. I apologize, I had intended to refer to

that passage. The case involved a claim also under

subsection (4).	In the end the claim was
dismissed.	Of relevance, in particular, is the

conclusion at the end which goes over the page

from 228 to 229. Having referred to Grove v

Flavel, and Jeffree, the Full Court says that:

In both those cases, as in a case of "insider

trading", the director concerned to his own

advantage makes use of knowledge - in the

2 cases cited, knowledge of the precarious

financial position of the debtor

companies - which he has acquired by virtue of

his position as a director. That is the

gravamen of the conduct at which s 229(4) is

aimed, and its seriousness is reflected in the

penalty, which is the same as that in the case

of a failure to "act honestly".

We would make two points about that. The

first is that the court, in our submission,

correctly seized what the original purpose of

section 229(4) was in terms of extending the net of
the improper use of information provision in

subsection (3). The second is that the court has

identified, in our submission, that the director,

concerned to his own advantage.	in using his position as such an officer, must be
In our submission, what is meant by that is that he is intending to gain an advantage for
himself. It means, in our submission, specific
intent. The paradigm case, using Justice McHugh's
noun, is insider trading, in which there is a use
of information. That was, in the events, probably
obiter.

The question of impropriety: what is meant by

impropriety? The use of the position must be with

a specific intent. This is where the complexities

commence. In Es-me Pty Ltd v Parker, a civil case

in the Full Court of the Supreme Court of Western

Chew(3) 20 MR WILLIAMS, QC 10/12/91

Australia, (1972) WAR 52, there was a claim made

based on confidential use of information by an

agent.

A claim was based on section 124(2), as it

then was. Your Honours will recall that

section 124(2) of the uniform Companies Act

reflected the original Victorian Companies Act

provision, and the use of the word "improper"

qualified the advantage to be obtained rather than

the use of the position. Notwithstanding that, the

analysis by His Honour Mr Justice Burt, as he then

was, is of assistance. At page 54 at point 8, he

said:

It was also pleaded that the respondent

had committed a breach of s. 124(2) of the
Companies Act in that he used information

obtained from the appellant's files and from negotiations carried out with the architects

to obtain the contracts on his own behalf and

relying upon s. 124(3)(a) of the Companies Act

the appellant claimed an account of the

profits ..... As to that aspect of the claim the

learned trial judge held thats. 124(2) of the

Companies Act "relates to the improper use of

secret or confidential information by an

officer of a company for his own personal

gain" and his finding was that "there was

nothing of that nature alleged to have been

done by the defendant".

For myself, I am unable to agree that

the terms of that subsection, "information acquired by virtue of his position as an

information to be withins 124(2) of the in

officer" and to satisfy that description the

information would, I think, necessarily be

"confidential" in the sense that apart

altogether from the statute it would be a

breach of the officer's fiduciary duty to the

company to use that information to gain an

advantage for himself. The finding then is

that the respondent did not use any

information of that character, and this being

so, a breach of the statutory duty had not

been established, and that is a finding of

fact which should not be disturbed.

On a proper construction of the language of subsections (3) and (4), the use of information or

the use of a position by an officer will not be

improper merely because it resulted in the gaining

of an advantage or causing a detriment, nor will it

be improper if it was intended to gain an advantage

for himself or to cause detriment to the

Chew( 3) 21 MR WILLIAMS, QC 10/12/91

corporation of necessity because there is this

additional requirement of the use of the position

being improper. The two can be distinguished.

Our submission is - and it is paragraph 10 of the outline of submissions - that if the officer's

use of his position with the intention to gain a

relevant advantage or cause relevant detriment is

improper in that sense - in the sense that, in

paragraph 9, it is in breach of a duty to act in
the interests of the company as a whole, then the

offence will be committed whether or not the

advantage is gained or detriment is caused.

So the use of the position must be, in our

submission, in breach of a duty to act in the
interests of the company as a whole and it is not

of necessity the gaining of the advantage, by the

use of the position, which will give rise to that

impropriety. There may be quite a variety of

circumstances in which there is impropriety but the

gaining of the advantage would not, of itself, be a

problem.

