Re Andrew James O'Connor v Gary Scott Stevenson [1990] FCA 89 (29 March 1990)

FEDERAL COURT OF AUSTRALIA

Re: ANDREW JAMES O'CONNOR
And: GARY SCOTT STEVENSON
No. G 163 of 1988
FED No. 123
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES REGISTRY
GENERAL DIVISION
Einfeld J.(1)

CATCHWORDS

Trade Practices - Contempt of Court - breaches of undertakings to Court - incorporation of entrepreneur after undertakings - effectiveness of undertakings not to contravene Act by servants or agents - vicarious liability - agency - corporation as agent for contempt of court purposes - form of charges

Trade Practices Act 1974 53bb, 53c, 64(2A)

HEARING

SYDNEY
29:3:1990

Counsel and solicitors for the Prosecutor: Mr P. Hastings instructed by
the Director of Public Prosecutions

Counsel and solicitors for the Defendant : Ms M. Beazley instructed by
Collin W. Love and Co

DECISION

On May 11 1989 I imposed fines on this defendant totalling $72,000 for false representations and misleading and deceptive conduct in contravention of the Trade Practices Act 1974. The nature and circumstances of the conduct are set out in the reasons for judgment given at that time. It will suffice for present purposes to summarise the essential matters proved there. Until mid 1988, the defendant traded under various business names as a publisher of differently titled magazines, commercially sustained by advertising sold principally by telephone. The defendant's servants or agents sold or attempted to sell advertising space in magazines published by the defendant or his business names by making misleading or false assertions to potential advertisers in order to obtain their consent to advertise and their payment for the advertising. The relevant trading name for this case was Packmore Publicity.

2. The current proceedings are for determinations and penalties in regard to alleged contempts of Court by the defendant in this connection prior to his trial before me. The contempts are said to arise from breaches of undertakings given by the defendant to Justice Gummow on 19 July 1988 pending the hearing of those earlier contravention proceedings. These undertakings were signed by counsel for the defendant, presumably on instructions, and because they were embraced in consent Short Minutes covering the matters, by counsel for the prosecution as well. The prosecutor here is an officer of the Trade Practices Commission.

3. The defendant's undertakings were as follows:

1. The Defendant undertakes to the Court that, pending
the determination of these proceedings, he, his
servants or agents, in trade or commerce, in
connection with the publication or possible
publication of any material printed or published by
or on behalf of the Defendant, will not represent,
by means of postal or telephonic services or by
means which involve the use of such services, to
any other person, firm or corporation that that
person, firm or corporation, as the case may be,
has agreed to or has authorised the placing of an
advertisement in a publication when there has been
no such agreement or authorisation.
2. The Defendant undertakes to the Court that, pending
the determination of these proceedings, he, his
servants or agents, in trade or commerce, in
connection with the publication or possible
publication or any material printed or published by
or on behalf of the Defendant, will not assert, by
means of postal or telephonic services or by means
which involve the use of such services, a right to
payment from any person, firm or corporation, for
unsolicited advertising services, without having
reasonable cause to believe that there is a right
to payment.

4. As there was significant argument as to the form of the charges, I set them out in full. It is my view that these are not the appropriate ways to charge people with contempt of court for breaches of undertakings to the Court, but because this was not the way the case was argued and for other reasons which will become clear, I do not decide this matter on such a narrow basis.
1 The Sawka Allegation

5. It is asserted that on or about 19 September 1988 the defendant represented

by his servants or agents, in trade or commerce, in
connection with the publication of material
published by or on behalf of the Defendant, by
means involving the use of telephonic services, to
Rosemary Maree Sawka, a partner in the firm
Gwandalan Supermarket, that James Yaroslav Sawka, a
partner in that firm, had agreed on behalf of that
firm to the placing of an advertisement in a
publication when there had been no such agreement.

