Director of Public Prosecutions (Cth) v Hopwood & Byrnes No. Sccrm-98-10, Sccrm-97-292 Judgment No. S6719

[1998] SASC 6719

DIRECTOR OF PUBLIC PROSECUTIONS (CTH)
v HOPWOOD and BYRNES

Court of Criminal Appeal
Coram:  Prior, Olsson and Williams JJ

Olsson J 

These are applications by the Commonwealth Director of Public Prosecutions for leave to appeal against sentences imposed on the respondents by a District Court Judge on 19 January 1997 and 22 October 1997 respectively.  They fall to be considered against a lengthy and complex history of relevant events.

After trial by judge alone in the District Court the appellant Hopwood was convicted of one count of improper use of his position as a director to gain advantage, contrary to section 229(4) of the Companies (SA) Code.

The appellant Byrnes was convicted of two offences, namely:-

.one count of improper use of position as a director to gain advantage contrary to section 229(4) of the Code;  and

.one count of furnishing misleading information contrary to section 564(1) of the Code.

Pursuant to the provisions of the Code an offence pursuant to section 229(4) attracts a maximum penalty of a fine of $20,000 or imprisonment for five years or both.  An offence pursuant to section 564(1) attracts a maximum penalty of a fine of $10,000 or imprisonment for two years, or both.

In the event the learned sentencing judge imposed a fine of $4,500 on Hopwood;  and a single fine of $8,000 on Byrnes in respect of both offences committed by him.

One factor which influenced the learned sentencing judge to adopt that course was the circumstance that both offenders had been embroiled in the criminal law processes over a long period of time at very considerable expense.  He apparently took the view that this had, in a practical sense, itself been a considerable penalty.

It is fair to say that the offences in question were part and parcel of the remarkable corporate excesses which occurred during the 1980s.  The historical facts relevant to them are complex and have been traversed by the courts on a number of occasions.

The trial of the two offenders extended over a period in excess of two months.  It was followed by the publication of detailed reasons for conviction which ran to some 104 pages.  The decision of the trial judge was the subject of an appeal to the Court of Criminal Appeal.

On 21 April 1994 that court quashed both convictions of offences pursuant to section 229(4) and also a conviction of Byrnes pursuant to a third count, which is not now relevant.  It did not interfere with the conviction of Byrnes of the section 564(1) offence.

The Director sought and obtained special leave of the High Court to appeal against the decision of the Court of Criminal Appeal as to the section 229(4) matters.

By its judgment published on 23 August 1995 (The Queen v Byrnes and Hopwood (1995) 183 CLR 501) the High Court allowed the appeal and set aside the order quashing the section 229(4) offences. It remitted the matter back to this court for further consideration of the issues related to them, in light of legal principles which it enunciated.

Those issues came before a differently constituted Court of Criminal Appeal, the ultimate judgment of which is reported as R v Byrnes and Hopwood (1996) 20 ACSR 260; 186 LSJS 106 (“the remittal decision”).

For reasons expressed by that court, of which I was a member, the original convictions in relation to the alleged section 229(4) offences were affirmed and the appeals against them dismissed.  The respondents unsuccessfully sought special leave to appeal to the High Court against that decision.

In reporting the application for special leave on 3 February 1997 the Editor of the Legal Reporter said:

“The Court of Criminal Appeal accepted the trial judge’s findings on credibility, and affirmed the convictions.

In this application, it was sought to challenge the way the Court of Criminal Appeal had accepted findings by the trial judge, it being argued that it should have conducted an independent review of all the facts.

The Court refused special leave without calling on the respondent.  Brennan CJ said ‘on the undoubted facts in this case, the conviction of the applicants was  inevitable.  It is not a case in which to consider the functions of a Court of Criminal Appeal against conviction by a trial judge sitting without a jury.  Accordingly, special leave will be refused in both applications’. ”

The forensic sparring did not cease there.

