Edwards v R [1992] HCA 19; (1992) 173 CLR 653 (3 June 1992)

HIGH COURT OF AUSTRALIA

EDWARDS v. THE QUEEN [1992] HCA 19; (1992) 173 CLR 653
F.C. 92/018

Criminal Law - Companies

High Court of Australia
Mason C.J.(1), Brennan(1), Deane(2), Dawson(3), Toohey(4), Gaudron(1) and McHugh(1) JJ.

CATCHWORDS

Criminal Law - Parties - Being knowingly concerned in commission of offence - Offence of making improper use of office in company to cause detriment to company - Elements of offence - "Knowingly concerned" - Companies (Western Australia) Code, s. 229(4) - Companies (Interpretation and Miscellaneous Provisions) (Western Australia) Code, s. 38(1).

Companies - Officers and employees - Offences - Improper use of position to cause detriment to company - Companies (Western Australia) Code, s. 229(4).

HEARING

1991, December 10, 11; 1992, June 3. 3:6:1992

DECISION

The appellant and Anthony James Lloyd were each convicted of an offence on indictment at a trial in the District Court of Western Australia before O'Dea D.C.J. and a jury.

2. The charge against Lloyd was:
"(1) On 27 October 1988 at Perth ANTHONY JAMES LLOYD being
a Director of Western Collieries Ltd made improper
use of his position as a Director to cause detriment
to Western Collieries Ltd by causing the Rural and
Industries Bank of Western Australia to loan the sum
of $6,000,000.00 in money to Western Collieries Ltd
and then depositing that money with Rothwells Limited
so that it could then be used by Rothwells Limited to
discharge a liability to the National Australia Bank."

"(2) AND FURTHER THAT on the same date and at the same
place KEVIN JOHN EDWARDS was knowingly concerned in
ANTHONY JAMES LLOYD being a Director of Western
Collieries Ltd made (sic) improper use of his
position as a Director to cause detriment to Western
Collieries Ltd by causing the Rural and Industries
Bank of Western Australia to loan the sum of
$6,000,000.00 in money to Western Collieries Ltd and
then depositing that money with Rothwells Limited so
that it could then be used by Rothwells Limited to
discharge a liability to the National Australia Bank."

3. The offence of which Lloyd was convicted was an offence against s.229(4) of the Companies (Western Australia) Code ("the Code"). The offence of which the appellant was convicted arises from the operation of s.38(1) of the Companies and Securities (Interpretation and Miscellaneous Provisions) (Western Australia) Code ("the Interpretation Code"). That sub-section provides:

"A person who aids, abets, counsels or procures, or
by act or omission is in any way directly or indirectly
knowingly concerned in or party to, the commission of an
offence against any relevant Code shall be deemed to have
committed that offence and is punishable accordingly."

4. The principal submission presented by the appellant in support of his appeal is that the trial judge erred in his charge to the jury in failing to direct the jury that an intention to cause detriment to Western Collieries Ltd. ("Western") was an element of the offence with which Lloyd was charged. The parties concede that this point was not taken at the trial by counsel for the appellant; nor, for that matter, was it taken by counsel for Lloyd. Nonetheless, the appellant contends that his conviction was fatally flawed because an essential element of the charge was not left to the jury, namely, that the appellant was knowingly concerned in Lloyd making improper use of his position as a director of Western for the purpose or with the intention of causing detriment to that company.

5. On the view which we take of s.229(4) of the Code, as expressed in our reasons for judgment in Chew v. The Queen, delivered immediately before judgment in this case, the sub-section has a purposive element. The words "to cause detriment" must be understood in the sense of "for the purpose of causing detriment" and not in a merely causative sense which was the interpretation preferred by the Court of Criminal Appeal both in Chew and in the present case.

6. Once this interpretation of s.229(4) is accepted, the appellant's submission in the present case must be upheld. In Yorke v. Lucas (1) , [1985] HCA 65; (1985) 158 CLR 661. this Court dealt with the meaning of the words "knowingly concerned" in s.75B of the Trade Practices Act 1974 (Cth). The Court held that the words required that the person charged must have knowledge of the essential elements constituting contravention of the Act. As Mason A.C.J., Wilson, Deane and Dawson JJ. observed (2), ibid., at p 670. the words require:

"a party to a contravention to be an intentional
participant, the necessary intent being based upon
knowledge of the essential elements of the contravention".

