Waters v Diesel Holdings Pty Ltd
[2024] VSCA 77
•29 April 2024
| SUPREME COURT OF VICTORIA COURT OF APPEAL |
| S EAPCI 2023 0088 |
| JOSHUA ROY WATERS | First Applicant |
| and | |
| JRW ENTERPRISES PTY LTD (ACN 622 752 943) as trustee for THE J R WATERS FAMILY TRUST | Second Applicant |
| v | |
| DIESEL HOLDINGS PTY LTD (ACN 145 993 326) AS TRUSTEE FOR THE DANIEL BAXTER FAMILY TRUST | First Respondent |
| AND | |
| DANIEL JOHN BAXTER | Second Respondent |
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| JUDGES: | FERGUSON CJ, WALKER JA and GINNANE AJA |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 10 April 2024 |
| DATE OF JUDGMENT: | 29 April 2024 |
| MEDIUM NEUTRAL CITATION: | [2024] VSCA 77 |
| JUDGMENT APPEALED FROM: | [2023] VSC 455 (M Osborne J) |
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CORPORATIONS – Directors – Automatic disqualification pursuant to s 206B(1)(b)(ii) of Corporations Act 2001 – Whether director had committed ‘offence involving dishonesty’ – Director convicted of family violence offences and bail offences – Whether offence ‘involves dishonesty’ depends on offence provision or common law rule not circumstances of offending – Dishonesty must be ‘inherent’ in offence but does not need to be element of offence – Offences in present case did not ‘involve dishonesty’ – Appeal dismissed.
Corporations Act 2001 ss 206A, 206B.
Australian Securities Commission v Lord (1991) 33 FCR 144; Pollard v DPP (Cth) (1992) 28 NSWLR 659; ABC v Victims of Crime Assistance Tribunal [2021] VSC 730; Barber v Law Society of New South Wales [No 2] [2001] NSWSC 861; DPP v Verigos [2007] VSC 97; Re Magna Alloys & Research Pty Ltd (1975) 1 ACLR 203; R v Barlow (1997) 188 CLR 1; Peters v The Queen (1998) 192 CLR 493, discussed.
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| Counsel | |||
| Applicants: | Mr H Heuzenroeder with Ms S Weinberg | ||
| Respondents: | Mr B J Murphy | ||
Solicitors | |||
| Applicants: | AXM Law | ||
| Respondents: | Velocity Legal | ||
FERGUSON CJ:
I agree with Walker JA.
WALKER JA:
The second respondent, Mr Baxter, is the director of the first respondent (‘Diesel Holdings’). He was previously also a director of another company, Rock Solid Structural Developments Pty Ltd (‘Rock Solid’). The applicant, Mr Waters, was also a director of Rock Solid. In 2021 and 2022 Mr Baxter was convicted of various offences, including causing injury intentionally, contravention of a family violence intervention order, contravening a conduct condition of bail and committing an indictable offence whilst on bail.
Section 206B(1)(b)(ii) of the Corporations Act 2001 (Cth) provides that a person is disqualified from managing corporations if the person is ‘convicted of an offence that involves dishonesty and is punishable by imprisonment for at least 3 months’. ‘Dishonest’ is defined in s 9 of that Act to mean ‘dishonest according to the standards of ordinary people’.
After Mr Baxter’s convictions, Mr Waters caused documents to be filed with the Australian Securities and Investment Commission (‘ASIC’) notifying it that Mr Baxter had ceased to be a director of Rock Solid. Mr Waters also caused Rock Solid to sell property and pay the entirety of the proceeds of sale to JRW Enterprises Pty Ltd (‘JRW Enterprises’), which Mr Waters controlled, by the issue of certain special units. Diesel Holdings and Mr Baxter then brought a proceeding against Mr Waters, JRW Enterprises and Rock Solid in relation to those matters.
Mr Waters and JRW Enterprises claim that Mr Baxter was automatically disqualified as a director of Diesel Holdings by reason of s 206B(1)(b)(ii).[1] As a consequence, they claim that the proceeding brought by Diesel Holdings has been brought otherwise than by that company acting by its lawfully appointed director. They made an interlocutory application for that proceeding to be dismissed or permanently stayed on the basis that is was improperly brought. That application was dismissed by the trial judge.
[1]It was implicit in their argument that disqualification occurred on the first date on which Mr Baxter was convicted of an offence involving dishonesty, which is either 18 May 2021 or 25 February 2022. They also argued that Mr Baxter had ceased to be a director of Rock Solid automatically as a consequence of s 206B(1)(b)(ii) on one of those dates: Diesel Holdings Pty Ltd v Waters (2023) 70 VR 556, 557–8 [4] (M Osborne J); [2023] VSC 455 (‘Reasons’).
Mr Waters and JRW Enterprises now seek leave to appeal that decision. The key issue on the application for leave to appeal, as it was before the judge, is whether Mr Baxter was convicted of any offence that ‘involves dishonesty’ within the meaning of s 206B(1)(b)(ii) of the Corporations Act. This required consideration, first, of the proper construction of s 206B(1)(ii) and then of its application to Mr Baxter.
For the reasons that follow, I would grant leave to appeal but dismiss the appeal. In short, the trial judge was correct to conclude that an offence ‘involving dishonesty’ is
one that can be classified as such on the face of the relevant offence provision or common law rule, without consideration of the circumstances of the particular offending. Dishonesty does not need to be an element of the offence, but it does need to be ‘inherent’ in the offence. Furthermore, his Honour was correct to conclude that, whichever construction of s 206B(1)(b)(ii) is adopted, none of the offences of which Mr Baxter was convicted ‘involved dishonesty’ so as to engage the operation of s 206B(1)(b)(ii) of the Corporations Act.
Key facts
Mr Waters and Mr Baxter established Rock Solid in August 2018, for the purpose of purchasing and developing property together as business partners. The shares in Rock Solid were owned equally by Mr Waters and Mr Baxter. Rock Solid acted as the trustee of the FatHead Unit Trust (‘FatHead Trust’). The units in the FatHead Trust were owned in equal shares by JRW Enterprises (controlled by Mr Waters) and Diesel Holdings (controlled by Mr Baxter).[2]
[2]Reasons, 557 [1].
On 18 May 2021, Mr Baxter was convicted of the following offences in the Magistrates’ Court and sentenced to an imprisonment term of six months:
(a)causing injury intentionally, pursuant to s 18 of the Crimes Act 1958; and
(b)contravention of a family violence intervention order intending to cause harm or fear for safety, pursuant to s 123A(2) of the Family Violence Protection Act 2008 (the ‘FVP Act’).[3]
[3]Reasons, 557 [2], 561–2 [23(a)].
