Australian Competition and Consumer Commission v Davies

IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 530 of 2014

BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

JUDGE: REEVES J DATE: 11 SEPTEMBER 2015 PLACE: BRISBANE

Introduction 1 Mr Davies, the respondent, was the sole director and shareholder of a company called Natural Food Vending Pty Ltd (NFV). 2 In this proceeding, the Australian Competition and Consumer Commission (the Commission) has alleged that Mr Davies committed an offence under s 155(5)(a) of the Trade Practices Act 1974 (Cth) (the TPA) by aiding, abetting, counselling or procuring NFV's failure to comply with a notice issued to it under s 155(1) of the TPA (the notice). 3 NFV was served with the notice at its registered office on 10 November 2010. On 11 November 2010, Mr Davies was personally served with the same notice. 4 The notice required NFV to furnish certain information and to produce a number of specified documents to the Commission by 2:00 pm on 1 December 2010. 5 The information and documents sought by the notice related to certain statements, or representations, that NFV allegedly made from on or about 2 October 2008, to the effect that: (a) NFV was affiliated with the charity, Cure our Kids; (b) NFV was a member of the Australian Vending Association; (c) NFV had pre-secured locations where it could place purchaser's vending machines; (d) NFV would supply vending machines to purchasers within a specified period; and (e) by entering into an agreement to purchase goods and/or services from NFV, a purchaser would acquire a viable and profitable business. 6 It is not in dispute that NFV failed to comply with the notice by the stated deadline and that this failure was contrary to s 155(5)(a) of the TPA.

The charge made against Mr Davies 7 The terms of the charge against Mr Davies are that: NFV committed an offence against s 155(5)(a) of the Trade Practices Act by failing to comply with the notice issued under s 155(1) of the Trade Practices Act; and Mr Davies aided, abetted, counselled or procured the commission of that offence by NFV and is therefore, by operation of s 11.2(1) of the Criminal Code (Cth), taken to have committed the offence against s 155(5)(a) of the Trade Practices Act. 8 The particulars provided in support of this charge are as follows: 1.1 NFV was at all material times a registered Australian proprietary company of which [Mr Davies] was the sole director, member and shareholder. 1.2 On 10 November 2010, Graeme Samuel, the then Chairman of the [Commission], issued a notice to NFV pursuant to s 155(1)(a) and (b) of the Trade Practices Act 1974 (Cth) ("the s 155(1) notice"). 1.3 Pursuant to s 155(5)(a) of the Trade Practices Act 1974 (Cth), NFV was required to comply with the s 155(1) notice by furnishing the information and producing the documents sought by the notice to the [Commission] by 2:00 pm on 1 December 2010. 1.4 On 11 November 2010, the s 155(1) notice was served personally on [Mr Davies] at … the registered office of NFV and [his] residential address. 1.5 On 30 November 2010, [Mr Davies] met with Peter Ngan and signed documents to appoint Mr Ngan as liquidator of NFV effective at 8:00 am on 1 December 2010. 1.6 At no time before the deadline set in the s 155(1) notice, namely 2:00 pm on 1 December 2010, did [Mr Davies] inform Mr Ngan of the existence of the s 155(1) notice or of the [Commission's] interests in NFV. 1.7 At 8:00 am on 1 December 2010, Peter Ngan was appointed as liquidator of NFV. 1.8 Contrary to the requirement imposed upon NFV by s 155(5)(a) of the Trade Practices Act 1974 (Cth), NFV failed to comply with the s 155(1) notice by 2:00 pm on 1 December 2010.