There is no reason for drawing any distinction between the meaning of the words "knowingly concerned" in s.75B of the Trade Practices Act and the meaning of the same words in s.38(1) of the Interpretation Code. In the context of s.38(1) and s.229(4), they require knowledge of the purpose of the principal offender to gain an advantage for himself or herself or any other person or to cause a detriment to the corporation.

7. It has not been suggested by the Crown that, on this view of s.38(1) and s.229(4), the trial judge correctly or adequately instructed the jury. What the trial judge told the jury with respect to the elements of the offence charged against the appellant is best conveyed by two passages from his charge to the jury. They are:

"The difference in this count (i.e., the count against
the appellant) is that the Crown must prove and prove to
your satisfaction beyond reasonable doubt that Mr Edwards
was knowingly concerned in Mr Lloyd doing what he did

. He had to know that Mr Lloyd was a director of Western

Collieries. He had to know that he made improper use of
his position as a director. He had to know that it would
cause detriment to Western Collieries, and so on.
Once the Crown has established that Lloyd has done what
he has done then it is a question of whether the Crown has
established to the necessary satisfaction that Edwards was
knowingly concerned in what Lloyd was doing and knowing
that he was a director and knowing that he was making
improper use and knowing that would cause detriment by
causing the bank to loan the money and so on."

Clearly the trial judge did not tell the jury that it was necessary for them to find that the appellant knew that Lloyd's purpose was to cause a detriment to Western by causing that company to borrow money for no purpose of the company and in a situation in which it would have to look to Rothwells Ltd. ("Rothwells"), a company in serious financial difficulties, for repayment.

8. It follows that, in our view, the appellant's conviction must be set aside on the ground of error of law unless the case falls within the proviso to s.689(1) of The Criminal Code (W.A.).

9. The Crown argues that the proviso should be applied on the ground that the appellant has not lost, as a result of the error of law, "a real chance of acquittal", to use the words of Barwick C.J. in Reg. v. Storey (3) [1978] HCA 39; (1978) 140 CLR 364, at p 376. In Wilde v. The Queen (4) , [1988] HCA 6; (1988) 164 CLR 365, at pp 371-372 Brennan, Dawson and Toohey JJ. observed that:

"where there has been a departure from the requirements of
a properly conducted trial, it cannot be said that there
has been no substantial miscarriage of justice if the
applicant has thereby lost 'a chance which was fairly open
to him of being acquitted' to use the phrase of Fullagar
J. in Mraz v. The Queen (5) [1955] HCA 59; (1955) 93 CLR 493, at
p 514 or 'a real chance of acquittal'".

10. The Crown contends that the verdict of the jury indicates that the jury accepted that the appellant knew that Lloyd was acting as a director, that what Lloyd did would cause a detriment to Western and that the appellant took an active part in what was happening with that knowledge. That much may be accepted. The Crown then submits that, in the light of the surrounding circumstances, the only inferences which are open are that the appellant knew that Lloyd was not acting in the interests of Western and its shareholders and creditors as a whole and that the borrowing of $6,000,000 by Western from the Rural and Industries Bank of Western Australia and the subsequent payment of that amount to Rothwells to be paid by it in satisfaction of a liability to the National Australia Bank ("the Bank") would put Western at risk and therefore cause a detriment to that company.

11. We agree that the inference that Lloyd was not acting in the interests of Western, its shareholders and creditors as a whole in arranging for and carrying out the transaction is irresistible, as is the inference that Edwards knew that Lloyd was not so acting. But we do not consider that it necessarily follows that the jury would have found that Lloyd's purpose was to cause a detriment to Western or that the appellant was aware of that purpose. It would have been a different matter had Lloyd been charged under the other limb of s.229(4) with making improper use of his position for the purpose of gaining an advantage for Rothwells or the Bank and had the appellant been charged with being "knowingly concerned" in that offence. In that event, the Crown would have had no difficulty in establishing, on the facts of the present case, a purpose on the part of Lloyd to gain an advantage for Rothwells or the Bank and knowledge on the part of the appellant of that purpose. Why Lloyd and the appellant were not charged with offences framed in that way is a question to which there is no obvious answer and the failure to charge them in that way creates, in our view, an insuperable obstacle to the application of the proviso.

