Hamilton v Whitehead

[1988] HCATrans 263

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Perth No P20 of 1988

B e t w e e n -

ROBERT GEORGE HAMILTON

Applicant

and

GEOFFREY MARTIN WHITEHEAD

Respondent

Application for special

leave to appeal

MASON CJ
WILSON J

TOOHEY J

Hamilton

TRANSCRIPT OF PROCEEDINGS

AT PERTH ON FRIDAY, 28 OCTOBER 1988, AT 9.46 AM

Copyright in the High Court of Australia

PlT 2/1/RB 1 28/10/88

MR K.H. PARKER, QC, Solicitor-General for Western Australia:

If it please the Court, I appear with my learned

friend, MR K. RATNESER, for the applicant. (instructed

by the Crown Solicitor for Western Australia)

MR P.W. NICHOLS:  May it please the Court, I appear for the

respondent. (instructed by Messrs Lawton Gillon)

MR PARKER: May it please Your Honours, may firstly I lighten

the load a little by indicating that the papers

refer to six appeals.	It is not desired, to simplify
the issues, to proceed with two of those six.	So

that the two orders which appear at pages 29 and 30

of the book, and 33 and 34 of the book we would not
desire to pursue. That leaves on foot only those
prosecutions in respect of which the company actually

stands convicted, they being - and it is the order

at pagas 23 and 24, an offence of offering to

Mr and Mrs Kratz a prescribed interest; pages25 and 26

of the book, an offence of offering to Lock; at

pages 27 and 28 an offence of offering to Weeks, and

at pages 31 and 32, the offence of issuing a prescribed

interest to Mr and Mrs Kratz.

Your Honours will have noticed that the application

comes to you direct from a single judge of the

supreme court. That is perforce of the operation of section 206A of the JUSTICES ACT of this State which

precludes an appeal from the decision of

Mr Justice Franklyn to the Full Court. So that the

applicant can only turn to this Court, as a matter of

law.

MASON CJ:  Was it possible to have the matter referred to the

Full Court?

MR PARKER: 

It was, if it please Your Honour, but you will

notice that this matter was never raised either before
the magistrate or on appeal and it first emerged in

His Honour's reserve decision.  So neither party had

a chance to speak about it and certainly not to

contemplate the issue being referred to the Full Court. The offences are all against section 169 of the

COMPANIES CODE.  The actual statutes are with

Your Honours' tipstaves but I believe the relevant

provisions sufficiently appear at page 7 of the book,
to simplify the matter, in the decision of

Mr Justice Franklyn. Section 169 provides that:

A person, other than a company or an agent

of a company

and I would indicate that by section 164 "company"

in section 169 is a public company, so it has no

application to this company in this case, which is a

proprietary company

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A person ..... shall not issue to the public,

offer to the public for subscription or

purchase, or invite the public to subscribe
for or purchase, any prescribed interest.

In respect of the first three of the appeals, the company has been convicted under that section,

person including company by definition, of offering a

prescribed interest to the company, and in the fourth
case, the company has been convicted of issuing a

prescribed interest to the company.

It is by virtue of section 9 of the COMPANIES

AND SECURITIES (INTERPRETATION AND MISCELLANEOUS

PROVISIONS) CODE that "person" in section 169 includes

company, a proprietary company. The offering and the

issuing of the prescribed interest in this case,
although the acts of the company for which it stands

convicted, was physically undertaken by the company's

managing director, the respondent. to this application,

who was at all times acting on behalf of the company.

The respondent, with his wife, had full control of the

company; it was a nominal capital company.

The present four charges against the respondent

were in respect of and relied on the very same conduct

of the respondent which, because he was acting

throughout as the company's managing director, led to
the company's conviction. It was argued that by virtue

of section 38(1) of the COMPANIES AND SECURITIES

(INTERPRETATION AND MISCELLANCOUS PROVISIONS)(WESTERN

AUSTRALIA) CODE - and again the provision is at page 7

of the book.- that the respondent was a person who,

by acts, was directly knowingly concerned in the

commission of the offences against section 169 by the

company.

Section 38(1) are words that will be familiar

to Your Honours. It is the in connnon form accessory provision. It cannot be relatively distinguished in

its language from section 75B and 79 of the TRADE

PRACTICES ACT, or from section 5 of the CRIMES ACT.

So that this case has implications for many purposes

which include, but range far beyond, the COMPANIES

CODES of Australia.

MASON CJ: Yes, that brings to the surface paragraph 3 of

your outline of submissions and we have constituted

this Court of three to hear the application as an

ordinary civil special leave application but it had

occurred to us that it may be possible to hear the

argument on the footing that the argument would be as

substantial as the argument that would be presented

in an appeal and then deal with the matter definitively

one way or the other. But paragraph 3 and the passage

in YORKE V LUCAS which you have identified in

paragraph 3 raise the question whether it is appropriate

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for a court of three to hear this question on a final
basis. It may be, because four members of the Court

left the question open in the context of the TRADE

PRACTICES ACT, that it would be unwise for a Court

of three now to determine or embark upon a definitive

resolution of the question in the context of the

. COMPANIES CODE. Is there any basis for distinguishing

the question in the context of the COMPANIES CODE from

the question as it arose in the TRADE PRACTiCES

legislation?

MR PARKER:	I believe not, Your Honour, no. The only corrunent I would make is that in YORKE V LUCAS it was an
in-passing corrunent.  The case was decided upon
another basis. At the end of the judgment there was this reference, "Well, we are aware of what was said
by Dixon Jin an earlier case, MALLAN V LEE, and that may have been a difficulty in the way of this case as
well, but we have no need to consider that." In
short form, that was the effect of what was said in
YORKE V LUCAS.  So that it would not appear as a
matter of law or precedent that there would be difficulty with three Justices considering the matter but clearly
I understand the sense in what Your Honour was putting.

MASON CJ: Perhaps we should hear more of your argument,

Mr Solicitor, so we can assess the strength or the

weakness of it more accurately.