Mr Davies enters a plea of not guilty but makes certain admissions 9 At the commencement of the hearing of this matter, Mr Davies entered a plea of "not guilty" to the charge. He did so in the following terms: Well, your Honour, it's a little bit complex because I agreed to most of the - the - the charge, but not to two of them. So that would be - I - I suppose that would make it not guilty. 10 Mr Davies' statement that he "agreed to most of the … charge, but not to two of them" appears to refer to a document entitled "Admissions of the Respondent", which the Commission tendered in evidence with his consent. The key admissions made in that document are that: (a) NFV was, at all times relevant to the charge, an Australian proprietary company and was first registered with the Australian Securities and Investments Commission on 2 October 2008; (b) Mr Davies was the sole director and shareholder of NFV throughout the period relevant to the charge, that is, from 2 February 2009 onwards; (c) NFV's registered office address was, at all material times relevant to the charge, the same as Mr Davies' residential address; (d) on 10 November 2010, the Commission issued a valid notice to NFV at its registered office under s 155(1) of the TPA, which required NFV to furnish certain information and produce certain documents described in the notice to the Commission by 2:00 pm on 1 December 2010; (e) on 11 November 2010, the notice was personally served on Mr Davies at NFV's registered office; (f) Mr Davies, as the sole director and shareholder of NFV, was responsible for ensuring NFV complied with the notice; (g) on 30 November 2010, Mr Davies had a meeting with Mr Peter Ngan at Mr Ngan's office, where Mr Davies signed documents necessary to appoint Mr Ngan as liquidator of NFV effective from 8:00 am on 1 December 2010; (h) as at 2:00 pm on 1 December 2010, the information and documents required by the notice had not been furnished or produced to the Commission; (i) as at 4 February 2011, 21 February 2011 and 2 August 2011, Mr Davies had not provided any books or records of NFV to Mr Ngan; (j) on 3 August 2011, Mr Davies delivered a cardboard box containing documents to the office of Jirsch Sutherland, which box contained an assortment of documents, primarily invoices for purchases made by NFV, but did not contain the complete books and records of NFV; and (k) as of 17 March 2015, the information and documents required by the notice had not been furnished or produced to the Commission by Mr Davies. 11 The matters Mr Davies was requested to admit, but refused to do so, were that: (a) at the meeting between Mr Davies and Mr Ngan on 30 November 2010, Mr Davies did not inform Mr Ngan about the notice; (b) on 2 December 2010, Mr Ngan wrote to Mr Davies at the registered office of NFV requiring, among other things, the delivery of all books and records of NFV to Mr Ngan on or before 5:00 pm on 23 December 2010; (c) Mr Davies received the letter from Mr Ngan dated 2 December 2010, described above; (d) on 4 February 2011, Mr Ngan wrote to Mr Davies noting the failure to respond to his letter of 2 December 2010 and requiring, among other things, the delivery of all books and records of NFV to Mr Ngan on or before 21 February 2011; and (e) Mr Davies received the letter from Mr Ngan dated 4 February 2011, described above.

Some procedural history 12 Mr Davies was self-represented at the trial of this proceeding. He cross-examined some of the witnesses called by the Commission, he gave evidence himself, he was subjected to cross-examination and he made some brief oral closing submissions. As would be expected, the Commission also made oral closing submissions. After the trial concluded, I sought some additional assistance from the Commission, mainly directed to the application of the provisions of the Criminal Code Act 1995 (Cth) (the Code) in the circumstances of this matter. The Commission's counsel agreed to make further written submissions on those issues and the Commission also agreed to fund counsel to act as a contradictor to assist the Court by providing written submissions on the same issues. Both counsel subsequently filed a set of written submissions. I have found both sets of submissions most helpful in preparing these reasons. I will not seek to summarise their contents except to say that what follows is essentially based upon them.