12. As things stand, although the existence of a purpose on the part of Lloyd to cause detriment to Western and knowledge on the part of the appellant of that purpose are possible inferences, we are not persuaded that the jury would necessarily have so concluded. It follows that, in our opinion, the error of law deprived the appellant of a real chance of acquittal on the offence charged and the case is not one in which the proviso to s.689(1) should be applied.

13. In the result we would allow the appeal, set aside the conviction and order a new trial.

I agree with Mason C.J., Brennan, Gaudron and McHugh JJ. that the learned trial judge's summing up failed adequately to instruct the jury that the appellant was not guilty of the offence with which he was charged unless he knew that Lloyd had made an improper use of his position as an officer or employee of a corporation for the purpose of gaining or causing a relevant advantage or detriment. For the reasons which their Honours give, I would allow the appeal.

I have expressed my view in Chew v. The Queen that s.229(4) of the Companies (Western Australia) Code requires proof of an improper use by an accused of his position as an officer or employee of a corporation with the intention of gaining, directly or indirectly, an advantage for himself or for any other person or with the intention of causing detriment to the corporation. Accordingly, I am able to express my agreement with the reasons for judgment of Mason C.J., Brennan, Gaudron and McHugh JJ. in this case. I would allow the appeal.

The appellant was convicted of being "knowingly concerned in ANTHONY JAMES LLOYD being a Director of Western Collieries Ltd made (sic) improper use of his position as a Director to cause detriment to Western Collieries Ltd by causing the Rural and Industries Bank of Western Australia to loan the sum of $6,000,000.00 in money to Western Collieries Ltd and then depositing that money with Rothwells Limited so that it could then be used by Rothwells Limited to discharge a liability to the National Australia Bank".

2. Lloyd was convicted of an offence under s.229(4) of the Companies (Western Australia) Code ("the Companies Code") of making improper use of his position as a director to cause detriment to Western Collieries Ltd. in the manner indicated in the preceding paragraph. The appellant's conviction resulted from the operation of the Companies and Securities (Interpretation and Miscellaneous Provisions) (Western Australia) Code ("the Companies Interpretation Code"), s.38(1) of which reads:

"A person who aids, abets, counsels or procures, or by
act or omission is in any way directly or indirectly
knowingly concerned in or party to, the commission of an
offence against any relevant Code shall be deemed to have
committed that offence and is punishable accordingly."

By virtue of s.3(c) of the Companies Interpretation Code and s.5 of the Companies (Application of Laws) Act 1981 (W.A.), this provision applies to an offence under the Companies Code.

3. This appeal was heard at the same time as Chew v. The Queen in which judgment has just been delivered. The primary question in each appeal was whether s.229(4) of the Companies Code required improper use of his or her position by an officer of a corporation, with the intention of gaining an advantage for himself or herself or for any other person or of causing a detriment to the corporation. The view I took in Chew was that the sub-section is concerned with an act constituting improper use, deliberately done, which gains an advantage or causes a detriment as set out in the sub-section, but that the sub-section does not require that the act be done with the intention of gaining the advantage or causing the detriment. However, that was not the view favoured by the majority in Chew, who held that the sub-section has a purposive element. For the reasons given by Mason C.J., Brennan, Gaudron and McHugh JJ., the present appeal must therefore be upheld.

4. There is a second ground of appeal, formulated in these terms:

"The Court of Criminal Appeal erred in law in holding
that on a charge of being knowingly concerned in an
offence by Lloyd under Section 229(4) of the Companies
Code it was not necessary for the Crown to prove that the
appellant knew that the use made by Lloyd of his position
as a Director was 'improper'."

Because of the argument addressed to the Court, I propose to deal with this ground.

