| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : FARMER -v- THE HONOURABLE MINISTER FOR CONSUMER AND EMPLOYMENT PROTECTION OF THE STATE OF WESTERN AUSTRALIA [2003] WADC 25 CORAM : BLAXELL DCJ HEARD : 25 NOVEMBER 2002 DELIVERED : 12 FEBRUARY 2003 FILE NO/S : CIVO 251 of 2002 BETWEEN : CHARLES FARMER Applicant
AND
THE HONOURABLE MINISTER FOR CONSUMER AND EMPLOYMENT PROTECTION OF THE STATE OF WESTERN AUSTRALIA
Respondent
Catchwords: Application for leave to carry on business under business name - Business to be conducted within five years of the applicant being convicted of offences in connection with the management of a corporation - Turns on own facts
Legislation: Nil
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Result:
Application refused Representation:
Counsel:
Applicant : Mr C G Nash
Respondent : Ms E C J Needham
Solicitors:
Applicant : Muries Lawyers
Respondent : Elizabeth Needham
Case(s) referred to in judgment(s):
Klein v Domus Pty Ltd (1963) 109 CLR 467
Case(s) also cited:
Tavelli v Johnson, unreported; SCt of WA; Library No 960693; 25 November 1996
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1 BLAXELL DCJ: This is an application pursuant to s 5A of the Business Names Act 1962 for the applicant to have leave to carry on a business in the State of Western Australia under the business name "Leather World Sofas Plus". The need for the applicant to obtain leave arises from him being convicted (on 10 and 11 June 2002) of 32 offences in connection with the management of a corporation. Pursuant to s 5A the applicant is barred from conducting business under a name other than his own name during a period of five years following these convictions, unless he obtains the leave of this Court.
2 Section 5A does not lay down any conditions or criteria as a prerequisite to the granting of leave, and the discretion to be exercised by the Court is completely unfettered. Counsel have been unable to discover any previous decision under s 5A, and it would seem that the present case is the first time that the provision has been utilised.
The principles to be applied 3 By the very width of the discretion created, Parliament has obviously provided this Court with the opportunity to do justice no matter what the circumstances of the particular case. I must nevertheless have regard to the legislative framework within which the discretion is to be exercised. As was stated by Dixon CJ in Klein v Domus Pty Ltd (1963) 109 CLR 467, at 473: "This Court has in many and diverse connexions dealt with discretions which are given by legislation to bodies, sometimes judicial, sometimes administrative, without defining the grounds on which the discretion is to be exercised … We have invariably said that wherever the legislature has given a discretion of that kind you must look at the scope and purpose of the provision and at what is its real object. … the real object of the legislature in such cases is to leave scope for the judicial or other officer who is investigating the facts and considering the general purpose of the enactment to give effect to his view of the justice of the case." 4 In the present instance I consider that the general purpose of the Business Names Act 1962 is to ensure that any person who has dealings with a business is able to ascertain whom he or she is dealing with. This purpose is achieved in s 5 which effectively requires the registration of a business name which is not the name of the owner of a business. Certain particulars must be provided with the application for registration (s 7) and
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those particulars are available for inspection by any person (s 22). The registered business name must also be displayed at the place of business and appear on all relevant documentation of the business (s 20). 5 It is against the background of this general purpose of the legislation that s 5A imposes a prohibition on persons convicted of certain offences including those in connection with the management of a corporation, or those involving fraud or dishonesty. The prohibition is in the following terms:
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6 It can be seen that s 5A has the primary purpose of providing an additional measure of protection to members of the public who have business dealings with persons to whom the section applies. This is achieved by requiring a convicted business proprietor to conduct business in his own name during the period stipulated. Accordingly a member of the public who has dealings with the offender will know from the outset the identity of the person he or she is dealing with, and will not be put to the inconvenience and trouble of searching the business names register.
7 No doubt Parliament also contemplated there might be circumstances in which this primary requirement would be unduly onerous or unfair to a particular offender. For this reason provision was made for an application for the grant of leave so that in appropriate cases the requirements of the section could be avoided. 8 Obviously the burden is on an applicant for leave to establish the grounds for and to persuade the Court that leave should be granted. In my view the factors that should be taken into account in deciding whether or not to grant leave include the circumstances and relative seriousness of the offences the subject of the convictions, the personal circumstances of the applicant, the potential detriment to members of the public if leave is granted, and the potential detriment to the applicant if leave is not granted. These are all matters that need to be assessed as a matter of commonsense having regard to the overall justice of the case.
