Hosken, Robert William and Hosken, Heather v Australian Securities Commission
[1999] TASSC 27
•15 March 1999
[1999] TASSC 27
PARTIES: HOSKEN, Robert William
and
HOSKEN, Heather
v
AUSTRALIAN SECURITIES COMMISSION
TITLE OF COURT: SUPREME COURT OF TASMANIA
JURISDICTION: APPELLATE
FILE NO/S: LCA 54/1998
DELIVERED: 15 March 1999
HEARING DATE/S: 22, 13 and 24 September 1998
JUDGMENT OF: Slicer J
CATCHWORDS:
Appeal and New Trial - Appeal - General principles - Interference with judge's findings of fact - Functions of appellate court - Where inferences of fact involved.
Companies (Tasmania) Code 1982, s229(4).
Devries and Another v Australian National Railways Commission and Another (1992 - 1993) 177 CLR 472; State Rail Authority of New South Wales v Earthline Constructions Pty Limited (In Liquidation) (1999) 2 Leg Rep 2, applied.
Aust Dig Appeal and New Trial [21]
Criminal Law - Jurisdiction, practice and procedure - Judgment and punishment - Sentence - Factors to be taken into account.
Companies (Tasmania) Code 1982, s556(1).
Garcia v National Australia Bank Ltd (1998) 155 ALR 614, applied.
Davies v Taylor (1997) 7 Tas R 265; Bannerman v Tsiakis A9/1995, followed.
Aust Dig Criminal Law [820-851]
REPRESENTATION:
Counsel:
Applicants: B D Bongiorno QC and P A Griffits
Respondent: A M Blow QC
Solicitors:
Applicants: Griffits and Jackson
Respondent: Commonwealth Director of Public Prosecutions
Judgment category classification:
Judgment ID Number: [1999] TASSC 27
Number of pages: 5
Serial No 27/1999
File No LCA 54/1998
ROBERT WILLIAM HOSKEN and HEATHER HOSKEN v
AUSTRALIAN SECURITIES COMMISSION
REASONS FOR JUDGMENT SLICER J
15 March 1999
The applicants, who are husband and wife, were the co-directors of a company, AH No 2 Pty Ltd ("the Company") which operated an hotel in Launceston. The construction, capital and operating costs of the operation as at the relevant time exceeded $28 million. Between March and September 1989, the Company was permitted to trade at a time when there were reasonable grounds to expect that the Company would not be able to repay all its debts as and when they became due. The applicants were convicted of 372 offences, contrary to the Companies (Tasmania) Code, s556(1). At the conclusion of the period of continued trading, some twenty-three businesses were owed a sum in excess of $330,000. The first-named applicant was convicted of the charges, and a fine of $150,000 was imposed. Likewise, convictions were recorded against the second-named applicant, and she was fined the sum of $10,000. Both have appealed their respective penalties. The applicants have not proceeded with their appeals in relation to the convictions, and, accordingly, those motions to review will be dismissed.
The grounds proceeded with in the notice to review are that:
"6The sentences imposed by the learned Magistrate …. were manifestly excessive.
7The learned Magistrate erred in fact and in law in refusing to accept the Applicants' unchallenged assertions of their financial position when those assertions were not disputed by the prosecution, when the learned Magistrate did not himself challenge those assertions or indicate that he did not accept them, and when there was no other evidence which justified their rejection."
It is convenient to deal with the latter ground first. At the commencement of the hearing of this appeal, the applicants sought to put before this Court fresh evidence as to their current financial position. The respondent opposed its admission. The evidence was in opinion form provided by John Spark, an experienced accountant who had conducted an analysis of the applicants' financial position and their associated corporate entities as at the time of the hearing of this appeal. The effect of his evidence was that Mr and Mrs Hosken had entered into a deed of arrangement whereby, when certain property of the companies owned by them are sold, there will be sufficient moneys to repay the creditors. Analysis of the evidence shows that the opinion is dependent upon the sale of the properties at a substantial price, and the effectiveness of the deed is in turn dependant upon a satisfactory resolution of complex internal arrangements between the corporate entities. The evidence was heard de bone esse and will be admitted in relation to Appeal No 55/1998, since it is relevant to the question of re-imposition of penalty, following the quashing of at least three of the convictions considered in that appeal. This Court has power to receive the evidence on the hearing of this appeal, and, although it has little import, it is so received. Its reception impacts on ground 7 of the notice to review, in that it presents a more optimistic picture of the financial position than that provided to the learned magistrate. In effect, the evidence makes the penalties imposed by the learned magistrate commensurate with the means of the parties. But there remains a more fundamental response to the claim of error made in ground 7. Counsel for the respondent did challenge the implications of the factual material relevant to means which was put as a mitigating factor. He stated at 866 of the transcript:
"So far as the defendants' financial position is concerned, if it's true that all of their business ventures since 1989 have been successful and if it's true that their financial position is now as stated by our learned friend, then it must follow that they have either (a) lived off their capital or (b) disposed of their capital or a combination of the two."