2-3 The Carbone Allegations

6. These are that on or about 17 October 1988 the defendant

(a) (represented) by his servants or agents, in trade
or commerce, in connection with the publication of
material published by or on behalf of the
Defendant, by means involving the use of telephonic
services, to Francesco Attilio Carbone that the
said Francesco Attilio Carbone had agreed to the
placing of an advertisement in a publication, the
Journal for Intellectually Handicapped Children,
when there had been no such agreement;
(b) (asserted) by his servants or agents, in trade or
commerce, in connection with the publication of
material published by or on behalf of the
Defendant, by means involving the use of telephonic
services, a right to payment from Francesco Attilio
Carbone for unsolicited advertising, without having
reasonable cause to believe that there was a right
to payment.
4-5 The Stewart Allegations

7. These are that on or about 7 December 1988 the defendant

(a) (represented) by his servants or agents, in trade
or commerce, in connection with the publication of
material published by or on behalf of the
Defendant, by means involving the use of telephonic
services, to James Gordon Stewart that the said
James Gordon Stewart had agreed to the placing of
an advertisement in a publication when there had
been no such agreement;
(b) (asserted) by his servants or agents, in trade or
commerce, in connection with the publication of
material published by or on behalf of the
Defendant, by means involving the use of telephonic
services, a right to payment from Geopray Pty Ltd
trading as Maroubra Locksmiths for unsolicited
advertising, without having reasonable cause to
believe that there was a right to payment.

8. In or about July 1988, within a few days after giving the undertakings to Justice Gummow, the defendant's business involved in these allegations ceased to be run by the name of Packmore Publicity and, on legal and accounting advice, began being operated by Lymtram Pty Ltd, a shelf company which the defendant purchased and thereafter came to own and control. It was not expressly established whether Lymtram also took over the employment of the defendant's employees at that time. The prosecution certainly did not expressly prove that this occurred or followed but also did not prove that the employees involved in the relevant happenings for these charges were or continued to be employed by the defendant personally. One employee gave evidence that she was employed by Lymtram at a relevant time. It seems clear that the same employees continued working as they had with the defendant, doing the same work. There was also evidence of an application by Lymtram to the Tax Office for group employer status. The clear inference is that Lymtram became the employer of the people involved at the time of the changeover.

9. The evidence establishes that a decision was made in December 1988 to close down Lymtram's business. No further advertising business was sought by Lymtram after that time, its only business then being a commitment to publish a final edition of one magazine. At the time of the hearing, ill health of the defendant had prevented this from occurring.

10. The evidence concerning the changeover to the company had these features:

1. The same books of account were used, separated only by a
red line ruled across the page.
2. There was a formal agreement for the sale and purchase
of the business, although the only evidence to this
effect was in one of Mr Stevenson's affidavits which
established no purchase price or whether any money
actually changed hands. Because the defendant was not
available for cross examination, I would ordinarily have
treated this evidence with reserve, but as it was a
relevant admission against interest, I see no reason to
disbelieve it.
3. Although the company was a shelf company, and the
co-director with the defendant apparently could have
been his wife as co-shareholder, an outside director,
Walter John Finley, who had previously only been an
employee of the defendant, was appointed.
4. A new lease for the business premises was entered into
by the company, and rental payments were made by the
company.
5. The printer of the defendant's publications was notified
of the changeover although there was no evidence as to
whether trade creditors were informed.
6. In addition to the earlier mentioned application by
Lymtram to be a group employer for tax purposes, the
telephone accounts for the defendant's earlier number(s)
were changed to Lymtram.

11. The prosecution case in relation to the Sawka allegation was in substance uncontested. It was an eminently credible allegation that on the date in question Mrs Sawka received a telephone call from a woman purporting to be from the Institute of the Intellectually Disabled. This woman claimed that Mr Sawka had agreed to advertise in the Institute's publication. Both Mr and Mrs Sawka denied ever having authorised such an advertisement. This was a former publication of Packmore Publicity, now to be published by Lymtram. It was not denied that the telephone call emanated from Lymtram's offices.

12. The Carbone allegations were that Mr Carbone, who was the manager of a business known as Pinuccio's Menswear, was telephoned by a woman claiming to represent the Journal of Intellectually Handicapped Children. He was told that the proceeds of the magazine helped the intellectually handicapped children's association and that he had already authorised one advertisement for which payment was due. Mr Carbone denied having ever authorised such an advertisement.