The statutory framework 13 This Court has jurisdiction to hear and determine prosecutions for offences under the TPA: see s 163(1) and (2) of the TPA. Although the TPA has been superseded by the Competition and Consumer Act 2010 (Cth), the TPA continues to apply to acts or omissions that occurred before 1 January 2011: see item 6 of Schedule 7 to the Trade Practices Amendment (Australian Consumer Law) Act (No 2) 2010 (Cth). 14 Section 155 of the TPA relevantly provided: 155 Power to obtain information, documents and evidence (1) Subject to subsection (2A), if the Commission, the Chairperson or a Deputy Chairperson has reason to believe that a person is capable of furnishing information, producing documents or giving evidence relating to a matter that constitutes, or may constitute, a contravention of this Act … a member of the Commission may, by notice in writing served on that person, require that person: (a) to furnish to the Commission, by writing signed by that person or, in the case of a body corporate, by a competent officer of the body corporate, within the time and in the manner specified in the notice, any such information; (b) to produce to the Commission, or to a person specified in the notice acting on its behalf, in accordance with the notice, any such documents; or (c) to appear before the Commission, or before a member of the staff assisting the Commission who is an SES employee or an acting SES employee and who is specified in the notice, at a time and place specified in the notice to give any such evidence, either orally or in writing, and produce any such documents. … (5) A person shall not: (a) refuse or fail to comply with a notice under this section; (b) in purported compliance with such a notice, knowingly furnish information or give evidence that is false or misleading. (5A) Paragraph (5)(a) does not apply to the extent that the person is not capable of complying with the notice. (6A) A person who contravenes subsection (5) is guilty of an offence punishable on conviction by a fine not exceeding 20 penalty units or imprisonment for 12 months. Note 1: Chapter 2 of the Criminal Code sets out the general principles of criminal responsibility. Note 2: Part IA of the Crimes Act 1914 contains provisions dealing with penalties. 15 Neither of subs 2A (see the stem to subsection (1) above), nor subs 5A (above), has been raised as an issue in this proceeding. 16 As indicated by Note 1 to s 155(6A) (see above), Chapter 2 of the Code sets out all the general principles of criminal responsibility that apply to an offence against the laws of the Commonwealth (see s 2.1 of the Code). Section 3.1 in Pt 2.2 of the Code sets out the elements of an offence, as follows: 3.1 Elements (1) An offence consists of physical elements and fault elements. (2) However, the law that creates the offence may provide that there is no fault element for one or more physical elements. (3) The law that creates the offence may provide different fault elements for different physical elements. (Emphasis in original) 17 The physical elements of an offence referred to in s 3.1(1) are described in s 4.1(1) of the Code, as follows: (1) A physical element of an offence may be: (a) conduct; or (b) a result of conduct; or (c) a circumstance in which conduct, or a result of conduct, occurs. (Emphasis in original) 18 The word "conduct" in s 4.1(1)(a) is defined in s 4.1(2) of the Code as: "an act, an omission to perform an act or a state of affairs". 19 Given that the charge against Mr Davies relates to the failure of NFV to comply with the notice, it therefore constitutes conduct in the form of "an omission to perform an act". That being so, s 4.3 of the Code is of some importance in this proceeding. It provides: An omission to perform an act can only be a physical element if: (a) the law creating the offence makes it so; or (b) the law creating the offence impliedly provides that the offence is committed by an omission to perform an act that there is a duty to perform by a law of the Commonwealth, a State or a Territory, or at common law. 20 In Director of Public Prosecutions (Cth) v Poniatowska (2011) 244 CLR 408; [2011] HCA 43, the High Court considered the meaning of the above provision of the Code. With respect to it, the Court observed (at [33]) that there were many Commonwealth statutes which made it an offence to fail to do an act. It gave examples (at [33]) which included s 74 of the Social Security (Administration) Act 1999 (Cth) ("a person must not refuse or fail to comply with a notice under [various sections]"), ss 77CA and 267B of the Bankruptcy Act 1966 (Cth) ("a person must not refuse or fail to comply with a notice given to the person under … s 77CA") and the failure to answer questions or documents under s 135C of the Competition and Consumer Act 2010 (Cth) ("a person commits an offence if (1) the person is subject to a requirement under s 135B(2); and (2) that person fails to comply with the requirement"). Section 155(5) of the Trade Practices clearly falls within this ambit: see also Director of Public Prosecutions (Cth) v Keating (2013) 248 CLR 459; [2013] HCA 20. 