Southern Cross Exploration Nl v Peter Thomas Myers Sca [1989] ACTSC 13 (21 March 1989)

SUPREME COURT OF THE ACT

SOUTHERN CROSS EXPLORATION N.L. v. PETER THOMAS MYERS
S.C.A. No. 1 of 1988
Appeal from Magistrates Court

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Gallop J.(1)

CATCHWORDS

Appeal from Magistrates Court - displacement of ingredient of mens rea - whether onus of proof of change of circumstances discharged

Companies (Acquisition of Shares) Act 1980, ss.16(2)(c) and 1(d), 52(1) and (2), 53(1) and (3),

BT Australia Limited v. Bell Bros. Pty. Limited & Ors (1981) 27 SASR 557

He Kaw Teh v. The Queen [1985] HCA 43; (1987) 157 CLR 523

Sherras v. De Rutzen (1895) 1 QB 918

HEARING

CANBERRA
21:3:1989

ORDER

The appeal be dismissed.

DECISION

This is an appeal against conviction and sentence imposed upon the appellant in the Magistrates Court, Canberra, on 7 December 1987. The proceedings in the Magistrates Court were instituted by information on 26 February 1986 in respect of an offence against s.53(1) of the Companies (Acquisition of Shares) Act 1980 (the Act) in that on 6 October 1983 the appellant contravened the provisions of s.52(1) of the said Act by giving notice that it proposed to make take-over offers in relation to the shares in a company, to wit, Offshore Oil N.L., a company incorporated in the ACT., when it did not propose to make take-over offers in respect of shares in the said Offshore Oil N.L.

2. The information was heard in the Magistrates Court on 14 April, 28 and 29 September and 7 December 1987. Magistrate Nicholl convicted the appellant and imposed a pecuniary penalty of $200.

3. The relevant provisions are ss.52(1) and (2) of the Act which read:
"52. (1) A person who does not propose, whether

alone or together with another person or other persons,
to make take-over offers or to cause take-over offers
to be made, or to cause to be made a take-over
announcement, in relation to shares in a company shall
not, whether alone or together with another person or
other persons, give notice or publicly announce that he
proposes, or that he and another person or other
persons propose together, to make take-over offers or
to cause take-over offers to be made, or to cause to be
made a take-over announcement, in relation to shares in
that company.
(2) Where -
(a) a person whether alone or together with another
person or other persons, gives notice or publicly
announces that he proposes, or that he and another
person or other persons propose together, to make
take-over offers or to cause take-over offers to
be made, or to cause to be made a take-over
announcement, in relation to shares in a company;
and
(b) the person does not, within 2 months, or such
further period as the Commission permits in
writing, whether alone or together with another
person or other persons, make take-over offers or
cause take-over offers to be made, or cause to be
made a take-over announcement, in relation to
shares in that company,
the person shall be deemed to have contravened
sub-section (1) unless the person establishes that
there was such a change in circumstances after the
notice was given or the announcement was made that he
could not reasonably be expected to make the take-over
offers or cause the take-over offers to be made or
cause the take-over announcement to be made."

4. The offence of which the appellant was convicted is created by s.53 which provides that a person who contravenes or fails to comply with a provision of the Act is guilty of an offence (s.53(1)). The penalty for an offence under the section is a fine not exceeding $2,500 or imprisonment for a period not exceeding 6 months, or both (s.53(3)).

5. In his oral reasons for judgment delivered on 7 December 1987 the Magistrate found that the appellant had given notice that it proposed to make take-over offers in relation to the shares in Offshore Oil N.L. and that it had not discharged the onus of establishing that there had been such a change in circumstances after the notice was given that it could not reasonably be expected to make the take-over offers in relation to the shares in Offshore Oil N.L. In the course of his oral reasons the Magistrate said:

"whilst there could be circumstances in which the
failure to satisfy requisitions of the Corporate
Affairs Commission might possibly be treated as such a
change in circumstances, it does not seem to me that,
in this case, that the matters that have been relied
upon by the defendant can properly be described as such
a change of circumstances as would, as it were, render
it unreasonable for them to be called on to continue
with their takeover offers.
Their problem was that they - a, by not giving
sufficient thought to what was required, their own
situation was somewhat complicated with the associated
companies and query with what were associate companies
for the purposes of the takeover offer and the material
that may have to be included in part A.
However, it is quite, quite clear that it is only the
deeming provision that establishes the prosecution. If
one looks at the rest of the evidence and the continued
negotiations with the Corporate Affairs Commission, it
is clear that there was throughout the period an
intention by part of the company to go on with the
takeover offer if they could only get their part A
documents registered, and that was as late as December
1984.

