Lee v Evans

112 CLR 276

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(Decision by: Barwick CJ)

Lee v Evans

Court:

Judges:
Barwick CJKitto J
Taylor J
Windeyer J
Owen J

Subject References:
Corporations
Business names
Prohibition of use in invitation to public to lend money

Legislative References:
Registration of Business Names Act 1928 (SA) - Section 4a

Hearing date: ADELAIDE 22 September 1964;
Judgment date: 5 November 1964

SYDNEY

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Decision by:
Barwick CJ

The appellant was charged before a special magistrate in Adelaide with using or making reference at Whyalla on 12th August 1963 in an invitation to the public to deposit money with or lend money to the appellant to the business name of Chowilla Timber Supply Co , which was the business name of the appellant registered under the Registration of Business Names Act, 1928-1961 of South Australia. Particulars of the charge were supplied by the prosecution and were amended during the hearing. In the result, the particulars of the charge were that the invitations (sic) to the public were oral and made to Owen Claude Broadbent, John Noel Broadbent, and other persons unknown to the complainant, and that the use of or making reference to the business name was that the appellant introduced himself either as the proprietor or as the representative of the Chowilla Timber Supply Co

Section 4a (1) of the Registration of Business Names Act, 1928-1961 provides:"(1) Notwithstanding any other provision of this Act, where a firm, individual or corporation carrying on business in South Australia under a business-name is registered or required to be registered under this Act in relation to that business-name no person shall use or make reference to that business-name in any invitation to the public, or in any advertisement inviting the public, to deposit money with or lend money to that firm, individual or corporation. Penalty: Five hundred pounds."

The evidence given before the magistrate by Owen Claude Broadbent and his son John Noel Broadbent, both of whom were pastoralists and who were both seen at Whyalla by the appellant at the same time, established that the appellant, being theretofore unknown to either of them, introduced himself as having some connection with a man named Galpin who, he said, was a timber getter, principally taking out redgum sleepers from areas along the Murray, and that he, the appellant, was trying to form a timber business, "Chowilla Timber Supplies", into a company having sufficient members and size to be brought "into the Stock Exchange". The appellant asked them whether they would put money into the company by taking shares in it. Ultimately the Broadbents agreed and each signed a cheque, one for PD200 and one for PD100, made out in favour of Chowilla Timber Supplies, that name being inserted in each cheque by the appellant. Owen Claude Broadbent said that the appellant represented that there would be a profit to him of ten per cent, and, if he did not "go the five years", eight per cent. The Broadbents said that in exchange for their money they expected to receive shares in the Chowilla Timber Company. The appellant gave the Broadbents receipts which specified the PD200 and the PD100 respectively as being "investment in full in above firm", the above firm being Chowilla Timber Supply Co Later, letters each dated 14th August, were written to the Broadbents in the following terms:

"Dear Sir,

We have pleasure in thanking you for your investment of PD100, in the above company (i.e. Chowilla Timber Supply Co ), interest payable quarterly, at the rate of ten per cent per annum.

As explained by our representative, your next interest payment will be posted to you at the end of September".

These letters were rejected by the magistrate but admitted by the Full Court, and although not included in the appeal books, copies of the letter to Owen Claude Broadbent were supplied to this Court during argument.

Evidence was given by two other persons named Tuckwell, whom the appellant interviewed on 30th July 1963, and with whom he discussed the investment of money, suggesting the Chowilla Timber Supply Co as a suitable investment. He persuaded these people to authorize him to dispose of their units in certain unit trust companies and arranged with them to return with the proceeds of the sale of these units, when they would determine how much they wished to invest. These proposals, however, miscarried, due, it would seem, to the intervention of the officers of the unit trusts concerned.

In answer to a police officer on 12th September 1963 the appellant agreed that he had asked Tuckwells to invest in the Chowilla Timber Supply Co ; and that he did tell Owen Claude Broadbent that if he invested money for five years in the Chowilla Timber Supply Co he would receive ten per cent per annum paid quarterly, and that he had told him that if he took his money out before five years there would be an adjustment of the interest rate. He agreed that he had visited the Broadbents for the purpose of inviting them to "invest" money with the Chowilla Timber Supply Co He also answered the following question, "How many people have you visited in this State to raise money for the Chowilla Timber Supply Co ?" with the answer, "I would not know, but about thirty-five families have invested a total of about PD26,000 and they came from all over the State". He was not asked the direct question whether he had invited the Broadbents or, for that matter, any other persons, to lend money to or deposit money with the Chowilla Timber Supply Co or to or with himself.