MR PARKER:  Thank you, Your Honour. Because of the way the

case was approached by the magistrate it appears from

the reasons of Mr Justice Franklyn that no formal

finding was made as a matter of fact that the

respondent was knowingly concerned in the offences of

the company. Leaving aside the question of law now
to be considered, it seems to be inevitable and

inescapable as a matter of fact that the respondent

was knowingly concerned in the relevant activity here . the company's affairs and activities and he was the

sole body and mind by which the company acted

throughout.

So much was accepted by Mr Justice Franklyn

but he declined to interfere with the magistrate's

dismissal of these charges for reasons that are set

out very briefly at page 18 of the book at D where

His Honour said:

Thus it relied on the acts and decisions

of Whitehead as "the directing mind and

will of the company" as being the acts and

decisions of Establish -

the company -

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It appears to me clearly wrong and

oppressive to then prosecute Whitehead
personally for the identical acts and

decisions as were relied on as the acts

of the company. I am not prepared to

interefere with his Warship's findings

dismissing the charges -

Now, all relevant matters of fact and law necessary

to support the convictions had been found by His Honour.

In so far as His Honour felt the conviction to be wrong

there is no reason given or authority cited but his

consideration of the issue suggests that he may well

have had in mind the notion reflected in that statement

in YORKE V LUCAS to which we have already turned, and

that will be the main issue dealt with in our

submissions.

His Honour's alternative reference to oppression

does not of course provide a legal basis for refusing

to convict where, on a complaint duly brought, the
necessary facts have been duly established. In any

event, the conunents are as a matter of fact inappropriate,

in our submission, in the facts of this case, having

regard to the degree of involvement of the respondent

and his controlling role in the company.

Your Honours will appreciate that under the

COMPANIES legislation the liability of a director to

conviction as a party to offences of the company has

consequences far beyond the mere conviction and

penalty. This issue must be viewed, not merely in the
circumstances of this case, but in the scope of

operation of section 38(1) to the whole of the

COMPANIES CODE and the related legislation under which,

in a great variety of circumstances, companies may

connnit offences, both public and proprietary companies,

and the issue of whether or not the directors by whose

acts the company connnitted those offenc·es is also in

breach of the Code is material for a great variety of

reasons. For example, sections 227(2) and 227A of the

Code, the disqualification provisions for directors,

and the SECURITIES INDUSTRIES CODE, section 14, has

a great range of potential consequences, bearing in

mind that a prescribed interest, the subject of this

charge, is also by definition a security for the

purposes of that Code.

The TRADE PRACTICES ACT context, of course,

the consequencee beyond conviction, particularly in the
area of civil liability, are significant.

That, I think, brings me to the seventh paragraph

of our outline of submissions. It is our submission

that in the facts of this case it is the effect of

section 38(1) that the conduct of the respondent

which constituted the conunission of the offences against

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section 169 by the company also exposes the

respondent to conviction as an accessory for

that offence. And I use "accessory" to include,

if there is any doubt about it, a person knowingly

concerned in an offence as well as the more usual

descriptions of "accessory" that are also found in

section 38(1).

Could I ask Your Honours to turn to

REG V GOODALL, (1975) 11 SASR 94, a decision of

the Full Court of South Australia.	As the headnote
reveals, there:

A director of a limited company was

charged with fraudulent conversion .....

The case for the Crown was that the company

had received moneys for investment; that

some of the moneys, in accordance with the

directions of the accused and a co-director,

who were in control of the company, had been

fraudulently converted, and that the accused

had aided and abetted -

they, of course, being specifically alternative forms
of accessory under section 38(1) of the COMPANIES CODE
here and, in our submission, for this, the argument

today, there is no distinction to be found between

any of the categories of "accessory" in section 38(1).

So it was said:

that the accused had aided and abetted the

commission of the offence by the company and
was therefore liable to be prosecuted and

punished as a principal offender. It was

contended on behalf of the accused that the

director of a company who controlled the

company could not aid and abet the commission

of an offence by the company by the same act
or conduct which constituted the commission of

the crime by the company itself.

Precisely the circumstance here.	The decision of the court was
that the Crown was entitled to rely upon
the acts of the accused as establishing both the proof of an offence committed by the
company as a principal and -

as proof -

that the accused had aided and abetted
that offence.

The learned Chief Justice's reasons, dealing with this matter, commence at page 99 with an introductory

citation of some authority. I think it is page 100

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it would be sufficient to take up his reasons.	And
there about two-thirds of the way down page 100, case of conspiracy where there must be two minds reaching an agreement, went on to say:

Whatever may be the case with regard to conspiracy, there have been several cases

where the manager or director of a company
has been found guilty of aiding and abdtting

the company in the connnission of a crime -

and he cites three examples. Could I mention, without

turning to it, that the last one of those is

unreported by I have provided Your Honours with a

copy of that if Your Honours need to turn to it.

On the other hand expressions have sometimes

fallen from Judges of eminence to the

effect that one man cannot play the dual

role of being the brain of the company
responsible for the connnission of an unlawful

act and an accomplice of it or joint

tortfeasor with it in his individual capacity.

In O'BRIEN V DAWSON, Starke J. said:-

"The company, if it were guilty of a breach

of its contracts in this case, acted through

its director the respondent Doyle, but it

is neither 'law nor sense' .. to say that Doyle

in the exercise of his functions as a director

of the company combined with it to do any

unlawful act or become a joint tortfeasor.

Again,it is equally fallacious to assert

that Doyle knowlingly procured the company
to break its contract. The acts of Doyle were

the acts of the company and not his personal

acts which involved him in any liability to

the plaintiff."

Could I mention in passing that if Your Honours come

to turn to O'BRIEN V DAWSON Your Honours will see

that it was a conspiracy that was the foundation
of the action there under consideration.	So the

connnents really are to be considered in the light

of the conspiracy.

