Schreuder v Australian Securities Commission
[1999] TASSC 108
•26 October 1999
[1999] TASSC 108
CITATION: Schreuder v Australian Securities Commission [1999] TASSC
PARTIES: SCHREUDER, Rolf John
v
AUSTRALIAN SECURITIES COMMISSION
TITLE OF COURT: SUPREME COURT OF TASMANIA
JURISDICTION: APPELLATE
FILE NO/S: LCA 26/1998
DELIVERED ON: 26 October 1999
DELIVERED AT: Hobart
HEARING DATE/S: 20, 21, 22, 23, 26, 27 July 1999
JUDGMENT OF: Evans J
CATCHWORDS:
Magistrates - Appeals from and control over magistrates - Tasmania - Motion to review - When remedy available - Unsafe and unsatisfactory ground - Relevance of magistrate's findings of fact and reasoning process in appellate review of the evidence on this ground.
Magistrates - Appeals from and control over magistrates - Tasmania - Motion to review - When remedy available - Review of sentence.
Companies (Tasmania) Code, ss 129, 229, 572(1), 597.
Justices Act 1959 (Tas), ss107, 108(1) and 110(2).
Corporations Law, s597.
Gipp v R (1998) 102 A Crim R 299; Levy v Gray, A11/1996; Ratten v R (1974) 131 CLR 510; R v Burns (1995) 183 CLR 501; Cannane v J Cannane Pty Ltd (1997 - 1998) 192 CLR 557, followed.
Woolley v Turale A45/1996; Darvall v North Sydney Brick & Tile Co Ltd (1989) 16 NSWLR 260, considered.
Aust Dig Magistrates [270]
REPRESENTATION:
Counsel:
Appellant: In person
Respondent: K E Read, I M Arendt
Solicitors:
Appellant: In person
Respondent: Commonwealth Director of Public Prosecutions
Judgment Number: [1999] TASSC 108
Number of Paragraphs: 77
Serial No 108/1999
File No 26/1998
ROLF JOHN SCHREUDER v AUSTRALIAN SECURITIES COMMISSION
REASONS FOR JUDGMENT EVANS J
26 October 1999
The appellant has filed a notice to review appealing against his conviction and sentence on charges of breaching the Companies (Tasmania) Code. He was sentenced to three years' imprisonment, nine months of which were suspended.
Regrettably, this is not the first occasion on which a prosecution of the appellant referable to the events on which the charges are based has been the subject of an appeal. Two earlier prosecutions were dealt with in Australian Securities Commission v Schreuder A79/1994; (1994) 14 ASCR 614 and Schreuder v Australian Securities Commission (1996) 6 Tas R 223.
Ground of appeal
The sole ground for the appeal against conviction is that it was unsafe and unsatisfactory. During the hearing of the appeal, the appellant applied to amend his notice to review by adding grounds that:
The complainant withheld evidence from the court and the defendant; and
Counsel for the defendant failed to exercise due diligence.
I refused the application, as there was no suggestion that either of the proposed grounds involved an allegation of error or mistake of law or fact on the part of the learned chief magistrate.
This Court's jurisdiction in relation to appeals from the court of petty sessions is entirely governed by the statute creating it; Maynard v Rush [1965] Tas SR 233 and Minogue v Mele B8/1987. The judgments of the members of the High Court in Gipp v R (1998) 102 A Crim R 299 emphasise the importance of examining the legislative basis of a court's appellate jurisdiction when considering what can be encompassed by an appeal. See Gaudron J at 306, McHugh and Hayne JJ at 315, Kirby J at 333 - 334, and Callinan J at 344 - 345.
In this case, the relevant statutory provisions are the Justices Act 1959, ss107(1), (2) and (4), 108(1) and 110(2).
The clear effect of these provisions is to confine this Court's jurisdiction to review a court of petty sessions' decision to circumstances where it can be shown that there has been an error or mistake on the part of the magistrate or justice on a matter of fact or law. There is no jurisdiction in relation to a ground of appeal which does not involve the assertion of such an error. See Cleaver v Powell [1979] Tas R 134 at 138 and Webster v White 58/1991.
Unsafe or unsatisfactory conviction
This ground of appeal received detailed consideration in the judgments of the members of the High Court in Gipp (supra). Kirby J at 333 - 334, in summary, said that it would be preferable not to persist with the use of this phrase as a ground of appeal as it may mislead and direct the Court's attention away from the statutory provisions which are the basis of the particular court's appellate jurisdiction. Callinan J, at 344 - 345, said:
"The criminal appeal provisions in this country do not contain the words 'unsafe and unsatisfactory'. Resort to the expression, an 'unsafe and unsatisfactory' verdict, as a ground of appeal should therefore generally be discouraged, but the requirement that Courts of Appeal consider the substance of such a ground when it is properly raised, by an independent assessment of the case remains. Appeals should preferably be framed by reference to the terms of the appeal provisions."
The difficulties inherent in such a general ground of appeal are canvassed by McHugh and Hayne JJ at 312 - 316 and Kirby J at 335 - 337.
I have already mentioned in par6 the statutory provisions which underpin this Court's appellate jurisdiction and confine the jurisdiction to the consideration of an error or mistake on the part of the magistrate or justice on a matter of fact or law. The decisions of the members of the Full Court in Kelly v O'Sullivan (1995) 4 Tas R 446, are authority that an appeal on the ground that a decision is unsafe or unsatisfactory raises the issue of error or mistake on the part of the justices or magistrate and the ground is sufficient to invoke the appellate jurisdiction of this Court.