The magistrate found that the appellant on 12th August 1963 at Whyalla invited both the Broadbents to invest in the Chowilla Timber Supply Co of which he was, in fact, the sole proprietor. He found it proved beyond reasonable doubt that the appellant both used and made reference to the business name Chowilla Timber Supply Co "in an oral invitation to Owen Claude Broadbent and John Noel Broadbent at Whyalla on 12th August, 1963, to deposit money with and lend money to Chowilla Timber Supply Company, that is, to himself". The magistrate seems to have been prepared to make this finding because, as he says, "Under the circumstances the invitation to invest seems to me to come within the terms `to deposit money' and also `to lend money' as that was all that could take place at that stage. ... no shares were issued ... and interest appears to have been paid". I take this to be a reference by the magistrate to the fact that, at the date of the invitation to invest, the company in which the shares were to be taken had yet to be formed and that an indefinite delay might occur in its formation. He may well also have had in mind that there probably were references made by the appellant at the time of the interview to the payment of interest meantime. He seems also to have thought that the circumstances that no shares had, in fact, been issued and that interest was, in fact, subsequently paid supported his view that the invitation was of the kind he was prepared to find.

The magistrate was of opinion, however, that because of the nature of the charge and its particulars, there could not be a conviction unless he was satisfied beyond reasonable doubt that the oral invitation made to the Broadbents at Whyalla on 12th August 1963 was an invitation to the public. In the result, he was not prepared so to find. He held that the invitation to the Broadbents on 12th August was not an invitation to the public generally and was not capable of being acted upon by any member of the public. Accordingly, he dismissed the complaint.

The informant appealed to the Full Court of the Supreme Court against this dismissal. The Full Court reversed the magistrate, holding that the evidence left its members with no doubt that the invitation to the Broadbents was given to them "as members of the public" and that it was therefore an invitation to the public within the meaning of s. 4a (1) of the Registration of Business Names Act, 1928-1961. Their Honours were of the opinion that "an invitation to the public cannot mean anything but an invitation to members of the public" ^[F1] and that "it is sufficient" (i.e. to satisfy the statute) "if the invitation is given to the individual as a member of the public" ^[F2] .

No point was raised before the Full Court and no point is taken in the notice of appeal to this Court that the magistrate ought not to have found that the invitation to the Broadbents was an invitation to lend money to or to deposit money with either the Chowilla Timber Supply Co or the appellant. The magistrate's finding appears to have been accepted on the footing that although the invitation to the Broadbents was not, in terms, an invitation to deposit or to lend money, such an invitation was implied in the invitation to invest in the circumstances in which that invitation was given.

The question remains as to whether there was an invitation to the public in connection with which the appellant on 12th August 1963 made use of or reference to the business name Chowilla Timber Supply Co It is plain from the particulars of the charge that the case against the appellant was that the invitation to the public was oral and that it was to be found in his conversation with the Broadbents on 12th August 1963. It may be conceded that it may be possible to establish an invitation to the public by proving a series of particular invitations to individuals over so wide a field and in such circumstances or terms as to lead to the inference that an invitation to the public is being made. But apart from the precise form and limiting effect of the charge and of its particulars, such a case could not have been made on the facts of the present case. There was evidence that the appellant invited the Tuckwells to invest in the company but there was no material such as might have justified the magistrate in the case of the Broadbents in inferring, that an invitation to lend money to or to deposit it with the firm or the appellant was involved in his conversation with the Tuckwells. There was, in addition, the admission of the appellant to the police officer that spread over some period of twelve months, a period of which the terminal points were not specified, a number of families upon his solicitation had invested a large sum of money in the Chowilla Timber Supply Co But there was no material to warrant the conclusion that any or all of this money was obtained in circumstances in which an invitation to lend money or to deposit money had been given. The case therefore stands on the evidence, as it did on the particulars, solely on the oral invitation to the Broadbents given on 12th August 1963. In this connection, there was some evidence that the Broadbents had been chosen for approach by the appellant because they were shareholders of South Australian Perpetual Forests and, therefore, persons likely to be interested in a timber milling or timber supplying company.