When the matters came before the learned trial judge the respondents sought to raise various issues as to evidence relevant to the sentencing process.  This resulted in the stating of a case to the Court of Criminal Appeal, the outcome of which is reported as R v Byrnes and Hopwood (1996) 189 LSJS 190. Special leave to appeal to the High Court against that decision was also sought by the respondents and refused.

When the matter went back to the learned trial judge the respondents raised issues which required him to conduct a disputed facts hearing as to what monetary losses (if any) had been sustained, resulting from the commission of the offences of which the respondents had been convicted.  A finding as to these facts appears in R v Byrnes and Hopwood (No 6) (Lunn DCJ, 22 October 1997, D3688, unreported).  It will be necessary to return to some aspects of that finding in due course.

The learned trial Judge then sentenced the respondent Byrnes on the lastmentioned date and the respondent Hopwood on 19 January 1997.

I have recited the above history in some detail because it serves to illustrate that, not only were the respondents not entitled to any sentencing discount for timely pleas but, as was their legal right, they fought the proceedings tooth and nail all  of the way - ultimately with no success as to the issue of criminal responsibility and with but very limited success as to sentencing issues.  Whilst they are, in no sense, to be condemned for doing so, it seems to me, with respect, the fact that they have incurred substantial legal expenses along the way is not a matter in mitigation of penalty and should not have been taken into account as being a factor of that nature.  The other side of the same coin is that the Crown (and thus the taxpayer) has been put to enormous expense in prosecuting the proceedings through to what is, from its perspective, a successful conclusion in terms of ultimate convictions.

The historical facts giving rise to the convictions are, as I have indicated, lengthy and complex.  They have, on several occasions, been traversed in the judgments already published.  It would be profitless to attempt, fully,  to retrace the same detailed ground at this time.

Whilst it is difficult to precis such a complex situation, the following very simplified summary will suffice.

Hopwood is an experienced geologist by profession and Byrnes an experienced commercial lawyer.  They were both directors of two companies called Magnacrete Limited and Jeffcott Investments Limited respectively.

The latter company found itself in financial difficulties towards the end of 1988.  The two respondents embarked on a complicated scheme to resolve those difficulties by a convertible note issue to its shareholders for $6 million.  That money was needed urgently to repay its borrowings.

The issue of the notes was to be underwritten by Jarden Morgan Australia Limited, but the underwriter required Jeffcott to procure a sub-underwriter.

Jeffcott held a significant shareholding, directly and indirectly, in Magnacrete, which had substantial cash reserves.

The respondents arranged, with a merchant banker (Baron), for a company called Vicksburg Pty Ltd to be set up for the purpose of borrowing $1.7 million from the Commonwealth Bank which would, in turn, be lent to Baron to finance the sub-underwriting.  Vicksburg was a ‘shelf’ company which had no assets or undertaking.  It was simply a corporate vehicle created for giving effect to the proposed transaction.

Magnacrete in effect made available $2 million of its cash reserves with the bank as security for the loan.  By an agreement executed under Magnacrete’s common seal and signed by the respondents in their capacities as directors of that company (without the knowledge or authority of the other directors of that company) Magnacrete undertook to guarantee the bank loan, in return for a fee of $40,000.  A further agreement with Vicksburg was also executed by them, in a similar manner, without the knowledge or authority of the other directors.

Additionally, without the authority of the other directors of Magnacrete, the respondents affixed its common seal and countersigned an authority to the Commonwealth Bank to deduct from Magnacrete term deposits with that Bank any moneys due to it as a result of the Vicksburg loan.  That related to the $2 million cash security above referred to.

The significance of those transactions was that:-

1. had the respondents sought the approval of the other directors of Magnacrete to the above transactions it is probable that the proposal would have been strongly objected to, at least by one of the other directors.  That objection may well have precipitated a situation whereby, for one reason or another, the transactions may not have gone ahead at all;

1. the substantial purpose of the transactions was not to benefit Magnacrete, but to further the interests of Jeffcott;  and

1. the respondents deliberately placed themselves in a position in which their duties to the two companies were in patent and serious conflict.

