Montgomery v Stewart

[1967] HCA 11

HIGH COURT OF AUSTRALIA

Barwick C.J., Kitto, Taylor, Menzies and Windeyer JJ.

MONTGOMERY v. STEWART

(1967) 116 CLR 220

27 April 1967

Companies

Companies—Prospectus—Untrue statement or wilful non-disclosure—Offence—Prospectus alleged to contain more than one untrue statement or wilful non-disclosure—Whether information bad for duplicity—Companies Act 1958 (Vict.), s. 43.*

Decisions

April 27.
The following written judgments were delivered:-
BARWICK C.J. Section 43 of the Companies Act 1958 (Vict.) provides "Where in a prospectus there is any untrue statement or wilful non-disclosure any person who authorized the issue of the prospectus shall be guilty of an offence and liable to imprisonment for a term of not more than twelve months or to a penalty of not more than Five hundred pounds or both unless he proves either that the statement or non-disclosure was immaterial or that he had reasonable ground to believe and did, up to the time of the issue of the prospectus, believe the statement was true or the non-disclosure immaterial: . . . ". (at p222)

2. The applicant for special leave was charged by information that at Melbourne on a specified date he had authorized the issue by Reid Murray Acceptance Limited of a prospectus which included untrue statements contrary to s. 43. (at p222)

3. Under the heading "Particulars of Untrue Statements" there was listed a number of statements claimed to be untrue. The appellant took exception to the information on the ground that it charged more than one offence. Being unsuccessful before the Court of Petty Sessions in this submission, the appellant sought from the Supreme Court of Victoria both an order to review the decision of the Court of Petty Sessions and a writ of prohibition to restrain further proceedings upon the information on the footing that the Court of Petty Sessions lacked jurisdiction because of the duplicity of the information. The Full Court of the Supreme Court of Victoria rejected both applications of the appellant and, in my opinion, rightly. Indeed, but for one or two matters raised in argument before this Court, I would be content to adopt the reasons expressed by the Chief Justice of Victoria for dismissing the appeal to that Court. (at p222)

4. It is to my mind quite plain that the offence created by s. 43 is the single act of authorizing the issue of a prospectus which contains any untrue statement or wilful non-disclosure. Perusal of Pt III, Div. 2, of the Act, in my opinion, makes it clear that the legislature desired to ensure that a prospectus should not be issued unless it complied with the requirements of the statute and contained no untrue statement and no wilful non-disclosure. But in s. 43, as elsewhere in the division, the legislature provided for exculpation. Thus no offence is committed where an untrue statement or wilful non-disclosure in an issued prospectus is either as to an immaterial matter or was reasonably believed to be true or to be immaterial. If there is any untrue statement or any wilful non-disclosure in the prospectus as to which the person authorizing the issue cannot make good one or other of the exculpatory matters, there must be a conviction; that is to say, that, unless the defendant is able to establish, as to every statement which is proved to be untrue and every wilful non-disclosure which is made out, either immateriality or reasonable belief in truth or immateriality, as the case may be, the authority for the issue of the prospectus will be in breach of the statute. (at p223)

5. An endeavour was made in argument to construe the section as if it created an offence of making an untrue statement or of wilfully failing to disclose some material fact in a prospectus to the end that the making of each false statement or each wilful non-disclosure constituted a separate offence. But, in my opinion, the language of the section just will not bear such a construction. (at p223)

6. In support of the submission it was said that because the exculpation of necessity must relate to a particular statement or non-disclosure, more than one statement or non-disclosure could not be included in an information as otherwise the right of exculpation would be rendered nugatory. But with every respect to those with whom this argument may find favour, I am unable myself to accept it. The ability to establish the exculpatory matter remains to the defendant no matter how many statements are alleged to be false, particulars of these statements being available to him. (at p223)