The section creating the offence with which the appellant was charged was inserted in the Registration of Business Names Act, 1925-1955 by s. 3 of No. 38 of 1961, an Act to amend the Registration of Business Names Act, 1928-1955. The Court is permitted to know that during 1959, 1960 and continuing into 1961 there had been in the community a great increase in public solicitation, principally by advertisement, of the deposit of money either at call or for short terms, and also of the lending of money for longer terms, at rates of interest considerably greater than the then current bank deposit rates. The evident purpose of the amending legislation was to prevent public solicitation to lend or to deposit money by persons, including corporations, trading under business names, without the disclosure of the identity of the person (including a corporation) who was in truth the intended depositee or borrower. The amending section sought to achieve this result by prohibiting the use of a business name in connection with an invitation to the public to lend or to deposit money. The essentials of the offence which the amending section thus creates are (1) that there shall be an invitation to lend or deposit money to the proprietor of the business carried on under the business name and (2) that such invitation should be an invitation to the public. Thus both the precise nature of the invitation and its public character must be shown.

It has been submitted to us in substance that the offence is committed whenever a business name which is or ought to be registered under the Registration of Business Names Act is used or referred to in connection with an invitation to lend or deposit money to or with the firm of that name or its proprietor or proprietors given to any member of the public unless that individual stands in some existing relationship to the invitor or to that firm, or to its proprietor or proprietors, which is the reason for the selection of that individual as an invitee. In other words it is said that the amending section precludes the use of a business name in or in connection with any invitation to lend to or deposit money with the firm or the proprietor or proprietors which does not arise out of some particular relationship between the person to whom the invitation is issued and the person extending it, or perhaps with the firm or its proprietor or proprietors. This in reality is, in my opinion, what the Full Court decided. But with great respect this is not, in my opinion, the meaning of the amending section.

The Full Court's reasoning begins with the proposition that the expression "to the public" must take its particular significance from the context in which it is used because it is not an expression of a fixed and universal meaning. So much may be granted and is a good reason for not attempting any general pronouncement as to its signification. Taking a dictionary meaning of "the public" as referring to the community in the aggregate, and therefore as signifying the members of the community, the Court concluded that an invitation would not satisfy the amending section unless some member or members of the public were actually invited. This is, in my view, an equivocal statement. With every respect I am unable to agree with it, if it means that an invitation which is of its nature an invitation to the public must be shown to have reached some specific individual or individuals. Equally, I must disagree if it means that when an invitation has reached some individual or individuals in no other capacity than that of a member or members of the community it is by that very circumstance an invitation to the public. It must be conceded that an announcement which is not an advertisement within the meaning of the amending section, but which in form constitutes an invitation to the public at large, must be published in some fashion if there is to be an invitation to the public: but being published, the use of the business name in association with it either at or subsequently to its publication would constitute an offence under the amending section, although no particular person was shown to have seen or to have received the invitation the announcement conveyed. But the Full Court meant, it seems to me, that upon some member of the public being invited, as such, i.e. for no other reason than that he was one of the general mass of citizens, what I might call the public element of the offence was provided.

The Full Court in arriving at this view largely relied upon Nash v Lynde reported in the Court of Appeal ^[F3] and in the House of Lords ^[F4] and, indeed, adopted a paraphrase of a passage from the judgment of Lord Hailsham L.C. in that case ^[F5] . But in Nash v Lynde ^[F6] the question was whether a prospectus, which had been found to be in its nature an invitation to the public to subscribe for or to purchase shares, had been "issued" within the meaning of s. 81 of the English Companies (Consolidation) Act, 1908. The contest was as to whether the issue to be in breach of that section must be an issue to the public generally or whether its issue to any member of the public as an invitation to take shares was sufficient. It was decided that the latter was the correct position. Nash v Lynde ^[F7] was not a case in which the basis for concluding that there was an invitation to the public had to be found in the nature of the publication or issue of the prospectus. Although a convenient word it might be better not to use the word publication in this context, but to speak only of issue.

