David John Griggs v Australian Securities Commission No. SCGRG 95/2217 Judgment No. 5446 Number of Pages 6 Magistrates

[1996] SASC 5446

COURT IN THE SUPREME COURT OF SOUTH AUSTRALIA NYLAND J

CWDS
Magistrates - appeals from and control over magistrates - corporations other corporations liability for torts, crimes and offences - Appeal against sentence - appellant pleaded guilty to 11 breaches of Corporations Law and Australian Securities Commission Law - magistrate imposed fine - appellant bankrupt - magistrate failed to consider capacity to pay fine - appeal allowed. Colorations Law ss 591(1), 590(1)(9b)(ii), 1311(1); Crimes Act 1914 ss 10, 16C; Australian Securities Commission Law s63(1), referred to. Fry v Bassett (1986) 44 SASR 90; Rahme (1989)43 A Crim R 81, applied.

HRNG ADELAIDE, 22 November 1995 #DATE 21:2:1996 #ADD 28:3:1996

Counsel for appellant:     Mr G K Patel

Solicitors for appellant:    Patel and Co

Counsel for respondent:     Mr R Perrotta

Solicitors for respondent: DPP (Cwlth)

ORDER
Appeal allowed.

JUDGE1 NYLAND J This is an appeal against sentence. The appellant was charged on information with the following offences:
    (a) Three counts of, as a director of a company, failing to
    take all reasonable steps to ensure that proper accounts
    were kept by the company, contrary to ss591(1) and 1311(1)
    of the Corporations Law.
    (b) Four counts of, as a director of a company, failing to
    deliver up to the liquidator the books of the company,
    contrary to ss590(1)(9b)(ii) and 1311(1) of the Corporations
    Law.
    (c) Four counts of failing to comply, without reasonable
    excuse, with a requirement to produce books relating to the
    affairs of the company to the Australian Securities
    Commission (hereinafter referred to as "the ASC"), contrary
    to s63(1) of the Australian Securities Commission Law.

2. On 14 August 1995, the appellant appeared before a court of summary jurisdiction sitting in Adelaide in the State of South Australia, and pleaded guilty to all counts on the information.

3. At the hearing in the Magistrates Court, the respondent was represented by Mr Perrotta, of counsel. He made detailed submissions to the court concerning the circumstances of the offending, the particulars of which are set out in his affidavit received by me on the hearing of this appeal. In that affidavit, the essential facts which formed the basis of the various charges are described as follows:
    "i) the defendant was the director of four companies that
    went into liquidation;
    ii) as such, he was served with Notices from the duly
    appointed liquidators requiring him to deliver up all of the
    books of the four companies within his possession to the
    liquidators within 14 days of service;
    iii) the defendant failed to comply with the Notices;
    iv) the liquidators prepared reports, as required by law,
    to the ASC stating that the Notices were not complied with
    and that the records that were delivered were very
    inadequate given the nature and size of the businesses of
    the respective companies;
    v) by reason of the fact that the liquidators attempted to
    secure compliance with the Notices and that the records were
    inadequate the administration of the companies in
    liquidation was significantly prejudiced and became more
    costly than it otherwise would have;
    vi) as a result of receiving the reports from the
    liquidators the ASC issued Notices pursuant to the ASC Law
    requiring the defendant to deliver the books relating to the
    companies to the ASC within 14 days;
    vii) the defendant failed to deliver any records to the
    ASC. Several search warrants were then issued pursuant to
s10 of the Crimes Act and executed by the Australian Federal
    Police with the assistance of the ASC on a number of
    properties;
    viii) a significant number of records relating to the four
    companies, in addition to others, were seized pursuant to
    the search warrants;
    ix) upon examination of the records it was apparent that
    proper records had not been kept for the four companies;
    x) the defendant was then charged on information with
    having failed to deliver the books to the liquidator: s590;
    and to the ASC: s63; and to having failed to ensure that the
    companies kept proper records: s591."

4. The charges laid against the appellant related to four companies:
    (1) Ayelands Pty Ltd. This company was the trustee of the
    Ayelands Property Trust and was a property developer. It
    purchased, developed and sold real estate. The appellant
    and his sister were shareholders in the company.
    (2) Crestwood Homes Pty Ltd. The business of this company
    was building and land development. The appellant's father,
    Eric Griggs and his wife, Rosemary Ann Griggs, were
    shareholders of the company and also former directors.
    (3) Lawinna Pty Ltd. This company was a property investor,
    being the owner of the Beenleigh Shopping Centre in
    Queensland. Eric Griggs and his wife were shareholders of
    the company and also former directors.
    (4) Middleton Heights Pty Ltd. The business of this
    company was that of property developer. It also purchased,
    developed and sold real estate. Eric Griggs was a
    shareholder of Middleton Heights and he and his wife were
    also former directors.