(Continued on page 8)

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MR PARKER (continuing): In MALLAN V LEE, Mr Justice Dixon,

as he then was, said:

It would be an inversion of the

conceptions on which the degrees of

offending are founded to make the

person actually committing the forbidden

acts an accessory to the offence
consisting in the vicarious responsibility

for his acts.

I will turn, in a short time, to MALLAN V LEE in

detail. Can I pause for a moment and say that

whilst the Chief Justice here is not persuaded by

the comments of Mr Justice Dixon, in our submission,

it is the case that Mr Justice Dixon's comments were

entirely apposite and well founded in the context of

the peculiar provision he was dealing with, and I

will come to that in a short time.	But the
Chief Justice said of it:

To this last consideration it might be said,

with great respect, that, where the mind responsible for the crime or the tort is

that of the person in control of the company,

it is now settled that the responsibility

of the company is not vicarious but direct -

citing TESCO SUPERMARKETS to which I will turn in a

moment.

In any event, with great respect to

those who think otherwise, my view is that

the logical consequence of SALOMON's case

is that the company, being a legal entity

apart from its members, is also a legal

person apart from the legal personality of

the individual controller of the company,

and that he in his personal capacity can aid

and abet what the company speaking through

his mouth or acting through his hand may

have done. I am fortified in this

conclusion by the decision of the Privy

Council in LEE V LEE's AIR FARMING LTD.

There their Lordships held that the governing director of a company could

enter into a contract of service with the

company so as to entitle his widow to

workmen's compensation in consequence of

his death ..... even though he made all the
relevant decisions and did all the relevant

acts with regard to the contract of

employment in the name of the company.

MASON CJ: Well now, stopping there for a moment: the reservation

by the joint judgment in YORKE V LUCAS of the question does indicate that the Court there was not immediately

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accepting the proposition that is stated by

Chief Justice Bray in the long paragraph you

have just read?

MR PARKER:	I believe that is so, Your Honour, although~ certainly, in the case, without any direct reference
to it but certainly it was a live issue in the
minds of the Court in YORKE V LUCAS.

MASON CJ: Yes.

MR PARKER:  And there is no question that the proposition cited

from Mr Justice Dixon which founded that comment,

we submit, is a correct proposition in the context

of the section he was dealing with but quite

inapplicable, as a general proposition, to offences

and accessories of the type being considered here.

That is the basis of our submission.

MASON CJ: Yes. Now, if that submission was correct, then the

Court should not have reserved the question at all

in the context of YORKE V LUCAS.

MR PARKER: Yes, because the context there was the same as this.

MASON CJ:	Indeed, theprevious comment made by Chief Justice Bray,
after his citation of MALLAN V LEE, would have disposed
of the question, had the Court accepted it, in
YORKE V LUCAS.
MR PARKER:	Yes. That is clearly the issue, if it please

Your Honour.

I would mention that Mr Justice Sangster,

at pages 111 to 114, and Mr Justice Jacobs concurring

with the Chief Justice at page 114, had taken the

same line and the consequence in their decision was

that - as indicated from the headnote - in that

case the director could be convicted as having aided the company in the offence committed by the company for the reasons there outlined.

I am sorry, at page 101, I was distracted from

completing that reference. Could I just remind

Your Honours of the last sentence of the quotation

from LEE V LEE'S AIR FARMING where the Privy Council

said:

In their Lordships view it is a logical

consequence of the decision in SALOMON's

case that one person may function in dual

capacities.

Now, if I could ask Your Honours to turn to a

decision of the Chief Justice of New Zealand in

FLEMING V ELLICOTT, (1961) NZLR 106. There the

SOCIAL SECURITY ACT obliged employers to deduct

from wages of employees certain social securities

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charges to be paid by the employer to the

Inland Revenue. Section 119(2) made it an offence to misapply or permitting to be misapplied

moneys so deducted. The managing director of an

employer company was charged with a number of

offences against section 119(2). The company was

the employer which had the obligation to

deduct and deal with the moneys. The managing

director was charged with misapplying or permitting

to be misapplied the moneys deducted by the company.

o~ appeal from the magistrate's dismissal of the

charges which was on the basis, as appears on the

first page of the report at the very bottom, in

his words in the case stated, paragraph (c):

The managing director of a company could

not be charged under s. 119(2) of the

SOCIAL SECURITY ACT 1938 as he had no power, other than by virtue of his employment as a servant · of the company

concerned, to permit moneys belonging to

the company to be applied for a purpose other

than payment to the Inland Revenue Department.

The company had not been charged in this case;

only the director. In upholding the appeals from
the dismissals, the Chief Justice held that either

the managing director as managing director, or

the managing director as a servant of the company

may be guilty of abetting the offence of the company

in the misapplication of the moneys. His decision is

that on either basis the managing director could be

convicted. His reasons are short and without

reference to authority and are, in the middle of

page 109 - - -

MASON CJ: The reason why they are short is that His Honour

had difficulty in understanding what the argument

was that he was dealing with.

MR PARKER: Yes. It is enough to say he had great difficulty

with the magistrate's findings and great difficulty

understanding the basis but it is enough to say - - -

MASON CJ: But as my brother Wilson points out, the fact that

a judge has difficulty in understanding the argument

does not necessarily result in a short judgment.

But it seems that the Chief Justice not only had

difficulty in understanding counsels argument,

he had difficulty in understanding the magistrate's

judgment and he also thought that counsel had

difficulty in understanding the argument they were presenting. So, the case really does not help us,

does it, Mr Solicitor?

MR PARKER: Well, it is a decision of the Chief Justice that

in both capacities as a director or as a servant

there could be conviction. It is not of great strength

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when one - because the Chief Justice was

unassisted with any authority or submission about

the matter.