On 25 February 2022, Mr Baxter was convicted of the following offences in the County Court and sentenced to an imprisonment term of three years, one month and 14 days:
(a)causing injury intentionally, pursuant to s 18 of the Crimes Act;
(b)two counts of contravention of a family violence intervention order intending to cause harm or fear for safety, pursuant to s 123A(2) of the FVP Act;
(c)contravening a conduct condition of bail, pursuant to s 30A of the Bail Act 1977 (a strict liability offence);
(d)committing an indictable offence whilst on bail, pursuant to s 30B of the Bail Act (an absolute liability offence); and
(e)contravening a family violence interim intervention order, pursuant to s 123(2) of the FVP Act.[4]
(I will refer to all of the offending as the ‘Baxter Offences’.)
[4]Reasons, 557 [2], 561–2 [23(b)].
On or about 12 April 2022, Mr Waters, in his capacity as a director of Rock Solid:
(a)caused a form 484 to be filed with ASIC notifying it that Mr Baxter had ceased to be a director of Rock Solid on 19 May 2021; and
(b)caused a form 484 to be filed with ASIC notifying it of a change to Rock Solid’s registered office.
Rock Solid, as trustee of the FatHead Trust, owned a property in Cranbourne West, Victoria (the ‘Cranbourne Property’). On or about 13 May 2022, Mr Waters caused Rock Solid to sell the Cranbourne Property. At the time, Mr Baxter was in jail following the Baxter Offences. The proceeds of sale of the Cranbourne Property were paid out to JRW Enterprises in their entirety by reason of the issue and subsequent redemption by Rock Solid of special units in the FatHead Trust, which were issued solely to JRW Enterprises by Rock Solid by resolution of Mr Waters (as sole director).[5]
[5]Reasons, 557–8 [3], [5]–[6].
Following those events, Diesel Holdings and Mr Baxter commenced a proceeding in the Supreme Court against Mr Waters, JRW Enterprises and Rock Solid, in which they allege that the conduct of Mr Waters in:
(a)removing Mr Baxter as a director of Rock Solid;
(b)causing Rock Solid to sell the Cranbourne Property; and
(c)paying out the entirety of the sale proceeds to JRW Enterprises (by the issue and subsequent redemption by Rock Solid of special units in the FatHead Trust),
was oppressive and in breach of duties owed to them by, variously, each of Mr Waters, JRW Enterprises and Rock Solid.[6]
[6]Reasons, 558 [5].
As noted above, Mr Waters and JRW Enterprises made an interlocutory application for orders that the proceeding be dismissed or, in the alternative, permanently stayed, on the basis that it was improperly brought. Alternatively, Mr Waters and JRW Enterprises sought that the claims made by Diesel Holdings be stayed or dismissed, or for Diesel Holdings to be removed as a party to the proceeding.[7]
[7]Reasons, 558 [7].
Mr Waters and JRW Enterprises contended that Mr Baxter, by reason of the Baxter Offences, was automatically disqualified as a director of Diesel Holdings pursuant to s 206B(1)(b)(ii) of the Corporations Act. There is no other director of Diesel Holdings, thus they contended that:
(a)the proceeding had been brought by Diesel Holdings acting otherwise than by its lawfully appointed director; and
(b)if the proceeding was permitted to continue, Mr Baxter would be committing a further criminal offence pursuant to s 206A(1) of the Corporations Act, because he would be continuing to make decisions that affect Diesel Holdings after his disqualification as a director.[8]
[8]Reasons, 558–9 [8]–[9].
Relevant legislative provisions
Section 206B is found in pt 2D.6 of the Corporations Act, which is headed ‘Disqualification from managing corporations’. That part commences with s 206A, which provides as follows:
Disqualified person not to manage corporations
(1)A person who is disqualified from managing corporations under this Part commits an offence if:
(a)they make, or participate in making, decisions that affect the whole, or a substantial part of, the business of the corporation; or
(b)they exercise the capacity to affect significantly the corporation’s financial standing; or
(c)they communicate instructions or wishes (other than advice given by the person in the proper performance of functions attaching to the person’s professional capacity or their business relationship with the directors or the corporations) to the directors of the corporation:
(i)knowing that the directors are accustomed to act in accordance with the person’s instructions or wishes; or
(ii)intending that the directors will act in accordance with those instructions of wishes.
(1A)For an offence based on subsection (1), strict liability applies to the circumstance, that the person is disqualified from managing corporations under this Part.
(1B) It is a defence to a contravention of subsection (1) if the person had permission to manage the corporation under either section 206GAB or 206G and their conduct was within the terms of that permission.
(2)A person ceases to be a director, alternate director or secretary of a company if:
(a)the person becomes disqualified from managing corporations under this Part; and
(b)they are not given permission to manage the corporation under section 206GAB or 206G.
Section 206B provides as follows:
Automatic disqualification—convictions, bankruptcy and foreign court orders etc
Convictions
(1)A person becomes disqualified from managing corporations if the person:
(a)is convicted on indictment of an offence that:
(i)concerns the making, or participation in making, of decisions that affect the whole or a substantial part of the business of the corporation; or
(ii)concerns an act that has the capacity to affect significantly the corporation’s financial standing; or
(b)is convicted of an offence that:
(i)is a contravention of this Act and is punishable by imprisonment for a period greater than 12 months; or
(ii)involves dishonesty and is punishable by imprisonment for at least 3 months; or
(c)is convicted of an offence against the law of a foreign country that is punishable by imprisonment for a period greater than 12 months.
The offences covered by paragraph (a) and subparagraph (b)(ii) include offences against the law of a foreign country.
(2)The period of disqualification under subsection (1) starts on the day the person is convicted and lasts for:
(a)if the person does not serve a term of imprisonment—5 years after the day on which they are convicted; or
(b)if the person serves a term of imprisonment—5 years after the day on which they are released from prison.
Bankruptcy or personal insolvency agreement
(3)A person is disqualified from managing corporations if the person is an undischarged bankrupt under the law of Australia, its external territories or another country.
(4)A person is disqualified from managing corporations if:
(a)the person has executed a personal insolvency agreement under:
(i)Part X of the Bankruptcy Act 1966; or
(ii)a similar law of an external Territory or a foreign country; and
(b)the terms of the agreement have not been fully complied with.
(5)A person is disqualified from managing corporations at a particular time if the person is, at that time, disqualified from managing Aboriginal and Torres Strait Islander corporations under Part 6-5 of the Corporations (Aboriginal and Torres Strait Islander) Act 2006.
Foreign court orders
(6)A person is disqualified from managing corporations if the person is disqualified, under an order made by a court of a foreign jurisdiction that is in force, from:
(a)being a director of a foreign company; or
(b)being concerned in the management of a foreign company; or
(c)being a director of a passport fund, or of an operator of a passport fund; or
(d)being concerned in the management of a passport fund.