21 Insofar as it relates to a failure to comply with a notice issued under s 155(1), s 155(5) of the TPA makes an omission to perform that act the gravamen of the offence created by it. This brings it within the terms of s 4.3(a) of the Code. 22 The fault elements of an offence (the second set of elements referred to in s 3.1(1) of the Code) are set out in Div 5 of Pt 2.2 of the Code. Section 5.1 provides: (1) A fault element for a particular physical element may be intention, knowledge, recklessness or negligence. (2) Subsection (1) does not prevent a law that creates a particular offence from specifying other fault elements for a physical element of that offence. (Emphasis in original) 23 What constitutes intention, knowledge, recklessness and negligence within the terms of s 5.1(1) above is illuminated in ss 5.2, 5.3, 5.4 and 5.5 respectively. However, to establish which of these fault elements applies in the present case, it is necessary to go to s 5.6 of the Code. It provides: 5.6 Offences that do not specify fault elements (1) If the law creating the offence does not specify a fault element for a physical element that consists only of conduct, intention is the fault element for that physical element. (2) If the law creating the offence does not specify a fault element for a physical element that consists of a circumstance or a result, recklessness is the fault element for that physical element. Note: Under subsection 5.4(4), recklessness can be established by proving intention, knowledge or recklessness. (Emphasis in original) 24 Since s 155(5) of the TPA does not specify a fault element and, for the reasons given above, an omission to perform an act is conduct as defined in s 4.1(1)(a), it follows from s 5.6(1) above that the fault element for the offence under s 155(5) of the TPA is intention. 25 With respect to conduct, s 5.2(1) of the Code provides that: "A person has intention with respect to conduct if he or she means to engage in that conduct." 26 Since Mr Davies has been charged with complicity in the commission of an offence by NFV, the provisions of s 11.2 of the Code, dealing with complicity and common purpose, are also significant in this proceeding. That section appears in Pt 2.4 of the Code under the heading: "Extensions of criminal responsibility". The other operative provisions of that Part deal with "Attempt" (s 11.1); "Joint commission" (s 11.2A); "Commission by proxy" (s 11.3); "Incitement" (s 11.4); and "Conspiracy" (s 11.5). 27 Section 11.2 relevantly provides: 11.2 Complicity and common purpose (1) A person who aids, abets, counsels or procures the commission of an offence by another person is taken to have committed that offence and is punishable accordingly. (2) For the person to be guilty: (a) the person's conduct must have in fact aided, abetted, counselled or procured the commission of the offence by the other person; and (b) the offence must have been committed by the other person. (3) For the person to be guilty, the person must have intended that: (a) his or her conduct would aid, abet, counsel or procure the commission of any offence (including its fault elements) of the type the other person committed; or (b) his or her conduct would aid, abet, counsel or procure the commission of an offence and have been reckless about the commission of the offence (including its fault elements) that the other person in fact committed. (Emphasis in original) 28 A number of aspects of this provision requires comment. First, unlike the provisions of ss 11.1 (Attempt), 11.4 (Incitement) and 11.5 (Conspiracy), s 11.2 does not create a separate offence. Rather, it "states a way in which a person may commit an offence, even though not falling within the terms of s 3.2 of the Code": see R v Kaldor (2004) 150 A Crim R 271; [2004] NSWCCA 425 (Kaldor) at [77] per Howie J, Dunford J agreeing. As Howie J went on to observe, this distinction is made clear by the provisions of s 11.6(1) of the Code and the note beneath it: see Kaldor at [78]-[79]. Section 11.2 therefore provides an extension of criminal liability for the offence of the principal offender, if a person aids, abets, counsels or procures that offender in the commission of that offence. 