Could I turn, Your Honours, to the eighth

submission in our outline, and Your Honours will
see that that is drawing upon both SALOMON's case

and TESCO and travelling fairly much the same ground as Chief Justice Bray did in GOODALL's case and I will not delay Your Honours with turning

in detail to either of those cases but could I

quote to Your Honours briefly from the speech of

Lord Reid in TESCO V NATTRASS, (1972) AC 153, and

I am reading from page 170. Your Honours, we

thought, to save the burden of the material -

TESCO being an incredibly long case and for almost

the whole of it, totally immaterial to this case -

MASON CJ: So, you have prepared selected excerpts?

MR PARKER:  Selected excerpts. I am a little embarrassed to

see that for the most part the page numbering is

hidden by the stapling but it is on the third sheet

of the extract. It is the speech of Lord Reid and

I commence at E:

I must start by considering the nature of the personality which by a fiction the

law attributes to a corporation. A living

person has a mind which can have knowledge

or intention or be negligent and he has hands

to carry out his intensions. A corporation

has none of these: it must act through

living persons, though not always one or the

same person. Then the person who acts is

not speaking or acting for the company. He

is acting as the company and his mind which

directs his acts is the mind of the company.

There is no question of the company being

vicariously liable. He is not acting as a

servant, representative, agent or delegate.

He is an embodiment of the company or, one

could say, he hears and speaks through the
persona of the company, within his appropriate

sphere, and his mind is the mind of the company.

If it is a guilty mind then that guilt is the

guilt of the company. It must be a question

of law whether, once the facts have been

ascertained, a person in doing particular

things is to be regarded as the company or
merely as the company's servant or agent.
In that case -

that is of servant or agent -

any liability of the company can only be a

statutory or vicarious liability.

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And on the next page, in a citation from LENNARD's

CARRYING CO. LTD V ASIATIC PETROLEUM, a speech of

Viscount Haldane, the very last lines having covered

the same situation in dealing with the person who

is the directing mind of the company, the last

two lines say:

but somebody for whom the company is liable

because his action is the very action of

the company itself.

And then a reference to Lord Denning in BOLTON (ENGINEERING) V GRAHAM. I will take up in the

middle of that:

Some of the people in the company are mere servants and agents who are nothing

more than hands to do the work and cannot

be said to represent the mind or will.

Others are directors and managers who

represent the directing mind and will of

the company, and control what it does.

The state of mind of these managers is

the state of mind of the company and is

treated by the law as such.

Lord Diplock, at page 200, has some similar views and applies the same cases: LENNARD'S CARRYING V

ASIATIC PETROLEUM and BOLTON V GRAHAM.	I will not
ask Your Honours to turn to it.

That speech of Lord Reid is, of course, a

constant reference today in this area.

MASON CJ:	Did anyone agree with what Lord Reid said in TESCO?
MR PARKER:	Lord Reid and Lord Diplock were the only two whose

reasons came to this issue. They were in agreement.

The issues in the case, for the most part, were quite different from anything we are considering

today and most of the speeches dealt with those other

matters. Now, at our ninth submission we have listed -

and I will not ask Your Honours to turn to them as

a matter of brevity - some cases where it is

clear either that the court proceeded in acceptance
of the proposition that a director could be liable
for the same acts as the company was guilty of or,
in some of the cases, there have actually been

categories and STERLING as well; the others, where there has been actual convictions of.

convictions of the director as well as the company.

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MASON CJ:	Now, into what category do the individuals fall?
Do they fall within the category that Lord Reid
identified as, in effect, the superior managerial
officers of the company or do some of them fall outside that category?
MR PARKER:	They all are the managing director or the

controlling force or the brain of the company in

each case. They are listed because in none of

them is there any more consideration of it than

in the New Zealand decision, it is just accepted

or acted upon. In SORSKY, CONTINENTAL CABLEVISION

and MAELOR-JONES the directors were actually

convicted. That brings me, Your Honours, to a

consideration of - - -

WILSON J:  In which of.these cases was both the company and

the director convicted?

MR PARKER:  SORSKY was a criminal conviction; CONTINENTAL

CABLEVISION, the same, and MAELOR-JONES was a

conviction under the South Australian SECRET

COMMISSIONS ACT.	The first three cases are in
the trade practices field.	Now, if I could turn
to MALLAN V LEE, 80 CLR 198.

(Continued on page 14)

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MR PARKER (continuing): Critical to an appreciation of

this case, in our submission, and, in particular,

to the words of Sir Owen Dixon, is the offence

constituted by section 230(1) of the INCOME TAX

ASSESSMENT ACT 1936-1944. It is set out at

page 198 as a footnote. Your Honours will notice

that there are two forms in which the offence

can be commited and I will deal with them distinctly.

The first is:

Any person who ..... in any return knowingly

and wilfully understates the amount of
any income.

In this case Their Honours held that aspect of the offence applied to a public officer of a

company who knowingly and wilfully understated

the income of the company in the return of the

company. Their Honours held that the statement

of income in that offence did not have to be

in the return of the person who was completing

the return, not in the person's own return of

income. Those words applied in respect of any

return completed by a person whether of the person's

own income or, for example, as an agent, a trustee,

an executor, a public officer or in whatever

representative capacity.

So it was the view of each of Their Honours

that the public officer was guilty by virtue

of the first words, the first alternative, of

that offence directly by being the person who

completed the misleading return.

The alternative basis upon which there

was liability under the section is in these words: any company on whose behalf the public

officer ..... in any return knowingly and

wilfully understates the amount of any

income.

Your Honours will appreciate immediately the

uniqueness of the elements of that offence.

The company is liable if it is that the public

officer, acting on behalf of the company, in

a return knowingly and wilfully understates the

income. In our submission, that alternative

form of liability in the section is expressly
providing for the company's vicarious liability

by virtue of the stipulated actions of the public

officer in completing the company's return.

Two charges were laid in MALLAN V LEE.

The company was charged with that second form;

the specific offence relating to the company.

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It was charged with being "a company on whose behalf

the public officer knowingly and wilfully understated".

Mallan, the public officer, was also charged

by an act was "directly knowingly concerned in

the commission of the offence of the company"

relying on section 5 of the CRIMES ACT. So the

public officer was charged as an accessory to

the offence of the company. He was not charged

as principal with the offence which the Court
held he himself committed in the first form of

the two forms of offence constituted by the

subsection.