It is difficult to envisage a more deliberate and blatant breach of corporate duty, particularly in light of the more expanded factual history set out in the first 1996 judgment of the Court of Criminal Appeal.  Undoubtedly Byrnes was the author of the scheme, but Hopwood was aware of the issues involved and a willing party to them.  Both men were well experienced in corporate/commercial transactions.

The second count against Byrnes related to the furnishing by him of misleading information both to the directors of Magnacrete and the Australian Stock Exchange concerning the Vicksburg arrangement.  Once again, it was a deliberate and blatant offence committed by an experienced commercial lawyer.

In my judgment in the remittal decision I summarised the overall situation in these terms:

“... the purpose, or the substantial purpose, of the transactions involved was not to confer any significant benefit to Magnacrete, but, primarily, to benefit Jeffcott; and thereby cause an advantage to the latter.  Put in another way, Magnacrete’s interests were consciously subordinated to those of Jeffcott; and its assets were put at risk for no true, commensurate benefit to it.  Each of the appellants actively promoted the interest of Jeffcott (which was, in practical terms, their own personal interest) in preference to that of Magnacrete, contrary to their clear legal duty.  Quite clearly, on any dispassionate view, the risks to Magnacrete arising from the guarantee and the non-recourse loan, far out weighed any possible financial benefit to it.

In considering the particular situation of Hopwood  it must at once be conceded that, much of the detailed implementation of the scheme was in the hands of Byrnes.  However, the plain fact of the matter, on the facts as found, was that Hopwood well knew, at the time when the relevant documents were executed, that there had been no proper authorisation of the sealing of them.  It is clear, even on his own evidence, that he expected that there would need to be some formal, subsequent, board meeting to ratify implementation of what was being done; and he merely proceeded in the belief that, although Hill would oppose it, the other directors would approve it.  Cadit quaestio!”

Inter alia, that summary was acceded to by the other members of the Court and, despite some criticisms of it now sought to be advanced by Mr Hevey, of counsel for Byrnes, I adhere to it as being substantially accurate.

It is a curious feature of the present appeal that Mr Hevey now seeks to resile from what was put to the High Court on the special leave application related to the committal decision.  He now fervently asserts that this Court should regard the findings of fact made by the learned trial Judge as sacrosanct.  We ought not to substitute our views for them, nor accept those of the previous Court of Criminal Appeal!

Magnacrete subsequently collapsed in early 1991 and was placed in liquidation.  In September of that year Vicksburg was also placed in liquidation.  The liquidator of Magnacrete instituted civil proceedings, inter alia, against the respondents claiming damages from them in relation to their breaches of duty above described.  Those proceedings were ultimately compromised, the two respondents each contributing $50,000 to the all up settlement figure of $640,000.  The unsecured creditors of Magnacrete ultimately received a dividend of about 20 cents in the dollar.  Costs incurred by the liquidator in prosecuting the civil proceedings were of the order of $300,000.

In his submissions Mr Hevey argued that no relevant loss was occasioned to Magnacrete, because the guarantee  executed by the respondents was never called up.  He contended that any contingent liability pursuant to the guarantee was overtaken by the fact that, in May 1989, Magnacrete paid $1.7m by way of loan to Vicksburg, which thereafter gave rise to a debt due by Vicksburg to Magnacrete of like  amount.  It seems common ground that this was, at the time, the only commercially sensible step which the Board of Magnacrete could take, given the situation in which it found itself.

