Griggs v Australian Securities Commission

GRIGGS v AUSTRALIAN SECURITIES COMMISSION
[1999] SASC 405

Magistrates’ Appeal
Bleby J

The proceedings

These are two appeals against penalty for various breaches of the Corporations Law imposed by the Magistrates’ Court. Although there are in fact two appeals, that is mainly the product of a procedure adopted in the Magistrates’ Court which I am about to describe.
The appellant was originally charged on information with four summary offences and nine indictable offences, with one additional alternative charge for one of the indictable offences. All the alleged breaches were of various provisions of the Corporations Law, with the one alternative count being a count of forgery contrary to s 235 of the Criminal Law Consolidation Act 1935. The indictable offences were serious offences of dishonesty.
The four summary offences each alleged in respect of a different company that the appellant, being an insolvent under administration, did, without leave of the Court, manage the particular company, contrary to s 229(1) and s 1311(1) of the Corporations Law.
The appellant originally pleaded not guilty to all counts, but after the prosecution had opened, and after several further adjournments, the prosecution accepted a plea to Counts 2 and 4 in respect of a company known as Pernil Pty Ltd (“Pernil”) and Kaben Holdings Pty Ltd (“Kaben”) respectively, being two of the summary offences only, and filed an additional complaint, to which the appellant pleaded guilty, alleging that the appellant had failed to take all reasonable steps to secure compliance by Kaben with s 289(1) of the Corporations Law. That breach was constituted by s 591(1) and s 1311(1) of the Law.
In respect of Counts 2 and 4 on the first information, it became apparent that the basis of the plea was not agreed, and there followed a lengthy disputed facts hearing related to the period, in each case, during which the appellant had managed the two companies concerned. In the case of Pernil (Count 2) the prosecution alleged in the information a period from 18 June 1992 to 5 August 1994 (a period of approximately 26 months), whilst the defendant admitted managing the company between May 1993 and April 1994 (approximately 11 months). In the case of Kaben the prosecution alleged in the information that he managed the company between 22 December 1992 and 5 August 1994 (a period of approximately 19 months), whilst the defendant admitted managing the company between May 1993 and January 1994 (approximately 8 months).
The factual dispute was to some extent about what the appellant did do in the disputed periods, but more significantly was as to whether what he did do constituted “managing” the respective companies. At the hearing the respondent did not dispute the appellant’s assertion that he ceased managing the respective companies at or about the times the appellant alleged. The actual disputed periods in each case were from the date of incorporation for about 11 out of 22 months in the case of Pernil and for about 5 out of 13 months in the case of Kaben.
In relation to the additional complaint alleging breach of s 591(1) and s 1311(1) of the Corporations Law, there were no disputed facts. The appellant admitted that he had failed to record correctly on the relevant cheque butts the payees of eight cheques, having recorded different names as payees on the cheque butt from those which appeared on the corresponding cheque.
The Magistrate imposed one penalty for the two breaches of s 229 of the Corporations Law. For that he was sentenced to eight months’ imprisonment, to be released after having served three months, upon giving security in the amount of $100 by recognisance that he would be of good behaviour for 12 months. He was directed to pay court fees of $102, payable within six months, and the sum of $8000 by way of costs, payable over three years. The maximum penalty for a breach of s 229 is $5000 or imprisonment for one year or both.
In respect of the additional complaint for the breach of s 591(1) and s 1311(1) of the law the Magistrate ordered the appellant to perform 100 hours of community service within 18 months and ordered the payment of court fees of $72 within six months. The maximum penalty for this offence was also a fine of $5000 or imprisonment for one year or both.

Grounds of Appeal

The appellant has appealed against both the sentences imposed. The original grounds of appeal merely alleged that the penalties were manifestly excessive and that in relation to the two offences relating to the management of the two companies, a fine only should have been imposed. A judge of this Court, on 25 March 1999, ordered that a document entitled “Appellant’s Outline of Argument” should stand as additional grounds of appeal. In this document the appellant challenged a number of findings of fact made by the Magistrate and alleged that in any event the facts did not constitute “management” of the respective companies by the appellant during the respective disputed periods. There was no appeal against the order for costs. The appellant was represented by counsel in the Magistrates’ Court but conducted his own appeal before me. Nevertheless, his argument was thorough and well presented, and I derived considerable assistance from his written and oral presentations.
The two companies concerned were building companies. At the disputed facts hearing the prosecution called a number of witnesses including those responsible for the formation of the companies and those who performed work for the companies, both as employees and as contractors. The defendant did not himself give evidence. For written reasons published on 20 November 1998 the Magistrate found that the appellant managed the two corporations during the period alleged in each case, and he proceeded to sentence the appellant on that basis.
The appellant challenges the findings of the Magistrate that he was managing the two companies during the periods alleged. He does so both by challenging some of the findings of fact made by the Magistrate and by alleging that the facts as found during the relevant period did not constitute managing the company as contemplated by s 91A(2) of the Corporations Law. That subsection reads:
“91A(2).... A person manages a ... corporation if the person, ... is a director or promoter of, or is in any way (whether directly or indirectly) concerned in or takes part in the management of, the corporation.”

The undisputed periods and background information

In respect of the period for which it was acknowledged by the appellant that he had taken part in the management of the two corporations, a statement of agreed facts was tendered. In each case it was acknowledged that he was involved in the day to day running of the business of the companies for the periods admitted. He was never a director of either company, but he did suggest the appointment of directors; he wrote letters on behalf of the company and prepared agreements; he used pre‑signed company cheques; he paid accounts and supervised staff; he dealt with council and statutory authorities and prepared contracts for the building of houses; he conducted on‑site supervision of building projects and prepared cost estimates on such projects; he dealt with contractors and tradespeople on financial matters and allocated jobs, ordered supplies and sent correspondence; he arranged loans between the two companies and with other companies with which he was associated; he was responsible for raising claims for progress payments and with day to day dealings with creditors and suppliers; he kept a close watch on the financial position of the companies, obtaining daily printouts of bank balances; he arranged for the payment of accounts and negotiated the payment of subcontractors; he placed orders for building materials with trade creditors, requested engineering consulting services and planning services and prepared lodgment of development proposals and applications with local councils.
One of the facts specifically mentioned in the statement of agreed facts was that on or about 2 September 1993 the appellant took steps to stop payment of a cheque to a trade creditor of Pernil over $10,000. He wrote out a direction to the Commonwealth Bank to stop payment of the cheque, but because he was not the director or a signatory to the account, he did not have authority to give such a direction. He cut out the signature of one of the signatories to the account, attached it to the stop payment instruction and faxed it to the Commonwealth Bank. The bank acted on the direction, which was done without the knowledge of the director whose signature was used. However, it appears from the appellant’s record of interview that Mr Lomman, the director concerned, had agreed to the stopping of payment on the cheque. The use of his signature was to satisfy the bank’s requirement. Mr Lomman, in his evidence did not suggest otherwise. Whilst that might be properly described, in the circumstances, as an act of management, it must be remembered that the appellant, by the time that these charges were dealt with, was not charged with any offence of dishonesty, and that the act in question appears to have been taken solely in the interest of the company, not to any personal advantage of the appellant, and in order to satisfy the wishes of the director, Mr Lomman.
Pernil was incorporated on 18 June 1992 and traded as Claridge Building Company. Kaben was incorporated on 22 December 1992 and traded as Edenwood Homes. The appellant was paid by Pernil but not by Kaben.
It seems that the appellant and members of his family had been involved in a business known as Crestwood Homes. Crestwood Homes Pty Ltd was a building company and property developer of which the appellant had been a director almost continuously between March 1979 and May 1990 when it went into liquidation. The appellant’s son, David, had also been actively involved in that company. Between 1975 and 1991 the appellant had also been a director of a number of other property developers. He had significant experience in building and property development.
Crestwood Homes Pty Ltd went into liquidation with a number of building projects incomplete and a debt of over $200,000 to a company known as Rural Building Supplies. That company was controlled by a Mr Lomman. It too went into liquidation, largely as a result of the failure of Crestwood Homes. It was the financial difficulties encountered by the several companies in which he was involved that had caused the appellant’s bankruptcy in November 1991. He was undischarged from that bankruptcy throughout the relevant periods alleged in the information.
Mr Lomman, who gave evidence, had principally been involved in building supplies, but he said that in discussions with the appellant and the appellant’s son it was agreed to form a new company (Pernil). The Magistrate found that Pernil was incorporated to carry on the unfinished projects commenced by Crestwood Homes, and that other work would be generated by the appellant’s contacts in the building industry.