At pages 213 to 216, Mr Justice Dixon deals

with the matter.	A little over half-way down
page 213:

The charge against the appellant is that

by act he was directly knowingly concerned

in the commission of the offence above

alleged -

that is the companies' offence -

The charge refers to the Crimes Act 1914- 1946, s.5. I think that the charge against him should have been for an offence against so much of s.230(1) as says that any person who in any return knowingly and wilfully

understates the amount of any income shall

be guilty of an offencP.. It was in my

opinion neither n~ce~Yary nor possible

to treat the appellant's signature as public

officer of the company's return, in which,

according to the allegation, he knowingly

and wilfully understated the income, as

exposing him to liability under s.5 of

the CRIMES ACT as one knowingly concerned

in the company's offence under s.230(1).

The company's offence consists only in

its vicarious responsibility for his alleged

act in knowingly and wilfully understating

on behalf of the company in its return
the amount of income derived by the company.

That act amounts in my opinion to an offence

by him under s.230(1). The provision may

be divided into two parts -

and he then deals with them and, about line 7

on page 214:

A public officer cannot, I think, make
his company responsible under the second

part of the provision without himself becoming

liable under the first part.

PIT4/2/SDL	15	28/10/88
Hamilton

The very last three words on page 214 and on to

the next page:

I understand the policy of the more general part of section 230(1) to be to place upon all persons who make in a return a wilful

understatement of income or misstatement,

a penal responsibility whether they do

so on behalf of themselves or of others.

There is no reason why this principle should the company is to make the corporation
not extend to public officers &c of companies.

vicariously liable, not to exclude the

liability of the public officer or other

agent of the company whose act and guilty

mind form the essential elements in the

offence.

So that His Honour is there directly contemplating,

of course, that both the public officer and the

company are properly convicted under the section

but is saying that it is the scheme of the section

that the public officer is directly liable to

conviction under the first part and that the company is vicariously liable, for the public

officer's acts, by force and virtue of the section

under the second alternative.

MASON CJ: Is not the important part of the judgment the

two sentences that commence the paragraph beginning

at the bottom of page 214:

It might be argued that the express

provision made by s.230(1) relating to
the case of a company shows an intention
on the part of the legislature to make
the company and not the public officer
director or servant of the company penally

liable for a wilful understatement of income

or misstatement, and that the wide words

of the other part of the sub-section should

not be interpreted as including the public

officer director or servant making a return.

Such an inference would in my opinion be

mistaken.

Now, the implication seems to be that if the

section had been expressed in that way then an

offence on the part of the company would have

been created and the individual, in effect,

responsible for_ the commission of the offence

by the company could then have been proceeded

against for being knowingly concerned in or aiding

and abetting the commission of that offence.

PIT4/3/SDL	16	28/10/88
Hamilton
MR PARKER:	I am grateful to Your Honour, yes.	I think that

ground is, perhaps, covered a little later as

well but Your Honour is quite right in that.

A little above the middle of page 215:

Section 252(1)(i) of the INCOME TAX

ASSESSMENT ACT 1936-1944 provides that

any proceedings under that Act taken against

the public officer shall be deemed to have

been taken against the company and that

the company shall be liable jointly with

the public officer for any penalty imposed

upon him ..... But I do not see why it should

not apply -

that provision -

to s.230(1). If it does apply, it is perhaps

logically possible to give it an operation

by which it makes the company jointly liable

with the public officer for his offence

and separately liable for its own offence,

incurring a separate penalty for each.

But I think the more reasonable interpretation

of the two provisions in combination is

that they show a legislative intention

that the public officer and the company

shall both be liable, but only in one penalty.

On either view, s.252(1)(i) tends to confirm

the conclusion that s.5 of the CRIMES ACT

1914-1936 can have no application to the

public officer who brings his company under

the sanctions of s.230(1). For it shows

that for penal purposes the company and
the public officer are to be identified

and the company is to be jointly liable

with him for any penalty he incurs.

On the interpretation I have given

to s.230(1), for more than one reason s.5

of the CRIMES ACT cannot apply to a public

officer so as to make him an accessory

to the offence of the company. In the

first place the public officer's act on
behalf of the company making it an offender
ipso facto amounts to a substantive offence

on his part under s.230(1). In the second

place, the sub-section makes him the actor,

the principal, for whose guilty conduct

the company is responsible vicariously.

It would be an inversion of the conceptions

on which the degrees of offending are founded
to make the person actually cannitting the

forbidden acts an accessory to the offence

consisting in the vicarious responsibility

for his acts.

PIT4/4/SDL	17	28/10/88
Hamilton

In our submission, the juxtaposition

of the two forms of offence in the section under

the first of which the public officer was necessarily

guilty as a principal whenever he completed a

company's return and under the second of which

the company was necessarily guilty vicariously

when the public officer so acted justified the

view reached that it was the intended operation

of the section that any liability of the public

officer must be under the first alternative as

principal.

Your Honours, in our submission, will

appreciate how material the peculiar form of

the statute was to this decision. The words

at the top of page 216 which were referred to

again in YORKE V LUCAS are, in our submission, when seen in the context of Mr Justice Dixon's

reasoning, referable entirely to the peculiar

form of the truly vicarious offence committed

by the company.	The last line of the quotation,
on page 216:

an accessory to the offence consisting in the vicarious responsibility for his

acts -

is a precise reference, in our submission, to

the elements of the offence committed by the

company as framed in section 230(1). The inversion

of conceptions to which Sir Owen is referring
is clearly by •,irtue of the peculiar forms of

the elements of that offence of the company

Could I mention that, at pages 212 to 213,

the Chief Justice agreed with the views of Sir Owen

in respect of section 230(1).	In our submission,
section 169 - - -

MASON CJ: What about the" next paragraph though, Mr Solicitor?