In my consideration of this appeal, I am assisted by the exposition of Underwood J on the unsafe or unsatisfactory ground of appeal in Levy v Gray, A11/1996 at 2 - 6. I proceed in accordance with the following passage at 4:
"Consistent with general principle and authority it seems to me that appellate review of a conviction imposed by a judicial officer who gives reasons on the ground it is unsafe or unsatisfactory, necessitates a review, not only of the evidence, but also of the judicial officer's views upon that evidence. His findings of fact based on credit should not be disturbed unless there is very good reason to do so, especially when they are based upon the demeanour of the witnesses as they gave their evidence. Similarly, it seems to me consistent with principle that appellate assessment of the evidence must have regard to the expressed reasoning process of the judicial officer who determined the matter at first instance. It would not be possible to be satisfied that the magistrate ought to have entertained a reasonable doubt and that his failure to do so constituted an error of fact without looking at the reasoning process and findings of fact that led to the alleged error. Furthermore, if those findings were ones that were open to be made at first instance, having regard to the fact that there the witnesses were seen in the witness box, they should not be disregarded upon appellate review unless there is cogent reason to do so."
I remain mindful of the following observation in Woolley v Turale A45/1996 of Underwood and Zeeman JJ at 9:
"It must always be remembered that the basis of a review in such a case [an appeal on the ground that a decision is unsafe or unsatisfactory] is error and that the description of the decision as being unsafe and unsatisfactory is merely a description of the result of the error rather than of the error itself …".
My review of the decision in this case has been hampered by the absence of particulars in the notice of review of the matters relied upon by the appellant in support of his contention that the decision is unsafe or unsatisfactory. The importance of the appellant framing issues for determination by the appellate court is referred to in Gipp (supra) by McHugh and Hayne JJ at 313 and Kirby J at 336. The Court is entitled to rely on the appellant to expressly raise the matters to which objection is taken. In this case, as the appellant appeared in person and there had already been considerable delay in the disposal of his appeal, I did not require the appellant to amend his notice to review by detailing appropriate particulars. In my review of the convictions, I have done the best I can to take into account matters raised in the course of the appellant's wide ranging submissions.
Matters raised by the appellant
Numerous assertions were made by the appellant in his written and oral submissions, many of which were not pursued after they had been canvassed in the course of the hearing. I shall not detail them, save to record that the appellant withdrew an assertion that the defence had requested the prosecution to call additional witnesses and put into evidence additional material, and that these requests had been refused. Whilst that assertion was withdrawn, the appellant pursued an associated submission that the learned chief magistrate should himself have called further evidence on particular matters. This submission reflects a fundamental misunderstanding of the role of the judicial officer who presides over a trial. The judicial officer cannot direct the prosecutor to call a witness and the officer only has power to call a witness in the most exceptional circumstances; R v Apostilides (1984) 154 CLR 563 at 575. In the view of Dawson J, even in the most exceptional circumstances, this power can only be exercised with the consent of the parties; Whitehorn v R (1983) 152 CLR 657 at 681. As observed by Barwick CJ in Ratten v R (1974) 131 CLR 510 at 517:
"It is a trial, not an inquisition: a trial in which the protagonists are the Crown on the one hand and the accused on the other. Each is free to decide the ground on which it or he will contest the issue, the evidence which it or he will call, and what questions whether in chief or in cross-examination shall be asked; always, of course, subject to the rules of evidence, fairness and admissibility. The judge is to take no part in that contest …".
Suffice it to say that no exceptional circumstance arose in the course of the hearing which might have warranted the learned chief magistrate to himself call evidence. My view about this is reinforced by the absence of any request by the defence to the prosecutor or the learned chief magistrate that further evidence be called.
Background
In November 1998, Merino Holdings Ltd, a subsidiary of Agricorp Ltd, made a take over offer for Transequity Ltd. The objective of Merino Holdings Ltd was to acquire 100 per cent of the shares in Transequity Ltd in order to obtain control of its three subsidiary companies, Tasman Wine Company Pty Ltd, Transequity Foods Pty Ltd and Transequity Services Pty Ltd ("the subsidiary companies"). It became apparent that Merino Holdings Ltd was not going to receive 100 per cent acceptance of its take over offer. Merino Holdings Ltd's objective could also be achieved by purchasing all of Transequity Ltd's shares in the subsidiary companies. Attention was accordingly given to an alternative arrangement to that end, which also involved Merino Holdings Ltd selling all of the shares it had acquired in Transequity Ltd.
At this time, the appellant was interested in obtaining control of a publicly listed company. He had engaged Credit Lyonnais May Mellor Ltd to help him locate a suitable target. He dealt with Mr Davies, the corporate advisory department manager of that company. The appellant and Mr Davies met with Mr Spring, who was managing the corporate advisory service of the Bank of Singapore. Mr Spring suggested Transequity Ltd as a potential quarry for the appellant and arranged his introduction to Mr O'Brien, the Chairman of that company. In the course of the appellant's meeting with Mr Spring, the appellant inquired whether the Bank of Singapore would lend him the funds he would need to purchase the shares in Transequity Ltd. The appellant explained to Mr Spring that the loan would be for a short period, sufficient for him to get the funds out of Transequity Ltd he needed to pay for the shares. He said this would be done simultaneously with the take over of the company. The Bank of Singapore did not lend any funds to the appellant.
The appellant's introduction to Mr O'Brien led to a written agreement dated 4 April 1989 between Agricorp Ltd, Merino Holdings Ltd and Elective Pty Ltd (another subsidiary of Agricorp Ltd) on the one part ("the vendors") and the appellant or his nominee on the other part. By the agreement, the appellant or his nominee agreed to purchase all the shares and options owned by the vendors in Transequity Ltd. The bulk of the shares were owned by Merino Holdings Ltd. I will refer to this agreement as the Transequity purchase agreement. By a contemporaneous agreement ("the subsidiaries' sale agreement"), Transequity Ltd agreed to sell to Agricorp Ltd, or its nominee, all of Transequity Ltd's assets, primarily its interest in the subsidiary companies, for a total consideration of $7,000,000.