The appellant’s case before the Magistrate

It was the appellant’s case that he did no work for Pernil at all until January 1993 because he was busy handling his own affairs and those of his children because of all their financial difficulties arising from the collapse of his various companies including Crestwood Homes. He acknowledged that from January 1993 to May 1993 he worked part‑time for Pernil doing mainly office based work, including preparation of material quantities and placing orders, costing of job components, arranging for engineering survey reports, preparing plans and specifications, lodging applications with government departments and local councils and sending out plans and specifications for quotations from suppliers. He alleged that it was in May 1993 that his son, who had been the building supervisor of Pernil, moved to another area. He alleged that shortly after this Mr Lomman decided to accept a full‑time position with a building supply company at Macclesfield. It was only then that he took over a greater role of site supervision and supervision of the one other staff member of Pernil, Mr Ridge. He claimed that Pernil ceased operations on 30 April 1994, when he ceased any involvement in the management of the company.
Kaben appears to have been run on a smaller scale. It was formed by the appellant’s son‑in‑law, Ben Anthonysz. According to the appellant, it did not commence trading until May 1993. The appellant thereafter became involved on a voluntary basis and incidental to his involvement with Pernil. He claimed that Kaben only became involved in one project on its own land at Littlehampton, and that he had agreed to assist the company by allowing use of Pernil’s subcontractors and suppliers, so that it could obtain the benefit of trade discount available to Pernil. He claimed that after January 1994 Kaben opened its own office in Mount Barker and was fully administered by its own directors and staff.
What I have just described is based largely on what the Magistrate identified as Exhibit D1, described as the appellant’s “Basis of Plea of Guilty”. It was handed to the Magistrate by the appellant’s counsel on the day on which the evidence on the disputed facts hearing began. However, it must be read with some caution and can only be acted on to the extent that it comprises admissions by the appellant and that it is otherwise supported by the evidence led by the prosecution, as the appellant did not lead any evidence on the disputed facts hearing.

Pernil - The Magistrate’s findings

The Magistrate found the following facts in relation to the activities of the appellant with respect to Pernil in the disputed period:
The appellant was “actively involved” in the formation of Pernil. Mr Lomman, one of the directors and a beneficial owner of the shares in the company of which Pernil was a subsidiary, was not an experienced builder, although he had extensive experience in building supplies. The formation of Pernil was “part of a deliberate scheme devised by Lomman, the (appellant) and his son David Griggs to carry on with the unfinished building jobs left by the business of Crestwood Homes which at a time prior to liquidation was controlled by a company in which David Griggs was a director”.
There were discussions among the three of the major participants as to how they would obtain work for the company. They were each to use their extensive contacts in the building industry to obtain work. In fact they did obtain work and subcontractors in that way, including by way of the many contacts the appellant had in the industry.
The appellant was responsible for government and local government applications, colour selection of tiles and other building materials.
He was involved in pursuing an agreement with the owner of some land on which Pernil was to build some houses. He prepared the building contract.
It was the appellant’s responsibility to progress a building project from the initial contact with the owner of the land, through the planning stage, obtaining approvals and approaching subcontractors. Site supervision was initially done by the appellant’s son.
There were some site visits by the appellant for conferences with owners and for liaising with the site supervisor.
He prepared claims for progress payments which were ultimately signed by Lomman, and, with David Griggs, was responsible for obtaining the progress payments.
After nine months of trading the appellant became responsible for the company’s banking.
The appellant was present at most directors’ meetings, along with his son, when they reviewed with Mr Lomman progress on projects, need for tradesmen, materials, progress payments etc. Mr Lomman’s evidence was that decisions were reached by consensus at those meetings.

(10)He entered into a Jobstart agreement between the company and the Commonwealth and arranged for the employment of persons under that agreement.
(11)He arranged for the company to purchase a number of pieces of land and prepared the contracts for such purchase, although the contracts were signed in each case by Mr Lomman on behalf of the company.
(12)He was responsible for the engaging of subcontractors for Pernil, and was regularly on site giving instructions, distributing plans and giving instructions to contractors.

In the latter portion of the disputed period the appellant asserted to Mr Ward, a plumbing contractor, that he ran the company, a fact confirmed to Mr Ward by Mr Lomman. Mr Ward also considered that, whilst initially he was answerable to Mr Lomman, later, and within the disputed period, the appellant was the one who was doing all the dealing and “the buck stopped with him”.

(14)Mr Burdett, a contract carpenter, worked for the company for the whole period, though not exclusively. He considered the appellant to be his supervisor, and from whom he accepted directions as to the order of doing jobs and the supply of building materials for his work. The appellant arranged for payment of Mr Burdett and negotiated the price for his work.
(15)Mr Burns, a ceiling contractor, was instructed by the appellant as to the allocation of time for work to be performed, and organised for payment from at least September 1992.
(16)The appellant had access to the company’s cheque book and completed details of the payment and the payee on cheques which had been pre‑signed, or which were later signed by someone other than the appellant.
(17)Ridge was an employee of Pernil. He understood that he was answerable to the appellant. Ridge described the appellant as the day to day manager of Pernil during the first six or seven months of the life of the company. He operated under the supervision and instruction of the appellant with respect to a number of matters including collection of materials, drawing of cheques, use of the company’s seal and inter‑company loan transfers. At the appellant’s instruction he prepared a variety of documents and letters relevant to the company’s business.