5. The appellant and his sister, Karen Anthonysz, succeeded their parents as directors of Crestwood Homes, Lawinna and Middleton Heights. The succession occurred with respect to the latter two companies after Eric Griggs and his wife became bankrupt. A total of 16 companies in respect of which Eric Griggs and the appellant were past or present directors went into liquidation between November 1991 and January 1993 inclusive. Those companies included the four which are the subject of the information against the appellant.

6. Liquidators were appointed by the Supreme Court to wind up each of the four companies. The appellant's subsequent non-cooperation with the liquidators became the subject of charges 4 to 7. This persisted and the failure to cooperate with the ASC are the subject of charges 8 to 11. When the books and records were eventually obtained they were found to be inadequate, thus leading to counts 1 to 3.

7. The magistrate convicted the appellant on all counts. On counts 1 to 3 he imposed one penalty, namely a fine of $1,000. As to counts 4 to 7, he imposed one penalty, being a fine of $2,000, and as to counts 8 to 11, he also imposed one penalty, being a fine of $2,000, with court costs of $86 and counsel fee of $160. This makes a total sum of $5,246 in all. He allowed 12 months to pay. The appellant has appealed on the ground that the sentences are manifestly excessive.

8. At the hearing before the magistrate, the appellant was represented by Mr Patel, of counsel, who made submissions in mitigation of penalty. Mr Patel also appeared for the appellant on the hearing of this appeal. There is no record of the submissions which Mr Patel made to the magistrate but as I understand the matter, it was put to the magistrate on behalf of the appellant that the collapse of the Farrow group, the mortgagee over some of the property of the companies, meant that some of the information which was in Farrow's possession could not be accessed by the appellant. The magistrate was also informed that the appellant was bankrupt, that he was earning $400 a week gross, and had no means to pay a large fine. It would appear that no particulars as to the appellant's commitments were provided to the magistrate nor sought by him.

9. The magistrate in his sentencing remarks said:
    "The collapse of the Farrow Group is hardly the defendant's
    fault and provided difficulties for many.

He is a young man with no previous convictions and is
    entitled to credit for his pleas. He could have done what
    so many charged with commercial offences do, that is pleaded
    not guilty for the sake of it, to stuff the system up for as
    long as possible. He did not and he is entitled to
    considerable credit for his pleas. He says in effect, I am
    a carpenter, not a business man. I was unprepared to become
    a director of these companies but I had to when my father
    became bankrupt and thus ineligible. When I did become a
    director I accepted personal obligations but I was really
    incapable of discharging them except by taking the problems
    to my father who by then was incompetent himself because of
    his illness. It is an explanation but I think hardly an
    excuse. It is not suggested that the defendant's failures
    were calculated to mask some inappropriate personal benefit
    and while this may not be such a case, it is easy to imagine
    a situation in which a defaulting director will prefer to
    run the risk of having imposed upon him a substantial fine,
    rather than making an effort to discharge his obligations.
    In other words, I fear that the imposition of a fine, that
    easily comes within the defendant's limited capacity to pay,
    for breaches as persistent and serious as these will not
    discourage and indeed will encourage others who have the
    same obligations to ignore them or to fail to comply with
    them to the disadvantage of liquidators and regulatory
    authorities, to the disadvantage of creditors and of the
    community."

10. It is clear from his Honour's remarks that he took a serious view of the appellant's offending and considered deterrence to be of paramount importance. Before imposing the penalties to which I have referred he went on to say:
    "The informant does not submit that these offences are
    serious enough to warrant the imposition of a sentence of
    imprisonment and it would be pointless to impose penalties
    that would not be defended in the event of an appeal, but my
    concern is that imposition of fines within the defendant's
    capacity to pay will be interpreted as yet another case of
    the court's lack of willingness to deal sternly with what
    are regarded as 'corporate' offences."

11. In the course of submissions, the magistrate asked Mr Perrotta whether he considered that a sentence of imprisonment should be imposed and that Mr Perrotta then informed the court that imprisonment was an option for the court on the facts but he was not making either a positive or a negative submission as to imprisonment. It would appear, however, from the magistrate's remarks that he interpreted this submission as suggesting that the respondent was not seeking a custodial sentence rather than taking a neutral stand on the matter. This is not, however, the subject of a cross-appeal. In any event, I believe that the magistrate was correct in his determination that a fine was the appropriate penalty to be imposed in the circumstances of this case.