The Transequity purchase agreement was subject to conditions precedent which included:
· the passing of resolutions by the members of Transequity Ltd approving the subsidiaries' sale agreement and the vendors' sale of their Transequity Ltd shares to the appellant or his nominee; and
· completion of the subsidiaries' sale agreement.
The appellant nominated Associated Holdings Ltd, all the shares in which were beneficially owned by him, as his nominee for the purposes of the Transequity Ltd purchase agreement. Agricorp Ltd nominated Merino Holdings Ltd as the purchaser pursuant to the subsidiaries' sale agreement.
In summary, the outcome to be achieved upon the settlement of the agreements was:
· the transfer of the vendors' shares in Transequity Ltd to Associated Holdings Ltd for a consideration of upwards of $6,156,000 paid to Merino Holdings Pty Ltd; and
· the transfer of Transequity Ltd's interest in its subsidiary companies to Merino Holdings Ltd for a consideration of $7,000,000, paid to Transequity Ltd.
Notice was given of a general meeting of Transequity Ltd to be held on 9 June 1989 for the purposes of considering the resolutions which needed to be passed if the agreements were to proceed. Information provided to shareholders in relation to the meetings included the following:
(As to the subsidiaries' sale agreement)
"Transequity entered into an agreement on 28th April 1989 with Agricorp Limited or its nominee ('Agricorp') (the 'Subsidiaries Sale Agreement') pursuant to which Transequity agreed, subject to obtaining shareholder approval, to sell all of its assets to Agricorp, being shares in Transequity Services Pty Ltd, Tasman Wine Company Pty Ltd and Transequity Foods Pty Ltd ('the Subsidiaries') loans, office equipment, furniture and fittings ('the Assets'). In addition, Agricorp Limited agreed to assume liability to certain creditors of Transequity for an aggregate amount not exceeding $108,543. The Subsidiaries Sale Agreement is conditional upon the resolutions set out in the Notice of Meeting being approved by shareholders.
The proposed consideration for the sale of the Assets is $7,000,000 which is made up of $300,009 plus the sum of $6,699,991 in full repayment and satisfaction of all outstanding loans made by Transequity to the Subsidiaries."
(As to the Transequity purchase agreement)
"Merino Holdings Limited, a wholly owned subsidiary of Agricorp Limited is presently entitled to approximately 90.7% of the issued fully paid shares in the capital of Transequity. There is still a current takeover offer by Merino Holdings Limited to acquire all of the fully paid shares in Transequity. The offer is due to expire on 17 May, 1989 but will be extended by Merino Holdings Limited until the date of the Meeting.
By an agreement dated 4 April 1989 (as amended by an Amending Agreement dated 28 April 1989) between Agricorp Limited, Merino Holdings Limited, Elective Pty Ltd and Rolf J Schreuder or his nominee ('the Sale Agreement'), Merino Holdings Limited agreed, subject to obtaining shareholder approval, to sell all of the fully paid ordinary shares which it holds in the capital of Transequity to Rolf J Schreuder or his nominee. On 11 April 1989, Rolf J Schreuder nominated Associated Holdings Limited as his nominee.
If Resolution No 2 in the accompanying Notice of Meeting is approved by shareholders, Associated Holdings Limited will acquire all the shares held by Merino Holdings Limited in Transequity. The number of shares sold will be 16,322,600 fully paid shares plus any further shares which Merino Holdings Limited acquires pursuant to its current takeover offer and will include all shares in Transequity acquired up to 6.00pm on the day of the General Meeting.
The purchase price to be paid for the shares by Associated Holdings Limited is $6,156,500 for 15,832,600 shares and for each share in excess of 15,832,600, 42.02 cents per share. Associated Holdings Limited will then be entitled to at least 90.7% of the fully paid shares in Transequity. At present, Associated Holdings Limited does not have an entitlement to any shares in Transequity."
The subsidiaries' sale agreement and the Transequity purchase agreement were completed on 16 June 1989. Three of the charges against the appellant relate to what then occurred. Count 8 alleges that at the time of completion, the appellant was a director of Transequity Ltd and he breached the Code, s129(5), in that he was knowingly involved in Transequity Ltd directly financing dealings in its own shares. Count 12 alleges that by reason of the appellant's involvement in what occurred he improperly used his position as an officer of Transequity Ltd in breach of the Code, s229(4). Count 14 alleges he failed to act honestly in the exercise of his power as an officer of a corporation in breach of the Code, s229(1)(b).
There are ten further charges of breaching the Code, s229(4), contained in Counts 18 - 20, 22 - 27 and 29. These charges relate to events which occurred between 16 June 1989 and 11 August 1989. It is pertinent to an assessment of the appellant's conduct during this period that whilst, via Associated Holdings Ltd, he became the owner of a substantial majority of the shares in Transequity Ltd, he did not own all the shares. Upon completion of the Transequity purchase agreement, Associated Holdings Ltd acquired about 90.7 per cent of Transequity Ltd's fully paid ordinary shares. Associated Holdings Ltd also acquired options and partly paid shares in Transequity Ltd. Subject to exercising the options and converting the partly paid shares into fully paid shares, it was open to Associated Holdings Ltd to increase its fully paid shareholding in Transequity Ltd to 94.8 per cent. It appears from a director's report dated 16 November 1989, signed by the appellant, that this was done on 1 August 1989 and accordingly that by that date the minority shareholding in Transequity Ltd had been reduced from about nine per cent to about five per cent. The director's report forms part of Transequity Ltd's 1989 annual report, which also includes a statement of shareholders as at 31 October 1989. That statement shows that there were many shareholders besides Associated Holdings Ltd in Transequity Ltd.