This case, perhaps, suggests some

possibilities. Where a director is contracting

with a company, if he complies with the statutory

and articles obligations to disclose his interest

and if there are any relevant obligations to obtain

the approval of a general meeting, if he does that then the gaining of the advantage would not in any

sense be said to be improper but he may,

independently of that, having complied with those

requirements, have used his position improperly.

The question that is asked of this case, in

our submission, is what happens where the conflict

of interest of the director in seeking personal

advantage is relied on. How do you relate

impropriety and the gaining of the advantage? In

our submission, you do it by asking two questions.

The first is: did the officer use his position with

objectively improper as being other than in the

the subjective intention of gaining an advantage?

interests of the company?

If the second point is satisfied, objectively

it is improper, but the first point is not,

subjectively the intention was not to gain an

advantage, then there is no offence committed. And

that gives rise to the possibility, if subjectively

the intention is to act in the interests of the

company, even if objectively it is not in the

interests of the company, no offence is committed.

It focuses upon the responsibility of the director in question in an appropriate way and that is, in

Chew(3) 22 MR WILLIAMS, QC 10/12/91

our submission, the way to resolve the dilemma that

arises where circumstances are relevant both to the

use of the position and to the impropriety.

Could I now invite attention to the judgments

of the majority of the Full Court, with a view to

identifying what it is that Their Honours did which

is not consistent with the analysis which we submit
is appropriate. Chief Justice Malcolm's judgment

is in volume 4. At page 973, His Honour says:

In my opinion, s 229(4) creates a

statutory duty on the part of a director or

other officer of a corporation not to make

improper use of his position so as to gain

advantage for himself or another or to cause a

detriment to the company. The section is

concerned with particular aspects of misuse or

abuse of power. Because it may involve an

examination of purpose, this suggests that the

commission of the offence created bys 229(4)

involves a mental element. The decisions in

such cases as Howard Smith and Whitehouse,

however, indicate that the purpose of the exercise of the power is to be determined objectively and not by reference to the

relevant director's subjective belief or

intention -

and His Honour then goes on to refer to a number of

authorities and, in particular, Marchesi v Barnes

and Southern Resources.

His Honour, in our submission, is there making a fundamental error in that he is running the
impropriety question into the intention part, the

gaining of advantage or causing of a detriment, and

he is doing that because that is what the civil

cases of Howard Smith and Whitehouse have done in

relation to fiduciary duty. At page 980,

His Honour says at point 5:

The prohibited act is making improper use of

the position in one or other of the specified

circumstances, namely to gain an advantage or

cause a detriment. The use of the infinitive

verbs "to gain" and "to cause" might suggest that the making of improper use must be read

as "in order to gain" or "in order to cause"

respectively. This in turn suggests that the
act of making improper use of position must be

for the purpose of gaining an advantage or

causing a detriment. In other words, the act

is done with the intention of bringing about

such a result.

Chew(3) 23 MR WILLIAMS, QC 10/12/91

He then refers to Jeffree's case, at page 195.

It is a passage I did not read, but one referring

to the case. In the middle of the passage, Mr

Justice Brinsden says:

The section directs its attention to an

improper use in order to gain an advantage.

The offence is committed even though the advantage is not, in fact, gained.

That is a point that His Honour disagreed with,

suggesting Mr Justice Brinsden was obiter on that

point. At point 5, on page 981, the Chief Justice

said:

In my view the infinitive verbs in sub-ss (3)

and (4) of s.229 were used in the sense of

improper use of position "so as to gain an

advantage" or "so as to cause detriment", as

the case may be. In my opinion, the gaining

of the advantage or the causing of the

detriment is an element of the offence. It is

the collateral purpose represented by the

advantage or the detriment that contributes to

the impropriety of the conduct.

One could imagine that there will be

situations in which that will not be true. If the

impropriety concept is extensive enough to

encompass procedural impropriety such as fraud, or

perhaps something short of fraud - if a director

acquires information but does not reveal it to the

other directors, the -"mpropriety may arise out of

that. If he then does something by reason not of

the use of the information but by having failed to

reveal it to the other directors to gain an

advantage, then he might be committing an offence.