5. The Court of Criminal Appeal of Western Australia was constituted by Malcolm C.J. and Rowland and Franklyn JJ. The Chief Justice was a member of the Court of Criminal Appeal in Chew. Only Malcolm C.J. dealt expressly with the further ground of appeal. His Honour rejected the ground, saying that the argument "would require proof of the making of a value judgment by Edwards". Rowland J. agreed with the Chief Justice on this aspect; Franklyn J. agreed generally with the Chief Justice.

6. Counsel for the appellant contended that, for a person to be "knowingly concerned" in the commission of an offence under s.229(4) of the Companies Code, the Crown must prove that he or she intentionally participated in the offence, with knowledge of all the essential facts which constituted the principal offence. In the circumstances of this case, it was said, the Crown had to prove that the appellant knew that Lloyd made use of his position as an officer of Western Collieries in a particular way; knew that Lloyd did so with intent to cause detriment to Western Collieries; knew that detriment would in fact be caused; and knew that Lloyd's use of his position was improper. The appellant accepted that he did not need to know that what Lloyd was doing constituted an offence (6). See Giorgianni v. The Queen [1985] HCA 29; (1985) 156 CLR 473; Yorke v. Lucas [1985] HCA 65; (1985) 158 CLR 661.

7. The expression "knowingly concerned" was considered by this Court in Yorke v. Lucas. There the Court held that the words in question, appearing in s.75B of the Trade Practices Act 1974 (Cth), required that a person charged thereunder be shown to have had knowledge of the essential elements which constituted the contravention of the Act. In the view of Mason A.C.J., Wilson, Deane and Dawson JJ., the words "knowingly concerned" require "a party to a contravention to be an intentional participant, the necessary intent being based upon knowledge of the essential elements of the contravention" (7) (1985) 158 CLR, at p 670. The reference to "intentional participant", it is clear from the judgment, requires that a person charged with being knowingly concerned in the commission of an offence be shown to have known of all the elements constituting the offence. That view of the words "knowingly concerned" in the Trade Practices Act applies equally to the offence charged under the Companies Code.

8. Having dealt with the elements of the offence charged against Lloyd, the trial judge spoke of the charge against the appellant. He said:

"The difference in this count is that the crown must
prove and prove to your satisfaction beyond reasonable
doubt that Mr Edwards was knowingly concerned in Mr Lloyd
doing what he did. ... He had to know that he made
improper use of his position as a director. He had to
know that it would cause detriment to Western Collieries,
and so on." (emphasis added)

9. Later his Honour said:

"Once the crown has established that Lloyd has done what
he has done then it is a question of whether the crown has
established to the necessary satisfaction that Edwards was
knowingly concerned in what Lloyd was doing and knowing
that he was a director and knowing that he was making
improper use and knowing that would cause detriment by
causing the bank to loan the money and so on." (emphasis
added)

10. His Honour went on, albeit in a very summary way, to refer to the conduct of Lloyd and the appellant's involvement in that conduct. He then said:

"Mr Roberts-Smith (counsel for the appellant), as I
understand his argument, propounds that what was done
was not - I do not know that it propounds that it was
not improper but on behalf of Edwards he says that it
is necessary for Edwards to know it was improper. I am
instructing you that as far as the law is concerned, that
is not so. Edwards must know what is going on. In order
to be knowingly concerned, he must know what is going on.
He must know that Lloyd was acting as a director and
at that time he must know that what was happening was
detrimental to Western Collieries and would cause a
detriment to Western Collieries; but it is a question of
fact really as to whether it was improper or not. It is
your view as to whether it was improper or not that counts.
It is not Mr Edwards's view.
In fact there are some occasions in law where people do
things honestly and reasonably and so on and they can be
said not to be liable because of that, but of course in
this instance we know that Mr Edwards did not even direct
his mind to the fact as to whether it was improper or not.
He just let it happen.
What I am telling you is that it is no defence for
somebody to come along and say, 'I didn't think about it,
so therefore I didn't know it was improper' but it is for
you to decide if it was improper and of course if you are
not satisfied, if the 12 of you are not satisfied, that
what was done was improper, then that's the end of the
matter. There is no crime at all; but it does not matter
one way or the other as to whether Mr Edwards knew or did
not know that it was improper. It is your decision as to
that. So long as Mr Edwards knew that Lloyd was a director
... so long as Mr Edwards knew that at the time it was
to the detriment of Western Collieries, then Mr Edwards is
liable along with Mr Lloyd." (emphasis added)