Corporations Law, s597(12)
Before turning to the individual charges, I deal with one matter in relation to the evidence. The evidence before the learned chief magistrate included 844 pages of transcript of the public examination of the appellant pursuant to the Corporations Law, s597. That examination was conducted before Zeeman J in late 1991 and early 1992. The Corporations Law, s597(12), provides:
"[Incriminating evidence] A person is not excused from answering a question put to him or her at an examination held pursuant to an order made under subsection (3) on the ground that the answer might tend to incriminate him or her but, where the person claims, before answering the question, that the answer might tend to incriminate him or her, neither the answer, nor any information, document or other thing obtained as a direct or indirect consequence of the person giving the answer, is admissible in evidence against the person in criminal proceedings other than proceedings under this section or other proceedings in respect of the falsity of the answer."
On a number of occasions in the course of the appellant's public examination, he claimed that an answer might tend to incriminate him. Instances are when he was questioned about:
· Why he drew a cheque for $6,857,589.20 against Transequity Ltd's bank account in favour of Merino Holdings Ltd on 16 June 1989 and whether he knew when he wrote that cheque that it was drawn against the Transequity Ltd account.
· How the transaction by which Associated Holdings Ltd purchased the Transequity Ltd shares was effected.
· Whether Associated Holdings Ltd had the resources to pay for the Transequity Ltd shares and options it was acquiring from Merino Holdings Ltd and Elective Pty Ltd.
· What a cheque for $12,500 made payable to Claren Park Pty Ltd was for.
Questions which elicited a claim from the appellant that they might incriminate him, and his answers to those questions, were not omitted from the transcript which was put into evidence. They should have been excised as, pursuant to the Corporations Law s597(12), they were not admissible in evidence against the appellant. In my review of the appellant's convictions, I have paid no regard to these portions of the transcript.
I turn to the charges.
Count 8
"charge: Knowingly concerned in a company directly financing dealings in its own shares
breach of: Section 129(5) of the Companies (Tasmania) Code
particulars: that on or about the 16th day of June 1989 Rolf John Schreuder, whilst being a director of Transequity Ltd ACN 009 558 285 ('the Company') was knowingly concerned in the Company directly giving financial assistance in the sum of $6,857,589.20 to Associated Holdings Limited for the purpose of Associated Holdings Limited acquiring shares and units of shares in the Company, namely 16,658,600 fully-paid 25 cent ordinary shares in the capital of the Company, 9,000,000 partly-paid 25 cent ordinary shares in the capital of the Company and 5,400,000 options to acquire one fully-paid ordinary 25 cent share in the capital of the Company for 50 cents from Agricorp Limited, Merino Holdings Limited and Elective Pty Limited."
The Code, s129(1) and (5), provides:
"(1) Except as otherwise expressly provided by this Code, a company shall not ¾
(a)whether directly or indirectly, give any financial assistance for the purpose of, or in connection with ¾
(i) the acquisition by any person, whether before, or at the same time as, the giving of financial assistance, of ¾
(A)shares or units of shares in the company; or
(B)shares or units of shares in a holding company of the company; or
(ii) the proposed acquisition by any person of ¾
(A)shares or units of shares in the company; or
(B)shares or units of shares in a holding company of the company;
…
(5) If a company contravenes subsection (1), the company is, notwithstanding section 570, not guilty of an offence but each officer of the company who is in default is guilty of an offence."
The Code, s572(1), provides:
"(1) Where a provision of this Code provides that an officer of a corporation or other person who is in default is guilty of an offence, the reference to the officer or other person who is in default shall, in relation to a contravention of, or failure to comply with, the provision, be construed as a reference to any officer of the corporation (including a person who subsequently ceased to be an officer of the corporation) or any person, as the case may be, who is in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention or failure."
In Darvall v North Sydney Brick & Tile Co Ltd (1989) 16 NSWLR 260 Kirby P, at 292, said the following when rejecting a submission that s129 should be narrowly and strictly construed:
"To take too narrow an approach to the section would ignore and frustrate the achievement of its clear purpose. Relevantly, that is to ensure that those who acquire shares in a company do so from their own resources and not with the help of the company itself: see Burton v Palmer [1980] 2 NSWLR 878 at 886. As Lord Denning pointed out in Wallersteiner v Moir [1974] 1 WLR 991 at 1014; [1974] 3 All ER 217 at 238, financiers have used 'sophisticated methods' to get around the legislative prohibition, as originally expressed:
'… You have only to look at [the] cases … to see the devices which they use. Circular cheques come in very handy. So do puppet companies. The transactions are extremely complicated, but the end result is clear. You look to the company's money and see what has become of it. You look to the company's shares and see into whose hands they have got. You will then soon see if the company's money has been used to finance the purchase.'
Nothing would so clearly reward such 'sophisticated methods' and defeat the apparent purpose of Parliament than to adopt the construction urged for the respondents.
There are other reasons for rejecting the respondents' submissions. Under s129(5) of the Code, the company commits no criminal offence. It is the officers of the company who are liable under the subsection. And by s572(1) of the Code, it must be proved, in order to secure a conviction, that the officer was 'knowingly concerned in or a party to the contravention or failure'.
I therefore approach the construction of s129 with a view to giving the words used their ordinary language and to achieving, so far as those words permit, the apparent purpose of the legislature."