The Magistrate’s conclusion with respect to Pernil was that the appellant was “not only involved in the mere clerical and administrative duties. He played a much larger role - he ran Pernil Pty Ltd and was the driving force within the company from the time of its incorporation”.
The Magistrate, of course, made much more detailed findings. The findings which I have described are summaries only of the findings which led the Magistrate to conclude that in the disputed period in respect of Pernil, the appellant was managing the corporation in the sense described in s 91A(2) of the Corporations Law.
The first consideration is whether it was open to the Magistrate on the evidence to make the findings that he did. Many of the findings were not challenged by the appellant. Some of them were. In respect of those which the appellant challenged, I deal with them according to the numbers I have assigned to them above.

Pernil - Challenges to the Magistrate’s findings of fact

If what was intended by the Magistrate in relation to finding No (1) was that the appellant, along with others, deliberately set up a vehicle in order to continue trading in the same manner that Crestwood Homes had done despite the liquidation of that company, then I consider that the Magistrate was wrong. The appellant was never a director of Pernil and never had any beneficial interest in the company at all. It was Mr Lomman and his family who controlled the company and who were the ultimate beneficial owners of the shares. He and his wife were the directors of the company. Mr Lomman was asked whose idea it was for Pernil to be incorporated. He said:
“Well I guess that I always wanted to do some building work, I was always in the supply part but I thought well I wouldn’t mind doing some building work and because of this financial disaster we decided, well I guess I had numerous discussions with, a few discussions with David and John and we decided that we would form a company to proceed with building work with a view to making a living and maybe down the track get a bit of money back.”

The inference is that it was Lomman and his wife who decided to form the company, albeit with the assistance of the appellant and David Griggs. Mr Lomman had previously said at the outset of his evidence that he was the founder of the company and its director.
In my opinion it is not correct to say that the company was formed for the purpose of carrying on the unfinished building jobs left by the failure of Crestwood Homes. There is no doubt that Pernil, associated as it was with both the appellant and David Griggs, was well placed to tender for that work, but the only evidence relating to Pernil’s completion of those projects related to those in which a Mr Sprankling had an interest, and he deposed to the fact that for those projects of his which Pernil completed, they had submitted the lowest tender. Even if the appellant had been instrumental in the formation of Pernil for the principal purpose of taking over the Crestwood Homes contracts, that would be of marginal relevance to whether, at the material time, he was concerned in the management of the company. If he stood to gain by that it might be relevant to the question of penalty.
Finding No (7) was one which was disputed by the appellant. There is no doubt that it was open to the Magistrate to find on Mr Lomman’s evidence that the claims for progress payments were, for the most part, prepared by the appellant and were signed by Lomman. The appellant sought to argue that he was not responsible for the obtaining of the progress payments because the contracts themselves provided for various percentages of the contract price at various recognisable stages of the construction of a house. It was therefore a mechanical process. To some extent that is correct, but there still needed to be an assessment as to the stage at which construction had reached and a decision to make the progress claim. The evidence showed that during the disputed period the appellant did this and that he was involved in negotiations with some of the owners and their financiers if there were some minor dispute as to whether the particular stage had been completed.
In relation to finding No (9), the Magistrate was wrong in describing the meetings that were held as being directors’ meetings. It was not suggested by the prosecution that they were. The only director present was Mr Lomman, and he described the purpose of the meetings as being to discuss “what jobs were happening, whether we needed tradesmen, materials, progress payments, that type of thing”.
The appellant complained that finding No (10) was inaccurate. The appellant had indeed signed a Jobstart agreement on behalf of Pernil. It is technically correct that no person was employed under that agreement. There was a suggestion that Mr Swinburne, who later became a director of Kaben, was to be employed by Pernil. In fact he became a painting contractor to Pernil. In my opinion nothing turns on the appellant’s criticisms of the finding. The relevance of the finding is as to the appellant’s involvement in the execution of the umbrella contract with the Commonwealth and in the engagement of subcontractors on behalf of Pernil.
The appellant sought to minimise the impact of finding No (11) by saying that the fact that he “arranged” for the company to purchase some land is ambiguous. However, that is what Mr Lomman said of the transaction, and he gave no explanation as to what that involved. It was open to the Magistrate to infer from that that the appellant had played a part in negotiating the contracts, even though they were ultimately signed by Mr Lomman. The fact that the contracts did not proceed does not mean that they were irrelevant to the determination as to whether the appellant was participating in the management of the company. All that can be said is that the company and the proposed vendor under the contracts sustained no loss as a result of the appellant’s activities.
Finding No (13) was based on the evidence of Mr Ward. Mr Lomman gave no evidence about it. Mr Ward’s evidence was that the assertion made by the appellant was made “very close to the end of my association with the company”, when he was complaining of non‑payment by Pernil. He had earlier said that he had dealings with Pernil from mid 1992 to mid 1993. In the absence of any other evidence, the inference is that the assertion was made by the appellant during the period not disputed by the appellant. Accordingly, the finding had nothing to do with the disputed period.
The matters to which I have referred in finding No (17) largely gain support from the evidence of Mr Ridge. They are findings which, subject to one qualification, were available to be made on Mr Ridge’s evidence. To the extent that the Magistrate infers from that evidence that the appellant negotiated inter company loans on behalf of Pernil, I consider that that is not supported by the evidence of Mr Ridge or any other evidence. The evidence showed that there were inter company transfers of money made from time to time, particularly between Pernil and a company called Datan Holdings Pty Ltd, a company controlled by David Griggs and his wife, and also between Pernil and Kaben. There may well have been loan accounts raised in the books of the company to accommodate those transactions pending payment. In the case of Datan Holdings Pty Ltd the payments were as a result of Datan having contracted to supply the services of David Griggs and the appellant to Pernil in the initial stages of its operation before payments were made direct to the appellant by Pernil. In the case of Kaben, payments were made in the early stages of that company’s operation because the first houses that that company built were on allotments adjacent to houses being built at the same time by Pernil. It was to Kaben’s advantage, particularly in the building of its first houses, to use the credit of Pernil and to buy materials on the same account at the same time which were then delivered to their respective sites. The payments made by Kaben were for reimbursement of those costs. There was never any suggestion that the appellant was involved in or negotiated borrowings by Pernil in order to finance its operations.
I have carefully read the whole of the evidence before the Magistrate and the lengthy record of interview of the appellant, and I cannot agree with his conclusions that he “ran Pernil and was the ‘driving’ force within the company from the time of its incorporation”. There is no evidence that he had any part in the financial control of Pernil other than in seeing to the making of progress claims and the payment of subcontractors. There was nothing to suggest that he was involved in the negotiation of credit facilities with suppliers or in arranging necessary capital requirements or borrowings of the company. Mr Lomman’s evidence was that he was working more or less full time directing the company from its incorporation until at least March 1993, when the office moved from Blackwood to Mt Barker, and Mr Lomman began directing his efforts towards another building supplies company. For the first 11 or 12 months David Griggs was Pernil’s site supervisor. According to the unchallenged evidence of Mr Lomman, the running of the company was a shared activity, with decisions being reached by consensus between the three men.
Surprisingly, there was no evidence led as to who made decisions about tenders submitted for building work or the determination of contract prices. There was evidence that the appellant was involved in the preparation of contracts, but it does not follow that he decided the tender price. For a company whose sole activity was the construction of dwelling houses for other land owners, those were crucial decisions. And yet no evidence was led as to that activity. The prosecution bore the onus of proving the various acts of management by the appellant beyond reasonable doubt. On the evidence as it stood, it was not possible to draw an inference against the appellant that he bore or participated in that responsibility.
Subject to the qualifications I have expressed on the Magistrate’s findings, I consider that there was evidence on which the balance of the findings could properly be made in respect of the disputed period. The question remains, however, whether those activities of the appellant constituted managing Pernil in the relevant sense.