Definitions
(7)In this section:
foreign jurisdiction means a foreign country, or part of a foreign country, prescribed by the regulations as a foreign jurisdiction for the purposes of this section.
Part 2D.6 also contains provisions that permit a court to disqualify a person from managing corporations[9] and provisions that permit ASIC to disqualify a person from managing corporations.[10] These are discretionary powers.
[9]See ss 206C, 206D, 206E, 206EAA, 206EAB.
[10]See ss 206F, 206GAA.
Finally, pt 2D.6 contains provisions that enable a person to be relieved from their disqualification. Section 206GAB provides as follows:
ASIC may give a person who it has disqualified from managing corporations under this Part written permission to manage a particular corporation or corporations. The permission may be expressed to be subject to conditions and exceptions determined by ASIC.
Section 206G provides as follows:
(1)A person who is disqualified from managing corporations may apply to the Court for leave to manage:
(a)corporations; or
(b)a particular class of corporations; or
(c)a particular corporation;
if the person was not disqualified by ASIC.
(2)The person must lodge a notice with ASIC at least 21 days before commencing the proceedings. The notice must be in the prescribed form.
(3)The order granting leave may be expressed to be subject to exceptions and conditions determined by the Court.
Note: If the Court grants the person leave to manage the corporation, the person may be appointed as a director (see section 201B) or secretary (see section 204B) of a company.
(4)The person must lodge with ASIC a copy of any order granting leave within 14 days after the order is made.
(5)On application by ASIC, the Court may revoke the leave. The order revoking leave does not take effect until it is served on the person.
The judge’s reasons
The trial judge found that Mr Baxter was not automatically disqualified as a director of Diesel Holdings pursuant to s 206B(1)(b)(ii) of the Corporations Act. That was because the Baxter Offences did not ‘involve dishonesty’, either as an element of the offences, inherent in the offences committed, or in the circumstances surrounding commission of the offences. Accordingly, the trial judge found that Mr Waters and JRW Enterprises had not met the exceptional circumstances required to ground the relief sought in their interlocutory application.[11]
[11]Reasons, 577 [75]–[76].
The judge observed that it was not in issue that each of the Baxter Offences carried a maximum term of imprisonment greater than three months. It was also not in dispute that dishonesty was not an essential element of any of the Baxter Offences.[12] Thus the only question was whether the offences ‘involved dishonesty’ within the meaning of the section. As noted earlier, ‘dishonest’ is defined in s 9 of the Corporations Act as ‘dishonest according to the standards of ordinary people’. While that definition is related to the approach of the High Court in Peters v The Queen,[13] the judge observed that a focus on that case ran the risk of distracting from the real focus, which is the interpretation to be given to the word ‘involves’.[14]
[12]Reasons, 562 [24].
[13](1998) 192 CLR 493; [1998] HCA 7 (‘Peters’).
[14]Reasons, 566–7 [44].
The judge explained that the parties had propounded two different constructions of s 206B(1)(b)(ii):
(a)a narrower construction, where the offences must be ones which, in the abstract, involve dishonesty (for example, by reference to the elements of the crimes, or inherently so); or
(b)a broader construction, where involvement of dishonesty is determined at the factual level of the offending (including by reference to the surrounding factual circumstances).[15]
[15]Reasons, 561 [19].
The judge observed that similar issues had arisen in the construction of other legislation using the word ‘involves’, and the answer given had varied. In some cases, courts had taken the broader approach,[16] and in others the narrower approach.[17] His Honour then observed that, despite the varied approach taken in the cases, the relevant inquiry required the Court to ascertain the meaning of the term ‘involves’ by reference to the particular provision of the Corporations Act under consideration.[18]
[16]See, eg, Australian Securities Commission v Lord (1991) 33 FCR 144, 149–50 (Davies J) (‘Lord’); Pollard v DPP (Cth) (1992) 28 NSWLR 659, 663, 666 (Abadee J) (‘Pollard’); ABC v Victims of Crime Assistance Tribunal (2021) 66 VR 381, 396 [77]–[79] (Quigley J); [2021] VSC 730 (‘ABC v VOCAT’).
[17]See, eg, Barber v Law Society of New South Wales [No 2] [2001] NSWSC 861, [32]–[33] (Bell J) (‘Barber’); DPP v Verigos (2004) 145 A Crim R 82, [26]–[28] (Nettle J); [2007] VSC 97 (‘Verigos’).
[18]Reasons, 572 [61].
After setting out the relevant principles of statutory construction, the judge then set out the policy rationale of director disqualification provisions, namely to protect the public and to protect the corporate structure from being used to the financial detriment of investors, shareholders, creditors and persons dealing with the company.[19]
[19]Reasons, 573 [63], quoting Re Magna Alloys & Research Pty Ltd (1975) 1 ACLR 203, 205 (Bowen CJ in Eq) and referring to Adams v Australian Securities and Investments Commission (2003) 46 ACSR 68; [2003] FCA 557 (Lindgren J).
The judge then turned to the consequences of the broader construction. He observed by way of example that, on the broad approach, a random assault with no element of premeditation would not be one which the ordinary member of the public would regard as dishonest — whereas an assault preceded by an element of deception would fall within the scope of the automatic disqualification provision. More concretely: a director convicted for randomly engaging in an act of violence on a street corner with a stranger would not be automatically disqualified as a director, but a director who deceptively asked the victim to stop, on the false pretence that the director wanted assistance with directions, would face automatic disqualification.[20]
[20]Reasons, 573 [64].
The judge also considered the statutory context. He observed that various other provisions in the Corporations Act that provide for automatic disqualification operate in a narrow fashion — they are analysed by reference to the offence alone, not by reference to the circumstances of its commission.[21] In that regard, his Honour referred to s 206B(1)(b)(i),[22] s 206B(1)(c),[23] s 206B(4),[24] s 206B(5),[25] s 206B(6)[26] and s 206EB.[27]
[21]Reasons, 575 [67].
[22]Namely: contravention of the Corporations Act punishable by imprisonment for a period greater than 12 months.
[23]Namely: conviction of an offence against the law of a foreign country punishable by imprisonment of greater than 12 months.
[24]Namely: automatic disqualification in an insolvency context.
[25]Namely: automatic disqualification as a director as a result of disqualification under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth).
[26]Namely: reciprocal automatic disqualification arising by orders of a court of foreign jurisdiction.
[27]Namely: automatic disqualification if a court order is made disqualifying a person from managing corporations under the Australian Securities and Investments Commission Act 2001 (Cth).