Whilst I approach this matter with those comments in mind I should say that I have not found the transaction under consideration to be particularly sophisticated or complicated. It is not difficult to establish what happened to Transequity Ltd's money and who got the shares.
The appellant or his nominee was the purchaser pursuant to the Transequity purchase agreement. That agreement detailed the procedure to be followed on the date when the transaction was completed. This included the holding of a board meeting at which the then current Transequity Ltd directors resigned and were replaced by such persons as the appellant or his nominee nominated. The requisite meeting took place on the morning of 16 June 1989. The outgoing company secretary, Mr Steele, was present at the meeting. He was called as a witness before the learned chief magistrate. He confirmed what is recorded in the minutes of that meeting, that is, that the appellant, Mr Andrea and Ms Billinge, were appointed as directors of Transequity Ltd in place of the former directors who resigned. This occurred prior to settlement of the sale and purchase of the Transequity Ltd shares. This evidence that the appellant was a director of Transequity Ltd before the settlement is supported by other evidence and there is no contrary evidence.
Prior to the settlement, the appellant had opened an account for Transequity Ltd with the Commonwealth Bank of Australia ("CBA") at its 367 Collins Street, Melbourne branch. The settlement took place at that branch on 16 June 1989. The appellant was the sole signatory to the account.
The amount payable for the shares and options in Transequity Ltd being purchased from Merino Holdings Ltd and Elective Pty Ltd was calculated at $6,857,589.20. For the purposes of the settlement, the appellant signed a cheque drawn against Transequity Ltd's new CBA account in favour of Merino Holdings Ltd for the above amount. That cheque was used to obtain a CBA bank cheque for the same amount payable to Merino Holdings Ltd. When these cheques were drawn, there were not sufficient funds in Transequity Ltd's new CBA account to meet a payment of $6,857,589.20. There had been no operations on the account prior to 16 June 1989 and, apart from the payment of $6,973,351.68 subsequently received by Transequity Ltd from Merino Holdings Ltd for the sale of its interest in its subsidiary companies, the only payment into the account was a deposit of $5,000. Plainly, CBA's bank cheque for $6,857,589.20 was not going to be released until the funds to be received by Transequity Ltd from Merino Holdings Ltd, pursuant to the subsidiaries' sale agreement were in hand for crediting to Transequity Ltd's CBA account.
The following people were involved in the settlement:
· Mr Schreuder for Transequity Ltd.
· Mr Hosking, a CBA new accounts officer, at the 367 Collins Street branch.
· Mr O'Brien, the former chairman of Transequity Ltd and the chairman of Merino Holdings Ltd.
· Ms Edgar, a solicitor representing Merino Holdings Ltd.
· Mr Scott and Mr Ludeman, officers of the National Australia Bank ("NAB") employed at its Stock Exchange branch in Queen Street, Melbourne, the branch where Merino Holdings Ltd banked.
Mr Scott and Mr Ludeman gave evidence. Mr Scott said of the transaction which was being settled that Transequity Ltd was being sold by our client (a reference to Merino Holdings Ltd) and our client was purchasing the assets of Transequity Ltd. Mr Scott and Mr Ludeman took to the settlement two NAB bank cheques for a total amount of $6,973,351.68 drawn against the account of Merino Holdings Ltd. That was the amount payable to Transequity Ltd pursuant to the subsidiaries' sale agreement. They attended the settlement on the basis that the cheques would only be handed over when they were satisfied they had received in return clear funds to be credited to the account of Merino Holdings Ltd.
For the purposes of the settlement, Mr Steele, the company secretary of Merino Holdings Ltd and the former company secretary of Transequity Ltd, had been involved in calculating the number of shares in Transequity Ltd being sold by Merino Holdings Ltd to Associated Holdings Ltd. He had also prepared the necessary share transfer forms. He was unable to attend the settlement. He handed the transfers to Mr O'Brien and Ms Edgar, who took them to the settlement.
Mr Schreuder attended the settlement with a document which can best be described as a settlement agenda. It had been prepared for him by solicitors. The agenda recorded matters to be attended to at the settlement, including obtaining from the vendors the share certificates being purchased and related share transfers.
At the settlement, Mr Scott and Mr Ludeman declined to accept the CBA bank cheque for $6,857,589.20, in payment for the Transequity Ltd shares. They wanted to ensure that clear funds were received for the shares and that in the words of Mr Ludeman "there would be no stops or any problems with the bank cheque". They requested that in lieu of the cheques, the CBA provide them with a bank warrant. A warrant is a voucher used for bank to bank transactions. Mr Hosking arranged the preparation of the requested warrant. He had previously checked that the amount being debited to Transequity's account would be covered by the NAB bank cheques to be received by Transequity Ltd from Merino Holdings Ltd. The warrant was handed to Messrs Scott and Ludeman in exchange for the NAB bank cheques for a total of $6,973,351.68 which was credited to Transequity's CBA account. Messrs Scott and Ludeman returned to the NAB where the amount of the warrant was credited to the account of Merino Holdings Ltd and that account was then debited with the two bank cheques which had been handed over at the settlement.
The evidence before the learned chief magistrate was that Transequity Ltd paid $6,857,589.20 to Merino Holdings Ltd for the Transequity Ltd shares transferred to Associated Holdings Ltd. The inescapable conclusion to be drawn from this evidence is that Transequity Ltd provided financial assistance of that amount to Associated Holdings Ltd in connection with the purchase of Transequity Ltd shares and that the appellant, an officer of Transequity Ltd, was knowingly involved in what occurred. Nothing said by the appellant in the course of his public examination suggested otherwise, and much of what he said supports the conclusion I have reached. It is apparent from the evidence of Mr Spring, referred to in par16, that from the outset, the appellant had in mind using Transequity Ltd's funds to pay for its shares.