13. The Carbone allegations were challenged by Ms Jennifer Ryan, a former employee of the defendant or one of his entities, who is alleged to have made the misleading or false representations. Ms Ryan said that she had no recollection of these events, but that they would not have occurred as related by Mr Carbone. I was not impressed with Ms Ryan's evidence. It was at best prevaricating.

14. It was further alleged that Mr Finley, the co-director with the defendant of Lymtram, went to Mr Carbone's shop the next day to collect payment. He stated three times that the money would benefit handicapped children. If said, this was false.

15. The Stewart allegations were to similar effect. Mr Stewart claimed to have been telephoned by a man who thanked him for advertising in his magazine for handicapped children and "said that he would send a representative out with an invoice". The person making the telephone call was never identified. The prosecution initally suggested that it was the defendant personally but no evidence to this effect was ever presented. However, Mr Finley subsequently came to the premises. Neither Mr Stewart nor his co-director Mr Smith recall ever having authorised such an advertisement.

16. The Stewart and Carbone allegations were challenged by Mr Finley. His evidence was punctuated by colourful allegories and powerful verbal asides but many of his assertions on matters in controversy were contradictions and bluster. His evidence was unpersuasive. The defendant himself was seriously ill with significant heart disease and was unable to attend Court. In the circumstances, I accepted his evidence by affidavit but his version of the facts must be treated with caution in the light of the absence of cross examination. In my view, neither Mr Finley nor the defendant weakened the credibility and acceptability of either the Carbone or the Stewart allegations.

17. Thus, if these charges fell to be determined on credibility questions, the prosecution case would prevail.

18. However, the case was not seriously contested on such a limited basis although the defence heavily relied on onus and standard of proof questions, arguing that the relevant events had not been proved beyond a reasonable doubt. The prosecution did not dispute that at the time when the various alleged contempts occurred, the defendant was not trading in his own or a business name, at least in relation to the particular people involved in the charges. However, its assertion was that the defendant could not rely on the imposition of the company structure.

19. The prosecution did not allege that the interposition of Lymtram was a sham, deliberately transacted to avoid the undertakings. Counsel frankly said that I should draw the inference that the change was unrelated to the undertakings but rather that it was a device designed to and having the object of providing "some protection" to the defendant in this and other regards. The prosecution asked for an inference to be drawn, having in mind the date at which the transfer took place, that one of the reasons for the incorporation or the corporatization of the operation was to permit the defendant to avoid any possibility of the breach of the undertakings.

20. The incorporation, it was submitted, did not achieve that result because although a person may incorporate for all sorts of legitimate reasons including protection from personal contraventions of the law, the resulting company and its employees may then in fact act as the incorporator's agents in certain regards. The prosecution said that what has been proved is a failure to comply with the undertakings that the defendant's "agents" would not make the representations and assertions comprised in them. It is said that Lymtram, its director Finley and the offending employees were the defendant's agents.

21. The defence submitted that, assuming the facts alleged by the prosecution are accepted, the acts said to contravene the undertakings were not committed by the defendant personally but rather by the corporate entity. As to the protection offered by the corporate entity, the defendant quoted the well known principles which originated with Salomon v Salomon and Co Limited (1897) AC 22. The Lord Chancellor, Lord Halsbury, stated at 30:

I am simply here dealing with the provisions of the
statute, and it seems to me to be essential to the
artificial creation that the law should recognise only
that artificial existence - quite apart from the motives
or conduct of individual corporators. In saying this, I
do not at all mean to suggest that if it could be
established that this provision of the statute to which
I am adverting had not been complied with, you could not
go behind the certificate of incorporation to show that
a fraud had been committed upon the officer entrusted
with the duty of giving the certificate, and that by
some proceeding in the nature of scire facias you could
not prove the fact that the company had no real legal
existence. But short of such proof it seems to me
impossible to dispute that once the company is legally
incorporated it must be treated like any other
independent person with its rights and liabilities
appropriate to itself, and that the motives of those who
took part in the promotion of the company are absolutely
irrelevant in discussing what those rights and
liabilities are.