In our submission, it is not corrrect to say that

the collateral purpose represented by the advantage

or the detriment contributes to the impropriety of the conduct unless one separates the two questions

and asks, "Is the use of the position improper"

viewed descriptively or objectively. Did he

intend, by using his position in that way, to gain

an advantage subjectively.

BRENNAN J: Are you saying that the intention which he had

when he used his position is inadmissible to

establish impropriety?

MR WILLIAMS:  No, I do not suggest that. That is a point

that is actually picked up by Mr Justice Murray. fact to show that something was not in the interest

of the company but for the ulterior purpose, a

purpose extraneous to the interests of the company

or acting in the interests of the company, then it

Chew( 3) 24 MR WILLIAMS, QC 10/12/91

may be admissible on that point, but it is not in

itself the criterion.

BRENNAN J: Not the exclusive criterion, but it may be

relevant to establish the impropriety.

MR WILLIAMS:  Yes. The issue arises where objectively the

conduct is improper because it appears to be for

the interests of the director but not for the
interests of the company, but subjectively the

director intends to act in the interests of the

company and believes he is doing that. The penalty

provisions treat him as having the equivalent of an
intention to defraud if the subjective question is

not asked.

BRENNAN J:  Do you mean if he so acts under invincible

ignorance? I do not quite understand what you mean

by saying that he intends to act for the benefit of

the company but objectively is acting for his own

benefit.

MR WILLIAMS: Let me posit it by this case in question. It

was an ancillary or incidental consequence of the

accused's companies entering into the contracts

with the company, GCA, to sell shares and pay money

that his liability to someone else was discharged,

but subjectively the submission was that he

believed at all times that by selling the project

into the company, he was achieving a much bigger

result, he was doing something that was in the

interests of the company and his focus was in no

sense on the incidental consequence that his debts

might have been discharged.

We are talking here about a tourism project.

The accused was promoting the company to establish a major tourism project that involved a resort on

the coast of Western Australia, a tourist agency in

Singapore, a hotel in Perth. It also involved elements of a casino in Mauritius and it involved

an airline that operated between Perth and the

resort.

He had put all those things in place except

the resort which was still not in the company, and
the events relate to the transfer of the company,

the company owning the resort, into the relevant

corporation that gave rise to the charges.

Overall, he had no intention subjectively to

benefit himself. That was not the focus of his

intentions. He was acting in the interests of the

company subjectively, because this completed the

jigsaw. Subjectively he was not acting to gain a

benefit. Objectively there may be a different

judgment.

Chew(3) 25 MR WILLIAMS, QC 10/12/91

BRENNAN J: Because of facts that he did not know or because

of his different appreciation of those facts?

MR WILLIAMS:  A different appreciation of the facts. This

is the case where the relevant circumstances to

demonstrate intention are relevant to demonstrate

an objective impropriety, a case that does not
always arise.

GAUDRON J:  Mr Williams, could I ask you about your answer

to Justice Brennan? Does that not seem to assume

an exact correspondence between detriment and

advantage and what if - I mean, the factual

situation you have put in answer to the question

leaves advantage out of account altogether, I would

have thought. And you have only got to have one,

on any view.

MR WILLIAMS: Well, yes, that is the point where I think

there has got to be a judgment made. If the

advantage gained is so minimal in the context of

the overall benefit of the company, then it would

be a very odd result that visited the consequences

of criminal responsibility under section 229(4) on

an accused. But to accept that any advantage

constitutes a - if it is any part of the scheme

which is intended to be carried out but which is

overall in the interests of the company and

subjectively that is what is being pursued, then it

should not be the subject of criminal proceedings.

GAUDRON J: Then are you seeking to erect some theory of

dominant purpose in relation to the subsection?

MR WILLIAMS:  No. What we seek to say in that respect is

that you look to what the individual's intention

was. What was he doing?

DAWSON J: There is a difficulty about that, is there not,

because he intended to do what he did, at least in

this particular case, and he may have had a quite

bizarre notion of the nature of his act and, in

fact, it may well have been on the facts that it

quite clearly was to the detriment of the company

and to his advantage, but nevertheless you say

because he misunderstood the quality of his act,

although he intended to do it and it had that

result, he is not guilty.