11. Of these passages, Malcolm C.J. said:

"It was submitted that in the first of these three
passages the learned Judge got it right but thereafter
got it wrong. In my opinion the first passage contains
a shorthand summary of the elements of Lloyd's offence
which needed to be known by Edwards. Clearly Edwards had
to be shown to have knowledge of the relevant facts alleged
to constitute the elements of Lloyd's offence. It was
submitted, however, that, as a matter of law, Edwards could
not be knowingly concerned in the commission of the offence
by Lloyd unless he knew that Lloyd's use of his position
was 'improper'. This would require proof of the making
of a value judgment by Edwards. I am unable to accept
this submission. In my opinion it would be sufficient
that Edwards knew that Lloyd was using his position as a
director of WCL to borrow $6 million from the R and I Bank
overnight for the purpose of on-lending to Rothwells and
that WCL was being caused a detriment by being put at risk
of having to meet the liability, if the funds expected from
the Government pursuant to the Government, Bond and Spedley
Agreement did not in fact materialise the next morning."

12. The appellant took issue with this statement, in particular the Chief Justice's rejection of the argument that the appellant had to know that Lloyd's use of his position was improper and his Honour's statement that to hold otherwise would require proof of the making of a value judgment by Lloyd.

13. It is clear, as I explained in Chew, that the question whether an officer of a corporation made improper use of his or her position is an objective one and that what constitutes improper use must be determined according to the particular duties and responsibilities of the officer whose conduct is impugned. No proof of the making of a value judgment by the appellant was necessary. A value judgment was required of the jury in the sense that they had to be satisfied beyond reasonable doubt that, viewed objectively, Lloyd made improper use of his position as a director of Western Collieries. If the jury made that judgment, they had then to be satisfied that the appellant was aware of the circumstances that made Lloyd's use of his position improper. While the charge to the jury should have expressed these matters with greater clarity, it sufficiently brought home to the jury in general terms what was required of them.

14. In dealing with the charge against Lloyd, the trial judge said that "improper" ordinarily meant "unseemly, indecent, not in accordance with the rules of conduct". He continued:

"So as far as we are concerned, in the light of the evidence
that you have heard, which is, as I understand it, not
really controverted, was what was done unseemly, not in
accordance with the rules of conduct?"

15. As to the charge against the appellant, I have already referred to those passages which are relevant to the general way in which the jury were to approach their task of deciding whether the circumstances constituted an improper use by Lloyd of his position and whether the appellant knew of those circumstances. The trial judge went on to speak of various events that were relevant to their decision in this regard. It is unnecessary to canvas what his Honour said. Whatever the imperfections of the direction, it did sufficiently alert the jury to the need for the appellant to be aware of what was taking place and, in particular, to be aware of Lloyd's role in relation to the raising of a loan from the Rural and Industries Bank to Western Collieries and the on-lending of that money to Rothwells so that it could be used by Rothwells to meet a liability to the National Australia Bank. His Honour referred to the Crown's argument that the appellant was present while steps were being taken to borrow money from the Rural and Industries Bank; that he was aware of Lloyd's intention to assist Rothwells by that loan; and that he must have known that Western Collieries was simply a medium used to borrow the money, that company not standing to benefit in any way from the loan but, on the contrary, being at risk of having to repay the loan if the money was not forthcoming the next day. He reminded the jury of the defence case that the appellant did not become aware of the loan from the Rural and Industries Bank until after it had been approved, observing:

"If that be so you may well consider that he was not
knowingly concerned in raising money for Rothwells."

16. I have spent time on the direction to the jury because of submissions made by counsel for the appellant. But, as is apparent from the grounds of appeal, it is not the general adequacy of the direction that is challenged. The appellant has failed to make good his complaints underlying the second ground of appeal. But, for the reasons given in regard to the first ground, the appeal must be allowed.

ORDER

Appeal allowed.

Set aside the order of the Court of Criminal Appeal of Western Australia and in lieu thereof order that the appeal to that Court be allowed, that the conviction be quashed and that there be a new trial.