The question then arose as to the practical recoverability of that loan.  Such issue, in truth, depended on the value, as an asset, of the $1.7m convertible notes in Jeffcott, for which Vicksburg had subscribed and for which the loan transaction had been created.  That value was, in turn,  necessarily a direct reflection of the ability of Magnacrete to redeem the notes at relevant points in time.  The learned trial judge had found that, in February 1991, Jeffcott was not in a position to redeem a large number of its notes; and the  plain inference on the evidence was that this was  the situation from the time when they were issued - indeed, the $1.7m earlier referred to was used to satisfy pressing debts which Jeffcott had been unable to pay at the time.

It was no simple task to determine what detriment resulted from the commission of the offences.  The liquidator originally asserted that this was a sum of $1,583,034, plus Hungerford’s interest of the order of $843,468.  At the conclusion of the disputed facts hearing the learned sentencing Judge arrived at these basic conclusions:-

.there was undoubtedly some financial loss to Magnacrete arising out of the payment over by it of $1.7 million.  Although he was not able to put a precise figure on that loss it was certainly not as great as $1.5 million.  In this regard he commented:-

“I do not accept the argument that the payment of $1.7 million cannot constitute any loss to Magnacrete because in effect it was merely a transfer of it from its own pocket to another pocket in its by then wholly owned subsidiary, Jeffcott.  It was a takeover, and not a merger which had been effected, and in law Magnacrete and Jeffcott remained separate legal entities.  The assets of Jeffcott were not owned by Magnacrete even though a group balance sheet may give that impression.  The creditors of Magnacrete could not have recourse to the assets of Jeffcott to satisfy their debts other than through any surplus on a winding up of Jeffcott.  The fact that Jeffcott had become a subsidiary of Magnacrete does not prevent a loss arising out of the payment of the $1.7 million by Magnacrete from being a loss in law of Magnacrete.”

........ whatever loss arose from the $1.7 million transaction fairly resulted from, although not solely from, the execution of the documents the subject of the section 229(4) offences.  As he put it:-

“... If the defendants had not resorted to improper means to have those documents executed by Magnacrete the convertible note issue in all likelihood could not have proceeded.  If the whole scheme as originally envisaged was to be successful, $1.7 million of Magnacrete’s money would have been applied in respect of the convertible notes held by Vicksburg, although precisely when that was to occur may have been unclear.  I find it proved beyond reasonable doubt that prior to March 1997 some financial loss to Magnacrete had resulted from the offence in Count 1.”

........ it was an express term of the compromise of the civil proceedings that the liquidator of Magnacrete would not pursue the respondents for any moneys beyond their contributions to the settlement figure.  Those contributions were to be accepted in full satisfaction of their civil liability.

The reasoning of the learned sentencing Judge then proceeded thus:-

“The prosecutor argued that I was not bound by the subsequent action of Magnacrete in settling its civil claim for $640,000 to find that there was therefore no loss suffered by Magnacrete. Even if I had found that a greater loss had been proved, I do not consider that a legal liability which has been extinguished can be a loss for the purposes of s10(e) as there is no good reason not to hold that loss resulting from the offence in s53 of the Sentencing Act has any different meaning in s10(e). It follows that the loss in s10(e) cannot be greater than that for which a compensation order can be made under s53. There is also no loss proved through Magnacrete being kept out of the benefit of its money until March 1997. As the settlement incorporated a claim for interest under s30c of the Supreme Court Act it must be assumed that proper recompense was made for the delay in payment.”

As I understand that reasoning it amounts to the proposition that, because, in light of the compromise of the civil action, it would not be proper to make an order, pursuant to section 53 of the Criminal Law (Sentencing) Act, requiring the respondents to pay compensation for loss resulting from the relevant offences, equally it could not be said that, for the purposes of section 10(e) of that Act, there was any loss or damage resulting from the offence.