MR WILLIAMS:  The question asked by the subsection must be

gone back to, in our submission: what did he intend

to do? Did he intend to gain an advantage for

himself or to cause a detriment to the corporation?

Now, once you eliminate that question and say,

"Well, we'll look at it objectively", it becomes an

extremely soft offence indeed.

Chew(3) 26 MR WILLIAMS, QC 10/12/91

DAWSON J: But it is not a question - I think what I am

trying to put to you is it is not a question of

whether he did or did not intend to cause that

result. He intended to do what he did and to bring

about that result, but if, in his mind, that was
advantageous to the company and not to himself,

whereas in everyone else's mind the opposite was

the case, he nevertheless escapes liability, you
say.

MR WILLIAMS: Well, with respect, I do not find that an odd notion. If that is what he intended and, no doubt,

civil consequences would be visited upon him, but

criminal responsibility would not.

BRENNAN J: Did he intend, to use your strictest

construction of the section, that his debts should

be discharged?

MR WILLIAMS:	If you are asking me what the evidence is, I do not think I can answer in that particular
context. What that question raises is, what
happens where some advantage, or some detriment, is
incidentally caused in the implementation of the
director's intention? There, in our submission,
one must go back to the subjective intention.

BRENNAN J: But if one contemplates a result of an action

and desires that result to take place, one has an
intention to cause that result, whether it is

incidental or whether it is principle. Now the

question may be whether he saw it as an advantage
to himself, but that may be a very different

question from whether he intended to achieve a

result which is, in truth, an advantage.

MR WILLIAMS:  The answer, I suspect, to that question, would

involve a trifle more than simply saying, "Did he

intend to do the big act, and did he know the tiny

consequence would be a consequence of doing the big

act?". It then becomes a question, I think, of	asking: did his focus - was he intending to gain	that advantage or cause that detriment in a more
complicated sense than simply saying, well that is an inevitably consequence of what he did.

problem of putting money into Rothwells that day,

and the device which was adopted by those present
which included the appellant, Edwards, although he

was not involved in it, he was an observer

essentially on that occasion, was that a direction

was given that $15 million would be paid by the

State Energy Commission to Western Collieries by

way of advance purchase of coal.

Now, that has not been sought by Western

Collieries and there was no representative from

Western Collieries at that meeting. It was simply

a decision made by the Premier and others, which

would enable them then - or to enable Western

Collieries then, to place that money on deposit

with Rothwells, and so overcome the immediate

funding problem. And that is, in fact, what

happened. That device was put into effect, the

money was placed on deposit and catastrophe was

averted at least for another few days.

That was important in the context of Edwards'

evidence, in our submission, because it was the

background against which he was trying to solve the

problem the next week. The agreement by Bond and

the government in association with Spedleys to put

up to $75 million into Rothwells in fact did come

out of that meeting on the 21st but was not

consummated until the following Monday.

The agreement was in evidence in this trial

were seeking to implement when they performed the	and it was that agreement which Edwards and Lloyd
acts resulting in these charges. So as at
27 October, which was when the immediate events
occurred, what had happened the week before had not
seemed to have been a problem.

There was no suggestion, no understanding on

the part of Edwards or anybody else that what they

had done, what the government had done, in terms of

the ministers and its legal advisers, had actually

produced a problem. That became apparent later on

but not as at 27 October.

BRENNAN J:	Do you mean the balloon had not burst?
Chew(3)	80 MR ROBERTS-SMITH QC 10/12/91
MR ROBERTS-SMITH:	The balloon had not burst, but the point

about that was - we are talking here about intent,

Your Honour, you see, that is the important thing.

That is the background against which Edwards was

considering what he should do and what Lloyd was

doing.	As at that time, what had happened the week
before had not been seen to be a problem.	It had
in fact been seen to be a solution.

The other references perhaps are basically

self-evident.	I would only add perhaps two other
page references:	248 and 249, where Edwards

indicated that he thought there was a benefit to

Western Collieries in fact in the situation, that

is in the loan being provided, because it would

enable Rothwells to survive, and Rothwells was the

parent company.