The circumstances of the applicant's offences 9 On 10 June 2002 the applicant pleaded guilty in the Supreme Court to an indictment containing 14 counts of offences against s 1317FA(1)(a) and (b)(2) and s 588G(2)(a) of the Corporations Law of Western Australia. These offences were committed by the applicant between 3 June and 7 July 1997 in his capacity as a director of Farmer Furniture Pty Ltd. The essentials of each offence were that the applicant incurred a debt at a time when Farmer Furniture Pty Ltd was insolvent, knowingly and intending to defraud the unsecured creditors of that company. 10 On 11 June 2002 the applicant appeared in the Supreme Court and pleaded guilty to 18 counts the subject of a second indictment which alleged offences contrary to s 1317FA(1)(a) and (b)(1) and s 232(6) of the Corporations Law of Western Australia. These offences were committed by the applicant between 5 September 1996 and 20 June 1997 yet again in his capacity as an officer of Farmer Furniture Pty Ltd. In each instance he "knowingly made improper use of his position dishonestly and intending
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to gain, directly or indirectly, an advantage for himself" by authorising the sale of assets of Farmer Furniture Pty Ltd in consideration for the payment of money to himself. 11 I have been provided with a transcript of the sentencing proceedings before the Honourable Justice Wallwork in the Supreme Court. I note that the background to the offences is that Farmer Furniture Pty Ltd was a company of which the applicant was a director, shareholder, and substantial controller. There was expert evidence before the Court to show that during various periods after 31 March 1996 (including the period from 31 December 1996 to 23 July 1997) the company was insolvent and suffering from cash flow difficulties. At all material times the company was managed by an executive committee which included the applicant, and there were minutes to show that the members of that committee were aware of its financial state. 12 Farmer Furniture Pty Ltd operated a retail furniture business from three stores in the metropolitan area. From about December 1996 the company had increasing problems in fulfilling retail customer orders due to trade creditors and suppliers refusing credit by reason of overdue debts. 13 The applicant and other members of the executive committee were aware that the company had insufficient funds to pay all of its debts as and when they fell due. In this regard the company was highly dependent for its cash flow upon deposits placed by customers (when ordering items of furniture) which were then used to retire overdue debts in the hope of satisfying the various suppliers. Due to the lack of sufficient cash flow, customers were eventually offered discounts in return for deposits of either 50 per cent or 100 per cent (of the total amount to be paid for their furniture) at the time of placing their orders. 14 The directors also sought additional finance from the company's only secured creditor, Bankwest, but on 20 May 1997 this application was refused. The company continued to take deposits from customers, but on 23 July 1997 it ceased trading and went into voluntary administration. On the following day a receiver was appointed by Bankwest, and on 20 August 1997 Farmer Furniture Pty Ltd went into liquidation. 15 When the company ceased trading on 23 July 1997 it had a net asset deficiency of approximately $2.1 million. The liability to unsecured trade creditors was more than $1,705,000, and approximately $790,000 of that amount had been incurred during the period 28 May to 23 July1997.
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16 As at 23 July 1997 the quantum of unsecured retail customers who had placed deposits on unfilled orders stood at $435,000, and approximately $332,000 of that amount had been incurred in the period subsequent to 28 May. (I also note from the affidavit of Mr S P Meagher (manager for the Registration Services Branch in the Department of Consumer and Employment Protection) that a total of 249 of Farmer Furniture Pty Ltd's customers subsequently contacted his department to complain about the loss of their deposits.)
17 At the time of the applicant's sentencing, the liquidator was of the opinion that there was unlikely to be any return to unsecured creditors (other than for small amounts that had been already recovered by way of cancellation of credit card payments). 18 The facts of the offences the subject of the second indictment are that in about September 1996 the applicant orally agreed with a man in Victoria to forward to him consignments of furniture from Farmer Furniture Pty Ltd in consideration for payment of money to the applicant personally. The applicant's express intention in entering into this agreement was said to be "to make a bit of money on the side for myself". 19 Subsequently and up until 20 June 1997 there were a total of 18 consignments of furniture pursuant to the illicit agreement at a cost to Farmer Furniture Pty Ltd of not less than $30,400. This furniture was manufactured at the company's factory at the direction of the applicant and without there being any documentary records of the same. 20 His Honour the sentencing Judge appears to have accepted that some of the moneys so obtained by the applicant were used to free up supplies to Farmer Furniture Pty Ltd. In this regard, it was also not in issue that during Farmer Furniture Pty Ltd's terminal stages of decline the applicant put substantial personal assets into the company in an endeavour to keep it afloat. These personal assets included some $230,000 in money and the provision of a rural property owned by the applicant as security for bank finance. 21 His Honour the sentencing Judge took these mitigating circumstances into account as well as the applicant's history of heart problems since 1990. His Honour did not imprison the applicant but instead required that he enter into a bond for five years on his own surety in the sum of $20,000 to be of good behaviour. His Honour's sentencing remarks included the following:
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"… there are many factors which indicate that I should not sentence you to imprisonment, the first and most important being that I am satisfied that during the course of the last couple of years leading up to the insolvency both you and your family did everything possible to save this company, not only by any stretch of the imagination for yourselves but also for your employees and for your creditors. You also as a family deposited a very large sum of money and put at risk another very large sum of money in efforts to stave off insolvency with, as I say, having in mind both the creditors and your employees and of course yourselves to a limited extent. You pleaded guilty. You are now aged 66 years of age and your health is not good. It is quite a long time since these offences were (committed) but primarily because I'm sure from all the information I have been given by both the prosecution and the defence that at the time these offences were committed you did not fully appreciate the seriousness of what you were doing by continuing to trade while the company was insolvent."