7. Reliance was placed by the appellant upon the decision of this Court in Johnson v. Miller (1937) 59 CLR 467 as supporting the view that because of the exculpating provision only one statement could be made the basis of an information under s. 43. Properly understood, that case, in my opinion, lends no support to such a submission. The majority of the Court there decided that as the prosecution at the hearing of the information persisted in refusing to give any particulars of a person said to be seen coming from the licensed premises, the magistrate was justified in dismissing the information. The majority accepted the view, which was fundamental to its decision, that upon its true construction, s. 209 of the Licensing Act, 1932-1935 (S.A.) created a separate offence in respect of each person who is seen coming out of the licensed premises, unless perhaps a number of persons, acting in combination, are seen coming out of the premises at the one time: Johnson v. Miller (1937) 59 CLR, at p 483 . On this footing, it was said that unless the occasion the subject of the charge was identified, the information was defective. That a means of exculpation was provided by the statute, in my opinion, was not the basic reason for this construction, though reference is made in the reasons for judgment to that circumstance as supporting it. It seems to me that the same conclusion must have been reached by the majority upon its approach to the statute whether or not a means of exculpation had been provided by it. The view might have been taken that in substance the statute required the licensee not to have any persons upon his premises during the specified time and that therefore upon its true construction the section made it an offence if any person was seen emerging from his premises in that time unless as to all persons then emerging the exculpation could be established. But the majority did not place that construction on the section. In the present case, I cannot place upon s. 43 any construction comparable to that placed upon s. 209 of the Licensing Act (S.A.) in Johnson v. Miller (1937) 59 CLR 467 . It seems to me therefore, as I have said, that that case does not assist the appellant. (at p224)

8. It was also said in support of the suggested construction of the section that if more than one statement is particularized as being claimed to be untrue, a defendant who had successfully established either the truth or immateriality or his reasonable belief in the truth or immateriality of some of the statements, upon conviction as to another statement or other statements would have recorded against him a conviction which particularized all the statements which had been charged as being untrue. But in truth this is a result which will not eventuate if due attention is paid to the terms of the conviction when drawn up for purposes of record. The record of conviction should set out only the statements which were proved to have been untrue and in respect of which the defendant has been convicted. The same would apply in the case of a wilful non-disclosure. (at p224)

9. In my opinion, the application for special leave to appeal should be refused. (at p224)

KITTO J. It would need no argument to show that a section which provided simply that it should be an offence for a person to authorize the issue of a prospectus in which there was any untrue statement or wilful non-disclosure would apply to the issue of a prospectus containing a plurality of untrue statements or wilful non-disclosures or a mixture of both. But we are here concerned with a section which does not so provide. It provides that it shall be an offence for a person to authorize the issue of a prospectus in which there is any untrue statement or wilful non-disclosure unless the person proves either that the statement or non-disclosure was immaterial, or that he had reasonable ground to believe and did, up to the time of the issue of the prospectus, believe that the statement was true or the non-disclosure immaterial. This language is, in my opinion, incapable of being applied as a whole and separately in respect of each untrue statement or wilful non-disclosure which a prospectus contains. The simple mechanical process of turning the singular into the plural will not work, for the "unless" clause presents alternatives each of which must be intended to be available with respect to a single untrue statement or wilful non-disclosure. It is easy enough to suggest amendments which, by enabling a distributive application of the "unless" clause, would carry out this intention and yet prevent the section from creating more than one offence by each authorization of the issue of a prospectus; but amendment is not our province. The legislature has chosen to use language which, read as a whole, postulates a single untrue statement or wilful non-disclosure, and I would be disposed to give effect to it as it stands. (at p225)

2. I would grant special leave accordingly. (at p225)

TAYLOR J. We have before us an application for special leave to appeal from an order of the Supreme Court of Victoria which discharged an order nisi to review a decision of a magistrate to proceed with the hearing of an information exhibited against the applicant which alleged an offence under s. 43 of the Companies Act 1958 (Vict.). The information, as amended, alleged that the appellant did on or about 18th May 1963 authorize the issue, by Reid Murray Acceptance Limited, a company incorporated in Victoria, of a prospectus dated 3rd May 1962 which included untrue statements contrary to s. 43. Thereafter there were appended to the information particulars of a number of alleged untrue statements which were contained in the prospectus. (at p225)

2. When the information came on for hearing objection was taken on the ground that it alleged the commission of more than one offence and the magistrate, having rejected this contention, adjourned the further hearing to enable the applicant to challenge his decision. (at p226)