In a key passage of his Reasons, the judge said this:
The critical feature of s 206B of the Corporations Act in contrast to the other disqualification provisions of the Corporations Act is that the disqualification is automatic. Automatic disqualification does not contemplate third party determination, save for where an affected party seeks some sort of declaratory relief. For the section to be efficacious in its presumed intended operation, in the context of s 206B(1)(b)(ii), there needs to be clarity as to the class of offences covered. The person convicted, and those otherwise involved in the company such as fellow directors or shareholders, must be able to easily establish that as a result of the conviction of the particular offence, that, without more, the person is prohibited from acting as a director. Unlike those parts of the Corporations Act which predicate the prohibition on acting as a director by a determination of the Court or ASIC, s 206B(1)(b)(ii) is designed to operate immediately as and from conviction. The critical weakness with the broader interpretation favoured by the Applicants is that it requires a case by case assessment to be conducted, presumably by a judge, through the prism of ‘an ordinary member of the public’ in order to determine whether there is ‘dishonesty’ in the surrounding circumstances of every offence committed by a director punishable by imprisonment for at least 3 months, in order to determine, in effect, retrospectively, whether an automatic disqualification has arisen on conviction.[28]
[28]Reasons, 575–6 [70] (emphasis in original).
His Honour rejected the broader approach, holding that the focus is on the offence itself and whether dishonesty is inherent in, or integral to, that offence; the focus is not on the circumstances of the particular offending. That is not to say that dishonesty must be an element of the offence; rather, it must be inherent in the offence.[29]
[29]Reasons, 576 [71].
Turning then to the Baxter Offences, the judge held that not only do none of them have dishonesty as an element of the offence, likewise none of them ‘contain an inherent or integral dishonesty’.[30]
[30]Reasons, 576 [72].
The judge went on to observe that, even if the broad construction of s 206B(1)(b)(ii) was correct so that it was necessary and appropriate to examine the circumstances of Mr Baxter’s offending, he would have concluded that the Baxter Offences did not involve dishonesty.[31]
[31]Reasons, 577 [74].
The proposed grounds of appeal
The applicant’s proposed grounds of appeal were as follows:
(1)Having correctly determined that on its proper construction s 206B(1)(b)(ii) of the Corporations Act 2001 (Cth) did not require that “dishonesty” be an element of the offence, the primary Judge:
(a)Erred in concluding that the Baxter Offences did not contain an inherent dishonesty;
(b)Further erred in concluding that the Baxter Offences did not involve dishonesty; and
(c)Further erred in concluding that the section did not permit an examination of the circumstances of the offender’s conduct.
The primary Judge ought to have concluded that, with the exception of the offence of causing injury intentionally, each of the Baxter Offences “involves dishonesty” with the consequence that the within proceedings should be dismissed or stayed as an abuse of process, by reason of that fact that:
(d)The decision to institute the within proceedings constitutes an offence pursuant to s 206A of the Corporations Act 2001 (Cth);
(e)The Second Respondent has ceased to be a director of the First Respondent, and the proceedings have been instituted without proper authority.
(2)The primary Judge erred in finding that the Second Respondent had not automatically been disqualified as a director of the First Respondent pursuant to s 206B(1)(b)(ii) of the Corporations Act 2001 (Cth). The primary judge ought to have found that upon conviction by his pleas of guilt, s 206B(1)(b)(ii) of the Corporations Act 2001 (Cth) operated to disqualify and remove the Second Respondent as a director of the First Respondent.
(3)The primary Judge erred in finding that the bringing and maintenance of the proceedings by the Respondents was not an abuse of the Court’s process pursuant to r 23.01 of the Supreme Court (General Civil Procedure) Rules 2005 (Vic), and his Honour ought to have reached the opposite conclusion.
(4)The primary Judge erred in finding that the First Respondent was not required to cease being a party to the proceedings pursuant to r 9.06(a) of the Supreme Court (General Civil Procedure Rules) 2005 (Vic), and his Honour ought to have reached the opposite conclusion.
(5)By reason of the errors identified in Grounds 1 to 4 above, the primary Judge further erred in failing to award costs as prayed for in paragraph 4 of the Interlocutory Application dated 8 May 2023.
The parties’ submissions
Mr Waters and JRW Enterprises submitted that the judge erred in two ways:
(a)first, because he interpreted s 206B(1)(b)(ii) of the Corporations Act too narrowly; and
(b)secondly, because he failed to find that each of the Baxter Offences ‘involves dishonesty’, in circumstances where each offence involved a deliberate breach of an earlier explicit or implicit undertaking to a court not to engage in certain conduct, such undertaking being given to gain an advantage (namely to avoid a greater penalty) but later flouted.
If those arguments (which corresponded to proposed grounds 1 and 2) were successful, the success of other proposed grounds of appeal were submitted to follow as a matter of course.
In oral argument, Mr Waters and JRW Enterprises focused on the offence of breach of a conduct condition of bail, on the basis that this represented their strongest argument — they conceded that, if their argument failed in relation to that offence, it could not succeed in relation to Mr Baxter’s other offending.
Mr Waters and JRW Enterprises submitted that the primary judge failed properly to consider the rationale for the provision, and the importance of automatic disqualification, and focused instead on the question of ‘clarity’ to narrow the operation of the provision. They submitted that any clarity is illusory, because dishonesty is defined by reference to the ‘standards of ordinary people’ — but those are standards upon which reasonable minds may differ. Furthermore, they submitted that the illusory claim to clarity had been bought at the expense of increasing the risk to the public. They submitted that in order to give the statutory purpose its ‘full force and effect’, the word ‘involves’ should be given an expansive interpretation, including by reference to the circumstances of the offending.
Mr Waters and JRW Enterprises also relied upon the legislative context which, they submitted, operated by taking a ‘broad axe ’approach to disqualification under s 206B, but then to ‘apply the scalpel’ at the stage of an application for permission to manage a corporation under s 206GAB or s 206G.
Their primary submission was that Mr Baxter’s particular offending ‘involved dishonesty’. The conditions of Mr Baxter’s bail included that he reside at a particular address (Finlay Street) and that he not consume alcohol. Those conditions were breached and Mr Baxter pleaded guilty to the charge of contravening bail conduct conditions. In respect of this offence, Mr Waters and JRW Enterprises submitted:
By agreeing to bail, Mr Baxter, achieved for himself the advantage of avoiding further detention in custody. The other offences, in the nature of being bound over to keep the peace, may not have derived their legal force by a promise, but were non-punitive measures which an honest and law-abiding person would scrupulously have complied with.
It is submitted, that by promising to reside at Finlay Street, but cynically residing at Somerville; and by promising not to consume alcohol, but then consuming three drinks, Mr Baxter has gained the advantage of liberty by being on bail, yet dishonestly repudiated the quid pro quo. The extreme domestic violence in this case, may have tended to deflect attention from the dishonest flouting of bail conditions, as the milieu in which it occurred. Honest people would take seriously the conditions that were by agreement imposed, in order that there be confidence that Mr Baxter would keep the King’s peace. These offences had dishonesty inherent in them … and if not inherent they were simply dishonest according to the appropriate standard.