Against the  foregoing background the Director sought to make good his application for leave and also his  proposed appeal on four separate bases, namely:

1. That the learned sentencing judge patently erred in law in holding that the effect of the compromise of the civil proceedings was to bring about a situation in which it could no longer be said that Magnacrete had sustained any loss within the meaning of section 10(e) of the Criminal Law (Sentencing) Act (“the Sentencing Act”);

2. That he further erred in law in not finding, on the evidence given by the liquidator of Magnacrete that the loss sustained by it, for the purposes of that section, was of the order of $1,243,034 (including an interest component of $843,468);

3. That he also erred in law in rejecting the proposition that any relevant interest component could not constitute a loss component for the purposes of section 10(e) of the Sentencing Act; and

4. That the imposition of fines on the respondents fell far short of satisfying the important factor of general deterrence.

It is convenient to address those issues seriatim.

I have no problem with accepting the reasoning of the learned sentencing Judge that the ‘loss’ adverted to in section 10(e) of the Sentencing Act is clearly the same ‘loss’ as is adverted to in section 53 of that statute.

However, I find myself quite unable to accept the proposition of the learned sentencing Judge that, in the context of the instant case, the compromise of the civil proceedings, ipso facto, negated the existence of any relevant loss for the purposes of section 10(e) of the Sentencing Act.  It seems to me that there is a patent fallacy inherent in it.

The reason why it would be inappropriate to make a section 53 order is not because there was, in fact, no residual loss sustained by Magnacrete as a result of the offences, but because the express terms of the compromise (arrived at for reasons of commercial expediency) extinguished any right, of the liquidator of Magnacrete, to recover the amount of any actual loss over and above the compromise figure. 

Both sections of the Sentencing Act initially focus (inter alia) on what loss, if any, stemmed from the commission of the relevant offences.  Whether or not it was proper, in the circumstances of this case, to make any summary order for  compensation pursuant to section 53 was a secondary consideration, which did not bear on the issue as to what loss did in fact result from the offences.  Any contractual bar to the making of a summary order under that section did not affect the issue of whether, for the purposes of section 10(e), an actual loss in excess of an agreed settlement figure, had, in fact, actually occurred.

This being so the learned sentencing Judge plainly erred in not taking any section 10(e) factor into account.  On that basis alone the sentencing process clearly miscarried, because the learned sentencing Judge proceeded, in his fundamental reasoning, from an incorrect legal premise.

In any event, as the learned sentencing Judge did recognise - even if the prosecution was unable to prove the quantum of some outstanding loss to the company, nevertheless, the events following the impugned transactions were, on any view, “relevant matters” within section 10, which were properly to be taken into account.  The fact that some, or even total, reparation has been made in a particular case in no sense negates the inherent gravity of a crime.  It merely operates, pro tanto, to reduce or nullify what would otherwise constitute a circumstance of aggravation.

Of course, as against that aspect, as the learned sentencing Judge further recognised, neither of the respondents has displayed any contrition for his offending conduct at any stage.  Their attitude from first to last has been totally selfish, the focus being, first, on their own personal interests at the expense of all others and, second, on endeavouring to escape conviction for their offending behaviour at any cost.

I move on to the second issue raised by the Director.

It is fair to say that the bulk of the time occupied by this appeal was spent in a debate as to whether or not the evidence before the learned sentencing Judge disclosed that the impugned conduct of the respondents resulted in any loss to Magnacrete at all, within the meaning of section  10(e) of the Sentencing Act.

On the one hand, the Director argued that the evidence of the liquidator of Magnacrete unequivocally indicated the existence of an actual loss computed as under:

Moneys paid and fees satisfied in relation to Vicksburg on the vacation of the guarantee	$1,725,722
Less moneys got in  relation to the advance to Vicksburg	$145,658
$1,583,034
Less net amount recouped from civil action after payment of costs	$340,000
$1,243.034
Plus interest component	$843,468
$2,086,502

As against that counsel for both respondents strenuously argued that the evidence did not disclose that the offending conduct had resulted in any loss at all - inter alia, because it fell far short of establishing what was the actual value of the convertible notes taken up by Vicksburg, at the time when they were issued to it.  Such notes, it was said, were clearly of some value; and the Director’s evidence fell short of establishing the true situation in that regard.