The scope of s 91A(2)

For the purposes of the definition in s 91A(2) of the Corporations Law the appellant was not a director or promoter of Pernil. The question is whether he was in any way directly or indirectly concerned in or took part in the management of the corporation. Those are words of very wide import. When speaking of the phrase “be concerned in” the Court of Appeal in R v Campbell (1984) 78 Cr App R 95 said at 100 - 101:
“‘[T]he wording is so widely cast that ... it is intended to insulate persons ... from taking part in the management of company affairs generally... It would be difficult to imagine a more comprehensive phraseology. It is designed to make it impossible for persons to be part of the management and central direction of company affairs.’”
However, the prohibition is on a person taking part in the management of a company and not in the business of the company. This point was made by Ormiston J when speaking of the then s 227(1) of the Companies (Victoria) Code, which was in similar terms to s 97A(2), in Commissioner for Corporate Affairs v Bracht [1989] VR 821 at 828. The section is not intended to preclude a bankrupt person from earning a living in the employment of a company.
The use of the expression “directly or indirectly” also widens the net considerably. In this case, the evidence showed that at least for some if not all of the disputed period, the appellant and David Griggs were not employed by Pernil but by Datan Holdings Pty Ltd. Pernil paid the agreed amount of remuneration to Datan Holdings, and Datan Holdings in turn made its own arrangement for remuneration of the appellant and David Griggs. The expressions used in s 91A(2) are clearly sufficiently wide to cover that situation.
Management of a company may take place at many levels. It is reasonably clear from the section that management is not confined to matters performed by the directors or a managing director of a company, nor is it limited to the formulation of policy and direction of the company. As Ormiston J pointed out in Bracht (supra) at 829, there must be the exercise of some decision making powers. The question is how far down the management line does the definition extend. Ormiston J defined the concept of management in the following terms, with which I have no reason, with respect, to disagree (supra at 830):
“There must be an element of decision‑making, which affects the corporate enterprise as a whole, but those responsible need not form part of the board, nor even need they be executives directly communicating with the board. Nevertheless, in the ordinary course of affairs, it is only in a large company that persons outside this latter category, so far removed from the power of control exercised by the directors, may be engaged in the ‘management’ of a company. In a small company like the present the actions of those directly answerable to the directors may amount to ‘management’, for, even if those people are also engaged in routine activities of a kind not normally associated with management, it is sufficient if powers and functions are delegated to those persons which are likely in their performance to have a significant effect on the business and financial standing of a company. As it is a protective section, protective at least of the creditors and shareholders, then it must have been designed to prevent the participation in management of those who might put the solvency or the probity of the corporation’s administration at risk. Persons not given any significant discretion or advisory role in decision‑making could not therefore be intended as an object of the prohibition.
It may be difficult to draw the line in particular cases, but in my opinion the concept of ‘management’ for present purposes comprehends activities which involve policy and decision‑making, related to the business affairs of a corporation, affecting the corporation as a whole or a substantial part of that corporation, to the extent that the consequences of the formation of those policies or the making of those decisions may have some significant bearing on the financial standing of the corporation or the conduct of its affairs.”
That definition does not require that management be exclusively vested in one person. Different persons may undertake different aspects of management. The fact that in this case Mr Lomman may well have been regarded as being involved in the management of Pernil does not exclude the appellant from being so involved also.
Ormiston J went on in Bracht to attempt to summarise the nature of the prohibition in these terms (at 832 - 833):
“In the present section I would see the prohibition as covering a wide range of activities relating to the management of a corporation, each requiring an involvement of some kind in the decision‑making processes of that corporation. That involvement must be more than passing, and certainly not of a kind where merely clerical or administrative acts are performed. It requires activities involving some responsibility, but not necessarily of an ultimate kind whereby control is exercised. Advice given to management, participation in its decision‑making processes, and execution of its decisions going beyond the mere carrying out of directions as an employee, would suffice. If the respondent had been left to negotiate terms with bankers or providers of credit, although those terms had to be confirmed, there would have been sufficient participation, but not if those acts involved only communication or were merely casual. The negotiation of matters of financial importance, such as the rent of its principal premises, may well lead to an inference that a person is concerned in the management of a company, but not if that involved merely communication of instructions on a single occasion. A combination of these activities may likewise lead to the relevant inference, so long as the defendant is given some measure of responsibility or some area of discretion, or so long as his opinion is given some weight in the decision‑making processes of management. Beyond this it is difficult to go, for circumstances and procedures may vary widely from company to company.”
In a slightly different context Young J in Cullen v Corporate Affairs Commission (1989) 7 ACLC 121, after reviewing a number of authorities, including Bracht, concluded (at 126):
“From all this one can say that one looks to see somebody making decisions as to the direction of the corporation though one does not necessarily look for someone who is making decisions at the highest level, nor is it necessarily so that the manager’s decisions will not be subject to obtaining the approval of some higher officer. However, even though a person may be described as a manager if that person is merely carrying out the policy of the corporation in charge of a branch or division of the business and not making decisions as to its direction then probably that person is not taking a management role in the corporation.”
I would merely add that, upon a review of all the evidence in a particular case, it becomes essentially a matter of impression, bearing in mind the sort of factors which are referred to in these cases, together with others to which I make reference below. It will be unhelpful to embark on a minute assessment of each activity, to determine whether that is an act of management or an act of a clerical or administrative kind, and then to attempt some weighing or balancing process according to the result of such assessments.
One of the factors which must be borne in mind is that what constitutes an act of management in one company may well not do so in another. As Ormiston J recognised in Bracht (supra), one of the variable factors will relate to the size of the company. The engagement of and negotiation with subcontractors according to pre‑determined guidelines or subject to ratification by another in a large construction company, with many administrative employees, may well not constitute an act of management of such a company. However, for a company which is operated by one or two people, performing only the construction of residential dwellings, such engagement and negotiation completed on behalf of the company will have a much greater influence on the success or failure of the company, and may well constitute management of the company.
Not only will the size of the company be relevant but the nature of its activities. For example, a one person company may have as its sole activity that of drafting or preparation of site plans. Another company may have as its sole activity the estimating of quantities for other building contractors. Another may be solely engaged in soil testing and providing reports. It is difficult to conceive how the performance of those activities and their arrangement does not constitute the management of those companies. And yet the same activities carried out by a larger and multipurpose company may well not constitute management of that company. The activities of Pernil were rather limited. At no stage was it a property developer in its own right. Its sole business was the construction of houses and then only under contract to investors, developers or other property owners. It only ever built on other people’s land. Performing that limited activity largely through contractors by means of the activities of three people meant that there was every likelihood of all three being concerned in the management of the company.
Another useful factor to consider will be the extent to which staff are employed in the company and where the person the subject of the inquiry fits into that arrangement. While a brief summary can barely do justice to the whole of the evidence, it is relevant to note the following: during much of the disputed period, whilst the appellant was performing the activities which I have already summarised, Mr Lomman was also working in the office negotiating with suppliers and, no doubt, with financiers and others; David Griggs was employed as the site supervisor and spent most of his time on the several building sites coordinating the physical activities of subcontractors and Mr Ridge was employed in the office under the supervision and instruction from time to time of all three men, performing essentially clerical and messenger type functions. Most of the physical work of construction of the dwelling houses was, of course, performed by trade subcontractors. It is helpful from that point of view to see where the appellant stood in what might not disrespectfully be called the hierarchy of the company. He was operating at a reasonably responsible level.
Another indicator, at least as to how the various players perceived themselves in their level of responsibility, will relate to the remuneration, if any, paid to the persons concerned. By reference to a document (Exhibit P4) which Mr Lomman considered had been prepared at or about the time of incorporation of Pernil, he deposed to the fact that the appellant, David Griggs and himself were to be paid $700 per week gross, that each person was to supply one vehicle for his own transport and that these vehicles should be rented, serviced and maintained by Pernil, that each person was to supply his own telephone, but the costs were to be paid by Pernil, and that a number of establishment and office expenses, including part of Mr Ridge’s wages, would be paid by Pernil. Whilst any profits generated by the company would not doubt be distributed through the shareholder company to Mr Lomman’s family, the three principal players concerned each regarded themselves, so far as was reflected by their remuneration, as playing an equal part. That is consistent with other evidence of Mr Lomman that between them they ran the company by consensus.

