Chew v R

173 CLR 626
107 ALR 171

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(Judgment by: Toohey J) Court:

Judges: Mason CJ, Brennan, Gaudron and McHugh JJ
Deane J
Dawson J

Toohey J

Judgment date: 3 June 1992

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Judgment by:
Toohey J

The appellant appeals against his conviction of offences under s 229(4) of the Companies (Western Australia) Code (the Companies Code). The subsection reads:

An officer or employee of a corporation shall not make improper use of his position as such an officer or employee, to gain, directly or indirectly, an advantage for himself or for any other person or to cause detriment to the corporation.

Penalty: $20,000 or imprisonment for 5 years, or both.

The indictment on which the appellant was convicted contained four counts:

(1)

On or about 18 April 1986 at Perth STEPHEN CHEW, being Chairman of Directors of GENERAL CORPORATION OF AUSTRALIA LTD, authorised the payment by GENERAL CORPORATION OF AUSTRALIA LTD of the sum of $3,050,000 to ROTHWELLS LTD on behalf of WAIN HOLDINGS PTY LTD and thereby made improper use of his position as Chairman of Directors to gain advantage for himself and to cause detriment to GENERAL CORPORATION OF AUSTRALIA LTD.

(2)

AND FURTHER on or about 14 April 1986 at Perth, STEPHEN CHEW, being Chairman of Directors of GENERAL CORPORATION OF AUSTRALIA LTD, authorised the establishment of a Commercial Bill Facility by GENERAL CORPORATION OF AUSTRALIA for the sum of $4.65 million in favour of WAIN HOLDINGS PTY LTD and thereby made improper use of his position as Chairman of Directors to gain advantage for himself and to cause detriment to GENERAL CORPORATION OF AUSTRALIA LTD.

(3)

AND FURTHER between 1 May 1986 and 30 September 1986 at Perth, STEPHEN CHEW being Chairman of Directors of GENERAL CORPORATION OF AUSTRALIA LTD, authorised the acquisition of 200 shares in GSC PTY LTD by GENERAL CORPORATION OF AUSTRALIA LTD and thereby made improper use of his position as Chairman of Directors to gain advantage for himself and to cause detriment to GENERAL CORPORATION OF AUSTRALIA LTD.

(4)

AND FURTHER between 1 May 1986 and 30 September 1986 at Perth, STEPHEN CHEW being Chairman of Directors of GENERAL CORPORATION OF AUSTRALIA LTD authorised the acquisition of 1000 shares in IKPEN PTY and 1000 shares in MAROLY HOLDINGS PTY LTD by GENERAL CORPORATION OF AUSTRALIA LTD and thereby made improper use of his position as Chairman of Directors to gain advantage for himself and to cause detriment to GENERAL CORPORATION OF AUSTRALIA LTD.

The appeal turns on what may, loosely, be referred to as the mental element in s 229(4). More narrowly, the question is whether, as the appellant submitted, a breach of the subsection requires that an accused, in making improper use of his position as an officer of the corporation, do so with the specific intention of gaining an identified advantage for himself or another person or of causing an identified detriment to the corporation. The trial judge did not direct the jury expressly in those terms.

The appellant's analysis of the subsection identified five essential elements, formulated in the following way:

(1)

The accused was, at the relevant time, an officer or an employee of a corporation.

(2)

He used his position as such an officer or employee.

(3)

His use of the position was improper.

(4)

He made that improper use in order to gain, directly or indirectly, an advantage or in order to cause detriment.

(5)

The advantage was either for himself or for another person, or the detriment was to the corporation.

On this analysis, the question whether the use of the position was improper is an objective one. It is a separate question from whether the use was made in order to gain an advantage or to cause detriment; the test in that case is subjective.

The appellant's analysis was not favoured by the majority in the Court of Criminal Appeal of Western Australia in dismissing the appeal to that court. Malcolm CJ concluded: ^[F23] "In my opinion what is required by way of mens rea under s 229(4) is a deliberate act or combination of acts by a director as such, with knowledge that what is being done is not for the purpose of furthering any interest of the company, but to achieving a collateral purpose which will gain an advantage for himself or another, or cause a detriment to the company."

The Chief Justice went on to discuss ^[F24] the implications for s 229(4) of the Criminal Code (WA) (the Criminal Code), in particular s 23. It will be necessary to look at the operation of the Criminal Code later in this judgment.