I do not see that it is a profitable exercise to plumb this question to the depths.  It seems to me that both arguments are over  simplistic and fail to recognise all relevant factors to be taken into account.

Undoubtedly the evidence was less than fully satisfactory in terms of establishing the precise monetary consequence of the offending conduct at the relevant point in time.  However, I entertain no doubt that the learned sentencing Judge was unquestionably correct when he concluded that the inescapable inference was that, although there was some financial loss to Magnacrete,  he could not quantify it with precision.  This  was so because the convertible notes were not completely worthless when  issued and the evidence was insufficient to establish their actual worth.

To that must be added a further loss figure related to interest income foregone by Magnacrete when its moneys were transferred to the account of Vicksburg to support the guarantee.  It is common ground that, at the time, prevailing interests rates were running in excess of 15 per cent per annum.  The moneys made available to support the Vicksburg transaction had been on term deposit and Magnacrete lost the income arising  from that deposit.  Although precise figures are not available, this component would have been not insubstantial.

Much debate on the present appeal focused on the concept of ‘loss’, as adverted to in section 10(e) of the Sentencing Act, and the extent to which, if at all, the sequence of commercial transactions which followed the events   constituting the offences charged were properly to be considered in relation to it.

It is beyond question, as was said in R v Birmingham (No.2) (Perry J, 2 October 1997, S6390, unreported), that, in reviewing any “injury, loss or damage” resulting from an offence, a narrow or confined meaning is not to be attributed to these words.

The published authorities make it plain that the words employed are used in a broad, colloquial sense; and not as definitive technical expressions.  As the Court of Appeal said in R v Thomson Holidays Ltd [1974] 1 AllER 823 at 829, it was never, for example, intended to introduce into the criminal law “the concepts of causation which apply to the assessment of damages under the law of contract and tort”.    That type of approach was also adopted by the Court of Appeal in R v Reilly [1982] 3 AllER 27 at 34. A broad, common sense, practical overview is clearly required (Rowlston v Kenny (1982) 4 Crim App R (S) 85 at 87).

So it is that, in the instant case, the fact that the guarantee improperly executed may never have been called up by the Bank is not decisive.  The important consideration is that the unlawful and improper conduct of the appellants set in train a series of events which, from the outset, placed Magnacrete at a financial risk which ultimately materialised in a financial loss to it - given the almost inevitable decision of the Magnacrete board in May 1989 to vacate the guarantee by converting the  former arrangements into what was, technically, thereafter an unsecured loan situation.

It is to be remembered that the relevant sequence of events unfolded as under:

1. On or about 18 January 1989 the  impugned guarantee and associated documentation were executed on behalf of Magnacrete.

2. On 26 January 1989 Jeffcott advised Jarden that  there was a shortfall on the note issue of $2,035,575.

3. On 31 January 1989 Jarden called upon Baron to take up 1,631,717 notes, the latter having, on the preceding day, requested Vicksburg to draw down its loan facility.

4. Arrangements were made for the $1.6m to be paid direct by the Commonwealth Bank, to a subsidiary of Jarden.

5. Hill, a dissentient director of Magnacrete, who had come to hear something of the transaction, took steps to attempt to prevent its consummation.

6. An urgent Board meeting of Magnacrete was convened on 3 February, at which Byrnes gave what was, essentially, a misleading account of the transaction - which did not disclose the full ramifications of it.  Nor did he declare his conflict of interest and refrain from voting, as he should have done.

7. In the result Byrnes engineered a resolution confirming authority to the Commonwealth Bank to proceed.  As the High Court later commented, this resolution was plainly invalid because of the undeclared conflict of interest situation and Byrnes’ participation in the voting.

8. The 1,631,717 notes were duly issued and initially held by a nominee of Baron, payment being made by means of the overdraft facility of Vicksburg, guaranteed by Magnacrete.