In oral argument, they submitted that Mr Baxter knew he was required to report his change of address, yet deliberately decided not to do so, and was thereby ‘suppressing the truth’ of where he was residing. They submitted that, applying the test from Peters, ‘right-thinking members of the public would consider that cynically breaching [one’s] solemn promise to the court is dishonest’.
As a fall back submission, they submitted that, even on the intermediate construction, the offences — in particular, contravening a conduct condition of bail — were analogous to ‘flouting an order in the nature of binding over powers’ and thus inherently ‘involved dishonesty’.
In response, Mr Baxter and Diesel Holdings submitted that the judge had correctly construed the legislation and had correctly emphasised clarity in doing so. They also contended that the judge was correct to conclude that the Baxter Offences did not involve dishonesty, ‘inherent or otherwise’.
Consideration
The first question to be addressed is the construction of s 206B(1)(b)(ii) and, in particular, the meaning to be given to the words ‘involves dishonesty’. In my opinion the judge correctly construed the provision, although my reasons for adopting that construction are slightly different from his Honour’s.
The starting point in any exercise of statutory construction is the text of the provision. However, the text is to be considered in light of its context and purpose.[32] Context includes the legislative context, because the meaning of a provision must be determined by reference to the entire Act.[33] Identification of the statutory purpose may appear from an express statement in the statute or by reference to, or inference from, its language. Discernment of purpose may be aided by reference to any relevant extrinsic materials, in particular those that identify the mischief to which it is directed.[34] Consideration of purpose is further reinforced by s 15AA of the Acts Interpretation Act 1901 (Cth), which provides as follows:
In interpreting a provision of an Act, the interpretation that would best achieve the purpose or object of the Act (whether or not that purpose or object is expressly stated in the Act) is to be preferred to each other interpretation.
[32]SAS Trustee Corporation v Miles (2018) 265 CLR 137, 149 [20] (Kiefel CJ, Bell and Nettle JJ). See also 157 [41] (Gageler J), 162–3 [64] (Edelman J); [2018] HCA 55. See also Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27, 46–7 [47] (Hayne, Heydon, Crennan and Kiefel JJ) and the cases there cited at n 105; [2009] HCA 41; AB (a pseudonym) v Independent Broad-Based Anti-Corruption Commission [2024] HCA 10, [21] (Gageler CJ, Gordon, Edelman, Steward, Gleeson, Jagot and Beech-Jones JJ).
[33]Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355, 381 [69] (McHugh, Gummow, Kirby and Hayne JJ); [1998] HCA 28 (‘Project Blue Sky’). See also Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs v Moorcroft (2021) 273 CLR 21, 35–6 [15] (Kiefel CJ, Keane, Gordon, Steward and Gleeson JJ); [2021] HCA 19.
[34]Lacey v Attorney-General (Qld) (2011) 242 CLR 573, 592 [44] (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ); [2011] HCA 10. See also Port of Newcastle v Glencore Coal (2021) 274 CLR 565, 594 [87] (Kiefel CJ, Gageler, Gordon, Steward and Gordon JJ); [2021] HCA 39.
It is also permissible, in determining which of two competing interpretations of a statute ought to be adopted, to have regard to the consequences of each interpretation.[35]
[35]R v Young (1999) 46 NSWLR 681, 687–8 [15] (Spigelman CJ); [1999] NSWCCA 166. See also Project Blue Sky (1998) 194 CLR 355, 384 [78] (McHugh, Gummow, Kirby and Hayne JJ); [1998] HCA 28. See generally the discussion in Dennis Pearce and Robert Geddes, Statutory Interpretation in Australia (LexisNexis Butterworths, 8th ed, 2014) 79–83 [2.38]–[2.40].
Section 206B(1)(b)(ii) in effect provides that ‘a person becomes disqualified from managing corporations if the person is convicted of an offence that involves dishonesty and is punishable by imprisonment for at least 3 months’. There are three potential ways to construe this provision:
(a)First, it could involve assessment of the offence only, not the circumstances of the particular offending, and require that the offence in question has dishonesty as an element of the offence. No party suggests that this construction is correct. I will refer to this as the ‘narrow construction’.
(b)Secondly, it could involve assessment of the offence only, not the particular offending, and require that the offence in question is one that has dishonesty inherent within it, although dishonesty is not an element of the offence. An example of such an offence is the common law offence of conspiracy to defraud. As Toohey and Gaudron JJ observed in Peters, dishonesty is not a separate element of that offence, although dishonesty is a characteristic of the means agreed to be employed to effect the fraud.[36]
This is the construction for which the respondents contend, and which the judge found to be correct. I will refer to this as the ‘intermediate construction’.
(c)Thirdly, it could involve assessment of the circumstances of the particular offending, and an assessment of whether that offending ‘involved dishonesty’. This is the construction for which the applicants contend on the appeal. I will refer to this as the ‘broad construction’.
Authorities on ‘involving dishonesty’ (or similar)
[36](1998) 192 CLR 493, 501 [8] (Kirby J agreeing at 555–6 [145], albeit only after setting out the reasons why he did not agree with Toohey and Gaudron JJ and then withdrawing those reasons).
Before turning to the text, context and purpose of s 206B(1)(b)(ii), it is appropriate to say something about the authorities on which the parties relied and to which the judge made reference.
The first point to make is that, other than the decision of the trial judge, there is no case that has yet decided the issue with which we are concerned in relation to the scope of s 206B(1)(b)(ii). However, there is one decision concerning a predecessor provision (s 227(2)(b) of the Companies (New South Wales) Code), namely Pollard v Director of Public Prosecutions (Cth).[37] In that case Abadee J held that the section did not require that the offence be one that had dishonesty as an element.[38] That is, his Honour rejected the narrow construction. In addition he said, by way of obiter, that in his view, ‘if conduct or behaviour answering the description of fraud or dishonesty was involved in commission of the earlier offence’, then the offence would be one ‘involving dishonesty’.[39] In those remarks his Honour endorsed the broad construction. We are, of course, not required to follow those obiter remarks, not least because they are remarks of a single judge in relation to a different statute.
[37](1992) 28 NSWLR 659.
[38]Pollard (1992) 28 NSWLR 659, 666.
[39]Pollard (1992) 28 NSWLR 659, 663.
The other cases to which reference was made were not cases concerning s 206B(1)(b)(ii) or a predecessor section. It is thus possible to distinguish them. Indeed, as Nettle J observed in Director of Public Prosecutions v Verigos, the words of a statutory provision take their meaning from their context[40] (and, I would add, their purpose). Where the words ‘involving dishonesty’, or some analogue, appear in a different statute, the context and purpose will inevitably be different from the context and purpose relevant in the present case. Nonetheless, it is appropriate to explain why the cases to which reference was made were of limited assistance.