3. The relevant portion of s. 43 is in the following terms: "Where in a prospectus there is any untrue statement or wilful non-disclosure any person who authorized the issue of the prospectus shall be guilty of an offence and liable to imprisonment for a term of not more than twelve months or to a penalty of not more than Five hundred pounds or both unless he proves either that the statement or non-disclosure was immaterial or that he had reasonable ground to believe and did, up to the time of the issue of the prospectus, believe the statement was true or the non-disclosure immaterial: . . . . " It is the applicant's contention that where a prospectus contains a number of false statements those responsible for its publication commit a separate offence in respect of each false statement. I should have thought that were it not for the manner in which the words of exculpation are expressed in the concluding part of the section the proposition would plainly be unarguable. Leaving those words aside for the moment it seems clear enough that the conduct proscribed is the authorizing of the publication of a prospectus which contains "any untrue statement" and that the offence created by the section will be committed by a person who authorizes the publication of a prospectus which contains either one or a number of false statements. It may be compared with s. 169 of the Crimes Act 1958 (Vict.) which provides, inter alia, that whosoever being a director, manager or officer of any body corporate or public company publishes or concurs in publishing any written statement which he knows to be false in any material particular with intent to deceive or defraud any member shareholder or creditor of such body corporate or public company or with intent to induce any person to become a shareholder or partner therein, or to entrust or advance any property to such body corporate or public company, or to enter into any security for the benefit thereof, shall be guilty of a misdemeanour, and shall be liable to imprisonment for a term of not more than seven years. It was a substantially similar section (Larceny Act, 1861 (U.K.), s. 84) which was under consideration in R. v. Kylsant (Lord) (1932) 1 KB 442 , and, although it was held that the falsity of the prospectus was to be found in the failure to disclose a number of particulars with respect to the company's trading between 1921 and 1927 it was not suggested and did not occur to the Court of Appeal that the evidence, if it disclosed any breach of s. 84 of the Larceny Act at all, disclosed several breaches. A like comment may be made regarding the cases of R. v. Bishirgian (1936) 25 Cr App Rep 176 and Reg. v. Mackinnon (1959) 1 QB 150 . I refer also to the form of indictment for an offence under s. 84 of the Larceny Act, 1861 given in Archbold's Criminal Pleading Evidence &Practice, 36th ed. (1966), pars. 2016 and 2040 and observe that it appears to have been a form which has been generally followed. It was substantially followed in the Registrar of Companies v. Brierley (1965) NZLR 809 , where the charge was laid under s. 54 (1) of the Companies Act, 1955 (N.Z.), which is in similar terms to s. 43 of the Companies Act 1958 (Vict.), and no fault seems to have been found with it. (at p227)

4. As I understand the argument of the applicant, however, these general propositions are not seriously contested; the argument is that the exculpatory words make all the difference and that, when a prospectus contains a number of untrue statements, it is impossible to give literal effect to them unless the section be regarded as creating separate offences with respect to each false statement. Unless it be so regarded, it is said, the accused, in order to exculpate himself, must show that all the statements were immaterial or that he believed them all to be true whereas if he were charged separately with an offence in respect of each alleged statement he would be at liberty to show in respect of some, that they were immaterial and in respect of the others that he believed them to be true. (at p227)

5. I do not, myself, think that any difficulty arises on this score but before dealing with the contention it is not out of place to mention some of the anomalies which would arise if the applicant's contention were accepted. In the first place, it is said, a conviction, or an acquittal, for an offence under s. 43 would not constitute a bar to another prosecution or other prosecutions in respect of other statements in the prospectus which were also found or thought to be false. So that, depending upon the number of false statements made, the penalties prescribed might in the aggregate exceed those for an offence under s. 169 of the Crimes Act (Vict.) where, admittedly, the same line of reasoning cannot be employed to reach the conclusion that that section creates a separate offence in respect of each false material particular. It is plain I should think that the publication of a prospectus, or the concurrence in such publication, which contains any false statement is an offence under that section and a conviction or acquittal on any such charge would be a bar to any further proceedings against the same accused in respect of the same publication even though different particulars of the alleged false statement might be given on a subsequent occasion. Such particulars could not operate to change the substance of the charge and it is clear that the evidence necessary to support such a second charge would have been sufficient to procure a conviction on the first charge. But if we are to accept the applicant's contentions as to the effect of s. 43 an acquittal, or conviction, for the offence created by s. 169 would be no answer to a charge under s. 43 if the false statement alleged was one not particularized in relation to the charge under s. 169. Yet, it should be observed, an acquittal on an earlier charge laid under s. 169, or under s. 43 itself, might rest upon a finding that the accused had not concurred in or authorized the publication of the prospectus or upon failure of the prosecution to establish that he had done so. I find it difficult to conceive that these results were intended. (at p228)