22. The principle was applied in Tunstall v Steigmann (1962) 2 QB 593 at 600-601 per Ormerod L.J:

It was decided in Salomon v Salomon and Co Ltd that a
company and the individual or individuals forming a
company were separate legal entities, however complete
the control might be by one or more of those individuals
over the company. That is the whole principle of the
formation of limited liability companies and it would be
contrary to the scheme of the Companies Acts to depart
from that principle. It has been contended in this case
that a realistic view should be taken of the
circumstances. It is submitted that any person in the
street would say that the business was the landlord's
business, notwithstanding that it was being carried on
by a limited company, and that in those circumstances it
should be held that the provisions of paragraph (g), to
which I have referred, should be considered to be
satisfied. That, I think, is a dangerous doctrine. It
may be that in practice the landlord will continue to
carry on the business as it has been carried on in the
past when she was undoubtedly the proprietor of it. It
may be that she will derive a profit or otherwise from
the business as she has done in the past. But the fact
remains that she has disposed of her business to a
limited company. It is the limited company which will
carry on the business in the future, and if she acts as
the manager of the business, it is for and on behalf of
the limited company. In my judgment the fact that she
holds virtually the whole of the shares in the limited
company and has complete control of its affairs makes no
difference to this proposition. The object of a limited
liability company, as I understand it, is that the
shareholders shall have some protection and some limit
to the liability which they may incur in the event of
the company being unsuccessful. It is to be assumed
that the landlord in this case assigned her business to
the limited company for some good reason which she
considered to be of an advantage to her. She cannot say
that in a case of this kind she is entitled to take the
benefit of any advantages that the formation of a
company gave to her, without at the same time accepting
the liabilities arising therefrom. She cannot say that
she is carrying on the business or intends to carry on
the business in the sense intended by paragraph (g) of
the subsection and at the same time say that her
liability is limited as provided by the Companies Acts.

23. At 601-2 Lord Justice Ormerod went on to set out the circumstances in which the courts have departed from the principle in Salomon:

It has been argued in the course of this case that there
have been a number of departures from the principle of
Salomon v Salomon and Co Ltd in order that the courts may
give effect to what has been described as the reality of
the situation, and it is submitted in these
circumstances that the court should look at the
realities of the situation and that those realities are
that the business will in future be carried on by the
landlord as it has been carried on in the past. We were
referred to In re Yenidje Tobacco Co Ltd (1916) 2 Ch
426; 32 TLR 709 CA where the Master of the Rolls dealt
with a point in his judgment (pg. 429), the effect of
which was that the court would look behind the fact of
incorporation if the incorporation was in reality the
incorporation of a partnership and would treat the
matter for the purposes of winding-up as though it were
a partnership. We were also referred to a number of
cases arising under the Trading with the Enemy
legislation of the 1914-18 war, where unquestionably
companies registered in this country were treated as
enemy aliens, particularly were we referred to Daimler
Co Ltd v Continental Tyre and Rubber (Great Britain) Ltd
(1916) 2 AC 307; 32 TLR 624 HL. That was a case of a
company registered in this country, the whole of the
shares of which were owned by enemy aliens, and it was
decided that to trade with that company would be trading
with the enemy under the then current legislation. In
addition it was submitted that in applying the Rent
Restriction Acts the court has always looked to the
reality of the transaction and would not allow the
purpose of the Acts to be defeated by the use of the
Companies Acts. In support of this contention we were
referred to Samrose Properties Ltd v Gibbard (1958) 1
WLR 235; (1958) 1 All ER 502 CA.

24. The Court went on to observe that:

whilst it may be argued that in the above circumstances
the courts have departed from a strict observance of the
principle laid down in Salomon v Salomon and Co Ltd, it is
true to say that any departure, if indeed any of the
instances given can be treated as a departure, has been
made to deal with special circumstances when a limited
company might well be a facade concealing the real facts.