It seems to me that the judgment of Scrutton L.J., in that case ^[F8] does not clearly distinguish between two radically different situations, namely that which arises where an invitation, not in its terms or nature an invitation to the public, becomes such by reason of the circumstances of its issue, (or perhaps here one might properly say publication) and that which arises where an invitation which is in terms or of its nature an invitation to the public is issued, and the circumstances of that issue are examined to determine whether it constitutes an issue in the relevant sense. I find nothing in the judgments of the House of Lords in that case to lead me to think that any of their Lordships endorsed the passage of the judgment of Scrutton L.J. which the Full Court cites from the report in the King's Bench ^[F9] in the sense in which it is read by the Full Court. The contrasting positions are summarily put by Lord Buckmaster where he says: "A document is not a prospectus unless it is an invitation to the public, but if it satisfied this condition it is not the less a prospectus because it is issued to a defined class of the public" ^[F10] . Viscount Sumner said of the prospectus that whilst "No particular numbers are prescribed" i.e. in the definition of "the public" in the English Companies (Consolidation) Act, 1908, "Anything from two to infinity may serve: perhaps even one, if he is intended to be the first of a series of subscribers, but makes further proceedings needless by himself subscribing the whole. The point is that the offer is such as to be open to any one who brings his money and applies in due form, whether the prospectus was addressed to him on behalf of the company or not" ^[F11] .

It is true that Viscount Sumner was of the view that the "issue" within the meaning of s. 81, even of a prospectus which, was itself an invitation to the public, must be an issue to the public and in the passage quoted he may have been treating the case as one in which the nature as an invitation to the public was to be derived from the circumstances of its issue. But, in my opinion, this does not detract from his view as to what was necessary to make the offer an invitation to the public. In this respect what he says is not, in my opinion, inconsistent with the judgment of Swinfen Eady J. in In re South of England Natural Gas and Petroleum Co Ltd ^[F12] . That was a case in which his Lordship concluded that there was an invitation to the public, although the issue of the prospectus was not indiscriminate. I do not regard this case as an instance of an invitation which is shown to be an invitation to the public by the circumstances of its issue but rather as a case where an invitation to the public does not cease to be such because it is given a restricted or selective issue. As I have already indicated an invitation which is not ex facie an invitation to the public can be found to be such an invitation because of the nature of the authorized distribution it was given. In such a case the party accountable for its issue would be liable to have the extent of the circulation he had authorized taken into account. See in this connection Sherwell v Combined Incandescent Mantles Syndicate (Ltd) ^[F13] . But whether the question is whether the invitation is ex facie an invitation to the public or whether an invitation has become an invitation to the public by reason of the nature or extent of its issue, the basic concept is that the invitation, though maybe not universal, is general; that it is an invitation to all and sundry of some segment of the community at large. This does not mean that it must be an invitation to all the public either everywhere, or in any particular community.

How large a section of the public must be addressed in a general invitation for it to be an invitation to the public in the relevant connection must depend on the context of each particular enactment and the circumstances of each case. But within that sufficient area of the community the invitation must be general in the sense spoken of by Viscount Sumner in Nash v Lynde ^[F14] , by Warrington J. in Sherwell's Case ^[F15] , "An offer of shares to anyone who should choose to come in", and by Jordan C.J. in Ex parte Lovell; Re Buckley ^[F16] , "made to the public generally and capable therefore of being acted upon by any member of the public". That those to whose hands such an invitation is intended to come, also stand in some special relationship to the invitor, will not prevent the invitation being an invitation to the public. See In re South of England Natural Gas and Petroleum Company, Ltd ^[F17] . In my opinion Nash v Lynde ^[F18] lends no support to the proposition that an invitation to a single individual as a member of the public in the sense that he stands in no special relationship to the invitor is an invitation to the public within the meaning of the amending section.

Here the invitation was made to the Broadbents alone. It was not made to anyone else, nor was it capable of being acted upon by anyone else. It was not general but particular to them. Though it would seem that the Broadbents may have been chosen as recipients of the invitation because of their supposed special interest in timber raising or timber selling activities, I find it unnecessary in this case to base any conclusion wholly or partly upon that circumstance. For the purposes of my judgment the Broadbents were merely individuals in the general mass of citizens.

In my opinion the invitation to the Broadbents was not an invitation to the public within the meaning of s. 4a (1) of the Registration of Business Names Act, 1928-1961 and the magistrate was right in refusing to find that there was any such invitation. The appeal should be allowed.