At this stage it is relevant to consider the view of the subsection taken by Murray J, the other member of the majority. His Honour said: ^[F25] "[T]he criminal offence created by [s 229(4)] has as an element, the need to establish that the relevant improper conduct of the accused as an officer or employee of the corporation, had the direct or indirect result that an advantage was gained or a detriment caused within the meaning of the section."

Later, Murray J, speaking of the gaining of an advantage or the causing of a detriment, said of the subsection: ^[F26] "[T]hat provision was drawn to create a criminal offence, as well as to impose and preserve civil liability, where an officer or employee of a corporation in that capacity, had made improper use of his position in any way with the result that he or another gained an advantage or a detriment was caused to the corporation. In my view, it is not consistent with that purpose to require for the criminal offence so created, an intention to gain the advantage or cause the detriment. It is the effect of the conduct in question, as well as its essential impropriety, upon which the section focuses."

Wallwork J (who was in dissent and would have allowed the appeal) said: ^[F27] "In my opinion the words in the subsection imply an intent in the same way as sentences such as 'he broke into the house to steal'; 'he shot at the man to kill him', etc."

The respondent identified the relevant elements of s 229(4) in this way: "Section 229(4) requires proof of a willed act, which conduct is deliberately and consciously performed by an officer or employee of a corporation, which can be categorised as an improper act and which in fact causes an advantage for the officer or employee or for any other person or causes a detriment to the corporation. Such an event must not be one which occurs by accident (section 23 of the Criminal Code)."

The lines are thereby drawn for the purposes of the present appeal. It is useful to look initially at the proper construction of the subsection and then to consider what consequences, if any, the Criminal Code has for the operation of the provision.

Section 229 finds its place in Div 2 ("Directors and other Officers") of Pt V ("Management and Administration") of the Companies Code. Division 2 is concerned with such matters as the qualifications, appointment and removal of directors, together with provisions relating to their rights and obligations. Section 229 carries the title "Duty and liability of officers". Its subsections impose obligations on "officers" (a term which includes directors ^[F28] ), a breach of which gives rise to a criminal liability and to a civil liability as well. Section 229(10) provides that the section "has effect in addition to, and not in derogation of, any rule of law relating to the duty or liability of a person by reason of his office or employment in relation to a corporation and does not prevent the institution of any civil proceedings in respect of a breach of such a duty or in respect of such a liability".

In the appellant's submission, s 229 "is a penal provision, and the civil consequences that flow from parts of the section are... to be seen as ancillary to that primary purpose". The submission goes too far. Subsection (7) provides for the recovery of compensation for a contravention of or a failure to comply with a provision of the section, whether or not there has been a conviction under the section. Nevertheless, the appellant is right in contending that the words "in addition to" ^[F29] point up that subs (4) is intended to do more than restate fiduciary or other civil duties owed by a director. Subsection (4) is a penal provision and must be construed accordingly. Furthermore, the provision is part of a code for the formation and regulation of companies and "its language should be construed according to its natural meaning and without any presumption that it was intended to do no more than restate the existing law". ^[F30]

The plain meaning of the words in s 229(4) does not support the appellant's submission to the extent contended for. "Improper" is an adjective qualifying "use". That is not to say that "improper use" is to be determined according to some inflexible standard. The composite expression necessarily has regard "to the particular duties and responsibilities of the particular officer whose conduct is impugned". ^[F31] It is by reference to the appellant's position as Chairman of Directors of General Corporation of Australia Ltd that his conduct in authorising payment to Rothwells Ltd, in authorising the establishment of a commercial bill facility and in authorising the acquisition of shares must be judged. The expression is, as the appellant accepted, one to be determined objectively; essentially the issue is whether the conduct impugned is inconsistent with the proper discharge of the duties of the office in question. To resolve that issue it will be necessary to look at all relevant circumstances, including, for instance, the extent of a director's awareness of the financial stability of the corporation. ^[F32] But that does not mean that the test of "improper use" is subjective; it simply indicates the range of considerations that may have to be taken into account. Furthermore, the expression is a separate element of the subsection. There can be no offence unless what the accused has done answers the description of making improper use of his position.

But an offence is not constituted simply by making improper use of the position; the accused must make that use by an act which is consciously performed. That means no more than that the act must be one willed by the accused, not accidental. And the result of the act must be one which it is proper to characterise as an advantage or a detriment in terms of the subsection. That, in effect, was the approach taken by Murray J.