Is not His Honour saying that if his interpretation

of section 230(1) is not correct, none the less

it would still not be possible to convict the

officer of the company of aiding and abetting

or being knowingly concerned in the commission

of the offence by the company?

MR PARKER:  I had not bothered to read it, Your Honour,

because, as I understood it, as you will see

from the seventh line of that paragraph, as I

read it,His Honour is saying that if one is to

construe the section on the alternative basis

that he postulates, it is then his interpretation

of the legislature's intent that:

the legislature had made the company

responsible as an offender -

PIT4/5/SDL	18	28/10/88
Hamilton

MASON CJ:	To the exclusion.
MR PARKER:	To the exclusion, yes.
MASON CJ:	In other words, he is still relying on the peculiar

character of this provision in subsection (l)?

MR PARKER:  Yes. In our submission, those comments are

based upon that and I think that is evidenced

by the·three cases that he cites where, in each,

it was a case that the legislative intention

necessarily excluded - - -

MASON CJ:  Excluded aiding and abetting.

MR PARKER:  Yes. In one of them it was unlawful carnal

knowledge and the view was, "Well, the girl is

necessarily excluded as a party to that offence".

The other was an offence of a retailer selling arrlit was concluded that a buyer was necessarily

excluded from the ambit of the prohibition in

the section.

MASON CJ:  So this would only become applicable if you

could extract, as a matter of statutory intention,

from the particular provision in the Code creating

the offence, an intention to exclude a general

aiding and abetting, knowingly concerned provision?

MR PARKER:  That is our respectful submission and that

brings me, of course, then to contrast the offence

here, section 169, with the offence being considered

in MALLAN V LEE and, again, page 7 of the papers

is a ready reference to it. It is an entirely

straightforward, uncomplicated offence: any

person who - 'person"including, by definition,

a company - issues to the public or offers to

the public any prescribed interest i~ guilty

of an offence. In this case the company both

offered - in three of the cases - and issued

in the fourth, a prescribed interest.	The company
is therefore - and has been convicted of those
offences.	The offence contains no alternative

basis for liability at all. It is a straightforward,

"Any person who".

There is no offence with a vicarious element in the form of the statute. It is dealing with

any person or company which, as principal, does

the precluded conduct. The director of the company - or of a company which acts in breach of the section - is not by the words of the section constituted "the

actor" or "the principal" for whose conduct the

company is made responsible. That is not at

all the terms of the provision. In this case

the company is in breach of these sections not

because of any vicarious liability as indicated

PIT4/6/SDL	19	28/10/88
Hamilton

in TESCOE and GOODALL and the other decisions,

directly. That follows, necessarily, from the

form of page 169.

On the findings, the respondent has not

personally committed an offence against section 169.

The offering and the issuing were by the company.

In our submission, therefore, nothing in MALLAN

V LEE stands in the way of section 38(1) being

given its literal operation in its application

to section 169. Expressly, the latter section

provides no basis for a view that it is intended

to exclude the possibility of a director being

an accessory - which is the core of the passage

Your Honour the Chief Justice put in MALLAN V LEE.

(Continued on page 21)

PIT4/7/SDL	20	28/10/88
Hamilton

MR PARKER (continuing):  Put simply, in our submission, the

company here, as the principal offender, has

committed these four offences. The respondent, as

director, was knowingly involved in the commission

of the offence because it was his acts for the

company which led to it. In our submission, it is

a confusion of concepts to think that because the

director was the company's mind or its controlling

force when it, the company, committed the offence,

that the director's personal identity is fused with

and becomes one with the company for all purposes.
The director is acting for. the company and,

inevitably, from the nature of corporate activity, his acts are the acts of the company but, equally,

in our submission, the director is a thinking,

knowing person, consciously performing the relevant,

human activities. The director does not cease to be

a human being in full personal control of his own actions because at the same time he is exercising the authority of the company.

Where the company is itself the principal

offender it is submitted there is no valid objection

in legal principle to the director at the same time

being subject to criminal and other liability as an

accessory to the company's activities. Were it

otherwise, directors, for example, could truly escape

liability for a wide range of prescribed activity

by ensuring that it was always the corporate entity

which, as a matter of law, actually performed the

prescribed acts.

MASON CJ:  Is it possible to distil out of the COMPANIES CODE

a general policy o statutory intention to maintain

concurrent liability, as it were, on the part of

directors in relation to the commission of offences

by companies. Indeed, in a general way, I had

understood that to be the philosophy that underlies

the COMPANIES CODE.

MR PARKER:  I would respectfully accept that proposition,

Your honour, but it is the very section we are dealing

which is the mainspring for it, section 38(1).

MASON CJ: Yes, so it does not really rise higher than the

sections that we are dealing with.

MR PARKER: Well, no, but I have already mentioned to

Your Honours some of the consequential things that

may occur, such as section 227 and so on - - -

MASON CJ: Yes, I follow.

MR PARKER: - - - which indicate, we would submit, that it was

part of the scheme of the Act that directors and

their conduct should be viewed independently of the

company because, in the case of conviction, for example,

for indictable offences under the Act, or in the case

PlTS/1/VH	21	28/10/88
Hamilton

of repeated convictions, directors might be disqualified

from acting as director or promoter, and so on. So

that it would seem to be frustrating of those provisions

if it were the case that a director could not themselves
be guilty as a party to the offence of the company

which they controJ.led or on whose behalf they acted in

the relevant capacity.

Section 572 is officers and other persons who are

"knowingly concerned," the default provision

applicable to those. That may be another useful

reference for Your Honours - 572. Your Honours will

appreciate how frequent it is in today's corrnnercial

world for nominal companies to be used as the vehicle

for activity - - -

MASON CJ:  I think we are a-ware of that, it is drawn to our

attention almost daily.

PARKER J:	Thank you, Your Honour - and in particular for prescribed interest activities, the offence under
cnsideration here. If the decision below be correct,
the real human brains behind the whole activity
would not be in breach of the Act.  It is respectfully
submitted that it must be wrong in the context of the of the TRADE PRACTICES ACT where the equivalent provisicns with similar operation apply.