The appellant submits that Transequity Ltd's provision of finance in connection with the purchase of its shares is exempted from the operation of the Code, s129(1) by the Code, s129(9)(a), which provides:
"(9) Nothing in sub-section (1) prohibits ¾
(a) the making of a loan, the giving of a guarantee or the provision of security by a company in the ordinary course of its ordinary business where ¾
(i)that business includes the lending of money, or the giving of guarantees or the provision of security in connection with loans made by other persons; and
(ii)the loan that is made by the company, or, where the guarantee is given or the security is provided in respect of a loan, that loan, is made on ordinary commercial terms as to the rate of interest, the terms of repayment of principal and payment of interest, the security to be provided and otherwise."
As I understand the appellant, he contends that in paying for the shares purchased by Associated Holdings Ltd, Transequity Ltd was making a loan which is covered by the exemption created by s129(9)(a). In support of this submission, the appellant refers to evidence that the business activities of Transequity Ltd included the making of loans. The submission is without merit. There is no evidence that the payment was a loan to Associated Holdings Ltd made by Transequity Ltd in the ordinary course of its ordinary business or that it was a general loan as distinct from a loan directed to the acquisition of its shares. There are limited circumstances in which a loan by a company for the purchase of its shares comes within the exemption created by the Code, s129(9)(a). To do so, the financial assistance ordinarily needs to be made in a general manner, rather than in a manner directed to the acquisition of shares in the company providing the financial assistance; Steen v Law [1964] AC 287. There was also no evidence to suggest that such loan as the appellant asserts was made, was made on ordinary commercial terms as to the rate of interest and the terms of payment; this is required by s129(9)(a)(ii). The onus of establishing that the exemption applies is on the appellant; Ex parteD (1995) 17 ACSR 52. The appellant made no headway towards discharging that onus.
I am not persuaded that the appellant's conviction on count 8 is unsafe or unsatisfactory.
Count 12
"charge: Improper use of position as an officer of a corporation.
breach of: Section 229(4) of the Companies (Tasmania) Code
particulars: that on the 16th day of June 1989 Rolf John Schreuder as an officer of a corporation, named Transequity Ltd ACN 009 558 285 ('the Company') did make improper use of his position as such an officer to gain directly an advantage for Associated Holdings Limited in that as a director of the Company he withdrew $6,857,589.20 from the Company's account number 3000 361643 with the Commonwealth Bank of Australia at its branch at 367 Collins Street, Melbourne in Victoria, which sum he paid to Merino Holdings Limited ('Merino') for the purpose of having 16,658,600 fully paid 25 cent ordinary shares in the capital of the Company, 9,000,000 partly-paid 25 cent ordinary shares in the capital of the Company and 5,400,000 options to acquire one fully-paid ordinary 25 cent share in the capital of the Company for 50 cents transferred from Merino and Elective Pty Limited to Associated Holdings Limited."
The Code, s229(4) provides:
"(4) An officer or employee of a corporation shall not make improper use of his position as such an officer or employee, to gain, directly or indirectly, an advantage for himself or for any other person or to cause detriment to the corporation.
Penalty: $20,000 or imprisonment for 5 years, or both."
The appellant drew a cheque for $6,857,589.20 against Transequity Ltd's bank account in favour of Merino Holdings Ltd. This enabled that amount to be paid to Merino Holdings Ltd, via a bank warrant, for the Transequity Ltd shares transferred to Associated Holdings Ltd. The appellant attended the settlement when this occurred. At the time, the appellant was a director of Transequity Ltd and as such, an officer of that company; the Code, s229(5). By so acting, was the appellant making improper use of that position for the purposes of gaining an advantage for Associated Holdings Ltd or himself, or disadvantaging Transequity Ltd?
The test of impropriety is objective; Chew v R (1991) 173 CLR 626 and R v Yuill (1994) 15 ACSR 95:
"Impropriety does not depend on an alleged offender's consciousness of impropriety. Impropriety consists in a breach of the standards of conduct that would be expected of a person in the position of the alleged offender by reasonable persons with knowledge of the duties, powers and authority of the position and the circumstances of the case." (R v Burns (1995) 183 CLR 501 at 514 - 515).
It is not necessary for the prosecution to establish actual advantage to the appellant or Associated Holdings Ltd or actual detriment to Transequity Ltd. The words "to gain" in s229(4) mean "in order to gain". They are purposive and make it an element of the offence that the appellant engaged in the conduct in order to achieve any of the specified outcomes. It does not matter whether the outcome was in fact achieved. What must be proved is that the appellant intended the particular outcome and believed it would be an advantage to Associated Holdings Ltd, or himself, or a detriment to Transequity Ltd; Chew v R (supra) at 630 - 634 and ASC v Schreuder (1994) 14 ACSR 614 at 627 - 629; A79/1994 at 13 - 15.
The appellant initiated and supervised the use of Transequity Ltd's funds to pay for the Transequity Ltd shares transferred to Associated Holdings Ltd. The unavoidable conclusion is that his objective was to use the funds to that end and that he believed that he and Associated Holdings Ltd would thereby be advantaged. Transequity Ltd having received $6,973,351.68 for the sale of its assets pursuant to the subsidiaries' sale agreement, all but about $116,000 of that amount was paid out for Associated Holdings Ltd's purchase of Transequity Ltd shares. Transequity Ltd lost control of the $6,857,589.20 paid to the benefit of Associated Holdings Ltd. The appellant did not give evidence or adduce evidence before the learned chief magistrate. There was no evidence to suggest other than what seems patent from what occurred, that is, that Transequity Ltd was disadvantaged by the transaction.