12. Section 16C of the Crimes Act 1914 provides:
    "(1) Subject to subsection (2), before imposing a fine on a
    person for a federal offence, a court must take into account
    the financial circumstances of the person, in addition to
    any other matters that the court is required or permitted to
    take into account.
    (2) Nothing in subsection (1) prevents a court from
    imposing a fine on a person because the financial
    circumstances of the offender cannot be ascertained by the
    court."

13. In Fry v Bassett (1986) 44 SASR 90, at 92, Olsson J said:
    "... if it is appropriate to impose a fine the quantum of it
    must in any event be related to the means of a defendant in
    some logical manner, particularly in the case of persons who
    are of very limited resources. Whilst fines must, in
    general, constitute a proper reflection of the gravity of
    the offending, nevertheless subjective consideration must be
    given to what level of fine will act as a sufficient level
    of punishment to a defendant in his particular
    circumstances."

14. In Rahme (1989) 43 A Crim R 81, the Court of Criminal Appeal of New South Wales adopted a similar approach. In that case, Finlay J said at 86:
    "Scarman LJ in Jamieson (1975) 60 Crim App R 318, after
    agreeing with the observation concerning the imposition of a
    fine of substance in the particular offence there under
    consideration, which was a prevalent offence, and making it
    plain that the courts do deal severely with such offences,
    observed:
    'But there are two other principles to be observed when
    imposing a sentence such as this. The first is that a
    sentence must always be linked with the particular
    circumstances of the offender as well as the particular
    circumstances of the offence. Indeed, a sentence derives
    its character of justice or injustice from a combination of
    those two sets of factors.'

That case is authority for the broad proposition that once a
    determination has been made that a fine should be imposed
    the correct procedure in assessing the appropriate amount of
    the fine is to determine it by reference to the gravity of
    the offence for which it is imposed. If the court is
    satisfied that the offender would be unable to pay the
    amount determined it may reduce it to take account of the
    offender's means and impecuniosity."

15. In my view, the magistrate, having decided to impose a monetary penalty, was obliged to consider the capacity of the appellant to pay the fine. The only information before him was that the appellant was bankrupt and had an income of $400 gross per week. The magistrate should have been alerted therefore to the appellant's limited capacity to pay a fine. His remarks suggest, however, that a penalty within the appellant's capacity to pay would not be sufficient to meet the seriousness of the charge. This is clearly an error of approach. As Olsson J further said in Fry v Bassett (supra) at 92:
    "A modest fine towards the lower end of a permissible
    spectrum may well constitute a very salutary penalty and
    impose significant hardship on an impecunious person
    whereas, in the case of a person of means, a penalty higher
    along the relevant spectrum of reasonable tariffs may be
    more appropriate. This feature has been touched on by me in
Frost v Porter (1984) 116 LSJS at 456 and Williams v Fauser
    (unreported, No. 9239). Such considerations are also
    adverted to in M Daunton-Fear, Sentencing in South Australia
    (1980), pp193-194."

16. Those remarks are pertinent to the circumstances of the present case. In my view the sentencing discretion has miscarried. It is therefore open to me to sentence afresh. On the hearing of the appeal, an application was made by the appellant for leave to tender fresh evidence in the form of an affidavit of the appellant sworn on 16 November 1995. That affidavit sets out relevant particulars relating to the financial position of the appellant. I now give leave to the appellant to adduce fresh evidence for the purposes of assessing the appropriate penalty to be imposed. As I have already said, this was an appropriate case for the imposition of a monetary penalty. Nevertheless, this was serious offending, and the magistrate correctly approached the matter on the basis of deterrence being of the utmost importance. Pursuant to s4K of Crimes Act 1914, a separate penalty may be imposed for each of the three series of offences. I would impose one penalty of $500 for counts 1 to 3, one penalty of $750 for counts 4 to 7 and one penalty of $750 for counts 8 to 11. These fines amount to a total of $2,000 and I allow 18 months to pay.

17. There remains the question of extension of time to appeal. As I understand the matter, there was a delay in instituting the appeal due to lack of funds on behalf of the appellant. In view of my finding that there has been an error by the magistrate which requires this court to interfere on appeal, it is appropriate to grant an extension of time. I therefore extend the time for filing the Notice of Appeal to 20 September 1996.

18. The order of the Court is therefore that the appeal be allowed and the penalty imposed by the magistrate be set aside. Pursuant to s4K of the CrimesAct 1914, I impose one fine of $500 for counts 1 to 3, a fine of $750 for counts 4 to 7 and a fine of $750 for counts 8 to 11. There will be a total fine of $2,000 and I allow 18 months to pay the fine.