Section 11 merely notes specifically the conspiracy

offences and their distinction. That distinction has
been drawn on the basis that conspiracy involved
agreement by two minds, two parties, to act in the

unlawful way. That may be a proper distinction.

Clearly, for the purposes of this argument, conspiracy

cases are quite on a different fundamental basis because

there is not in the accessory liabilitv of

section 38 (1) any requirement that there is a meeting of

two minds in agreement to be involved in the activity.

That, if it please Your Honours, would conclude our

submissions. Could I simply indicate that, if leave

were granted, we would not ~eek to advance the matter

further by submission and that we would respectfully

submit that if the submissions were upheld, the

matter should be remitted to the supreme court with

appropriate directions. We would not, in any event,

seek any order for costs and the defendant can have his

costs under the SUITORS' FUND ACT of this State, .if Mr Justice Franklyn has erred in law. If it please

Your Honours .

MASON CJ: Thank you, Mr Solicitor. Yes, Mr Nichols.

MR NICHOLS:  If the Court pleases, I wish to adopt, in substance,

what my learned friend, the Solicitor-General, has said

in relation to the factual background and the nature

of the charges. I do, however, differ with him on the

philosophy behind the COMPANIES CODE and, in particular,'

PlT5/2/VH 22 28/10/88

Hamilton NICHOLS

I would submit, it is clear, particularly from the newer sections of the Code that when it is intended

to make directors separately liable for acts as

directors, the Code generally says so, as it does in,

for example, section 556, where it creates a number

of offences arising out of the conduct of directors
as directors. It is, therefore, in my respectful

submission, wrong to assume that t'here is some

underlying philosophy behind the Cod~ of finding

directors liable as directors and the company liable

as well. The Code is explicit on this point.

I wish, however, to deal with the submissions

of the appellant, applicant, in two approaches.

First, I will be brief on the question of special

leave. Next, I wish, in some more detail, to cover
the philosophical or, in the words of the Chief Justice

of South Australia, "metaphysical concept behind the

section." On the matter of special leave, I will

merely say that last time I had the honour to appear

before this Court in Canberra, my learned friend

argued the exactly opposite proposttion. Once more,

it was an appeal by way of order nisi to review under
the JUSTICES' ACT from a single judge. Once more,

by virtue of the nature of that very statute, it was

impossible to take the matter beyond the single judge

to the Full Court. None the less, this Court had no

hesitation whatsoever in saying that it was not

appropria.te to entertain an application for leave when they had the benefit only of a single judge. I would point out the statutory provision then in

contemplation was one of equally wide-ranging import,

in this case having applicability not only to every

State but also to imperial legislation. I refer, of course, to the POLICE ACT 1892 of this State.

So I would merely invite, if the Court is insufficiently persuaded on other aspects, the Court to follow the

precedent it has already set.

MASON CJ: What was the name of the case in which this

submission prevailed?

MR NICHOLS:  I am afraid I cannot recall the name of the

party.	It was the very first case heard at the
opening of the High Court in Canberra.	My learned

friend appeared in that case for the Crown. It

did not feature in the law reports.

As to the general philosophical concept, it is

my respectful submission in broad that my learned

friend has really advanced one submission which can
be falsified. That submission is that, where a

person is capable of acting in two separate capacities,

as director and in his own persona, then he may be

guilty of the offence under the COMPANIES CODE. I

would contend that where a person so subsumes his

personality in that of a company, or some othPr legal

entity, then he is not capable of being dealt with in

PlT5/3/VH	23	28/10/88
Hamilton

both capacities. I prefer to use the language

of Lord Reid in the TESCO case, rather than my own. learned friend from page 170 at line F:

He is an embodiment of the company or, one

could say, he hears and speaks through the

persona of the company.

I would like to begin by saying this concept is one

that has occurred frequently throughout history.

For example - a couple of homely examples - Pliny does not suggest that the Sibyl of Cumea

speaks personally; similarly, the Delphic oracle

does not purport to be the pythoness. The senate

and the people of Rome speak through the emperor.

It is reasonable, in my respectful submission, to

see that concept as one that figures in relation to

a company when the case of a separate persona being

subsumed· into the greater persona. That, after all,

in my respectful submission, is what Lord Denning

is saying in the passage in H.L. BOLTON (ENGINEERING)

COMPANY LTD V T.J. GRAHAM AND SONS LTD which I have

set out in full at paragraph 9 of my submissions.

The question, therefore, is whether that submission

or that view occurs in the other authorities to which my learned friend has referred. I would respectfully

submit that it sounds loud and clear in the voice

of Lord Reid in the TESCO case, and I would also

respectfully submit - and I think this is the core of

the matter - that it sounds loud and clear in

MALLAN V LEE.

MASON CJ:  But in those cases there is no vicarious liability

on the part of the company, is there, according

to the view of Lord Reid and Lord Diplock in TESCO?

MR NICHOLS:  Yes.

MASON CJ: There is vicarious liability?

MR NICHOLS:  No, I am agreeir:.g with Your Honour.

MASON CJ: Yes.

MR NICHOLS:  I appreciate the point that my learned friend has

made. It is a sub.tle point and a fair point in

relation to MALLAN V LEE and the nature of the liability,

but it is not a question of vicarious liability at

all, it is a q~estion of the subsuming of the

persona. In this case, the COMPANIES CODE clearly,

where it wishes to set up a separate liability on

a director, generally says so. It is inappropriate

to read into a general provision, which is clearly

designed to deal with lesser servants~ persons of

lesser rank than directors, the concept that the

director may be separately liable where he is also

the directing mind of the company. That brings me

to what Mr Justice Dixon said in MALLAN V LEE and,

PlTS/4/VH	24	28/10/88
Hamilton

again, Your Honour the Chief Justice has set out

the areas to which the Court must refer to determine

this question, Perhaps the passages that are most

useful in this respect are that at the foot of

page 214 of the report, which Your Honour has already

referred to:

It might be argued that the express provision

made by section 230(1) relating to the case of

a company shows an intention on the part of

the legislature to make the company and not

the public officer director or servant of the

company penally liable.

