Spies v The Queen

Case [2000] HCA 43

HIGH COURT OF AUSTRALIA

GAUDRON, McHUGH, GUMMOW, HAYNE AND CALLINAN JJ

PETER MANNERY SPIES  APPELLANT

AND

THE QUEEN  RESPONDENT

Spies v The Queen
[2000] HCA 43
3 August 2000
S263/1999

ORDER

  1. Appeal allowed.

  1. Set aside the orders of the Court of Criminal Appeal dated 17 September 1998.

  1. In lieu thereof order that:

(a)the appellant's appeal to that Court be allowed;

(b)the appellant's conviction under s 176A of the Crimes Act 1900 (NSW) be set aside and direct that a judgment and verdict of acquittal be entered in respect of that charge; and

(c)there be a new trial of the appellant on the charge under s 229(4) of the Companies (New South Wales) Code.

On appeal from the Supreme Court of New South Wales

Representation:

P Menzies QC with C J Bevan for the appellant (instructed by Clinch Neville Long)

P Roberts SC with M A Wigney for the respondent (instructed by Director of Public Prosecutions)

Notice:  This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

CATCHWORDS

Peter Mannery Spies v The Queen

Criminal law – Director charged with defrauding creditors of the company – Alternative charge of improper use of position as director – Conviction on first charge by jury – Conviction set aside by Court of Criminal Appeal – What facts the jury must have been satisfied of from their finding of guilt with respect to the first charge – Whether Court of Criminal Appeal had power to substitute conviction on the alternative charge in the circumstances.

Criminal law – Construction of provision conferring power on the Court of Criminal Appeal to substitute a verdict of guilty of an offence different from the offence which the jury convicted of – Standard of proof required to apply the provision.

Criminal law – Director charged with defrauding creditors of the company – Direction to the jury equated director's intention to hinder or delay the creditors with defrauding – Misdirection.

Criminal law – Elements of offence of defrauding.

Company law – Whether directors by reason of their position owe an independent duty to and enforceable by the creditors.

Words and phrases – "jury must have been satisfied of facts which proved the appellant guilty of other offence", "to defraud", "defrauding".

Companies (New South Wales) Code, s 229(4).
Crimes Act 1900 (NSW), s 176A.
Criminal Appeal Act 1912 (NSW), s 7(2).

  1. GAUDRON,  McHUGH,  GUMMOW  AND  HAYNE  JJ.    The question in  this appeal is whether the Court of Criminal Appeal of New South Wales (Spigelman CJ, Sully and Hidden JJ)[1] erred in exercising its powers under s 7(2) of the Criminal Appeal Act 1912 (NSW) to convict the appellant of an offence against s 229(4) of the Companies (New South Wales) Code ("the Companies Code") after holding that a conviction for an offence against s 176A of the Crimes Act 1900 (NSW) should be set aside.

  2. Section 7(2) of the Criminal…

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AGLC
Spies v The Queen [2000] HCA 43
Case
[2000] HCA 43
Decision Date

CaseChat Overview and Summary

The High Court of Australia heard an appeal by Peter Mannery Spies against a decision of the Court of Criminal Appeal of New South Wales. Spies had been convicted by a jury of defrauding creditors of a company, Sterling Nicholas, and an alternative charge of improperly using his position as a director. The Court of Criminal Appeal had set aside the conviction for defrauding creditors and substituted a conviction for the alternative charge.

The legal issues before the High Court concerned the power of the Court of Criminal Appeal to substitute a verdict of guilty for an offence different from that of which the jury convicted. Specifically, the Court had to determine what facts the jury must have been satisfied of to support the original conviction, and whether those facts necessarily proved the substituted offence. The Court also considered the elements of the offence of defrauding creditors and whether a misdirection had occurred by equating the intention to hinder or delay creditors with defrauding them.

The High Court reasoned that the Court of Criminal Appeal had erred in substituting the conviction. It held that the jury's finding of guilt on the primary charge did not necessarily mean they were satisfied of facts proving the substituted offence. The Court noted that the trial judge's direction to the jury had equated the intention to hinder or delay creditors with defrauding them, which was a misdirection. The Court found that it was not open to the Court of Criminal Appeal to conclude that the jury must have been satisfied of facts proving the appellant guilty of the alternative offence.

Consequently, the High Court allowed the appeal, set aside the orders of the Court of Criminal Appeal, and ordered that the appellant's conviction be set aside with a verdict of acquittal entered. The Court also directed a new trial on the charge of improper use of his position as a director.

Orders

Orders of the court

1.

Appeal allowed.

2.

Set aside the orders of the Court of Criminal Appeal dated 17 September 1998.

3.

In lieu thereof order that:

(a) the appellant's appeal to that Court be allowed;

(b) the appellant's conviction under s 176A of the Crimes Act 1900 (NSW) be set aside and direct that a judgment and verdict of acquittal be entered in respect of that charge; and

(c) there be a new trial of the appellant on the charge under s 229(4) of the Companies (New South Wales) Code.