[40](2004) 145 A Crim R 82, 91 [27]; [2004] VSC 97.
One of these cases was Verigos. It concerned the interpretation of s 53 of the Magistrates Court Act 1989, which conferred on the Magistrates’ Court a power to hear certain indictable offences summarily. This included an offence that ‘involves an intent to steal property’ of a certain value.[41] In the course of considering the legislative history and the purpose of the provision, Nettle J held that the word ‘involves’ ‘was used in the sense of “an element of the offence”’.[42] As already mentioned, no party advances the narrow construction of s 206B(1)(b)(ii), and in my opinion the purpose and context of the present provision are such that the narrow construction ought not be adopted.
[41]See item 18 of sch 4 to the Magistrates Court Act.
[42]Verigos (2004) 145 A Crim R 82, 91 [26]–[27]; [2004] VSC 97. His Honour was there discussing s 102A(b) of the Justices Act 1958, a predecessor provision to s 53, which referred to ‘any offence of burglary where the offence involves the stealing of any property’.
The next case was Australian Securities Commission v Lord.[43] In that case the provision in question permitted the issue of a notice to a person requiring the person to produce records. The power could be exercised in relation to ‘an alleged or suspected contravention of a law … that involves fraud or dishonesty and relates to a body corporate’.[44] Davies J held that it was not necessary that dishonesty be an element of the offence.[45] He did not say much more about this issue, but appeared to accept that attention could be given to the particular conduct suspected to be a contravention. However, the purpose of the provision in question was to enable the investigation of possible offences, which would support a broad construction. Furthermore, the language of the provision was notably different: it asked whether the contravention involved fraud or dishonesty, not whether the offence involved dishonesty. That is a clear basis for distinguishing Davies J’s approach.
[43](1991) 33 FCR 144.
[44]Australian Securities Commission Law (Cth), s 28(c).
[45]Lord (1991) 33 FCR 144, 150.
The parties and the judge also referred to ABC v Victims of Crime Assistance Tribunal.[46] That case concerned the Victims of Crime Assistance Act 1996, which provided for an award of financial assistance to a person who was a ‘primary victim of an act of violence’.[47] Section 3(1) contained a series of definitions, relevantly including a definition of ‘relevant offence’ as ‘an offence, punishable on conviction by imprisonment, that involves an assault on, or injury or a threat of injury to, a person’.
[46](2021) 66 VR 381; [2021] VSC 730.
[47]Victims of Crime Assistance Act 1996, s 7.
The applicant had been the victim of an aggravated burglary, in which two intruders had entered her home and stolen her personal belongings. She had slept through the offending, but became aware of it when she awoke in the morning. She suffered a psychiatric injury as a result of the aggravated burglary.[48] The question was whether the offence of aggravated burglary fell within the definition of ‘relevant offence’.
[48]ABC v VOCAT (2021) 66 VR 381, 383 [5]–[8]; [2021] VSC 730.
Quigley J construed the phrase ‘an offence … that involves … injury to, a person’ by reference to the factual circumstances of the offending, not by reference to the nature of the offence in the abstract. As her Honour observed:
To the extent that para (a) [of the definition] is ambiguous or could be read another way, this construction ought to be preferred. This construction is plainly open on the natural meaning of the word ‘involves’ and, importantly, would better serve the beneficial legislative objectives. The legislative objective of assisting victims ‘to recover’ would be better served if the particular circumstances of the offending were taken into account. Recovery is directed to what in fact happened to a person; not the abstract terms or elements of an offence.
This approach would cover a broader range of offending but it would not arbitrarily exclude a victim of a crime that included (in fact) an assault, injury or threat of injury, where such acts were not a necessary element of the offence. To the extent a constructional choice is available with respect to a beneficial provision such as this, a more liberal approach ought be taken.[49]
[49]ABC v VOCAT, 66 VR 381, 397 [83]–[84]; [2021] VSC 730.
Quigley J’s approach was plainly warranted by the statutory context, which is quite different from the present context.
Finally, reference was made to Barber v Law Society of New South Wales [No 2].[50] That case concerned s 79A of the Legal Profession Act 1987 (NSW), which conditioned recovery from the Law Society’s compensation fund on the solicitor in question being convicted of an ‘offence involving dishonesty’. Bell J held that the ‘offence the subject of the conviction must be one which answers that description without further inquiry’.[51] While her Honour did not consider whether the offence needed to be one that had dishonesty as an element, or simply one that was inherently dishonest, it seems tolerably clear that her Honour was rejecting a broad approach which involved consideration of the factual circumstances of the particular offending. In that case the offence was manufacture of prohibited drugs, which her Honour held was not an offence involving dishonesty.[52] Again, the statutory context and purpose were quite different.
[50][2001] NSWSC 861.
[51]Barber [2001] NSWSC 861, [32].
[52]Barber [2001] NSWSC 861, [33].
I note for completeness that the judge also made reference to various decisions of the Appeal Panel of the New South Wales Civil and Administrative Tribunal (NCAT) in relation to legislation governing building licences, real estate licences and security licences.[53] The relevant provisions provided that a person who had been convicted of an offence ‘involving dishonesty’,[54] or an offence ‘involving stalking or intimidation’,[55] within a specified period could not hold the relevant licence. Those decisions adopted the intermediate construction. In contrast, in relation to a different statutory scheme concerning tow truck licences, the Appeal Panel adopted the broad construction.[56]
[53]Reasons, 571 [56]–[58], referring to Hammond v Commissioner for Fair Trading (NSW) [2020] NSWCATOD 132 (‘Hammond’); Farah v Director General, Department of Finance and Services [2014] NSWCATAP 23 (‘Farah’); Luk v Commissioner of Police (NSW) [2019] NSWCATAP 23 (‘Luk’).
[54]Hammond [2020] NSWCATOD 132; Farah [2014] NSWCATAP 23.
[55]Luk [2019] NSWCATAP 23.
[56]Reasons, 571–2 [59]–[60], referring to Roads and Traffic Authority (NSW) v Sharp Towing Pty Ltd [2019] NSWADTAP 49.
Ultimately, what the cases demonstrate is that different approaches to the words ‘involves dishonesty’ (or similar) have been adopted in different cases, depending on the text, context and purpose of the particular provision in question. That simply drives the inquiry back to the text, context and purpose of s 206B(1)(b)(ii) itself.
Purpose
Before turning to the text of s 206B(1)(b)(ii), it is useful to set out the purpose of s 206B, about which there was no real dispute. That purpose was articulated (in relation to a precursor provision[57]) by Bowen CJ in Eq in Re Magna Alloys & Research Pty Ltd as follows:
The section is not punitive. It is designed to protect the public and to prevent the corporate structure from being used to the financial detriment of investors, shareholders, creditors and persons dealing with the company. In its operation it is calculated to act as a safeguard against the corporate structure being used by individuals in a manner which is contrary to proper commercial standards.[58]
[57]Namely s 122 of the Companies Act 1961 (NSW).