Viewed objectively the appellant's conduct was improper. What occurred contravened the Code, s129(1) and advantaged the appellant and his wholly owned company, Associated Holdings Ltd to, the detriment of Transequity Ltd.
I am not persuaded that the appellant's conviction on count 12 is unsafe or unsatisfactory.
Count 14
"charge: An officer of a corporation failing to act honestly in the exercise of his power
breach of: Section 229(1)(b) of the Companies (Tasmania) Code
particulars: that on the 16th day of June 1989 Rolf John Schreuder as an officer of Transequity Ltd ACN 009 558 285 ('the Company') failed to act honestly in the exercise of his power in the discharge of his office in that as a director of the Company he did with intent to defraud the company and the members of the Company withdrew $6,857,589.20 from the Company's account number 3000 361643 with the Commonwealth Bank of Australia at is branch at 367 Collins Street, Melbourne in Victoria, which sum he caused to be paid to Merino Holdings Limited ('Merino') for the purpose of having 16,658,600 fully-paid 25 cent ordinary shares in the capital of the Company, 9,000,000 partly-paid 25 cent ordinary shares in the capital of the Company and 5,400,000 options to acquire one fully-paid ordinary 25 cent share in the capital of the Company for 50 cents transferred from Merino and Elective Pty Limited to Associated Holdings Limited."
The Code, s229(1) provides:
"(1) An officer of a corporation shall at all times act honestly in the exercise of his powers and the discharge of the duties of his office.
Penalty:
(a) in a case to which paragraph (b) does not apply ¾ $5,000; or
(b) where the offence was committed with intent to deceive or defraud the company, members or creditors of the company or creditors of any other person or for any other fraudulent purpose ¾ $20,000 or imprisonment for 5 years, or both."
In determining whether the appellant acted honestly in the exercise of his powers as a director of Transequity Ltd, it is necessary to consider his knowledge and intentions at the time of the impugned actions and determine whether, by so acting, he acted dishonestly based on the standards of ordinary, decent people; Peters v R (1998) 192 CLR 493, Toohey and Gaudron JJ at 503 - 504.
The expression "with intent to defraud" does not have any universal connotation applicable in all statutory contexts; Balcombe v De Simoni (1971 - 1972) 126 CLR 576 at 582. I am, however, assisted as to the meaning of the expression by the following passage from the decision of Dixon CJ in Hardie v Hanson (1960 - 1961) 105 CLR 451 at 456:
"The phrase 'intent to defraud creditors of the company' suggests that present or future creditors of the company will, if the intent is effectuated, be cheated of their rights. An intent to defraud creditors has been described, for the purposes of bankruptcy legislation, as an intent by deceit to deprive creditors of something to which they are entitled."
This passage was referred to with favour in Cannane v J Cannane Pty Ltd (1997 - 1998) 192 CLR 557 at 567 and 578. Gaudron J, at 571 - 572, said:
"It is notoriously difficult to provide an exhaustive statement as to what is involved in the concepts of 'fraud' and 'intent to defraud'. 'Fraud' involves the notion of detrimentally affecting or risking the property of others, their rights or interests in property, or an opportunity or advantage which the law accords them with respect to property."
In Peters v R (supra) at 508, Toohey and Gaudron JJ said:
"Ordinarily, however, fraud involves the intentional creation of a situation in which one person deprives another of money or property or puts the money or property of that other person at risk or prejudicially affects that person in relation to 'some lawful right, interest, opportunity or advantage', knowing that he or she has no right to deprive that person of that money or property or to prejudice his or her interests."
Within the Code, s229(1), the elements of "failing to act honestly" and acting "with intent to defraud … or for any other fraudulent purpose" overlap. An allegation of an intent to defraud contains an ingredient of dishonesty; R v Cox & Hodges (1982) 75 Cr App R 291 (CA). The meanings of the terms "fraudulently" and "dishonestly" are, to a significant degree, interchangeable; R v Glenister [1990] 2 NSWLR 597 at 609 (CCA).
I have already expressed agreement with the learned chief magistrate's decision that the appellant's conduct in relation to the withdrawal of $6,857,589.20 from Transequity Ltd's account was improper. At the relevant time he was acting as a director of the company. I also agree with the learned chief magistrate's decision that the appellant's actions were dishonest. I am in no doubt that when he dealt with Transequity Ltd funds as he did, he was aware that the Code, s129(1) was being breached and that he intended that his actions would benefit himself and Associated Holdings Ltd to the detriment of Transequity Ltd and its members. By the standards of ordinary, decent people, what he did was dishonest. My review of this matter satisfies me that the appellant dishonestly and intentionally acted in a manner which disadvantaged Transequity Ltd and its members and that he acted with intent to defraud them.
For these reasons, I am not persuaded that the appellant's conviction on count 14 is unsafe or unsatisfactory.
Counts 18, 19, 20, 22, 23, 24, 25, 26, 27 and 29
Each of these counts is a charge that the appellant improperly used his position as an officer of Transequity Ltd in breach of the Code, s229(4).
About $116,000 of the funds received from the sale of Transequity Ltd's subsidiary companies remained in its CBA account after $6,857,589.20 had been paid out for the purposes of Associated Holdings Ltd's share purchase. These further charges appertain to payments made out of this account on cheques drawn by the appellant.
Count 18 relates to a deposit of $27,500 paid pursuant to an agreement to purchase the appellant's home. The appellant had defaulted under a mortgage he had given over his home. The mortgagee auctioned the home. Mr Andrea, who was also a director of Transequity Ltd, was the successful bidder at the auction. The appellant drew a cheque on Transequity Ltd's account in payment of the deposit. Whilst the deposit was ultimately forfeited, the effect of this failed transaction was to enable the appellant to remain in occupation of the home for an extended period.