6. The substantial ground of appeal was that the Corporate Affairs Commission itself had prevented the appellant from printing and dispatching its Part A statement and, accordingly, had created a change in circumstances after the appellant gave notice of its proposal to make take-over offers. The change in circumstances, so it was submitted, was such that the appellant could not have been reasonably expected to make the take-over offers.

7. It was common ground on the hearing of the appeal that the appellant had given notice that it proposed to make take-over offers on 6 October 1983 and that, having given such notice it lodged with the Corporate Affairs Commission the relevant documents in an endeavour to seek the approval of that Commission and hence comply with the provisions of s.16(2)(c) and (d) of the Act. The Commission made certain requisitions. Negotiations continued between the Commission and the appellant extending beyond the two month period contemplated by s.52(2)(b) of the Act. The appellant applied for an extension of time within which to make the take-over offers but the application for an extension of time was refused. The appellant continued to negotiate with the Commission in respect of the Part A statement until December 1984 when the appellant gave up and abandoned its intention to make the take-over offers.

8. The last correspondence between the appellant and the Commission was a request or requisition from the Commission to the appellant in the following terms:

"To enable the Commission to consider and examine the
Part A statement and proposed offer by Southern Cross
for Offshore, please:
1. Forward the prescribed fees of $590.00
2. Submit an investigating accountants report for
Southern Cross Pursuant to sub-section 16(2A) of
the Act."

9. Sections 52(1) and 52(2) of the Act have been roundly criticised in BT Australia Limited v. Bell Bros. Pty. Limited & Ors (1981) 27 SASR 557. Wells J. said at p 579:

"Section 52 is an egregious legislative curiosity.
The most casual perusal of the Act discloses that that
section is a cardinal weapon in Parliament's scheme for
the control of take-overs. One would have expected,
therefore, that it would be enacted in such a form that
its use in implementing that scheme would be
straightforward, and unencumbered by doubt and
misgiving. It has not been so enacted. Sub-sections
(1) and (2) create one offence, not two. The central
offence, as appears from sub-s. (1), consists in a
person's publicly announcing a proposal to make
take-over offers when that person does not propose to
do so. Anyone acting in breach of the sub-section,
disengaged from any association with sub-s. (2), in
effect, commits a fraud on the public; he commits it,
if at all, on the day he makes the public announcement,
because it is on that day that he possesses the
intention not to proceed. Obviously, proof of such an
intention would be difficult, and I have no doubt that
its legislative predecessor, s.180q. of the Companies
Act, demonstrated the need for amplification of its
provisions."