The applicant's personal circumstances 22 The applicant was born on 27 May 1936 in Glasgow Scotland and completed his schooling at the age of 15 years. He came from a family of upholsterers, and he himself entered into a five year apprenticeship to qualify as a master upholsterer. 23 In 1956 the applicant emigrated to Australia and thereafter was fully employed as an upholsterer until commencing his own business as a manufacturer and repairer of lounge furniture in 1959. The applicant initially worked on his own account from a garage at home, but within five years had built up the business to the point where he was employing approximately 30 people. 24 In 1963 the applicant formed the company known as Farmers Furniture Pty Ltd which was initially involved in wholesale furniture manufacturing. Subsequently he expanded into the retail trade and established three retail outlets in the Perth metropolitan area. The company traded profitably until 1996. 25 In approximately 1990 the applicant suffered a heart attack and he thereafter worked only part-time in his company. However, when the company commenced to get into financial difficulties the applicant
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returned to full-time work and exercised more hands on control of the business. 26 At the time of his sentencing, his counsel informed the Supreme Court that: "Charles Farmer (has) lost everything. He lost the company that for 37 years he had been the face of and been the founder of. It wasn't merely a fall from grace. … It's a family tragedy. He is now impecunious, he relies upon a government pension of $494 a fortnight, he lives in rented accommodation, he relies upon the generosity of others … ." 27 In an affidavit sworn on 18 October 2002 the applicant states that he is trying to establish a small business engaged in the manufacture and refurbishment of lounge furniture. At that time he was working from a garage at his residence but had signed a contract to lease retail premises in Myaree for an initial period of 12 months from 1 November 2002 with an option to renew for a period of three years. The monthly rental under the lease agreement is $2,000. 28 The applicant states that the main reason why he wishes to carry on the business is to "have my own income and not become a burden to my family and others". He has no intention of obtaining finance from a bank or other financial institution and is being supported financially by members of his family in trying to establish the business. He is also receiving considerable support from friends and trade suppliers who have dealt with him since he first went into business in 1959. Furthermore, the applicant intends to operate from the Myaree premises on his own account and "not employ other persons or incur liabilities other than in relation to the said premises and to trade suppliers".
Other matters relevant to the merits of the application 29 The applicant is of course entitled to conduct the business manufacturing and refurbishing furniture from his Myaree premises in his own name. However, he wishes to carry on business under the business name of "Leather World Sofas Plus", and in paragraph 14 of his affidavit he states that his reason for this is because: "I believe it is necessary to project a professional image to members of the public at large and not appear to be what is sometimes described as a backstreet operator."
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30 The applicant does not offer any other reason for desiring to trade under the proposed business name, and has not identified any particular prejudice that may flow to him if the leave applied for is refused.
31 To my mind there cannot be a great deal of substance to the contention that the proposed business name is necessary in order to project a professional image to members of the public. It is a matter of common experience that many trades people conduct business as sole traders in their own name yet have a reputation for professionalism and good work. Similarly, it is difficult to accept that the image of a "backstreet operator" is likely to arise from the mere fact that a person conducts business under his own name. The perception that a person is a "backstreet operator" is more likely to arise from the nature of the premises in which a business is conducted, and the way in which a business is run. 32 However, even if I was to accept the applicant's stated reason as having some substance, I must also have regard to the primary intent of s 5A of the Business Names Act 1962, namely that members of the public who have dealings with certain convicted offenders should know who they are dealing with. The applicant was convicted of offences of a very serious nature which resulted in numerous of his company's customers being defrauded of the deposits they had paid at the time of placing orders for furniture. It can be expected that customers dealing with the applicant in his new business will similarly be asked to make deposits at the time of placing orders. It is obviously in the public interest that these new customers should be aware of the identity of the person they are placing their monies with. I consider that in these circumstances the primary intent of s 5A needs to be given full weight.
Conclusion 33 In the end the applicant has failed to establish grounds for the exercise of my discretion to grant leave to conduct business under the business name proposed. Accordingly the application will be dismissed. |