Janus, W.C.C.M v Australian Securities Commission

[1992] FCA 999

Re: WALTER CORNEILLE CLEMENT MARIE JANUS
And: AUSTRALIAN SECURITIES COMMISSION
No. Q G3016 of 1992
FED No. 999
Number of pages - 9
Corporations

COURT

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Drummond J.(1)

CATCHWORDS

Corporations - application for leave to manage corporations pursuant to s. 229(3) of Corporations Law - applicant convicted of stealing as a trustee - offences not connected with the running of any corporation - mitigating features of offences - applicant given leave to take part in the management of a particular corporation otherwise than as director.

Corporations Law - s. 229

Re Magna Alloys and Research Pty. Ltd. (1975) 1 ACLR 203

Re Zim Metal Products Pty. Ltd. (1977) 2 ACLR 553

HEARING

BRISBANE

#DATE 17:11:1992

Counsel for the applicant: P.R. Dutney QC

Solicitors for the applicant: B.D. Williams

No appearance for the respondent.

ORDER

THE COURT ORDERS THAT:

1. The applicant has leave to take part in the management of The Australasian Franchisees Association Limited in any capacity other than the capacity of director.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

DRUMMOND J. This is an application by Mr. Janus for leave pursuant to s. 229(3) of the Corporations Law to manage a corporation. Counsel for Mr. Janus has explained the nature of the application as being one in which the primary relief sought is general leave to participate in the management of any corporation with which Mr Janus may be able to obtain a position. He explains that the application is also made in the alternative, for leave to take part in the management of a particular company, The Australasian Franchisees Association Limited.

1. So far as the wider basis for the application is concerned, I have been referred to a passage in the judgment of Bowen C.J. in Re Magna Alloys and Research Pty. Ltd. (1975) 1 ACLR 203 at 205, and it is suggested that in what is a somewhat delphic passage if it indeed supports the argument put forward here, his Honour was proceeding on the assumption that general leave of the kind primarily sought here can be granted. I am not satisfied that such general leave can be granted, although the structure of s. 229 is to impose a general prohibition and to give the court leave to lift the prohibition, which leave may be on such conditions or restrictions as the court thinks fit. It is, however, unnecessary to determine that issue because, on the material before me, even if there is power to grant general leave, I would not regard this as at all a proper case in which to grant it.

2. The real focus of attention is on whether the application should be granted in relation to the more narrow relief sought. The background to the matter is covered quite fully in affidavits sworn by Mr. Janus. The Australian Securities Commission was served with the application and original supporting affidavit. Its attitude is reflected in a letter dated 22 September, 1992, which is exhibited to the affidavit of Mr. Janus filed 7 October, 1992, in which a legal officer of the Queensland office of the Commission says that "the Commission neither consents to nor opposes the application and does not intend to appear at the hearing of the matter".

3. The Australasian Franchisees Association Limited, the company in the management of which Mr. Janus wishes to become associated, is effectively under the control of a solicitor, Mr. Stephen Cummins. It is intended to seek to develop a business for this company as a lobbyist for franchisees and it is Mr. Cummins' desire that Mr. Janus be involved in the activities of this particular company.

4. Mr. Janus was himself a solicitor of the Supreme Court of Queensland, but was struck off the roll of solicitors after charges against him were heard and found proved by the Statutory Committee of the Queensland Law Society in July 1987. The charges related to his dealings with two groups of clients, the Bromleys and a Mr. Lenton, in the course of his practice as a solicitor. These dealings ultimately led to him being charged with two offences of stealing as a trustee. The amounts involved in the Bromley matter were of the order of $27,000.00 and the amounts involved in the Lenton matter were of the order of $35,000.00. Mr. Janus pleaded guilty to both those charges and on 23 March, 1989 he was sentenced to imprisonment on each count for three years, the sentences to be served concurrently. His Honour, Judge McGuire, who imposed these sentences, made a recommendation that Mr. Janus be released on parole after serving one year.

5. The material indicates that there is a very real doubt indeed as to whether Mr. Janus was in fact guilty of any criminal offence in relation to the Bromley matter. The sequence of events was that a company controlled by Mr. Janus sold certain land to the Bromleys. In accordance with the contract of sale, a sum of $27,000.00 was paid by or on behalf of the Bromleys, which sum ultimately found its way into Mr. Janus' trust account on account of his company. The material before me indicates that those funds belonged to Mr. Janus' company at all relevant times.

6. There was a mortgage granted by Mr. Janus' company to AGC (Advances) Limited ("AGC") over the land sold to the Bromleys, which was one lot in a large subdivision. The Bromleys, in order to procure an unencumbered title on settlement, themselves paid out the mortgage, when it was the obligation of Mr. Janus' company under its contract with the Bromleys to lift that mortgage. Mr. Janus' company was in dispute with AGC and there is evidence to indicate that it was not relevantly indebted to AGC so that AGC was bound to lift the mortgage on the Bromley settlement without any further payment from Mr. Janus' company. Nevertheless, AGC took the attitude I have already indicated. The material indicates that, prior to settlement of the sale contract, Mr. Janus on behalf of his company offered to pay, without prejudice, the necessary funds to AGC to procure the release of the mortgage, but AGC declined settlement with Mr. Janus' company.