25. These authorities, the defendant submits, show that apart from statutory exceptions, the corporate veil is only pierced where the incorporation is a sham or is for the purpose of avoiding existing legal obligations. As an example of the former, the defendant cited the case of Gilford Motor Co Limited v Horne (1933) 1 Ch 935. In that case a company was set up to avoid a restrictive covenant and thus to perpetrate a fraud upon persons to whom the company's founder had an existing legal obligation.

26. The defendant submits that the present case provides no example of this kind. The fact that the same business books were used before and after incorporation, the defendant submits, is explained by the small size of the business. Counsel further submitted that the prosecution had not proved that there had been no payment for the business and in any event that the only effect of no payment would be to set up a debtor/creditor relationship. In other words, the defendant argued that there was no evidence that the purpose of incorporation was to avoid the consequences which would otherwise attach to a breach of the undertakings, and that the correct inference to be drawn is that it was not.

27. More controversially, the defendant argues that the authorities further permit the submission that it would have been quite proper for the defendant to have set up a corporate entity so as to protect himself against the consequences of his employees or agents engaging in conduct which contravenes the Act. The defendant claims an entitlement to argue that if those persons previously employed by him breach the Act so as to make the publishing entity subject to action by the Trade Practices Commission, why should he be personally liable, apart from under an aiding and abetting provision in the Act?

28. The defendant's point is that he may protect himself in any way permitted by the law. If proceedings were to be brought in this case, they should have been brought against the company and not against the defendant. Had the Commission wished to prevent the defendant from incorporating, the undertakings in question should have been phrased accordingly.

29. The defendant also argued that there was no evidence that the company was an agent of the defendant; there was no evidence of any directions given to the employees by the defendant in any capacity other than might be implied from his position as director.

30. I have no doubt at all that the representations and assertions alleged by the prosecution were made. I am also convinced that what was done and said were in breach of the spirit and substance of the undertakings. I am also persuaded that the changeover of the business from the defendant to Lymtram was, at least in part, motivated by an intention to avoid in a legal way the effect of the undertakings while allowing the business methods to proceed unchanged. However, the question as to whether that changeover and the actions and words of Lymtram's director and employees represent a breach of the defendant's undertakings is more difficult.

31. In principle it seems to me doubtful that one individual can give an enforceable undertaking that other persons will do or not do certain things. It also falls to be established as a matter of law that contravention by such people of this type of undertaking will amount to contempt by the person giving the undertaking. In particular, I am hesitant about the enforceability of such an undertaking, in terms of opening up the availability of a contempt charge, if the undertaking is given by a former employer and the breaches are committed by former employees now employed by someone else, albeit a corporate alter ego of the former employer not proved to have been a sham establishment.

32. The contempts charged are not founded on assertions that the defendant counselled, procured or was knowingly concerned in the alleged breaches of his undertakings by others nor that he aided or abetted Lymtram or its employees to break them. It is not alleged that he was even a relatively passive accomplice by simply permitting, even in the sense of not stopping or attempting to stop, the salespeople from contravening his undertakings. In substantive terms, what is alleged is that he personally and as a principal made the representations and assertions by (ie through or by means of) his agents. As it seems to me, therefore, this case does not turn on the use of the word "agent" in the undertakings but on whether the actions of these other people could represent breaches of the undertakings by the defendant, and whether the prosecution has established that the actual offenders were the agents of, ie acting for, the defendant.