6. However, as already appears, the applicant relies mainly on the apparent literal difficulty arising from the form of the exculpatory words and on this point we were referred to the case of Johnson v. Miller (1937) 59 CLR 467 . There the appellant had been charged in the language of s. 209 (1) of the Licensing Act, 1932-1935 (S.A.), the information alleging that he was the licensee of premises out of which certain persons were seen coming during prohibited hours. It should be mentioned that at the hearing the information was amended by deleting "certain persons" and by substituting therefor "a certain person" and the charge was dismissed by the magistrate, as I understand the case, because the Crown refused to give sufficient particulars concerning the "certain person": the particulars given, in the circumstance, merely indicated, without any further identification, that he was one of some thirty men who had been seen coming out of the premises between 9 a.m. and 10.45 a.m. on the date charged. Additionally, it seems, the prosecutor proposed to give evidence to the effect that some thirty persons had been seen coming out of the premises during this period. Now s. 209 (1) provided that a licensee might exculpate himself if he proved to the satisfaction of the magistrate that the person "(a) was not on the premises for any purpose . . . contrary to the provisions of this Act; or (b) was on the premises contrary to the will of the licensee, . . . and that the licensee . . . took all reasonable steps to prevent the said person from entering the premises and to remove him therefrom; or (c) was on the premises without the knowledge of the licensee, . . . and that the licensee . . . exercised all practicable diligence to prevent the said person from entering or being on the premises." The difficulty in the way of the licensee was that unless the prosecution provided particulars sufficient to enable him to identify the "certain person" it would be impossible to establish whether he fell within any of the three categories. It is true that Dixon J., as he then was, referred to the exculpatory provisions but he did so because, as he said, "No licensee could succeed in bringing the case within any of these grounds of excuse unless the presence or departure of some identifiable person or collection of persons on some distinct occasion constituted the offence from which he must so exculpate himself" (1937) 59 CLR, at pp 483, 484 , and not to reach his conclusion that the section created a separate offence in respect of each person seen leaving the premises during the prohibited hours. So much was clear enough; if one person was seen leaving the premises at 9.5 a.m. it is clear enough that the section operated and if another was seen to leave at 9.20 a.m. it operated again. (at p229)

7. I do not think that the case is of any real help in solving the problem before us. The form of legislation employed in s. 43 is common enough (cf. e.g. Crimes Act (Vict.), s. 169; Companies Act (U.K.), s. 44; Customs Act (Cth), s. 234 (d); and the Income Tax Assessment Act 1936-1966 (Cth), s. 227) and the gist of the offence is authorizing the issue of a prospectus which contains any untrue statement, or, for that matter, any untrue statements. This view finds some support in the observations made by Dixon J. in Hughes v. Phillips (1948) 75 CLR 436, at p 444 . The charge in that case was laid under s. 227 (1) of the Income Tax Assessment Act 1936-1946 (Cth) which provided "that any person who makes or delivers a return which is false in any particular . . . shall be guilty of an offence". However, sub-s. (2) went on to provide that in any prosecution for an offence under that section of a person who had not previously been convicted of an offence against the Act, or against any law of the Commonwealth or of a State relating to income tax, it should be a defence if the defendant proved that the return was prepared or made by him personally and that the false return was made through ignorance or inadvertence. Concerning the charge laid under this section Dixon J. said: "It does not follow that, in a prosecution in which the informant avails himself of the construction which I have just assigned to those words (i.e. 'in any particular'), the magistrate may not, if the interests of justice require it, insist upon the prosecutor giving particulars of the specific items in the return the falsity of which leads to the falsity of the final figure. That is a question upon which he has a discretion which he may exercise in order to see that the defendant knows the case he has to meet and is not taken by surprise or otherwise embarrassed" (1948) 75 CLR, at pp 443, 444 . There was no suggestion that a separate offence was committed in respect of each false particular in spite of the fact that in the Court below Jordan C.J. had held that the information was bad for duplicity. Latham C.J. dealt expressly with this point and said: "Upon appeal to the Full Court, the learned Chief Justice was of opinion that the information was bad for duplicity. The other members of the Bench, Davidson J. and Street J., did not agree with this view. It is true that the charge contained in the information might have been established by showing understatement of income in respect of either the business of motion picture exhibitor or of commissions; but this fact, in my opinion, shows only that the charge made could have been supported by more than one class of evidence and not that several charges were made" (1948) 75 CLR, at p 442 . Indeed all of the members of the High Court must have subscribed to this view because the order was that the conviction be restored. I observe also that this view seems to be implicit in the decision of the Supreme Court of Queensland in Ramm v. Gralow (1932) 2 ATD 6 where the charge was laid under s. 64 of The Income Tax Acts, 1924 to 1930 (Q.). The gist of the offence was the making of the return which included false statements and, to my mind, the gist of the offence on the present case is the authorizing of the issue of a prospectus which contains any untrue statement or statements. I do not think that the exculpatory words - and the textual difficulty which they are said to introduce if the use of the singular word "statement" were to be read as including the plural - should be permitted, against the plain meaning of the earlier words, to control the construction of the section in such a fundamental way. The difficulty disappears if, in the case where a prospectus contains a number of false statements, the exculpatory words are read distributively so that if a number of false statements are particularized the defendant may exculpate himself by proving that some of the statements were immaterial and that the others, being material, he believed to be true. This, in my view, is the true meaning of the section and I would refuse special leave. (at p230)