7. The moneys which the Bromleys used to lift the AGC mortgage came from the Queensland Law Society Fidelity Fund. The Law Society subsequently pursued Mr. Janus, obtained summary judgment for the amount in question against him and then sought to bankrupt him. With respect to the bankruptcy petition, Mr. Janus was given leave to go behind the judgment and to show, in effect, that he was not indebted to the Fidelity Fund. The petition was dismissed after the Law Society elected not to proceed with it.

8. Mr. Janus says that, against the advice of counsel that he had not committed any offence, he nevertheless pleaded guilty. The explanation for that is two-fold. First, that Mr. Janus was subjected to very great stress at this particular time - he was concerned for his family and he was in a state of ill health, suffering from a depressive psychiatric condition. The second explanation is the fact that, so far as the Lenton matter is concerned, he was indeed guilty on his own acknowledgment in his affidavit that has been read before me of the particular offence involving the stealing of the Lenton Trust moneys and may well have thought there was little point in defending the Bromley charge in circumstances in which he was bound to be sentenced to a term in prison.

9. Having said that in relation to the Lenton matter, I must say that the circumstances of the offence as revealed in the affidavit are such as to indicate that it is by no means the worst kind of offence of this class that can be envisaged, a fact which I think is reflected in what seems to me to be a fairly lenient sentence of three years imposed by Judge McGuire, an experienced District Court judge, and reinforced by the fact that his Honour made the recommendation for early release that I have referred to.

10. I should also say that, somewhat surprisingly, although Mr. Janus was struck off the roll of solicitors in Queensland, according to his affidavit he remains on the roll as a barrister and solicitor in both the Supreme Courts of Victoria and New Zealand.

11. So far as the offences are concerned, they are serious offences of dishonesty committed by a professional man, but they do not involve, it seems to me, any misconduct in connection with the running of any corporation, including the company controlled by Mr. Janus which was the vendor to the Bromleys.

12. Re Magna Alloys and Research Pty. Ltd. (1975) 1 ACLR 203 is authority for the proposition that the court's power to lift the prohibition imposed by s. 229(3) of the Corporations Law on a person who has been convicted is not a punitive power, but is designed for the protection of the public. However, there are other aspects of the power that are reflected in other decisions and, in this regard, I refer to the decision of Re Zim Metal Products Pty. Ltd. (1977) 2 ACLR 553. That was a case in which two gentlemen of previously good character who were the directors of a small family company involved in a business succumbed to the temptation to buy a couple of electrical appliances at a cheap price, the appliances being stolen. They were convicted of receiving stolen property and even though they were the controlling directors of this small family company for a number of years and had previous good characters, the course the court took in that case was to refuse their application for leave to participate in the management of the company as directors, but to grant leave to each of the applicants to take part in the management of the company in any capacity other than that of director. The reason for this approach appears from the comments made by McInerney J at page 558 of the report, where he said:
    

"I have considered whether I should grant leave to the

applicants to become directors. I have come to the

conclusion I should not. The policy of the legislation is that, prima facie, the person convicted, the applicants,

should be excluded from being directors. The possible harm which might occur to the company and to the applicants if they are excluded from management is, in my view, much more real than any harm that may flow if they are not allowed to become directors. There is something to be said, I think, for the view that public morality is better vindicated if the applicants continue to be excluded from being directors. Creditors and persons dealing with the company who now know or may hereafter come to know of the convictions of the

applicants, may take the view that the court views the

convictions as matters of no concern, if the court allows an applicant to be reinstated as director in a case where, in my view, there is no real need for that appointment."

1. The material before me does not indicate that there will be any impediment to Mr. Janus obtaining this position with Mr. Cummins' company if he is prohibited from acting as a director, but nevertheless free to act in any other capacity in the management of the company. If there were such evidence I would, of course, take it into account in deciding whether I would give Mr. Janus wider leave than I intend to give him (although it would, of course, depend upon the quality of any such evidence whether the application for wider leave would, in that event, succeed having regard to the comments in Re Zim Metal Products Pty. Ltd., which I regard as important in the present day).

2. I should also mention as further background to this application that Mr. Janus has had a long-standing psychiatric illness to which he himself ascribes many of his difficulties. The material includes a brief report from the psychiatrist who has treated him for a number of years. In this report dated 25 September, 1992, Dr. Theodoros, a specialist psychiatrist, says:
   

"... Mr. Janus has consulted me regularly over the last 3 years".

1. He refers to his long-standing disorder and says:
   

"In this time (which I take to be the last three years) his mood has been stable. It is my opinion that he is fit to exercise reasoned judgement."

1. There is nothing that I have seen or read in this matter which would throw the slightest doubt upon the doctor's opinion.

2. Having regard to the matters I have referred to, the nature of the offences, the fact that they did not involve an abuse of any position in relation to the management of a corporation, the mitigating features of the offences and the matters deposed to at length by Mr. Janus concerning his difficulties in obtaining employment to support his wife and family, I am prepared to grant leave to Mr. Janus to take part in the management of the company, The Australasian Franchisees Association Limited, in any capacity other than the capacity of director.