[58](1975) 1 ACLR 203, 205.
That purpose would in my view be adequately advanced by the intermediate construction, which would sufficiently capture the kinds of offences against which the section is directed: offences that tend to suggest that the person concerned is not a suitable person to manage a company. In contrast, a broader automatic disqualification provision would potentially capture a range of offending that is more extensive than that required in order to achieve the legislative purpose.
Furthermore, legislation ‘rarely pursues a single purpose at all costs’.[59] Thus the protective purpose is not pursued regardless of the cost to the individuals concerned. It is plain that the legislature has sought to identify with some precision the categories of offending that result in automatic disqualification; it is not all offending, or even all serious offending. In my view that legislative choice reflects the fact that disqualification from management of a corporation is a significant step, with significant effects on the individual concerned.
Text
[59]Carr v Western Australia (2007) 232 CLR 138, 143 [5] (Gleeson CJ); [2007] HCA 47. See also Construction Forestry Mining & Energy Union v Mammoet Australia Pty Ltd (2013) 248 CLR 619, 632–3 [40] (Crennan, Kiefel, Bell, Gageler and Keane JJ); [2013] HCA 36.
I turn now to the text of s 206B(1)(b)(ii).
The parties, in both their written and oral submissions, focused on the words ‘involves dishonesty’. They addressed that phrase by reference to the authorities that had considered that phrase in various different contexts. As discussed above, I have not found those authorities to be of great assistance.
In any event, the focus on the words ‘involves dishonesty’ is too narrow. The proper focus of the analysis is not on those words in isolation; rather, the proper starting point of the analysis is the whole of s 206B(1)(b)(ii), namely that ‘a person becomes disqualified from managing corporations if the person is convicted of an offence that involves dishonesty and is punishable by imprisonment for at least 3 months’.
When one pays closer attention to the language used in s 206B(1)(b)(ii) it is apparent, in my view, that it is directed to identification of the offence as a matter of law, rather than to the particular offending. That is, it is directed to the provision of the statute, or the rule of the common law, which the person concerned contravened.
First, the section refers to conviction for an ‘offence’; that word appears in statutes which create crimes.[60] Its ordinary meaning is to identify the particular law that a person has been charged with breaching — that is, the particular section of an act, or rule of the common law. It is the offence that must ‘involve dishonesty’.
[60]See, eg, pt I of the Crimes Act 1958, which sets out a ranges of ‘Offences’, including in pt I, div 2, theft and similar or associated offences and, in pt 1, div 10, conspiracy. The Summary Offences Act 1966 adopts the same use of the word ‘offence’: for example, pt 1, div 1 deals with public order offences and pt 1, div 8 deals with ‘Other offences’.
The intermediate construction is also supported by the latter part of s 206B(1)(b)(ii) — that the ‘offence … is punishable by imprisonment for at least 3 months’. That is clearly directed to the offence at the level of the particular legal rule that has been breached, rather than to the circumstances of the particular offending. The offences concerned can only be so identified by reference to the statutory provision that creates those offences and not by reference to the conduct the person concerned has engaged in. It would be quite odd to refer to a person’s particular offending as being ‘punishable by imprisonment for at least 3 months’. Rather, the person will have been subject to a sentence for a known term following their conviction. Where that is what is intended to be captured, direct statutory language is used. So, for example, s 93(8AA) of the Commonwealth Electoral Act 1918 (Cth) disqualifies from voting a ‘person who is serving a sentence of imprisonment of 3 years or longer’.
Thus in my view the language of s 206B(1)(b)(ii), understood in light of the legislative purpose, supports the intermediate construction; and that construction is further supported by the statutory context and the purpose of the provision, to which I now turn.
Context
The immediate context in which s 206B(1)(b)(ii) is found is s 206B(1), which is concerned with automatic disqualification by reason of conviction for certain offences. That sub-section sets out various categories of offence that trigger automatic disqualification, namely:
(a)offences closely connected with the management of the corporation — in sub-paragraphs (a)(i) and (ii);
(b)offences against the Corporations Act itself, punishable by imprisonment for more than 12 months — in sub-paragraph (b)(i);
(c)offences that ‘involve dishonesty’, punishable by imprisonment for at least 3 months — in sub-paragraph (b)(ii); and
(d)offences against a foreign law that are punishable by imprisonment for more than 12 months — in sub-paragraph (c).
The first of these categories is indictable offences that, in summary:
(a)‘concern’ the making, or participation in making, of decisions that affect the corporation’s business; or
(b)‘concern an act’ that has the capacity to affect the corporation’s financial standing.
These offences would include offences under s 206A of the Corporations Act.[61] But they are not limited to offences under that section (for if they were intended to be so limited, they would simply have referred to offences under that section).[62] Rather than involving an abstract consideration of the offence, this category of offences appears to me to require a consideration of the particular offending, in order to ascertain whether it affected the corporation’s business, or was capable of affecting its financial position.[63]
[61]That section relevantly provides as follows:
[62]In addition, that is made clear by the statement in s 206B that the offences covered by s 206B(1)(a) include offences against a law of a foreign country.
[63]By way of example of such offences, it has been suggested that the offence of making a contract containing a cartel provision, contrary to s 45AF of the Competition and Consumer Act 2020 (Cth), and of giving effect to a cartel provision, contrary to s 45AG of that Act, may be offences that fall within s 206B(1)(a): see DPP (Cth) v Bingo Industries Pty Ltd [2024] FCA 121, [301] (Wigney J).
One then moves on to s 206B(1)(b)(i), which is directed to an offence against the Corporations Act itself, punishable by imprisonment for more than 12 months. That is a clearly delineated category of offence — an offence is either an offence against the Corporations Act or it is not. (And it is either an offence punishable by more than 12 months imprisonment or it is not.) And the policy of the provision is clear — if the offence is an offence against the Corporations Act itself, and punishable by more than 12 months imprisonment, that is sufficient to warrant disqualification; there is no need for any further inquiry into the nature of the offending.
The same is true of s 206B(1)(c): a person has either been convicted of an offence against the law of a foreign country or they have not. And rather than require a person to delve into either the details of the foreign law or the facts of the foreign offending, a precautionary approach has been adopted: any such conviction results in automatic disqualification.
The question, then, is whether s 206B(1)(b)(ii) is directed to a class of offences that is readily identifiable in the abstract (like s 206B(1)(i)), or whether it is intended to turn on an assessment of the particular offending (like s 206B(1)(a)). The context does not provide a clear answer to that question. Indeed the context — in particular the operation of s 206B(1)(a) — suggests that the judge’s emphasis on clarity may not have as much force as his Honour gave it. That is, the operation of s 206B(1)(a) suggests that a lack of immediate clarity in relation to the nature of the offending is not necessarily antipathetic to the statutory scheme.