Background

Background to the litigation

In our opinion, the Court of Criminal Appeal erred in entering a conviction in respect of the s 229(4) charge because it was not open to the Court to hold "that the jury must have been satisfied of facts which proved the appellant guilty of" the s 229(4) offence.The factual background The appellant was one of two directors of Sterling Nicholas. He held 33,750 of the 50,000 issued shares. The other shares in Sterling Nicholas were held by a Mr Newton and his son. The only other director of Sterling Nicholas was a Mr McPherson, an employee of that company. Sterling Nicholas sold duty free items from a number of outlets to overseas travellers. Mr McPherson and the appellant were also directors of Holdings, a company in which the appellant owned 9,999 out of 10,000 issued shares and Mr McPherson owned the remaining share. Holdings had minimal trading activities. Its only asset was a design copyright in relation to two signet rings. At all material times, Sterling Nicholas operated at a loss. For the year ended 30 June 1988 its trading loss was $230,547, and its liabilities exceeded its assets by $361,974. For the year ended 30 June 1989, its trading loss was $1,014,472, and its liabilities exceeded its assets by $1,776,446. During 1989-1990, the appellant owed substantial sums of money to Sterling Nicholas. As at 22 March 1990, he had borrowed from Sterling Nicholas $176,354.80. He had also guaranteed Sterling Nicholas' bank overdraft and had given a mortgage over his home as security for the overdraft debt. The appellant knew the state of the finances of Sterling Nicholas and knew that they were getting worse during the 1989-1990 trading period. He made efforts to sell its business to outsiders but he was unable to do so. A minute of a meeting of directors of Sterling Nicholas, dated 17 October 1989, records a resolution that Sterling Nicholas should purchase all of the issued shares of Holdings for an amount of $500,000. Sterling Nicholas did not have the capacity to pay this sum or any sum for the Holdings shares. Nothing seems to have been done to promote the sale until 30 March 1990, when a minute of a meeting of directors of Sterling Nicholas records a resolution that Sterling Nicholas purchase the appellant's and Mr McPherson's shares in Holdings. The meeting also resolved that, because Sterling Nicholas could not pay for the purchase, an equitable charge would be granted over all of the assets of Sterling Nicholas until the appellant was paid. In addition, the appellant's loan account with Sterling Nicholas was credited with $500,000 being the purchase price of all the shares in Holdings. The result was that the appellant had sold shares in an apparently worthless company for $500,000 and had gone from a substantial debtor of Sterling Nicholas to a secured creditor of that company who was owed $323,645.20. These facts were the basis of the charges against the appellant although the prosecution also relied on certain matters that occurred when the business of Sterling Nicholas was sold to a third party. For present purposes, it is unnecessary to refer to those matters although the appellant's involvement in them must have told heavily against him when the jury were considering the elements of the s 176A charge.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

HUGH, GUMMOW AND HAYNE JJ CALLINAN J
One case which did go against the course of authority in South Australia and correctly refused to apply the South Australian counterpart of s 7(2), was R v Howe[54], where the trial judge had misdirected the jury as to self-defence. The Court of Criminal Appeal said[55]:"[T]he jury, upon a direction in accordance with the law ... would have been called upon to consider whether their verdict should be not guilty or guilty of manslaughter, according to the view they took on the evidence. It may be that if the trial had proceeded in that way, the jury would have refused to acquit the appellant, and found him guilty of manslaughter. But whatever the result may have been upon a proper direction as to self-defence, we are unable to say that on the finding of the jury it appears to us that the jury must have been satisfied of facts which proved the appellant guilty of manslaughter. Indeed, on this aspect of the case, there is no finding of the jury at all, for they were never invited to consider the matters of law and evidence which it would be necessary for them to deliberate upon when considering the possibility of returning a verdict of manslaughter under the heading of self-defence. Consequently, we are not entitled to apply the provisions of s 354(2) of the Criminal Law Consolidation Act [the South Australian equivalent of s 7(2)]."Subsequently, without considering the s 354(2) point, this Court affirmed[56] the decision of the Court of Criminal Appeal ordering a new trial.[54][1958] SASR 95.[55][1958] SASR 95 at 124.[56]Rv Howe (1958) 100 CLR 448. In our opinion, the English decisions should not have been followed in construing the statutes in New South Wales and South Australia. With the exception of Howe[57], all these New South Wales and South Australian cases were wrongly decided, as were the cases on misdirection or non-direction that apply them.[57][1958] SASR 95. A case in this Court, which arguably was wrongly decided, is Pemble v The Queen[58], where the appellant, on his own admission, had killed a woman after approaching her from behind with a loaded, cocked rifle with the intention of frightening her. In Pemble, a majority of the Court (Barwick CJ, McTiernan and Windeyer JJ, Menzies and Owen JJ dissenting) substituted a verdict of manslaughter for murder. They did so on the basis that the facts established manslaughter because the accused had killed the victim in the course of committing an unlawful and dangerous act. However, although the issue of manslaughter was before the jury, manslaughter by unlawful act was not. Barwick CJ concluded that brandishing a loaded, cocked rifle was an unlawful and dangerous act which would make the killing manslaughter and that, as a matter of law, the killing was not accidental even on the accused's account of the facts. That being so, the jury were satisfied of facts that made the killing manslaughter. However, this analysis is open to the criticism made by Menzies J[59] that the unlawfulness of the act leading to death could not be assumed because "it is by no means certain that, until a point had been reached that the girl was frightened by what the accused was doing, the accused committed an assault."[58](1971) 124 CLR 107.[59]Pemble v The Queen (1971) 124 CLR 107 at 134.

Ratio Decidendi

Legal Principle Established

Established by: HUGH, GUMMOW AND HAYNE JJ, CALLINAN J

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