The learned magistrate was entitled to treat with suspicion the claimed impecuniosity of the applicants. In his comments in passing sentence, at 896, he stated:
"The second matter raised was their own losses. I accept there was a substantial loss of the defendants' private fortune. I do note however that this was dealt with in a less than convincing way. The submissions were generalised and vague. No attempt was made to track the funds which existed in 1989, nor to prove property values, nor to establish amounts of mortgages and what it is that they secure. There was no production of bank accounts nor financial statements. There is no evidence from their accountant, their legal advisers, nor the Corporate Trustee that existed at least in 1989 and 90. Some losses, that is to say, that there were some losses is easy to accept. The claimed impecuniosity is not. I will return to this topic. The extent of the losses was large, but unascertainable on the evidence presented to me."
He returned to the questions at 898 - 899, stating:
"Impecuniosity. Again, this was dealt with unpersuasively. Mr Hosken took in the order of a hundred thousand dollars ($100,000.00) through the Section 229 charges, excluding the payments to the solicitors. He took a net one hundred and fifty three thousand nine hundred and eighty dollars ($153,980.00) between 17th and 19th July. The table on page 49 of my reasons shows other sums withdrawn other than the routine payments and excluding some relevant to the Section 229 matters. I refer again to the matter of the children's trust accounts. I refer to my comments on pages 42 to 45 concerning funds from Hosken sources generally. Not one word has been heard concerning these amounts and what became of them. I repeat what I said earlier. No valuations, copies of mortgages, accountants opinions, profit and loss statements and so on have been produced in this proceeding. The defendants have conducted successful projects since 1989. One or other or both of the defendants lease a Range Rover. I was not told of the cost. It is up to the defendants to prove incapacity to pay and the attempt has been wholly inadequate and unconvincing. I quote what the late Zeeman, J said about this in the recent case of Davies v Taylor, an unreported decision 131/97.
'It could not be said that by providing that material to the learned magistrate the appellant made a full and frank disclosure of his financial resources. He'd left many unanswered questions. Without a full disclosure of all relevant material the suspicion must remain that the appellant had organised his affairs in such a way that he could say that he had no assets and little income whilst retaining the ability to have recourse to property held and income earned by other entities in which he held an interest or over which he was in a position to exercise control for his personal benefit. In those circumstances the learned magistrate quite probably felt unable to conclude that financial circumstances of the appellant provided an insufficient basis for declining to make a reparation order as a matter of discretion.'
It is true that in that case there was evidence to raise the suspicion, but so there is here and I have referred to it already. In my opinion there is no better reason to believe Mr Hosken's ill-developed claims concerning his financial affairs now than there was at the trial. His Honour, the learned Chief Justice made similar remarks in the same case."
The learned magistrate was entitled to pay regard to the evidence given on the trial. He was entitled to use that evidence in considering the assertions made by counsel during the plea in mitigation. He was aware (irrespective of the validity of the s229 convictions) that Mr and Mrs Hosken had received considerable sums of money from the Company and had continued with other business interests. He considered the totality of the material placed before him. It was for the applicants to place before the sentencing tribunal complete and reliable information as to their financial affairs if their financial position was to be taken into account as a mitigating matter (Davies v Taylor (1997) 7 Tas R 265).
There is no merit in ground 7 and it will be dismissed.
Heather Hosken
It is claimed that a fine of $10,000 on the applicant is manifestly excessive. The learned magistrate, having made general comments about penalty, addressed the following specific remarks to her at 900 - 901, when he said:
"I think you were largely swept up by circumstances beyond your control. Your husband is clearly a powerful and dominating personality to whom you have always been intensely loyal. You were dependent upon advice, his amongst others, and disadvantaged I think by its lack. It is impossible and inappropriate not to take a comparatively lenient view of your offences, notwithstanding the harm that they have caused. There is no dishonesty in the Section 556 offences. I take the delay into account to the extent that I have commented. I give weight to your good character and the truly impressive testimony of the witnesses to it. I believe you to be sorry. I disagree that I should use the provision of 5 the Probation of Offenders Act. You undertook the responsibility of directorship and badly failed in its exercise. General deterrents is relevant to penalty. Others must see that directorship holds responsibility as well as rewards. Many have suffered as a result of your inaction. You will be convicted and fined on the complaint the sum of ten thousand dollars ($10,000.00)."
The sentence can only be viewed as lenient, and it more than adequately took into account the fact that it was the husband who controlled the Company. Mrs Hosken was one of only two directors. There is good reason to require more than one person to be the director of a company, especially one dealing with substantial amounts of money. There is good reason to require a director, who is also a family member, to show a real interest in the management of that company. The learned magistrate took into account her antecedents, character and the period of time over which the offences were committed. It was submitted that the learned magistrate paid insufficient regard to her lack of personal gain, but such ignores the reality that the applicant benefits generally by way of lifestyle. Further, "the fact that her complicity in the offences was due to a lack of action rather than positive wrongdoing" was reflected in the penalty imposed on her, compared with that imposed on her husband. But inaction or indifference to the conduct of a co-director warrants more than token sanction. The applicants received the benefits of the corporate shield in their financial dealings. That significant benefit carries responsibilities and duties, especially those designed to protect others who provide goods and services to that corporate body. A further argument was advanced that the penalty was "manifestly excessive having regard to: … (d) her position vis-à-vis her husband."