His Honour goes on to say:

Such an inference would in my opinion be

mistaken.

And he then goes, as Your Honour quite correctly

pointed out, to explain why there is a clear

legislative intention otherwise. But, I respectfully

submit that if one sets aside what His Honour has

stated in relation to those particular provisions,

there still remains the philosophical concept that

a person cannot at the same t:i.me,when acting in a

capacity, be guilty both as principal offender and
as accessory. It is not a question of looking to
vicarious liability, the existence or otherwise of

it; but that is a general philosophical concept.

TOOHEY J: Well, Mr Nichols, that argument involves a

reading down of section 38 of the Code.

MR NICHOLS: It does, in my respectful submission.

TOOHEY J:  And reading it down in such a way as to exclude

individuals who would otherwise qualify under the generic description of "person," what is the

basis of the exclusion?

MR NICHOLS:  I derive it from two points: first, that the

Coae itself generally says when it means to involve

directors who are acting as directors and, second,

the clear intention of the legislature behind the

provision of section 38 is to catch people who are

not directors, who are knowingly concerned in the

act. Directors are dealt with otherwise and elsewhere

in the statute. The object of section 38 is to go

for, if you like, a lesser class of persons.

TOOHEY J:  Do you mean, on its proper construction, it

exludes persons whose actions might be regarded as

the actions of the company?

MR NICHOLS:  That is my contention, if Your Honour pleases.

There is a numerous class of people - and again I wish to speak very briefly, but in general terms - who

are concerned with the actions of companies who are

PlTS/5/VH	25	28/10/88
Hamilton

not the directing brains of the companies whom that

section is meant to catch. Again, if I might

quickly mention the relevant passages that

Your Honour the Chief Justice has referred-to it

at page 215 and 216, and His Honour Mr Justice Dixon

made it fairly clear that one had to look closely

at the legislative intention. He set aside, in the

passage at the top of page 216 the particular words

of the appropriate statute and then attempted to

apply what would exist without those pecular words

when he said:

Section 5 of the CRIMES ACT could not be applied to make the public officer liable

under that provision. For it would mean

that by section 230(1) the legislature had

made the company responsible as an offender

for the knowing and wilful understatement
of income by the public officer to the
exclusion of any such liability of the

public officer. If that conclusion were

reached it would be impossible to make

him liable for the same conduct under a

provision dealing with accessories.

And I adopt what my learned friend has said. This

is a provision with which we are dealing that

deals with accessories. It is clearly not the intention of the COMPANIES CODE to deal with a

principal offender, someone who has become a

principal offender by virtue of his office, as an

accessory. And behind all that, there is really

the idea that one cannot be both an accessory and

a principal offender at the same time.

I am not going to trouble the Court with very

much more on this point, because I think that my learned

friend, the Solicitor-General, quite correctly put

these issues right before you. There is just a few

other points I would like to mention. In the

New Zealand case which was fairly summarily disposed

of, there is none the less some useful gain to be
made.	At (1961) NZR 109 ,line· 30, the learned

Chief Justice used this language:

But even if that which the present respondent

did or omitted to do in this case in relation
to the moneys deducted for social security
contributions were done or omitted by him in

his capacity as a servant.

Therefore he is drawing a valid philosophical distinction

between someone acting in his capacity as a servant

and someone acting as the governing mind of the company,

and that is the very concept that I seek to urge upon

the Court in its interpretation of this section.

Perhaps, finally, I would very briefly refer to the passage that I have cited in paragraph 9 of my

submissions from Lord DEmning. He draws the val id

PlTS/6/VH	26	28/10/88
Hamilton

distinction, or what is, in my respectful submission,

a valid distinction between people who are directing

minds and people who are other hands. I will

conclude my submissions by saying that section 38

deals with the other hands to which His Lordship

refers and not to the directing mind. I do not

propose to advance it unless the Court seeks my

assistance further on that point. That, in my

respectful submission, is the essential issue to

determine. It is substantially a philosophical one

and not one that arises necessarily from the

interpre~ation of MALLAN V LEE. It involves a

dichotomy between two separate approaches: one of

adopting the idea that because a person can be in

two capacities he must therefore be guilty in both

those capacities. The other one, which I urge upon

the Court: that a person may be, in fact, acting

in one capacity only and that someone else's.

Finally, it involves a careful and necessary consideration of the intent of section 38.	Those
are my submissions, if the Court pleases.

MASON CJ: Thank you, Mr Nichols. Yes, Mr Solicitor.

MR PARKER:  Very quickly, Your Honours. The reference of

my learned friend to section 556 of the Code as_ evitlencing that
the Act specifically identifies directors when it

intends them to be liable - section 556 is an

exceptional provision. By virtue of 553(1), it

applies only to companies:

that has been wound up or is in the course

of being wound up ..... under official

management -

under Part VII investigation; where a receiver is

appointed, or it -

has ceased to carry on business or is

unable topay its debts; or

that has entered into a compromise -

et cetera. Hence the point in 556 of specific offences

by directors relating to the improper incurring of
debts or fraudulent conduct by the directors in the

affairs of that company in the time preceding its

liquidation.

MASON CJ:	They are independent of offences by the company.
MR PARKER:	Yes. If it please Your Honours.

P1T5/7/VH 27 NICHOLS 28/10/88

Hamilton
MASON CJ: Yes, thank you, Mr Solicitor. The Court will take a

short adjournment in order to consider the course that

it will take.

AT 11.07 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.12 AM:

MASON CJ:  The Court will consider its decision in this

matter.

AT 11.12 AM THE MATTER WAS ADJOURNED SINE DIE

PlTS/8/VH	28	28/10/88
Hamilton