33. The nature of contempt of court in matters such as this and the concept of agency or vicarious liability in this context have always presented problems. In Australasian Meat Industry Employees' Union and Ors v Mudginberri Station Pty Limited [1986] HCA 46; (1986) 161 CLR 98, Gibbs CJ Mason, Wilson and Deane JJ said at 106-7:

Punishment for contempt serves two functions: (a)
enforcement of the process and orders of the court,
disobedience to which has been described as "civil
contempt"; and (b) punishment of other acts which impede
the administration of justice, such as obstructing
proceedings in court while it is sitting or publishing
comments on a pending case, which have both been
described as "criminal contempts": Fox, History of
Contempt of Court (1927), p 1. As Lord Diplock said in
Attorney-General v. Leveller Magazine Ltd (1979) AC 440
at p 449, criminal contempts "... all share a common
characteristic: they involve an interference with the
due administration of justice either in a particular
case or more generally as a continuing process".
The distinction, not recognized in Scotland, which has
often been made between civil and criminal contempt
seems to have originated in the seventeenth century:
Report of the Committee on Contempt of Court (1974)
Cmnd 5794, at par. 22. The existence of the
distinction has been recognised in judgments of this
Court: R. v Metal Trades Employers' Association; Ex
parte Amalgamated Engineering Union, Australian Section
[1951] HCA 3; (1951) 82 CLR 208 at pp 243, 253-254; John Fairfax and
Sons Pty Ltd v McRae [1955] HCA 12; (1955) 93 CLR 351 at pp 363-364;
Australian Consolidated Press Ltd v Morgan [1965] HCA 21; (1965) 112
CLR 483 at pp 489, 497-500. The principal theoretical
basis of the distinction is that disobedience to the
process and orders of the court in civil proceedings is
said to be a civil wrong, a matter between party and
party, enforcement being for the private benefit or
interest of the party seeking enforcement, whereas
impeding the administration of justice is a public
wrong. A secondary basis for the distinction is that
the main purpose of sanctions for disobedience in civil
proceedings is coercive rather than punitive: Ansah v
Ansah (1977) Fam 138, at p 144.
The distinction has been attended by some practical
consequences connected with procedure, onus of proof,
right of appeal, mode of punishment, privilege from
arrest, pardon and power to release an offender (Harnon,
"Civil and Criminal Contempts of Court", Modern Law
Review, vol 25 (1962) p 179), though differences in
approach to these matters have largely disappeared in
more recent times. According to some authorities,
criminal, but not civil, contempt could be punished by
the imposition of a fine. More recent decisions
indicate that a fine may be imposed when the contempt
consists of wilful disobedience to a court order in the
sense that the disobedience is not casual, accidental or
unintentional. The correctness of this approach is, of
course, a critical issue in this appeal.
In the light of these complexities it is not surprising
that the distinction between the two classes of contempt
has been subjected to increasing scrutiny. The
theoretical distinction between the two classes
overlooks the underlying rationale of every exercise of
the contempt power, namely that it is necessary to
uphold and protect the effective administration of
justice. Although the primary purpose in committing a
defendant who disobeys an injunction is to enforce the
injunction for the benefit of the plaintiff, another
purpose is to protect the effective administration of
justice by demonstrating that the court's orders will be
enforced. As the authors of Borrie and Lowe's Law of
Contempt, 2nd ed. (1983) say, at p 3:
"If a court lacked the means to enforce its orders, if
its orders could be disobeyed with impunity, not only
would individual litigants suffer, the whole
administration of justice would be brought into disrepute."

34. Whilst in a sense these proceedings are matters between party and party (Mr O'Connor the prosecutor and Mr Stevenson the defendant), it is not truly accurate to describe the subject matter here as relating to a civil wrong when it is the enforcement by a public body of and ensuring compliance with undertakings to the Court to comply with a statute for the public benefit. However, the joint judgment in Mudginberri continued at 108:

It is apparent from the foregoing discussion that very
great difficulty has been experienced in maintaining the
distinction between civil and criminal contempts and, in
particular, in elaborating a precise and certain
criterion which divides one class of contempt from the
other. The extremities to which the distinction has
sometimes driven the courts is strikingly illustrated by
the absurd proposition, which derives some comfort from
Seaward v Paterson (1897) 1 Ch 545, that the defendant
who disobeys an injunction granted against him commits a
civil contempt whereas the stranger who aids and abets
him is guilty of criminal contempt: see the criticisms
of this proposition by Lord Atkinson in Scott (1913) AC
at pp 456-457, and by Cross J in Phonographic
Performance (1964) Ch at pp 200-201. The concept that
disobedience to an order becomes criminal when the
primary purpose of exercising the power changes from
vindication of the rights of the plaintiff to
vindication of the authority of the court is both
complex and artificial. Salmon LJ was right when he
said in Jennison v Baker (1972) 2 QB at p 64, speaking
with reference to the enforcement of an injunction
generally, that "(t)he two objects are, in my view,
inextricably intermixed". When the defendant's
disobedience is casual it may readily appear that the
primary purpose of exercising the power is to vindicate
the plaintiff's rights. On the other hand, when the
disobedience is accompanied by public defiance it may as
readily be seen that the primary purpose of exercising
the power is vindication of the court's authority. But
the classification in terms of primary purpose is a more
complex and artificial undertaking when the punishment
is for wilful disobedience unaccompanied by defiance.
There is, accordingly, much to be said for the view that
all contempts should be punished as if they are
quasi-criminal in character, notwithstanding the
adoption of the contrary view by some members of this
Court in the decisions to which we have already referred.

35. The High Court went on to consider the distinction between casual, accidental and unintentional disobedience on the one hand and wilful disobedience on the other. At 112-113, their Honours said that lying behind punishment for such contempts is

the very substantial purpose of disciplining the
defendant and vindicating the authority of the court ...
It follows that a deliberate commission or omission
which is in breach of an injunctive order or an
undertaking will constitute such wilful disobedience
unless it be casual, accidental or unintentional.

36. Apparently, though an act or omission may itself be deliberate, the defiance of the order or undertaking may be accidental or unintended.

37. In my opinion the actions under consideration in this case were clearly intentional. If done by the defendant personally, or by others at his request, they would undoubtedly have constituted a wilful disobedience of his undertakings to the Court. However, the problem posed by this case is that although the defendant is alleged to be the principal offender, the case proved is that the "offences" were committed by other people. There is no evidence that the defendant had anything to do with the activities in question. He was not the employer of the perpetrators at the time, but merely a director of the company which employed them. We therefore have to look elsewhere to find his first degree involvement. Even if the corporate veil is lifted, what on the evidence is underneath?

38. If the undertakings had included a prohibition on aiding and abetting, causing, procuring or being knowingly concerned in the forbidden representations and assertions by others including any company of which he was a director or shareholder or in which he had a direct or indirect interest, and its directors and employees, whether actively or passively, this problem would not arise. If he had been charged, as it seems he might well have been on the facts of this case, with deliberately or negligently permitting or, when in a position to do so, not preventing Lymtram, its servants or agents to act contrary to the terms of the undertakings, and thereby being knowingly concerned in, those actions because he knew that, without his intervention, the undertakings might be breached, the present issue at least may not fall for decision. But these examples are not this case.

39. On the question whether it is possible to commit this quasi-criminal offence "by", ie through the actions of, an agent, the prosecution's submission really assumed the law in its favour and said that it is sufficient if the relevant acts or omissions are carried out by agents even though they were acting carelessly, negligently or in dereliction of their duty. This was not such a case. The acts of the salespeople were undoubtedly deliberate and apparently were assumed to be in compliance with the wishes of, and their duties and obligations to, their employer, Lymtram.

40. Vicarious liability in criminal law means the imposition of criminal liability upon a person in the capacity of a principal offender, even though the person is acting through another person. It is thus an exception to the common law, which in the main has refused to punish a person in the capacity of principal for another's deed.

41. Employers have often been held criminally or similarly liable for the acts of employees done in the course of employment. Likewise, a principal may be incriminated by the conduct of an agent in the scope of the agent's employment: see King and Minister for Customs v Australasian Films Ltd [1921] HCA 11; (1921) 29 CLR 195; De La Rue v McNamara (1940) VLR 128; Ex parte Falstein Re Maher 1948 SR (NSW) 133; Quality Dairies (York) Ltd v Pedley (1952) 1 KB 275; Carter v Burdoe (1928) 45 WN (NSW) 17.