Again, one is not concerned here with whether

or not that is necessarily a terribly reasonable

view. If one is concerned here with knowledge and

belief or intent though, the position, in our

submission, is quite different. The question is

what did he know? If he says, "I thought not only

was there no risk, but that it was for the benefit

of Western Collieries, because Western Collieries

was a wholly-owned subsidiary of Rothwells, and if

Rothwells survive, then there wouldn't be a

problem", then that puts a different complexion, in

our submission, on the question of knowledge and

intent.

If I might simply say for the same reasons in

relation to ground 1, that there was here, in light

of in particular that evidence, a substantial

miscarriage of justice. I would conclude perhaps

with the observation made by Your Honour

Justice Brennan in He Kaw Teh at page 575 that:

The absence of an honest and reasonable but

mistaken belief is not the equivalent of

knowledge of the facts which make the act

criminal.

Those are our submissions.

MASON CJ:  Thank you, Mr Roberts-Smith. Mr McKechnie?

MR McKECHNIE:  If Your Honours please, we will hand up our

submissions in relation to both matters. There is

a certain similarity as to them.

MR McKECHNIE:  As I said at lunch-time, Your Honours, our

position is that in substance, except for one

matter which I will come to, we would contend that

the judgment of the majority in Chew and of the

judges in Edwards and Lloyd is correct,

Chew(3) 81 MR McKECHNIE, QC 10/12/91

particularly the judgment of the Chief Justice, in

their construction of section 229(4). For that

reason I do not propose to be very long because, as

I say, the judgments speak for themselves, both as

to - - -

DAWSON J:	I am not sure that that is so, Mr McKechnie. you tell me what the Chief Justice does say,	Can
precisely?

MR McKECHNIE:  Yes, and I come to that in a minute,

Your Honour. I will come to it now, and put our

submissions in this way: as to section 229(4), the
substantial point is what is the mental element in
section 229(4). The Chief Justice and

Justice Murray had a difference of opinion as to

what one might describe as the basic mens rea of

the section. That is one matter about which there

may be some debate. The second matter is whether

or not section 229(4) as a matter of construction,

is a crime of specific intent, that is that the

acts done, the use of the position improperly, are

done with the intent for the purpose of gaining a

benefit or causing a detriment. Both the

Chief Justice - in fact all the judges in the cases

except for Mr Justice Wallwork, were of the view

that it is not a crime of specific intent; that is,

there is of course, as in every offence, a mental

element, but one does not read subsection (4) as

indicating that the use of the position must be for
an intention to gain a benefit or cause a

detriment.

DAWSON J: The ~~gused must intend that consequence which in

fact mayabe categorized as a detriment or an

advantage even though he does not so categorize it.

Is that part of the submission?

MR McKECHNIE: That is not part of my submission, no,

Your Honour. My submission is that there is a

mental element in the physical acts that the

accused does.

As a matter of submission, we would submit

that the Criminal Code applies, and I will develop

why shortly, and that the mental element is that

the acts done must be willed acts within section 23

and may not lead to an accidental event. The acts

done are the acts or act which goes to the use

which ~s improper - in the case of Chew the

authorization of the payment of money, the
authorization of the transfer of shares. That must

be a willed act and necessarily it must be an act

which the actor has knowledge of relevant facts.

Chew( 3) 82 MR MCKECHNIE, QC 10/12/91

To take a recent example which, hopefully, has now settled the law, that of Falconer, 171 CLR, the

act there being the act of discharging the loaded

firearm and, it would seem to follow, from the

judgment, knowing that the firearm was loaded.

Here, the act in Chew is the act of authorization

knowing the circumstances that what you are

authorizing is a cheque for payment and the like.

DAWSON J: There may not be much question here but I had in

mind the circumstances where there is improper

conduct but the consequence is something which is

entirely unforeseen and unintended.

MR McKECHNIE:  Yes.

DAWSON J: But which happens to be a detriment or advantage,

within the meaning of the section. Surely that

would not be sufficient?

MR McKECHNIE:  In my submission, that has nothing to do with

intention but has everything to do with - that may

be an act, or an event, rather, which is

accidental, unforeseen by the actor, unforeseeable,

not reasonably to be foreseen, and so criminal

responsibility would be relieved in that case.