Thus, if there is an element of "intent" in the offence, it is no more than an act deliberately done which brings about a result which can be characterised as an advantage for the person concerned or for another or as a detriment to the corporation. If this view of subs (4) is applied, say, to the first count in the indictment, the offence alleged is one of making improper use (that is, authorising payment by General Corporation); deliberately bringing about a result (that is, payment to Rothwells); a result which, in the circumstances, may properly be characterised as securing an advantage for the appellant and causing a detriment to General Corporation. In passing, it may be noted that the allegation of both securing an advantage and causing a detriment is unnecessary; either is sufficient. But the respondent conducted the case at trial on the basis of establishing both and did not seek to resile from this position on appeal.

The appellant argued that there is an ambiguity in the infinitives "to gain" and "to cause" and that this should be resolved in his favour by adopting the meaning most favourable to him, namely, "in order to gain" and "in order to cause". If there were an ambiguity, the argument would have force. ^[F33] But, in context, the use of the infinitive imports no more than a causal connection between "make improper use" and "advantage... or... detriment". The use of a comma after "employee" supports this view by isolating "to gain" from "shall not make improper use of". But I do not rely upon this as an aid to construction because there is no comma after "employee" in the preceding subsection which deals with improper use of information. The fate of Sir Roger Casement is a salutary warning against attaching too much significance to punctuation. But it is important that s 229(1), which obliges an officer "at all times [to] act honestly in the exercise of his powers and the discharge of the duties of his office", imposes in para (b) a higher penalty for contravention of the subsection where the offence was committed "with intent to deceive or defraud the company, members or creditors of the company or creditors of any other person or for any other fraudulent purpose". No other subsection of s 229 draws any such distinction or makes any such reference. Thus the structure of s 229 tells against the construction urged by the appellant in regard to subs (4).

It is not easy to see how an offence is committed under s 229(4) unless the officer has gained an advantage or caused a detriment. If the officer has proceeded no further than to make improper use of his position with the idea of gaining an advantage or causing a detriment, one would think that he had failed to act honestly in the exercise of his powers or the discharge of the duties of his office and thereby came within subs (1). Subsection (4), like subs (3), looks to a particular situation, one in which the officer has acted in such a way as to gain an advantage or cause a detriment. That, I think, is the plain meaning of the words used. If an offence under subs (4) is not committed merely by making improper use of a position, emphasis tends to be placed on the result of that use; this in turn strengthens the view that "to gain" and "to cause" have a causal rather than a purposive content.

It is necessary to see whether this view of the subsection, based on the plain meaning of the words, is affected by the provisions of the Criminal Code. It is s 23 of the Criminal Code with which we are concerned, a section which applies "to all persons charged with any offence against the statute law of Western Australia". ^[F34] Section 23 reads:

Subject to the express provisions of this Code relating to negligent acts and omissions, a person is not criminally responsible for an act or omission which occurs independently of the exercise of his will, or for an event which occurs by accident.

Unless the intention to cause a particular result is expressly declared to be an element of the offence constituted, in whole or part, by an act or omission, the result intended to be caused by an act or omission is immaterial.

Unless otherwise expressly declared, the motive by which a person is induced to do or omit to do an act, or to form an intention, is immaterial so far as regards criminal responsibility.

The Companies Code is part of the statute law of Western Australia; it is the product of an enactment of the Parliament of Western Australia. ^[F35] It follows that the common law doctrine of mens rea has no application to s 229(4); relevantly, the only question is the impact on the subsection of s 23 of the Criminal Code. ^[F36]

In terms of s 23 of the Criminal Code, it is not suggested that any act of the appellant occurred independently of the exercise of his will or by accident. The only question then remaining is whether an intention to cause a particular result is expressly declared to be an element of the offence constituted by s 229(4); otherwise the result intended to be caused is immaterial. It is apparent from what has been said already in this judgment that the subsection requires no more than an act deliberately done, having a result which may be characterised in a certain way. It is not the case that the provision requires, on the part of an accused, an intent to gain an advantage or cause a detriment. It follows then that nothing in s 23 of the Criminal Code affects the construction of s 229(4) which I have otherwise reached. ^[F37]

In the course of his charge to the jury, the trial judge read to them subsections of s 229, including of course subs (4). He told them that it was necessary for the Crown to prove:

(1)

That the accused was an officer of the company, a matter about which there was no argument;

(2)

That the accused used his position to gain an advantage for himself and to cause a detriment to General Corporation; and

(3)

That the use of his position for that purpose was improper.