42. In Australasian Films, the High Court (Knox CJ Duffy, Rich JJ) said at 217-8:

Having regard to all these matters, we think it is
clear, from the provisions of the Act, that the
intention was to make the principal responsible for an
act done by his agent or servant in the course of his
employment and for the state of mind of the agent or
servant in doing that act. Adopting the language of
Atkin J quoted above, we think that the principal is
liable in any case in which his servant or agent in the
course of his employment "commits the default provided
for in the statute in the state of mind provided for by
the statute. Once it is decided that this is one of
those cases where a principal may be held liable
criminally for the act of his servant, there is no
difficulty in holding that a corporation may be the
principal. No mens rea being necessary to make the
principal liable, a corporation is in exactly the same
position as a principal who is not a corporation." If
the principal is liable for the fraud of the agent
actually committing the offence, he is no less liable
for the fraud of some superior servant or agent by whose
direction the offence is committed, but we see no reason
for extending the responsibility of the principal to a
case in which it is sought to make the principal
responsible for the state of mind or the state of
knowledge of some other servant or agent not concerned
in the doing of the act.
On the findings of fact submitted to us there is no
ground for the contention that the defendant Company can
be convicted of intent to defraud the revenue in
connection with the charges relating to the claims for
drawback on films exported. It is clear on those
findings that no servant or agent of the Company knew at
any relevant time that the revenue was being or was
about to be defrauded, or that any false statement was
being or was about to be made, and that no servant or
agent of the Company who was employed in connection with
the exportation of the films or with the claims for
drawback in respect of them had any intent to defraud
the revenue.

43. In this case there is no evidence that any of the relevant "agents" knew the terms of the defendant's undertakings or even that he had given them.

44. However, on the view of the facts which I have formed, it is not necessary to decide this question because in my opinion, the prosecution has failed to prove that the people who committed the relevant acts were acting at the time as the agents of the defendant personally. It seems to me clear that without any statutory vicarious liability applicable to contempt of court for breach of an undertaking, an employee's acts do not per se attract the liability of the employer for the offences charged in these proceedings. They certainly do not incriminate a director of the corporate employer. Similarly, agency cannot be implied in a criminal context merely because the "offenders" were or are employed by a company partly or largely owned and operated by the defendant.

45. It may may well be, and probably is, the fact that Mr Finley and Ms Ryan and other employees carried out their work in precisely the same illegal way after the changeover to Lymtram as they had done previously when employed by the defendant. It also seems that Lymtram's method of operation may well have been as much in contravention of the Trade Practices Act as the defendant's had been. But there was simply no evidence led by the prosecution, not even by cross examination of the defence witnesses, to establish that this was so, nor that they acted on the defendant's instructions or with his encouragement, express or implied, on the days in question. There was certainly no evidence from the defence that they acted as they did despite his instructions or requests to the contrary; in any event, to use this as a criterion would reverse the applicable onus of proof. There was simply nothing to suggest that the defendant had spoken to the relevant employees at all on the subject or given them instructions one way or the other.

46. In a quasi-criminal proceeding, these are matters which the prosecution should prove if it seeks to establish that the defendant was the principal offender and that the actual actors were performing duty as his representatives. This may be so in fact; I see no evidence establishing it to be the case.

47. The prosecution pointed to the fact that the same books of account were continued, the personal and corporate businesses only being separated by a red line ruled across the page. Attention was drawn to the fact that Lymtram was a $2 shelf company procured by the defendant's accountant and that there was no evidence of any genuine commercial agreement between the defendant and Lymtram for the transfer of the assets. It was argued that the timing of the changeover, though not permitting an inference that it was all a sham to enable the defendant to avoid the consequences of his undertakings, should lead to the belief, and finding, that the whole escapade was not intended to effect real legal changes but merely to provide some unstated "protection" from some undefined consequences.

48. Accepting all that as true, these matters seem to me to beg the real question. They do not establish that Finley's, Ryan's and the unknown telephoners' acts and words were those of the defendant and that they acted at the defendant's bidding, urging, request or direction. For those reasons, it is my opinion that the prosecution fails and that the charges should be dismissed with costs.