Being concerned in the management of Pernil - conclusion

Taking all these factors into account, I consider that it was open to the Magistrate to conclude that the appellant was, during the disputed period, concerned in and took part in the management of the corporation. The level of responsibility which the appellant exercised through his various activities involved aspects of policy and decision making which, by virtue of the size and nature of the activities of the corporation, related to its business affairs and affected the welfare of the corporation as a whole. They had a not insignificant bearing on its financial standing and on the conduct of its affairs. His level of remuneration indicated a shared responsibility with the other two men involved, and that was reflected also in Mr Lomman’s evidence.
That is not to say, however, that the appellant’s involvement in the management of Pernil was consistent throughout the disputed period or that his level of involvement was not affected by that of Mr Lomman. I also recognise that for part of the period he was attending to other pressing personal affairs and was physically absent for some time by virtue of personal indisposition. None of those factors taken alone or collectively exclude him from being concerned in the management of the company during the relevant period. Nor is it relevant that Mr Lomman may have borne, as he probably did, the major policy and financial decisions of the company. Those are all matters which, whilst not excluding the appellant from being concerned in the management of the corporation, are of course relevant to any penalty that might be imposed.
The appellant argued by reference to the provisions of the Building Work Contractors Act 1995 and the regulations made under that Act that he was not taking part in the management of Pernil. He pointed to the licensing requirements of building work contractors and to those relating to building work supervisors. By reference to those provisions he argued, in my opinion correctly, that the contractor, in this case Pernil, must have directors whose experience, knowledge and financial background will ensure that the company is soundly managed financially, because they must meet a number of criteria relating to proper business management set out in the regulations. The supervisor, on the other hand, must have the necessary technical qualifications specified in the regulations that enabled him to oversee the practical construction of projects undertaken by the contractor. He argued that the criteria to be met by directors of a contractor were essentially managerial criteria, whilst those to be met by the supervisor were essentially administrative. Mr Lomman and his wife had plainly satisfied the authorities that between them they could provide the necessary managerial criteria by their experience and financial resources. They were not required to have the skills, experience and technical qualifications of the licensed building works supervisor. The requirements of the Act and the regulations were such that a director could not be an undischarged bankrupt, but there was nothing in the requirements relating to building works supervisors which required that such a person not be an undischarged bankrupt. It was essentially that level of responsibility which he claimed he was exercising on behalf of Pernil at the relevant time.
The appellant may well be right in his assessment of the requirements of the Act and Regulations. However, the mere fact that Mr and Mrs Lomman may have fulfilled the requirements applicable to the directors of a licensed building contractor does not mean that in practice someone else such as the appellant could not also be concerned, directly or indirectly, in the management of the company. No doubt many of the activities performed by the appellant could, even in the context of Pernil, be properly classified as administrative. Some of his functions may well have been those which a licensed supervisor is required to be able to perform. However, it does not follow that because the appellant performed some of those functions he was not also concerned in the management of the company as a matter of fact, or that in doing so he has necessarily committed any breach of the Building Work Contractors Act or Regulations.

Kaben - relevant background

Kaben was formed at the instance of Mr Ben Anthonysz, who was the appellant’s son‑in‑law. For many years he had carried on business as a contract tiler. He had performed work for Crestwood Homes, and also worked for Pernil after it was formed. Mr Anthonysz gave evidence that he was interested in getting into building work and “doing less with my hands and more with my head”. That is what motivated him to form the company, which was incorporated on 22 December 1992. At all material times he was the owner of 9,999 issued shares in the company and, at least after his appointment as a director, Mr Swinburne was the holder of one issued share.
Mr Anthonysz gave evidence that before Kaben could obtain a building work contractor’s licence under the Building Work Contractors Act, such that it would be able to enter into contracts with other persons for the building of houses, it had to satisfy the licensing authority that the company was a fit and proper person to hold the licence and that the directors were also, and that the directors met the requirements contained in the regulations. The company was therefore required to undertake the building of houses to demonstrate that capacity, but the only way in which it could do so was to build houses on its own land which it could then sell when completed.
Kaben went about that process by building a house initially for Mr Antonysz’s father and two other houses on adjoining allotments nearby. All premises were very close to where Mr Anthonysz himself lived. Evidence from Kaben’s financial records showed that the first preliminary earthworks on the two sites was performed in April 1993. The pouring of the footings for the two houses was performed in June 1993, outside the disputed period. Mr Anthonysz’s evidence was that most of the work in respect of his father’s house was organised and undertaken by his father. There was therefore very little, if any, actual building work undertaken by Kaben during the disputed period.
Ben Anthonysz was a director of Kaben at all material times after its incorporation. Mr John Gollan was a director from the date of incorporation until 22 March 1993, when he was replaced by Laurence Swinburne. Gollan was a land broker who for many years had been a friend of and had had a business association with the appellant. Mr Anthonysz’s evidence was that Gollan agreed to be a director on the initial formation of the company but otherwise had no interest in it.
Mr Swinburne was a painting contractor who had been included in a schedule to the Jobstart agreement signed by the appellant on behalf of Pernil as being a person in respect of whom a subsidy could be paid. Reference has already been made to that agreement. In fact the subsidy was not claimed, as Swinburne was engaged as a painting contractor by Pernil. He began work for Pernil in about November 1992. Swinburne’s principal qualification was as a contract mechanical draftsman. He had known the appellant for many years. Both of them were active Jehovah’s Witnesses. It was not until after he began working for Pernil that discussions arose about the possibility of his becoming a director of Kaben and about his participation in the activities of that company. An indenture constituting the Kaben Development Trust was executed on 15 January 1993. Ben Anthonysz and Mr Swinburne were named as the only two special beneficiaries of that Trust. Mr Anthonysz and Mr Swinburne in their evidence explained that that was to enable them to conduct, in effect, their own speculative building activities under the umbrella of Kaben. Kaben would obtain allotments and build houses for the ultimate beneficial purposes of the two individuals respectively.