9. That transaction was followed by a reverse takeover of Jeffcott by Magnacrete, again, as engineered by Byrnes.

(10)In early May 1989, at the instance of Byrnes, Magnacrete advanced $1.7m to Vicksburg to pay out the overdraft loan and take over the 1,631,717 notes then held on behalf of Baron, together with a further $1,045,205 to take over $1,000,000 of notes held by Arminga, a company associated with Hopwood.

(11)It is clear that, at least by early November 1989, Hopwood was pressing Byrnes for redemption of outstanding convertible notes issued to Arminga and that Jeffcott was not in a financial position to effect such redemption.  Indeed, as the learned trial Judge recited in his reasons for verdict, Hopwood was then asserting that Byrnes had constantly re-assured him that the notes and interest on them would be paid out by Jeffcott before 30 June 1989.  It had been unable to do so.

The foregoing scenario  eloquently illustrates that the unlawful conduct of the two accused set in train a course of events in which, on any objective view, placed Magnacrete at great financial risk from the outset; and that such risk steadily crystallised thereafter into financial disaster.  The clear inference was that Jeffcott did not ever escape from the very financial difficulties which Hopwood and Byrnes sought to address by the impugned transactions now under consideration.  It is equally obvious that, from the outset, the Jeffcott notes must, in  real terms, have been rather substantially less than their par value - certainly after a significant portion of the proceeds of the note issue had been expended in discharging its pressing liabilities.  It was, of course, the considered opinion of the liquidator of Magnacrete, that there was, at all material times, a serious risk that the notes were never going to be redeemed.  Ultimately that proved to be the case.

There can be no question that, in the relevant sense, the commission of the offences resulted in substantial loss both to Magnacrete and the holders of the convertible notes.

I proceed  to the third issue of law identified by the Director.

I agree with him that the learned sentencing Judge also fell into error when he concluded, on the authority of the judgment of Millhouse J in Kenny v Henderson and Anor (1990) 55 SASR 42, that ‘loss’, within the meaning of that expression as employed in sections 10(e) and 53 of the Sentencing Act, cannot include any interest component in relation to principal moneys lost.

With respect, I am of the opinion that the reasoning in that case does not reflect the correct legal principle as expressed by the Court of Appeal in R v Schofield [1978] 2 AllER 705 - an authority which does not seem to have been cited to Millhouse J. Schofield stands as clear authority for the proposition that interest lost on capital sums is properly to be regarded as portion of the loss resulting from offending conduct which gives rise to such a loss.  It is, logically, no less a real and actual loss, particularly in the commercial setting, than the loss of a relevant capital sum to which it may be related.

It follows that the learned sentencing Judge  plainly erred in law in declining to consider this aspect of the sequelae of the offending conduct.

As has been said by the High Court on several occasions it must always, firmly, be borne in mind that applications such as those now before the court necessarily place the respondents in double jeopardy.  That being so, leave to appeal ought only to be granted in relatively rare and exceptional cases.  As was said in Everett v The Queen (1994) 181 CLR 295 at 300, leave should, normally, only be granted to afford the Court of Criminal Appeal an opportunity to perform its proper function of establishing principles for the governance and guidance of courts having the duty of sentencing convicted persons - including the avoidance of manifest inadequacy or inconsistency in sentencing standards.

The factors already referred to combine to indicate that the sentencing process miscarried in a manner which demands that this court grant leave to appeal and review the sentences imposed afresh.

The complaint that, having regard to all relevant factors, the sentences imposed were manifestly inadequate and failed to reflect proper sentencing standards is also made out.

At time of sentencing Hopwood was a highly qualified geologist 57 years of age.  He had no antecedent record.  Although the ultimate collapse of Magnacrete was said to have been a financial disaster for him and his family, the learned trial Judge was told that he would have no problem in paying any fine.  The obvious inference to be drawn is that the fine actually imposed would not have caused him any real hardship.