DAWSON J: No, I have - a case where the accused intended to

do what he did but it had unforeseen consequences,

or even unforeseeable consequences, to the

detriment of the company. Surely he is not guilty

then? That would not be accidental; what the

accused did was not accidental.

MR McKECHNIE:  No, the acts of the accused were not

accidental; it would be a question whether the

result was accidental, whether the circumstances

that occurred were accidental. We would see a very

complete difference and that falling within

section 23.

DAWSON J: Could you not look at it in the same way and say

that they were simply not intended by the accused?

MR McKECHNIE: Undoubtedly, as a matter of fact.

BRENNAN J: Or as a matter of common law, if we were using

the common law.

MR McKECHNIE:  Or as a matter of common law.

DAWSON J: Yes, and I am probably guilty of that, too.

MR McKECHNIE: Put shortly, our submission is this, that

there are, of course, a variety of offences. Some

offences require a basic mens rea, which matters

not at common law, or are simply a willed act; they

Chew(3) 83 MR McKECHNIE, QC 10/12/91

are the same under the Code. Some offences attract

a higher penalty if attended with the circumstance
that they are done with a criminal intent. There

are many offences of that character. They are the

offences specified, as it were, in the second

paragraph of section 23 and are found within the

Criminal Code, and there are many of them:

intending to do grievous bodily harm; did grievous

bodily harm.

It is the possession in the act, or of a

criminal intent, which renders the actor liable to

a higher penalty or to a different offence. There

are other offences and, in our submission, this is

one where the actor is rendered liable to a higher

penalty, or is charged with an offence with a more severe penalty, not because of the possession of a particular intent but because of the consequences

of the act render it, in the judgment of

Parliament, a more serious offence. In our

submission, section 29(1) is an example of the

former and this is an example of the latter.

DAWSON J: Can I just take you back one moment, and it may

be that I do not understand what is meant by

accident in the Code, but is there not something
short of accident which can be described as

unintended. In a business sense, what may happen

may be unintended, and understandably unintended,

but it cannot be described as an accident.

MR McKECHNIE:  It is difficult to talk in the hypothetical,

Your Honour. It may be that the answer is that if

it is so unintended it is not in a real sense

caused - - -

DAWSON J: What if a bank forecloses - - -

MR McKECHNIE:	Well, you might say that it was not caused.
DAWSON J: Pardon?
MR McKECHNIE:	You might say that the use of the position

did not cause the result. It may be that I need to

think about it a little more, but it may be that if

it is so unintended and unforeseen that you cannot,

in truth, say that it was caused by the acts of

the -

DAWSON J:  Why do you balk at saying that if the actual

consequences were unintended, that is, the physical consequences, then there is no offence, because the

offence is an improper act to do something?

MR McKECHNIE:  I do not balk at the general proposition, but

the way I thought Your Honour was putting to me

Chew( 3) 84 MR McKECHNIE, QC 10/12/91

was, as it were, establishing the limits and I do

see limits to that broad proposition.

DAWSON J:  The limits are that it does not matter whether

the accused views it as being a detriment or

advantage if, in fact, it is one or the other.

MR MCKECHNIE:  Yes.

DAWSON J: Well, I do not think we are in disagreement.

MR McKECHNIE:  I do not think we are. But, to return to the

point I was making. We would see this as a

section, which properly construed is a section

wherein a higher penalty is exacted because of the

consequences of the acts done in counterpoint to

sections where a higher penalty is extracted

because of the criminal intent with which the acts

are done.

An example, which is a common example, and which we see as very clearly analogous, is that of

dangerous driving compared with dangerous driving

causing death. Those are offences which occur in
all jurisdictions. In Western Australia they occur

within the Road Traffic Act. Section 61 provides

an offence of dangerous driving punishable by a

$400 fine. Section 59 provides for the offence of

dangerous driving causing death or, as the section

says:

Anybody who causes death by driving

dangerously -

as a higher penalty involving a substantial period

of imprisonment.

DEANE J:  Do you say - take the last wording "improper use

of his position to cause detriment" - that there is

no purposive connection at all there?

MR MCKECHNIE: Yes, Your Honour.