Kaben - the Magistrate’s findings

So far as Kaben is concerned the Magistrate made the following specific findings which I summarise in manner similar to that which I adopted with respect to Pernil:
The appellant approached Mr Gollan and later, Mr Swinburne, to be directors of the company. Gollan commenced as a director on 22 December 1992 and Swinburne on 22 March 1993 when Gollan retired.
The defendant participated in discussions with Ben Anthonysz and Ben’s father and with Swinburne about his (Swinburne) becoming a director of the company and in relation to Swinburne’s financial involvement with Kaben.
The appellant had access to the Kaben cheque book and completed details of payments and payees on pre‑signed or subsequently signed cheques.
The appellant assisted Mr Anthonysz, a director of Kaben, in the incorporation of the company and “told me what I needed to do”. He arranged for Mr Ridge to type the memorandum and articles of the company and the Indenture constituting the Kaben Development Trust.
On a number of occasions he gave advice to the directors about particular dwellings and styles to be built and the selection of land.
He provided plans for construction of houses and assisted in the preparation of site plans and council applications.
In relation to possible development sites, he brought the land to the attention of the directors.
He introduced two of the directors to a finance broker.
He approached some subcontractors with a view to retaining them to perform building work for the company on its projects.
The Magistrate’s conclusions with regard to Kaben during the disputed period was that the appellant was “involved in making decisions, particularly during the meetings of the company, affecting the core business activities of (Kaben). Those decisions had a significant bearing on the conduct of the company’s affairs and its financial standing. During the disputed periods the (appellant’s) considerable expertise and experience in the building industry were sought, given by him and used by the respective companies”. In the latter sentence the Magistrate was speaking of both Pernil and Kaben.
Leaving aside the conclusion which I have just quoted, there was evidence on which the Magistrate could find each of the facts which I have set forth above. Indeed, the appellant did not seriously challenge such findings. However, a number of them require elaboration of the background against which the activities were undertaken and an overall assessment of the evidence of Ben Anthonysz, Mr Swinburne and, to a lesser extent, that of Mr Ridge.
As I have mentioned, Mr Anthonysz was the son‑in‑law of the appellant. The appellant was obviously keen to assist his son‑in‑law and daughter to set up their business if he was able to. He did suggest the appointment of his long‑standing friend and business associate Mr Gollan as the other director of the company, in order to satisfy the requirements of the Corporations Law. He agreed to help out for no other reason. No‑one ever had any expectation that Mr Gollan would take any active part in the affairs of the company. That was also the effect of the appellant’s record of interview with the police. It is also confirmed by the fact that he only remained a director for a short time until Mr Swinburne was appointed. The only suggestion in the evidence as to the appellant’s role in his appointment was that it was the appellant who suggested Mr Gollan as a suitable person. It was his son‑in‑law’s decision to appoint him.
Likewise, it appeared to the appellant that Mr Swinburne, when he began working for Pernil, might be an appropriate candidate as a replacement director. He suggested him to Mr Anthonysz who agreed to his appointment. There is nothing to suggest that either appointments were by decision of the appellant or that he attempted to exercise any control or influence in what was the decision of Mr Anthonysz.
Although Mr Anthonysz was unable to identify any cheques written by the appellant, there was evidence from Mr Swinburne that the appellant had from time to time, during the disputed period, made out cheques on behalf of Kaben, and that evidence was supported by Ridge. The appellant admitted making out such cheques in his record of interview. However, there is no suggestion whatever in the evidence that that was done other than in a clerical capacity and in respect of debts which had properly been incurred by Kaben. Particularly is this so in relation to payments made by Kaben both to Pernil and to Datan Holdings Pty Ltd, in circumstances which I mention below.
There is also no doubt that the appellant advised Mr Anthonysz as to what he needed to do in relation to the formation of Kaben. On behalf of his son‑in‑law he completed the reservation of name form for the company and its application for registration. He arranged for the typing in Pernil’s office, by Mr Ridge, of the memorandum and articles of the company and the indenture constituting the Kaben Development Trust. Once again, however, there is nothing to suggest that this was other than in a clerical or administrative capacity and on instructions from Mr Anthonysz. It was never suggested that the appellant was acting on his own initiative or that the nature and content of the documents had been determined by the appellant.
Although he gave advice not only to Mr Anthonysz and Mr Swinburne but also to his daughter and to Mr Anthonysz’s father about appropriate dwelling styles and selection of land, this was to be expected, given the appellant’s wide experience in the home construction industry. It was not surprising that he even supplied copies of plans and specifications from precedents that he had used before. However, the evidence went no further than to suggest that he was merely offering advice and suggestions, and that it was the group of people to whom the advice and suggestions were given and made who then decided whether or not to proceed. The same occurred in relation to possible development sites. The appellant was continuously aware of the availability of allotments of land in various Adelaide hills towns. His advice as to suitable building allotments was called on and given, but there was nothing to suggest that it was more than that. Indeed, the initial allotments of land on which the first houses were built were in an area close to where Mr and Mrs Anthonysz lived, and were allotments well known to them also.
The appellant did introduce the directors to a finance broker, but again that is as far as the evidence went. It did not suggest that he participated further in the discussions about how Kaben would be financed. He also approached some subcontractors about performing work for Kaben, but that was in his capacity of performing work for Pernil, after it had been decided by Mr Anthonysz, quite possibly at the suggestion of the appellant, that there was a certain common sense in Kaben’s first two houses being built in conjunction with those being constructed nearby by Pernil. Mr Anthonysz had agreed to and authorised the supply of materials arranged by Pernil to Kaben’s sites. He also agreed to the sensible suggestion that common contractors should be used. However, Mr Anthonysz never made any suggestion that it was other than his decision to engage those contractors. It was in those circumstances that some of the cheques which the appellant had prepared on behalf of Kaben were in fact paid to Pernil for reimbursement of the cost of materials used on Kaben’s sites but paid for by Pernil. From his involvement with Pernil the appellant knew precisely what materials had been acquired by Pernil for its own houses and what had been acquired for use by Kaben. He was the obvious one to arrange for reimbursement of the appropriate amounts.