In reviewing the situation of Byrnes the learned sentencing Judge noted that he was the prime mover of the section 229(4) offences.  He also observed that Byrnes did not stand to achieve any significant personal financial gain - his primary concern was to enhance his reputation as a company entrepreneur who could deal with difficult commercial enterprises.

He was a married person 41 years of age, also with no antecedent record.  After a number of years as a successful legal practitioner he accepted employment as chief executive officer of Jeffcott. In 1989 he joined an international legal firm in England and achieved considerable success as a lawyer practising in mining and petroleum law.  He lost that position and prospects of a partnership as a consequence of the prosecutions against him.  He has not been able to secure continuous employment since, although he has done a variety of contractual work.  His future is by no means certain - in career terms.  He has expended his savings in legal costs and his only resource is his current earnings.  Clearly the present proceedings have had far more disastrous practical consequences for him than has been the case with Hopwood.

In relation to both respondents the learned sentencing Judge, having recognised the gravity of the offending, said that if substantial financial loss to Magnacrete had been proved as a consequence of the offences he would have considered a custodial offence appropriate.  However, as he was not so satisfied, because he considered that the compromise of the civil proceedings negated the existence of any loss, he opted for a substantial fine in each instance.

In all of the circumstances, it seems to me that two features loom large.

First, on any view, these were deliberate, calculated, serious offences of their type, as to which the respondents have never displayed any contrition whatsoever.  In the case of Byrnes, there can be no question that he, in particular, had a full appreciation of the impropriety - if not the enormity - of his actions.

Second, they are the type of offences which have the propensity to cause serious detriment to others and are often difficult to detect and prosecute.  The factors of both general and personal deterrence loom large, as paramount concerns.

True it is that, in the instant case, the offences were committed by persons of prior good character - but that is, not infrequently, the position in situations such as those now before the court, which are the product of a type of commercial and corporate immorality in which, in some odd fashion, the end is thought to justify the means.  They were offences which struck at the very heart of the due and proper discharge by directors of their functions in controlling the activities of public companies and seriously undermined the protection which proper corporate procedures within such companies are intended to provide to creditors and shareholders alike.  They are the types of offence which must, in the public interest, firmly be dealt with and repressed, otherwise deterrence will remain but a myth.  Moreover, in many, if not most instances, the imposition of a fine will not only send wrong messages to others like minded and the commercial community generally, it will also not, in reality, constitute a great punishment to the perpetrators of these offences.

As has already been pointed out, the inherent seriousness of the offending is not offset by any reparation eventually made.  Moreover, it is not to be forgotten that, in the instant case, almost half of the amount recovered by the liquidator was expended in legal costs.  Additionally, the strong inference to be drawn is that, although quantification has been elusive, loss beyond the figure arrived at in the compromise was undoubtedly incurred.

In my opinion this is one of those exceptional cases in which error in principle has been demonstrated on any view.  Moreover, the fines imposed constituted a manifest departure from proper sentencing standards applicable to the offences in question.

I would grant leave to appeal, allow the appeal,  set aside the fines imposed, and substitute for them the following sentences:-

.As to the respondent Hopwood - imprisonment for a period of twelve months, with a non parole period of eight months

.As to the respondent Byrnes - imprisonment for a period of eighteen months, with a non parole period of twelve months.

I would not suspend these sentences.

Prior J

I agree with the reasons published by Olsson J.  Leave to appeal should be granted, the appeal allowed and the sentences of imprisonment proposed substituted for the fines imposed in the District Court.

On the material before the courts there is no good reason for suspension of either sentence.  For offences of this kind suspension of a sentence of imprisonment should be rare and exceptional once the proper exercise of the sentencing discretion calls for the imposition of more than a fine.

Williams J

I agree with the reasons given by Olsson J and with the orders which he proposes.