DEANE J: What if, for example, as managing director he was

guilty of fraud for the purpose of obtaining an

advantage to the company but his misuse of his position rebounded and instead of obtaining an

advantage the company sustained detriment, would

you say that he had used his position to cause

detriment?

MR McKECHNIE:  Yes. I would say, in that situation, very

definitely and, indeed, an indictment - if intent

were to be proved - alleging the fact of the

causation of detriment would fail.

Chew( 3) 85 MR McKECHNIE, QC 10/12/91

DEANE J: In other words, what you say is that this

subsection applies to any improper use of position

at all which, as a matter of fact, results in

detriment to the company, regardless of the fact

that he was motivated by an intention to benefit

the company.

MR MCKECHNIE:  Yes.

DAWSON J: Unless it is accidental?

MR MCKECHNIE:  Yes. I do not know that I want to get into

that at the moment. But, yes, Your Honour, our

submission is as simple and maybe as bold as that.

DEANE J:  I follow that, except the judgments below seem to

ignore the connection between "improper use" and

the infinitive "to cause" and to treat it as if it

simply means "an improper use and thereby the

company sustains". That, to my mind, is not an

obvious meaning of the words.

MR McKECHNIE:  I am not sure that Your Honour is being

entirely fair to the judgment of the Chief Justice.

DEANE J: Well, I may not be.

MR McKECHNIE:  And one of the problems with the section, in

my submission, which my friend, Mr Williams, fell

into from one time or another is, in fact, reading

into the section words that are not there,

particularly as Justice Brinsden did in Jeffree, in

order to gain a benefit - those words are not

there.

DEANE J: But if you have a prohibition of doing something

to cause something else, as a matter of language,

it is different from a prohibition of doing

something, full stop, and then, as it were, the

fact that it produces some effect being treated as

an element leading to criminal liability.

MR McKECHNIE:  I would agree with Your Honour. In my

submission the judgments below do not actually

disagree with that either. It is clear that, in
our submission, in order to found liability, there

must be first of all a use of position which must

be a willed act, whether with or without the

knowledge which the Chief Justice would import into

that. It must be a willed act - the use of the position. That use must be improper as judged

objectively, and it must have a result, either

causing a detriment or gaining a benefit.

DAWSON J: But that is just the distinction that His Honour

was putting to you. Assault occasioning actually

Chew(3) 86 MR MCKECHNIE, QC 10/12/91

bodily harm is a very different sort of offence to

assault with intent to cause - - -

MR McKECHNIE:	Indeed, Your Honour.
DAWSON J:	- - - and this is - it does not say "to cause"

but - it does, it says "to cause", yes, but not

saying "just occasioning" and the mental element is

different.

MR McKECHNIE:  The way that Your Honour put it to me as

assault occasioning bodily harm, which we would

ally with this section is very different with

assault with intent to cause, and I agree, they are

different, and that is why I say this is an example

of an offence which makes more serious the conduct

because of its results as compared with an offence

which is made more serious because of the intent by

which it was carried out.

DEANE J:  I do not want to take time, but what I was really

suggesting to you was that the way you are putting your argument can really only be put if you ignore the fact that subsection (4) is a prohibition and

if you treat it as if it says, "A person who does

this and thereby causes that is guilty of an

offence", but that is not what the subsection says.

It says, "You shall not do this to cause that".

MR McKECHNIE:  "You shall not make use."

DEANE J: Yes, "to cause". Having drawn your attention to

it, I do not want to take up time.

MR McKECHNIE:  I see Your Honour's point but I am not, with

respect, sure that we are too far apart on it.

There must be a positive act of making use.	The
prohibition is against that positive act.	The
positive act must cause something.

DEANE J:  No, there is a positive prohibition of using your

position to cause something. Having said it, that

is where it is.

MR McKECHNIE:	I take Your Honour's point.
MASON CJ: Mr McKechnie, it is time for us to adjourn.	In

the circumstances I do not think it will be

possible for us to resume before 10.15 am tomorrow.

We will adjourn till then.

AT 4.20 PM THE MATTER WAS ADJOURNED

UNTIL WEDNESDAY, 11 DECEMBER 1991

Chew(3) 87 10/12/91