Being concerned in the management of Kaben - Conclusion

I have already said enough to suggest that whilst Mr Anthonysz made what use he could of his father‑in‑law as a consultant and adviser, that is as far as the evidence went. Typical of his evidence on most of these topics was his answer about who was involved in the decision to purchase the allotments on which to build. He said (Transcript 322):
“Well the responsible individuals were myself and Laurie, and dad had an interest because he was going to have a share in that - in the profits of the share as well, so we were the three principle (sic) ones who would be interested in finally, on whether or not we were going to decide on that particular block or not. As I mentioned before we consulted the expertise of John, because he had the expertise in the field, but it was us three that had the responsibility of it....”
In relation to the obtaining of credit by Kaben, Mr Anthonysz deposed to the fact that a number of letters were sent out applying for the institution of credit accounts with various suppliers. The letters were sent out on the instruction of Mr Anthonysz, and he was anxious to distance himself, in those negotiations and discussions from his father‑in‑law. It was well known that the appellant had been actively involved in the building industry for a long time, that companies with which he was associated had gone into liquidation and that he himself was bankrupt. If he had become involved in such negotiations and discussions he would have been a credit liability to Kaben. If he did send letters it was in a purely clerical capacity.
It was clear throughout his evidence that Mr Anthonysz wanted to and did remain in firm control of the management of Kaben. He called upon his father‑in‑law for advice and assistance which was readily given but that is as far as it went. So far as the clerical functions of filling in forms and writing out cheques were concerned, he readily admitted that the appellant often “helped out with that sort of office work”. However, there is nothing to suggest that in doing so he was making any decisions on behalf of Kaben. Rather, the evidence suggested that he was merely attending, in a voluntary capacity, to the proper administration of Kaben. Of course, during the undisputed period his involvement increased, and the appellant did not dispute that during that period he became concerned in the management of Kaben.
In my opinion, in order to be concerned in the management of a company, a person must do more than merely give advice, where the decisions are plainly made by others, and must perform more than merely clerical or administrative functions in giving effect to decisions which had earlier been made by others. That is all the appellant was doing, and in my opinion the Magistrate erred in concluding on the facts he had found that the appellant was concerned in the management of Kaben. The factual findings do not justify the conclusion that the appellant was involved in making decisions affecting the core business activities of Kaben. The appeal must therefore be allowed in order to set aside the Magistrate’s finding that the appellant managed Kaben in the disputed period, that is from 22 December 1992 to the end of April 1993.

Assessment of the appropriate penalty - managing Pernil and Kaben

Having allowed the appeal against the findings of the Magistrate as to the period during which the appellant was concerned in the management of Kaben, it follows that there must be a reconsideration of the penalty imposed by the Magistrate for the two offences of managing a corporation whilst being insolvent under administration. He must now be sentenced on the basis that, in the case of Pernil he managed the company between 18 June 1992 and April 1994, and that in the case of Kaben he managed the company between May 1993 and January 1994 instead of for the period found by the Magistrate.
In my opinion the difference in the period makes some but not a significant difference to what should be the relevant outcome. It must be borne in mind that the purpose of the section is for the protection of creditors and shareholders from loss at the hands of a person whom the law deems unfit to manage a company. Such losses may come about in many ways, and to the extent that a person gains from such activities at the expense of shareholders and creditors, if that was his object in breaking the law, a substantial penalty will be called for, whatever the period may have been. On the other hand, if there is no evidence that the proscribed activities of management have in fact caused any losses to creditors or shareholders and if there has been no gain to the defendant beyond reasonable remuneration for the work performed by him then the breach becomes more technical and the penalty will be less, regardless of the period concerned.

In this case I am somewhat surprised at the extraordinary lengths taken by the prosecution to attempt to prove the additional periods when that was all that was in issue. The nature and significance of the appellant’s involvement, as it affected both companies, was of less moment during the disputed periods than during the undisputed periods. Even in the latter periods, the most important factors affecting penalty should have been the nature and degree of the appellant’s involvement, whether there was any personal gain by him (which might otherwise have been available for creditors or shareholders), and whether and to what extent his involvement caused loss either to the companies or to their creditors. Those factors, even during the undisputed periods, were either minimal or non‑existent.
The Magistrate considered that the two offences were “serious breaches of the legislation”. He considered the written statement of agreed facts in respect of the undisputed periods and relied, of course, upon his findings on the disputed facts hearing. He considered that deterrence, both general and personal, must predominate. An unspecified discount was given for what he described as the belated pleas of guilty. The appellant was plainly sentenced upon the basis of the conclusion of the Magistrate that he was the driving force of Pernil from the time of its incorporation and that he was involved in making decisions affecting the core business activities of Kaben - decisions which had a significant bearing on the conduct of the company’s affairs and its financial standing. I have already expressed the view that neither of those findings was open to the Magistrate. Accordingly, in my opinion, in imposing the sentence he did, the Magistrate proceeded on a misunderstanding of the evidence, and the penalty imposed was manifestly excessive even if he had been correct in determining the relevant periods for which the appellant had been managing the company.
Despite what appears to have been a very aggressive and in many respects pointless police interview over an inordinately long period of time, much of which was not in any way relevant to the offences in question, the management of these two companies by the appellant was relatively benign. He had no beneficial interest in either company. He entered no contract with either company from which he might have stood to reap personal gain. His only contract was a contract of employment. When he was paid, it was not suggested that his remuneration was other than reasonable for what he did.
Unlike many cases of a breach of s 229(1) of the Corporations Law he was not manipulating the affairs of either company on behalf of a stooge or nominal director. In both companies, the activities which he performed involved minimal risk to the company and its creditors. As I have mentioned, there is no evidence from which it could be concluded that the appellant determined the prices at which contracts for building houses would be entered into - one of the more financially sensitive aspects of a company performing these activities. In respect of Pernil the Magistrate was told that it went into liquidation with debts of approximately $110,000. No information was given as to debtors to the company or the reasons for its failure. More importantly, there was no evidence to show that the appellant’s activities were the cause of or had anything to do with the ultimate failure of Pernil.
Kaben did not fail and has continued to trade. There was no suggestion that shareholders of that company suffered any loss as a result of the appellant’s activities.
Both companies were building what might be called “standard” homes. There was nothing unusual or extraordinary about them. The contractors they engaged through the appellant were at standard and well‑known industry rates. Mr Lomman, by virtue of his past connections, did most of the negotiations for the supply of materials, where there was greater scope for negotiating particular deals.
There was never any attempt by the appellant to conceal his bankruptcy from the directors of the companies. His financial position was well‑known to them all. There was no suggestion in the evidence that he was using either company as a trading facade for his own benefit whilst bankrupt.
It is also of some significance, and was accepted by the Magistrate, that the appellant received legal advice from a solicitor as to what he could do in a company whilst he was an undischarged bankrupt. The nature of the advice was not disclosed, but the Magistrate accepted that the appellant did not intend deliberately to manage a corporation, as he believed that he was acting within the scope of that advice. In my opinion that is a very significant finding so far as penalty is concerned. It appears that that original legal advice was the reason that he initially pleaded not guilty, for when he received different legal advice as to the effect of what he did do, he changed his plea. It appeared that he otherwise endeavoured to comply with the law by having his Building Supervisor’s licence reinstated before taking over what he believed, on legal advice, to be a permissible activity in respect of Pernil. This he arranged for most of the non‑disputed period in respect of Pernil after his son relinquished the position of Building Supervisor.
Taking all these circumstances into account, in my opinion the Magistrate was wrong in describing the offending as “serious”.
At the time he was sentenced by the Magistrate (22 December 1998) the appellant was aged 55, was married and had a dependent 8 year old son. His wife was unemployed. He was employed part‑time in the building industry earning on average about $400 per week, and was still an undischarged bankrupt. The appellant was obviously distressed by his personal bankruptcy and the circumstances giving rise to it, together with the financial effect that had on his two adult children. They were eventually forced into bankruptcy as well.
For some time prior to 1991 the appellant had been suffering a depressive illness. That had a compounding influence with the collapse of his financial affairs on his self‑esteem and his ability to work and to make rational business decisions. That illness extended into 1992, but it also explains some convictions for other offences in about 1991 and 1992. There was a series of offences involving failure to ensure the keeping of proper accounts and to deliver up company books. He was convicted and fined for breaches of s 475 of the Corporations Law in failing to provide a report as to affairs to a company liquidator. He was also fined for a breach of the Landbrokers and Valuers Act in failing to comply with the requirement of the administrator of his trust account for the production of records. These were all committed at a time when his financial affairs were obviously in turmoil and he was having great difficulty personally in coping. Those difficulties continued well in to 1992 and beyond. He has also had to cope with this protracted litigation over a period of four years which has had an unsettling effect on his ability to consistently remain in employment.
At the time of the hearing of his appeal he had been offered full‑time work doing drafting design work for a development company, and is now looking forward to a greater period of security and financial stability.
In my opinion a sentence of imprisonment for these two offences is and always was inappropriate. I have had regard to a wide range of sentencing information for similar offences in what are obviously widely different circumstances. Such information is not particularly helpful without some knowledge of the circumstances concerned. I regard these offences as being very much at the lower end of the scale.
The appeal against the sentence in respect of the breaches of s 229(1) of the Corporations Law will be allowed. The conviction for both offences should stand. The appellant should be released under s 20(1)(a) of the Crimes Act 1914 upon his entering into a bond in the sum of $1000 that he comply with the following conditions:
That he be of good behaviour for a period of eighteen months;
That he pay to the Commonwealth a pecuniary penalty of $150 in respect of each offence, or a total sum of $300, on or before a date which I shall fix after hearing further submissions from the parties.
Depending on a ruling yet to be made, there may or may not need to be a condition in respect of the payment to the Commonwealth of portion of the costs of prosecution. The order of the Magistrate in respect of the payment of court fees of $102 should stand.