29 Secondly, the words "aids, abets, counsels or procures" are not defined in the Code and therefore have been held to have "their established legal meaning": see Handlen v The Queen (2011) 245 CLR 282; [2011] HCA 51 (Handlen) at [6]. That is: "[e]ach is used to convey the concept of conduct that brings about or makes more likely the commission of an offence": see Handlen at [6], referring to Giorgianni v The Queen (1985) 156 CLR 473 per Mason J, citing Cussen A-CJ in R v Russell [1933] VLR 59 at 67 and also J C Smith, "Aid, Abet, Counsel, or Procure", in Glazebrook (ed), Reshaping the Criminal Law (1978) p 120. 30 Thirdly, since s 11.2 of the Code is not "a law that creates an offence", it does not prescribe the elements of an offence within the meaning of Pt 2.2 of the Code: see s 3.2. Rather, it provides a set of statutory conditions which must be proved beyond reasonable doubt before a person can be found to have committed the principal offence: see R v LK (2010) 241 CLR 177; [2010] HCA 17 (LK) at [131]-[133]. While the decision in LK was directed to the provisions of s 11.5 of the Code, putting aside s 11.5(1), which does create an offence, the provisions of ss 11.5(2) to 11.5(8) describe a set of statutory conditions similar to those in ss 11.2(2) to 11.2(7). It follows that the reasoning in LK is equally applicable to the latter provisions. 31 Fourthly, while s 11.2(3)(b) of the Code provides that a person can have the requisite intention through recklessness, that provision applies to common purpose rather than complicity and it therefore has no application in this proceeding: see Re Pong Su (No 12) (2005) 159 A Crim R 300; [2005] VSC 32 at [47] per Kellan J and Ansari v R (2007) 70 NSWLR 89; [2007] NSWCCA 204 at [80] per Howie J. 32 The other provisions of the Code that are important in this case are those set out in Pt 2.5. They prescribe the means by which the elements of an offence can be established against a corporate body. In essence, they provide that the physical elements of an offence committed by the relevant individuals within a corporate body acting within their actual or apparent employment or authority are attributed to the corporate body: see s 12.2 of the Code. Further, s 12.3 relevantly provides that, where intention is the apposite fault element of an offence, that element will be attributed to the body corporate if it is proved that: "a high managerial agent of the body corporate intentionally … engaged in the relevant conduct, or expressly, tacitly or impliedly authorised or permitted the commission of the offence": see s 12.3(2)(b). The expression "high managerial agent" is defined in s 12.3(6) to mean, among other things, an "officer of the body corporate". 33 Notwithstanding these provisions, it is important to record that, for the purposes of s 11.2 of the Code, a corporate body and its directors are still treated as separate legal persons with the consequence that a director can aid and abet the commission of an offence by the company: see R v Jo (2012) 273 FLR 437; [2012] QCA 356 at [31]-[36] per Fraser JA, applying Hamilton v Whitehead (1988) 166 CLR 121 at 128, where Mason CJ, Wilson and Toohey JJ expressed agreement with R v Goodall (1975) 11 SASR 94 at 101 per Bray CJ. 34 Finally, the legal burden of proof on the prosecution must be discharged beyond reasonable doubt: see s 13.2 of the Code. 35 Accordingly, the statutory conditions the Commission must prove beyond reasonable doubt in this matter are: (a) NFV committed an offence against s 155(5)(a) of the TPA by failing to comply with the notice under s 155(1) of the TPA: as per s 11.2(2)(b) of the Code; (b) Mr Davies in fact aided, abetted, counselled or procured the commission of that offence by the NFV: as per s 11.2(2)(a) of the Code; and (c) Mr Davies intended that his conduct would aid, abet, counsel or procure the commission of the offence by NFV: as per s 11.2(3)(a) of the Code. 36 With regard to (a) above, the Commission must show that NFV committed the physical element of the offence (see at [21] above) and the fault element of intention (see at [24] above). 37 With regard to (b) above, the Commission must show that Mr Davies' conduct brought about or made more likely the commission of the offence by NFV (see at [29] above). 38 And finally, in relation to (c) above, the Commission must show that Mr Davies meant to engage in the conduct that aided, abetted, counselled or procured the commission of the offence by NFV (see at [25] above).