8. We were informed that there were three other applications pending by the applicant for special leave to appeal from orders of the Supreme Court and it was agreed that precisely the same point was involved in each of them. These applications, also, should be dismissed. (at p230)

MENZIES J. The gist of the offence created by s. 43 of the Companies Act 1958 (Vict.) is the authorization of the issue of a prospectus of a particular character - that is, one containing any untrue statement or wilful non-disclosure. This appears clearly enough in the first part of the section. The section goes on to afford a person charged with an offence thereunder defences to the charge by proving (1) that the untrue statement or wilful non-disclosure was immaterial or (2) that the defendant had reasonable ground to believe and did, up to the issue of the prospectus, believe that the statement was true or the non-disclosure immaterial. The maximum penalty provided for an offence is imprisonment for twelve months, or penalty of 500 pounds, or both. (at p231)

2. The question which has arisen is whether there is one offence, or a multiplicity of offences, when a prospectus of which an accused person has authorized the issue contains more than one untrue statement or wilful non-disclosure. The Full Court of the Supreme Court of Victoria decided that in such circumstances there was but one offence, and I have come to the conclusion that this decision is correct. My reasons for this conclusion can be stated shortly. (at p231)

3. The offence is not making an untrue statement or statements, or wilfully not disclosing what ought to have been disclosed in a prospectus. The statement or non-disclosure which renders punishable the authority to issue a prospectus may be that of some person other than the one who gave that authority - for example, it might appear in the report of an auditor. It is clear, therefore, that the substance of the offence is to be found in giving authority to issue a prospectus containing an untrue statement or a wilful non-disclosure, not in making the statement or in not making the disclosure. The giving of authority is, of course, a single act and the character of the act does not depend in any way upon, or vary with, the number of untrue statements or wilful non-disclosures to be found in the prospectus. Prima facie, therefore, the offence is the same regardless of how many untrue statements or wilful non-disclosures there may be. This prima facie view is, I think, reinforced by the provision of maximum penalties. It is hardly to be thought that if a prospectus contains ten false statements, the maximum penalty for authorizing its issue is not that named in the section, viz. twelve months, or 500 pounds, or both, but is ten years, or 5,000 pounds, or both. Furthermore, it is difficult to accept a construction of the section which would expose a person who has been once punished under the section to further punishment for authorizing the issue of the prospectus merely because it has been found that a statement in the prospectus not relied upon earlier as untrue, can now be proved to be untrue. (at p231)

4. The only basis for giving the section what I would regard as an unnatural and oppressive meaning is that the provisions in the section creating exculpatory defences cannot, in all circumstances, be given their strict literal meaning unless the charge to be faced must be confined to authorizing the issue of a prospectus with a particular untrue statement or wilful non-disclosure. It seems to me, however, that the true meaning of the latter part of the operative provisions of s. 43 is brought out if, after the word "proves", there were to be read "with respect to each false statement or wilful non-disclosure". Such a reading does, I think, do no violence to the language used but rather makes clear what I regard as the true effect of the section. So understood, the latter part of the section does not compel a reading of the whole which, for the reasons given earlier, I am satisfied would be contrary to its true sense. (at p232)

5. Counsel for the appellant relied upon the decision of this Court in Johnson v. Miller (1937) 59 CLR 467 but, in my opinion, that case is clearly distinguishable. That case starts at the point which the appellant here strives to reach. There it could not have been in question that if, for instance, one person were to have been found upon the licensed premises at 9 a.m. and another at 5 p.m. of the same day, two offences would have been committed and to have charged a defendant with the two offences in the one information would have rendered the information bad for duplicity. As Dixon J. said (1937) 59 CLR, at p 483 : "The provision appears to me to impose upon the licensee for each person found upon or seen leaving the premises a distinct liability as for a separate offence." (at p232)

6. I would therefore refuse the application for special leave to appeal against the decision of the Full Court. (at p232)

WINDEYER J. This is an application for special leave to appeal. Counsel for the applicant fully developed the argument which if leave were granted he would present to the Court. I am satisfied that an appeal would fail. I do not wish to add anything to what has been said by others for that conclusion. (at p232)

2. I would dismiss the application. (at p232)

Orders

Applications for special leave to appeal refused with costs.