Appeal against penalty - s 591 Corporations Law

This offence involved the failure properly to record on the relevant cheque butts the details of the corresponding cheques issued on behalf of Kaben. There were eight cheques involved. The information recorded on the cheque butts was not inaccurate as to the amount of the cheque but only as to the identity of the payees.
All but one of the cheques were made out either to “Datan Holdings Pty Ltd”, “Claridge Building Company” (i.e. Pernil) or “Cash”. In most cases, the cheques were received and banked by Datan Holdings Pty Ltd or Pernil in reimbursement for materials purchased by those companies on account of Kaben from the persons or bodies actually recorded on the cheque butt. In that sense, the information of the cheque butt was actually more informative than if the payee had been recorded. In respect of two cheques payable to “Cash” one cheque butt recorded the name of a materials supplier and one recorded Claridge Building Co. There is nothing to suggest that those cheques were not in fact delivered to those payees. In respect of one cheque only it was made out to a supplier, and the cheque butt recorded a different supplier, and in respect of one other, the cheque was made payable to Claridge Building Company, but the cheque butt incorrectly recorded the payee as “Datan Holdings”.
It was never suggested that any of these activities were intended to or did in fact result in concealment of the true situation. Nevertheless, the information was inaccurate, and if proper accounts were to be prepared for the company, it required some explanation from the drawer of the cheque additional to the information contained on the cheque butt.
The Magistrate did not comment on the nature of the offence. All that he said was: “For that offence I regard imprisonment as too harsh a penalty. I have decided to extend to the defendant the leniency of an order of community service”.
In my opinion this offence too was an offence at the lower end of the scale. An appropriate penalty was a fine. I consider 100 hours community service to be manifestly excessive.
However this was not the first time that the appellant had been guilty of an offence relating to poor record keeping, although at the time of the previous offences he was under some personal stress. On a previous occasion, for a series of related but different offences, he suffered a 12 month gaol sentence suspended upon his entering into a good behaviour bond for 2 years and performing 160 hours of community service. That was for 27 separate offences. This was one.
In my opinion the appeal should be allowed and the penalty set aside. In lieu thereof there should be substituted a fine of $250. I will hear the parties on the question of time to pay. The order for the payment of court fees of $72 should stand.

Costs in the Magistrates’ Court

In the Magistrates’ Court the prosecutor made an application for the payment of costs of $8000. The amount was not disputed by the appellant. The Magistrate could see no reason why the appellant should not have to pay these costs, although in view of his financial situation the Magistrate allowed the appellant three years to pay the costs, with liberty to apply for an extension of time if he had not made payment within that time.
There is no appeal against that order. However, in view of the fact that the disputed facts hearing occupied a number of sitting days and that the appellant has successfully appealed against the findings made in respect of one of the charges the subject of that disputed facts hearing, I would be prepared of my own motion to review that order, if requested to do so, as a consequence of allowing the appeal. That is a matter on which I will need to hear further argument from the parties.

Conclusion

At this stage I do not make any formal orders, as it is necessary to hear further submissions from the parties on some matters consequential upon the orders that I propose to make.
I indicate that the appeal will be allowed for the purpose of setting aside the Magistrate’s finding that the appellant managed Kaben Holdings Pty Ltd during the disputed period, namely 22 December 1992 to April 1994. I confirm the Magistrate’s finding that the appellant managed Pernil Pty Ltd during the disputed period (18 June 1992 to April 1993).
In respect of the two offences against s 229(1) of the Corporations Law the appeal against sentence will be allowed. The conviction for both offences will stand. I propose to order that the appellant be released under s 20(1)(a) of the Crimes Act 1994 upon his entering into a bond in the sum of $1000 that he comply with the following conditions:
That he be of good behaviour for a period of 18 months; and
That he pay to the Commonwealth a pecuniary penalty of $150 in respect of each offence, or a total sum of $300, on or before a date which I shall fix after hearing further submissions from the parties.
In respect of the appeal against sentence for the one count alleging a breach of s 591(1) of the Corporations Law, the appeal will be allowed and the penalty imposed by the Magistrate set aside. In lieu thereof I propose to order the payment of a fine of $250. I will hear further from the parties as to the time within which the fine should be paid.
The orders of the Magistrate with respect to payment of court fees will remain.
I will hear further from the parties as to whether there should be any variation to the order made by the Magistrate for the payment of $8000 to the Commonwealth by way of costs.

[1999] SASC 405

22 September 1999