Condition 1: Did NFV commit the offence? 39 This condition does not require that NFV need be convicted of the offence under s 155(5)(a), or even prosecuted for it, rather it is a necessary condition of the prosecution's case that it establishes NFV committed that offence: see Habib v Commonwealth (2010) 183 FCR 62; [2010] FCAFC 12 at [22] per Perram J. 40 Mr Davies has admitted that NFV committed the physical elements of the offence under s 155(5)(a) of the TPA (see Particular 1.8 at [8] and the admission of this at [10(h)] above). 41 As to the fault element, there is no evidence that NFV took any substantive steps to comply with the notice. Further, since NFV took no substantive steps to comply with the notice, it may be inferred that, as the sole director and, therefore, the relevant "high managerial agent" of NFV, Mr Davies "expressly, tacitly or impliedly" permitted NFV to commit the offences under s 155(5)(a) of the TPA (see at [32] above). 42 I am therefore satisfied beyond reasonable doubt that NFV committed an offence under s 155(5)(a) of the TPA. 43 This condition is therefore satisfied.

Condition 2: Did Mr Davies in fact aid, abet, counsel or procure NFV's commission of the offence? 44 The only area of contention in relation to this condition is the meeting between Mr Davies and Mr Ngan on 30 November 2010 mentioned in Particulars 1.5 and 1.6 (see at [8] above). Mr Davies arranged that meeting so that he could obtain advice from Mr Ngan about the affairs of NFV. During the meeting, Mr Ngan advised Mr Davies to place NFV in voluntary liquidation and he had him sign the papers necessary to achieve that end. However, consistent with the facts he has refused to admit (see at [11] above), Mr Davies claimed that he informed Mr Ngan about the existence of the notice during this meeting. In his evidence, he described what occurred at the meeting in the following terms: I sat down at that meeting and informed him of all of the actions against the company, including the ACCC investigation, and how that was obviously due the following day at 2 o'clock. He informed me that if I was to pay him some money, that that would go away. If I was able to get that money to him that night, the problem would pretty much go away as far as the ACCC investigation goes, and that he would be able to file it at probably 8 o'clock the following morning. 45 Mr Ngan was called as a witness by the Commission. He said that it "wasn't an overly long meeting but wasn't a short meeting either". He said it "might have lasted maybe 20, 30 minutes". He said that he presented some documents to Mr Davies to sign to initiate the liquidation of NFV and they "had a general discussion about creditors, people that were pursuing the company, general insolvency issues". He produced his notes of the meeting, which were to the following effect: Meeting Paul Davies. He attended my office to sign documents and advise of creditors. He indicated that there were a few demands and some legal action against the company. He indicated the company has ceased to trade. 46 In cross-examination, I attempted to assist Mr Davies by putting to Mr Ngan the matters Mr Davies had set out in a set of written submissions he had provided to the Court. That questioning proceeded as follows: Mr Ngan, did Mr Davies ask you - sorry, did you ask Mr Davies after he met you on 30 November why he thought he needed to wind up the company?- - -That was during the discussion - - - So you did ask him?- - -Yes, and he indicated he had numerous creditors and - - - Did you [sic "he"] say words to the effect that the company was trading insolvent and that it was required to give information to the ACCC by 2 pm on 1 December?- - -I don't recall that. Did you tell him that if he was to give you $12,000, the ACCC issue would no longer be a problem because once you had filed, the company would no longer need to produce documents, or words to that effect?- - -That would be totally irresponsible to say that a regulator pursuing a company can be solved by the matter of money. Did he pay you $12,000?- - -I don't recall that - that circular you had before which showed how much it - how much I received for the liquidation, because there's the receipts and payments at the back - I don't recall. Could you pass that up to me? It was 10,000, your Honour. That was the fee, not 12. 47 I do not consider I need to resolve which version of the discussion at the meeting on 30 November 2010 is more accurate. That is so because, even if Mr Davies is correct in his claim that he told Mr Ngan about the notice and the deadline for compliance on the following day, there is no evidence in either person's version of Mr Davies instructing Mr Ngan to take any action to comply with the notice, for example, identifying the location of the documentation sought by the Commission, or providing Mr Ngan with the information requested by the notice. Instead, even on his own version, Mr Davies appeared to be willing to pay Mr Ngan $10,000 (or $12,000) to ensure that the "problem would pretty much go away as far as the ACCC investigation goes". Thus, far from attempting to do everything to comply with the notice, Mr Davies appears to have been willing to pay, a not insignificant sum, to avoid such compliance. This course of conduct, in my view, brought about, or made it more likely, that NFV would fail to comply with the notice by the deadline of 2:00 pm on 1 December 2010. 48 I am therefore satisfied beyond reasonable doubt that Mr Davies in fact aided, abetted, counselled or procured the commission of the offence by NFV. 49 This condition is therefore met.

Condition 3: Did Mr Davies intend that his conduct would aid, abet, counsel or procure the commission of the offence by NFV? 50 This condition is met, for the same reasons as set out immediately above. Specifically, I consider the same course of conduct provides clear evidence that Mr Davies meant to engage in the conduct that brought about, or made it more likely, that NFV would fail to comply with the notice by the stated deadline. For this reason, I am satisfied beyond reasonable doubt that this condition is also met.

Conclusion 51 Since the Commission has established beyond reasonable doubt each of the statutory conditions necessary to fix criminal liability for the offence of NFV under s 155(5) of the TPA on Mr Davies, in accordance with s 11.2 of the Code, I find Mr Davies guilty of the offence as charged. I certify that the preceding fifty-one (51) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Reeves.