Furthermore, I accept the applicant’s submission that, even if clarity is regarded as important, once s 206B(1)(b)(ii) is understood as including offences that do not have dishonesty as an element of the offence, but in which dishonesty is ‘inherent’, there will always be some lack of clarity as to whether the offence of which the person has been convicted falls within that sub-section. That is because, as set out above, ‘dishonest’ is defined as ‘dishonest according to the standards of ordinary people’. That is not a bright line definition; it is a matter on which reasonable minds may differ. It may not necessarily be immediately apparent to a director, or the other managers of a corporation, whether a particular offence, which does not have dishonesty as an element, is an offence involving ‘dishonesty’, so defined.
Nonetheless, it does not follow that the question of clarity has no weight. It remains correct to emphasise, as the judge did, that this is an automatic disqualification provision, and it is important that people understand when they, or others, are disqualified from the management of a company. That is particularly so given that a person who is disqualified from managing corporations under s 206B commits an offence if they make or participate in making decisions affecting the corporation’s business, amongst other things.[64] Thus, although no approach might offer complete clarity, it is appropriate to consider which approach offers the greater clarity. In that regard, I consider that the intermediate construction offers greater clarity than the broad construction. Its focus on the legal rule that has been contravened is productive of greater certainty than a consideration of the circumstances of the particular offending.
[64]Section 206A(1)(a).
It is also necessary to consider the broader context in which s 206B appears. As Mr Waters and JRW Enterprises submitted, that context includes not only automatic disqualification, but also provisions that empower ASIC or a Court to revisit the disqualification and, where appropriate, permit the person to manage a particular corporation or, in the case of a court, a class of corporations or corporations generally. As noted above, they submitted that this aspect of pt 2D.6 supported the broad construction of s 206B(1)(b)(ii), on the basis that the legislative purpose was advanced by capturing a larger range of offending under that section, but then providing for a more nuanced consideration of whether the person ought to be prohibited from managing corporations at the point at which permission is being considered.
I accept that the scheme operates by automatically disqualifying a range of persons from managing corporations — whether automatically by reason of a relevant conviction, automatically by reason of bankruptcy, automatically for some other reason, by reason of a court order or by reason of an ASIC decision — and then provides a mechanism by which such disqualification can be reversed or moderated. But I do not accept that requires that a broad approach be taken to s 206B(1)(b)(ii). Indeed, in my view this matter cannot be said to support the broad approach — it is effectively neutral.
Conclusion on construction of s 206B(1)(b)(ii)
In some circumstances a reference to a person having been convicted of an offence could be directed to the particular behaviour of an individual that constituted the offence. For instance it can describe the ‘the act of offending’.[65] In R v Barlow, Brennan CJ, Dawson and Toohey JJ observed that ‘“[o]ffence is a term that is used sometimes to denote what the law proscribes under penalty and sometimes to describe the facts the existence of which render an actual offender liable to punishment’.[66] However, their Honours went on to make clear that the correct approach will depend on the particular statutory context in which the term appears.[67] In this case, the matters discussed above indicate that the word ‘offence’ is not used to refer to the ‘act of offending’ in s 206B(1)(b)(ii). Rather, it is used to refer to that which is prescribed by law under penalty. Section 206B(1)(b)(ii) captures offences in which dishonesty is inherent or an element of the offence. All that is necessary to determine whether an offence falls within s 206B(1)(b)(ii) is to consider the relevant legislative provision or common law rule for the offence. No further inquiry is necessary.
[65]Macquarie Dictionary (9th ed, 2023) ‘offence’ (def 6).
[66]R v Barlow (1997) 188 CLR 1, 9; [1997] HCA 19 (‘Barlow’).
[67]Barlow (1997) 188 CLR 1, 9–10; [1997] HCA 19.
Application of s 206B(1)(b)(ii) to the Baxter Offences
The second question to be addressed is the application of s 206B(1)(b)(ii) to the Baxter Offences — did those offences ‘involve dishonesty’ in the manner necessary to engage the operation of s 206B(1)(ii)? That is, did the offences in question inherently contain dishonesty as an aspect, although they did not involve dishonesty as an element of the offence? Again, in my view the judge reached the correct conclusion: the offences of which Mr Baxter was convicted, while reprehensible, did not inherently involve dishonesty.
Mr Waters and JRW Enterprises sought to analogise the Baxter Offences to ‘flouting an order in the nature of binding over powers’. They submitted that contravention of a conduct condition of bail ‘constituted a repudiation of Mr Baxter’s recognisance to a court’:
… by promising to reside at Finlay Street, but cynically residing at Somerville; and by promising not to consume alcohol, but then consuming three drinks, Mr Baxter has gained the advantage of liberty by being on bail, yet dishonestly repudiated the quid pro quo.
The dishonesty was said to arise by reason of, and at the time of, the deliberate breach of the bail condition.
In my opinion this argument is not persuasive. The argument conflates the offence of breaching a condition of bail with dishonesty. Even if it is properly characterised as a repudiation of his recognisance (which may be doubted), such repudiation nonetheless does not involve dishonesty. By reason of the definition of ‘dishonest’ in s 9 of the Act, dishonesty is to be assessed by reference to the standards of an ordinary person. In my opinion an ordinary person would not consider the offence of breaching a condition of bail to be dishonest. The same can be said for the other offences of which Mr Baxter was convicted. The judge was correct to conclude that dishonesty is not inherent in, or integral to, the Baxter Offences.
In light of those conclusions, it is not strictly necessary to consider whether, if the broader construction of s 206B(1)(b)(ii) were to be adopted, the offences would have fallen within that broad construction. However, it is appropriate to indicate that, even on the
broader approach propounded by Mr Waters and JRW Enterprises, I would have concluded that the Baxter Offences did not ‘involve dishonesty’. In that regard, I adopt the trial judge’s reason for so concluding:
While reprehensible, there is nothing to suggest that Mr Baxter was dishonest in the commission of these offences, nor does it appear any deceit, on the part of Mr Baxter or otherwise, furthered the commission of the Baxter Offences. Acting contrary to the law, as Mr Baxter has done, is different to acting with deceit or a lack of honesty. The Applicants’ submissions conflate the two.[68]
[68]Reasons, 577 [74].
Conclusion
For these reasons I would grant leave to appeal on proposed grounds 1 and 2 but dismiss the appeal. I would refuse leave to appeal on the remaining proposed grounds.
GINNANE AJA:
I agree with Walker JA.
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(1) A person who is disqualified from managing corporations under this Part commits an offence if:
(a) they make, or participate in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or
(b) they exercise the capacity to affect significantly the corporation's financial standing; …
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