10. In the same case, White J. said at p 585:

"Counsel said that the mischief which the
legislature intended to overcome was the manipulation
of the share market by persons making fraudulent and
baseless announcements from which they could reap
profit for themselves on the share market; and this
legislative objective is intended to be achieved by
punishing the announcer for making an announcement with
a fraudulent intention on the day thereof.
I agree that the above mischief is one of the
mischiefs aimed at by s.52 and that the above object is
one of its objects. However, there is in my opinion a
further mischief aimed at and sought to be overcome by
the sub-sections (1) and (2), that is to say, the
mischief of harm done to the other investors by a
person who (unless excused by sub-s.(2)) fails to
proceed with an offer in accordance with his announced
intention. And the legislative objective of avoiding
this mischief is intended to be achieved by forcing an
announcer to go ahead with the offer as originally
announced within the ensuing two months. He is not to
be permitted to 'wriggle out' of his announced
intention lightly. On the contrary, he will be
prosecuted for inaction if he fails to proceed without
good reason. The onus is upon the defendant announcer
to prove the existence of good reason, a relevant
change in circumstances. The time for proceeding with
the offer might be extended by the Commissioner; or the
announcer might be exempted by the Attorney-General.
Subject to those two possibilities, he must proceed to
carry out his announced intentions within two months
under pain of prosecution and penalty. For all
practical purposes, any prosecution would have to be
delayed for two months to give the announcer the
opportunity to avail himself of the locus poenitentiae
afforded by sub-s. (2). Whilst an announcer may, in
some extraordinary circumstances, commit a provable
offence against sub-s. (1) on the day of the
announcement (for example, by making unequivocal
admissions of his fraud on that very day), the usual
circumstances surrounding an announcement will no doubt
be that the announcer will protest that he had an
honourable intention to proceed on the day of the
announcement but that a relevant change of
circumstances arose in the following two months. The
intention would not, in the usual circumstances, be
known until after the expiration of the statutory two
months or of such extended time as the Commissioner
allows. Subsections (1) and (2) of section 52 embrace
both the usual and the extraordinary circumstances, in
my opinion. I take a simple example. Suppose that an
announcer made a fraudulent announcement with the
secret intention of not going ahead with an offer; and
that he did not admit to anyone his secret and
unprovable intention; and that he changed his mind and
proceeded with the offer at the end of the two month
period. He could not be prosecuted successfully
because there would be no proof of his original
fraudulent intention, either actual proof or deemed
proof. Nevertheless, the section would have achieved
its object and the originally contemplated manipulation
of the market for personal profit and the reckless
disregard for the harm to other investors would both
have been nullified. In the hypothetical case, the
announcer has a locus poenitentiae on each and every
day of the two months. I agree with Wells J. that the
deeming device adopted in sub-s. (2) has the
unfortunate effect of jumping together two different
kinds of intention as constituting the commission of
the one offence under sub-s. 91). Even if the section
were to be amended as suggested by him, I think that
its form then would, as its form now does, evince an
intention on the part of the legislature to punish more
effectively, and thus to discourage, the manipulation
of the market to the benefit of the fraudulent
announcers and to the detriment of other investors. In
other words, the legislature intends that announcers
will proceed with their offers and in that sense
'obliges' them to do so unless lawfully excused."

11. I venture to add to those observations only that by s.52(2) the legislature has given a clear indication that the presumption that mens rea is an essential ingredient in every offence has been displaced. In He Kaw Teh v. The Queen [1985] HCA 43; (1985) 157 CLR 523 each member of the High Court took the relevant principle to be as stated in Sherras v. De Rutzen (1895) 1 QB 918 at 921:

"There is a presumption that mens rea, an evil
intention, or a knowledge of the wrongfulness of the
act, is an essential ingredient in every offence; but
that presumption is liable to be displaced either by
the words of the statute creating the offence or by the
subject-matter with which it deals, and both must be
considered."

Clearly the presumption has been displaced by s.52(2) of the Act.

12. The appellant contended that, in relying upon the failure of the Commission to endorse the Part A statement, the Magistrate was wrong in holding that the appellant had not discharged the onus of proving on the balance of probabilities the change of circumstances necessary to excuse what would otherwise have been the commission of an offence. The Magistrate adverted to that issue and was not satisfied. He has not misdirected himself or construed the legislation incorrectly.

13. The appeal must be dismissed.

14. On the appeal against sentence, it was submitted on behalf of the appellant that, having regard to the Magistrate's finding that the appellant had an intention to make take-over offers throughout the duration of the relevant period, the Magistrate could have deemed it inexpedient to record a conviction against the appellant particularly because the imposition of a fine would have severe commercial repercussions for the appellant. The substance of the submission is undoubtedly correct but the maximum penalty for the offence is $2,500 (the alternative of imprisonment is inapplicable in the case of a corporation). In the circumstances, a penalty of $200 is not demonstrably wrong and is well within the range of appropriate penalty in all the circumstances.