Count 19 relates to a payment of $10,000 to a law firm. The payment was made in order to help Mr Andrea avoid going bankrupt.
Count 20 relates to a payment of $12,500 to Claren Park Pty Ltd. I will return to this payment later.
Count 22 relates to a payment of $5,000 for shares purchased for the benefit of the appellant and his family.
Count 23 relates to $16,000 paid to Credit Lyonnais May Mellors Ltd in reduction of a liability of the appellant or Associated Holdings Ltd.
Counts 24, 25, 26, 27 and 29 respectively related to payments of $1,000, $2,000, $5,000, $7,000 and $4,250 credited to the bank account of Presentation Property and Finance Pty Ltd. That company had a paid up capital of $2. The appellant and Mr Andrea respectively owned one of the two shares in the company. The making of the payments enabled the appellant to draw cheques against the bank account of Presentation Property and Finance Pty Ltd for his own purposes as distinct from the purposes of Transequity Ltd.
The learned chief magistrate delivered extensive reasons for convicting the appellant on these counts. I will not repeat them, they run to 29 pages. They contain an error of no consequence in relation to count 18 where the amount of $12,500 was transposed for the actual amount of the payment which is the subject of that count, $27,500. They also deal with a further charge, count 28, which the learned chief magistrate was wrongly informed was before him. In fact, the appellant had been acquitted on that charge on an earlier occasion. The error was adverted to before the appellant was sentenced. That charge related to a payment of $850 out of Transequity Ltd's CBA bank account to Presentation Property and Finance Pty Ltd. I am satisfied that the learned chief magistrate's consideration of that charge did not contaminate or adversely impact on his assessment of the evidence on the charges that were properly before him and the soundness of his reasons for conviction on those charges.
In his consideration of count 20, the learned chief magistrate referred to evidence the appellant had given about the payment of $12,500 to Claren Park Pty Ltd in the course of his public examination. On one occasion, when questioned about what the cheque was for, the appellant said that he claimed privilege (transcript 618). When this question was pursued he, in substance, said the cheque was in repayment of a loan of $10,000 he had received from Mrs Hobson, the woman who stood behind Claren Park Pty Ltd, plus interest. I take the appellant's claim of privilege prior to giving the above answer to have been a claim to the protection provided by the Code, s597(12), on the ground that his answer to the question might incriminate him. As to that provision, I refer to pars24 - 26 above. That protection having been claimed, regard should not have been paid to the appellant's answer. Insofar as the learned chief magistrate considered that answer, in my respectful view, he erred.
The appellant's admissible evidence about the payment was that it was for fees and that he could not recall what they were for. When pressed, the appellant said that Claren Park Pty Ltd provided advice about blood-stock, specifically horses. He said that the payment was for advice he had received since the early 1980s which was long prior to his involvement in Transequity Ltd. He acknowledged that Transequity Ltd had not incurred any liability to Claren Park Pty Ltd for the fees and, in substance, said that Transequity Ltd had paid the fees because it was going to benefit from the past advice he had received. The appellant also acknowledged that Mrs Hobson had lent him $10,000 to assist him to buy a property and that that amount, and interest, had been outstanding when the payment was made. As to delivery of the cheque to Claren Park Pty Ltd, the appellant said he had given Mrs Hobson the cheque when he had gone to visit her in Adelaide. He said he told her he had some money for her and gave her the cheque without her asking for it.
Confining myself to the admissible evidence given by the appellant in relation to the payment, I conclude that it was made in discharge of a personal liability he had to Claren Park Pty Ltd dating back to the early 1980s and that there may have been some connection between the payment and a loan of $10,000 which Mrs Hobson had made to him. In either case, the payment was made by the appellant out of the funds of Transequity Ltd for his personal benefit. His conduct, objectively viewed, was an improper use of his position as an officer of Transequity Ltd. In result, relying on different evidence than the evidence upon which the learned chief magistrate based his decision, I conclude that the appellant was properly convicted on count 20 and that this conviction should not be set aside as being unsafe or unsatisfactory.
Having reviewed the learned chief magistrate's reasons for convicting the appellant on charges 18 - 20, 22 - 27 and 29 and the relevant evidence, subject to the matters which I have mentioned, I agree with his reasons for convicting the appellant. I am not persuaded that the appellant's conviction on these charges was unsafe or unsatisfactory.
I dismiss the appeal against conviction.
Sentence
The learned chief magistrate imposed a general penalty of three years' imprisonment for the appellant's 13 offences. Nine months of the sentence was suspended on condition that the appellant be of good behaviour during the two year period following his release from prison.
The appellant appeals against the sentence on the grounds that it is manifestly excessive.
The effect of the appellant's conduct was to strip a public company of its assets, to the benefit of himself and to the detriment of its minority shareholders. His conduct was a premeditated breach of his obligations as a director of the company over a period of about two months. In a general sense, his behaviour amounted to a breach of trust. The acquisition of Transequity Ltd's shares required considerable planning and guile. The appellant had ample time to have second thoughts about what he was doing and to change course.
A substantial sentence of imprisonment was required for reasons of general deterrence, as well as personal deterrence. As to the latter, it is pertinent that the appellant had a relevant prior conviction. The appellant had shown no sign of remorse.
Other relevant matters were the appellant's personal circumstances, the lapse of time between the offences and his conviction and his good conduct since the date of the offences.
In the light of these matters, I am of the view that the sentence imposed was an appropriate penalty. It was not manifestly excessive. The appeal is dismissed.
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