The question of acquiescence has already been considered. Insofar as the argument depends on the status of the applicant as a women, or a wife, it must be rejected. Courts ought pay regard to the mitigating effects of one whose will is overborne by another, irrespective of gender or status, but they ought not accept the fiction that women are unable to understand or fully participate in matters of commerce. They ought not accept the fiction that wives give unreasoning or unthinking acquiescence to the wishes of their husbands. In dealing with a different aspect of the law, Kirby J stated in Garcia v National Australia Bank Ltd (1998) 155 ALR 614 at 635 - 636:
"A principle which accords to all married women a 'special equity' based on their supposed need for protection rests upon a stereotype of wives to which this court should give no endorsement. All persons of full capacity, including married women, should ordinarily conform to commercial transactions which they enter unless statute or judicial law affords relief. Marriage, and being the female member to a marriage, is not, as such, a relevant reason for relief from legal obligations. Some additional or different basis is required if relief is to be afforded. Whatever may have been the position in Australian society of 1939, it is offensive to the status of women today to suggest that all married women, as such, are needful of special protection supported by a legal presumption in their favour. Other cohabitees of a borrower may, in particular circumstances, be in a position at least as vulnerable as some wives. Some may be more so. Given the very significant number of Australians who now live in relationships of potential dependence and vulnerability outside marriage, it is inappropriate to affirm as a binding principle of Australian law a rule expressed to derive from the married relationship itself and then to apply it only to one party to that relationship, namely the wife. Adopting that approach reinforces outdated assumptions without addressing the problem of people in vulnerable and dependent relationships which are only sometimes illustrated by the case of a married woman."
A wife who is a co-director of a family company is well able and expected to monitor the affairs of that company. She is as qualified to discern irregularity as any other non-professional or lay person. The penalty ought not be reduced because of her status as a woman or a wife.
The motion to review the penalty imposed on Heather Hosken ought be dismissed.
Robert William Hosken
The applicant was well experienced in commerce and he controlled a labyrinth of corporate structures. The evidence given on the trial and received from Mr Sparks shows that he clearly understood matters of finance and complex commercial transactions. The learned magistrate addressed specific comments to the applicant in the following terms, at 901 - 902:
"This complaint is not a case for imprisonment. If you offended now, this complaint would be dealt with as a civil matter, but you controlled this company. It moved or ceased to move at your decree. You risked, as a gambler risks, and you lost. You did not do this on a single throw of the dice, but repetitively. You continued to gamble in the face of an ever more gloomy liquidity situation. This was all very well should the players have just been your companies and the financiers, which could in a sense take care of themselves, but at the gambling table with you were the bit players who trusted you because of their history of trading with you, or perhaps because of your reputation and achievements or all three. You lost sight of your responsibility to them and you have not redeemed yourself by regaining it. Indeed, you lied to them about your own true position in your statement to creditors. You used, to change my metaphor, creditors as pawns in your attempt to force the financiers to continue or to increase their backing of your company. None of this earns you any lenience. You continue to maintain that the creditors were Westpac's responsibility. This is simply a falsehood of recent invention. Yours is a bad case, not only because of the losses of one third of a million dollars and the particular impact that this has had on two in particular of the creditors, but because you took money away for yourself which had been earmarked for payment to the July creditors. I take account of your personal losses, your rehabilitation, the delay, your previous good character and the loss of your ability to be a director. On that complaint you are convicted and fined the sum of one hundred and fifty thousand dollars ($150,000.00)."
The applicant was involved in an operation, the funding of which had required loans amounting to $27 million. He was the controlling mind of the operation. He had caused the Company to trade with suppliers and service providers in a manner which resulted in the loss to some twenty-three businesses of an amount in excess of $330,000. Some nine years later, at the time of the sentencing hearing, no repayments had been made to those creditors. The applicant had continued to manage other commercial operations with the benefit of moneys derived from the hotel business and had made no attempt to repay the creditors between 1989 and the date of the imposition of sentence.
The learned magistrate took into account the penalties imposed or upheld by this Court in other cases involving mismanagement by a corporate officer, R v Duravic B32/1992; Bannerman v Tsiakis A9/1995; and Davies v Taylor (supra). He was required to impose a penalty which might dissuade others from believing that the corporate shield rendered them impervious to public scrutiny or sanction. The penalty reflected the principles of sentencing as stated by the Supreme Court of New South Wales, Court of Criminal Appeal in R v Corner, unreported, 19 December 1997; R v Thompson (1975) 11 SASR 217 and R v Pantano (1990) 49 A Crim R 328. The applicant possessed property and had for some nine years continued to run significant business interests. The penalty was commensurate with his culpability and means. The ground of appeal ought be dismissed.
Orders
1That the motions to review by Robert William Hosken and Heather Hosken in relation to their convictions recorded on Complaint 37679/1993 be dismissed.
2That the motion to review the penalty imposed on Robert William Hosken in relation to Complaint 37679/1993 be dismissed.
3That the motion to review the penalty imposed on Heather Hosken in relation to Complaint 37679/1993 be dismissed.
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