His Honour went on to tell the jury, in unexceptional terms, that what was improper had to be looked at "from the point of view of the particular officer involved", in this case a director of a company who was also chairman of directors. He was not suggesting a subjective test, only the need to look at the powers and duties of someone in the accused's position. He said that it was not essential that the conduct be illegal and that conduct may be improper even "if the person authorising the act believed it at the time to be in the overall interests of the company", an apparent reference to Whitehouse v Carlton Hotel Pty Ltd . ^[F38] His Honour amplified these remarks.

His Honour did not isolate the second of the matters he said it was incumbent on the Crown to prove; in particular, he did not deal with any question of intent in relation to gaining an advantage or causing a detriment. And there was no application for a redirection with respect to intent. Indeed, intent, in that regard, did not become an issue until some time during the hearing of the appeal to the Court of Criminal Appeal.

Following some questions from the bench to the Crown, a ground of appeal based on intent was added to the notice of appeal.

What the trial judge did say, before considering the meaning of "improper", was: "The crown is required to satisfy you beyond a reasonable doubt as to each of those three elements. It is the case that the use of the position must cause the gain to the person involved, namely Mr Chew, and must cause the detriment which results in each case, and obviously you will look at that matter from that point of view when considering the second element. It is also the case that the purpose or purposes of using the position was to cause a gain to himself or a detriment to the company, so that you will consider that at the same time."

It can be seen that the jury were instructed to look at whether the appellant used his position to "cause [the] gain" and "cause [the] detriment" and whether he used his position for those "purposes". While a direction in those terms did not strictly accord with the proper construction of s 229(4), the question remains whether any miscarriage of justice resulted therefrom. That question can only be answered by reference to the nature of the case against the appellant and a consideration of the issues truly raised.

There was no argument that the appellant was an officer of General Corporation within the meaning of s 229(4). It was not in issue before this court that he authorised the payment mentioned in the first count, the establishment of the commercial bill facility mentioned in the second count and the acquisition of shares mentioned in the third and fourth counts. Whether in each case the conduct of the appellant constituted an improper use of his position as Chairman of Directors of General Corporation was a matter for the jury, properly instructed. No complaint was made by the appellant of the trial judge's direction as to improper use, divorced from the question of intent. And, as has been noted earlier in this judgment, the appellant himself contended that improper use was a separate question, to be assessed objectively. On the proper construction of the subsection, the jury should then have been directed to consider whether, if the appellant's conduct constituted an improper use of his position, he deliberately engaged in that conduct with a result which could properly be characterised as an advantage to him and a detriment to General Corporation.

The appellant did not submit that there was no evidence that he deliberately brought about the payment to Rothwells (count 1), the establishment of a commercial bill facility in favour of Wain Holdings Pty Ltd (count 2), the acquisition of shares in GSC Pty Ltd (count 3) or the acquisition of shares in Ikpen Pty Ltd and Maroly Holdings Pty Ltd (count 4). Thus, once the jury had resolved the question of "improper use" against the appellant, the only remaining issue was whether the result, in each case, constituted an advantage to the appellant and a detriment to General Corporation. No complaint was made by the appellant of the direction on that score. The complaint was of a failure to direct the jury that they had to be satisfied beyond reasonable doubt that the appellant made improper use of his position, intending to gain an advantage for himself and to cause a detriment to the corporation. That complaint must be rejected as not warranted by the terms of subs (4). His Honour put to the jury the appellant's answers to the allegations against him, in particular his substantial shareholding in General Corporation, his commitment to the various projects in which it was engaged, his concern to advance the interests of the corporation and the unlikelihood that he would wish to cause it any detriment.

In the circumstances, the direction to the jury, taken in its entirety, did no injustice to the appellant. Indeed, in some respects it was unduly favourable to him by its requirement that the appellant used his position to "cause [the] gain" and "cause [the] detriment", as well as the reference to the appellant's "purpose or purposes of using the position". It follows that "no substantial miscarriage of justice has actually occurred". ^[F39] The appeal should therefore be dismissed.