High Court of Australia|1992-06-03|Before: Toohey J, Hugh JJ

Chew v R [1992] HCA 18; (1992) 173 CLR 626 (3 June 1992)

CHEW v. THE QUEEN [1992] HCA 18; (1992) 173 CLR 626

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

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

MASON C.J., BRENNAN, GAUDRON AND McHUGH JJ. The facts of this matter and the relevant statutory provisions have been set out in the reasons for judgment of Toohey J. However, it is necessary for us to set out again the provisions of s.229(4) of the Companies (Western Australia) Code:

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

2. The sense in which the word "to" is used in association with the infinitive may be purposive ("in order to") or causative ("so" or "so as to", though "so as to" may sometimes signify purpose rather than result). It is common to use "to" with the infinitive in the sense of "in order to" so as to express purpose, particularly in an adverbial clause, as an adjunct(1) See Quirk et al, A Comprehensive Grammar of the English Language,. (1985), par.15.48; Oxford English Dictionary, 2nd ed. (1989), vol.XVIII, pp 166-167. No doubt the use of subordinators such as "in order to" or "so that" is more frequent and makes for more precise expression. However, that circumstance does not of itself justify the conclusion that the use of "to" with the infinitive in an adverbial clause as an adjunct is usually causative, for that is not the case.

3. On the other hand, the presence of a comma which makes an adverbial clause a disjunct, rather than an adjunct, may indicate that consequence, not purpose, is intended(2) Quirk, op.cit., par.15.20. Result clauses differ syntactically from purpose clauses, the former being disjuncts whereas the latter are adjuncts(3) ibid., par.15.49. The presence of the comma before "to gain" in s.229(4) is significant because it separates the prohibition against making improper use of position from what follows, suggesting that what follows is separated from (and thus is a consequence of) the conduct which is the subject of the prohibition. Such a separation is not readily reconciled with a purposive construction because then the conduct which is the subject of the prohibition is more restricted and should be expressed in terms of making improper use of position in order to gain an advantage or cause a detriment so that the purposive limitation becomes an integral element in the expression of the prohibition.

4. It is curious that, in the respect just mentioned, sub-s.(4) differs from sub-s.(3) which has no comma separating "officer or employee" from "to gain". It is all the more curious because sub-s.(4) seems, as a matter of legislative history, to have evolved from sub-s.(3) which, unlike sub-s.(4), was to be found in the original s.124 of the uniform Companies Act 1961 and in the section as amended in 1973. Section 229(4) was introduced for the first time in 1981 and it follows, subject to differences attributable to the differences in subject-matter, the structure and language of s.229(3). It is not easy to assign a reason for the absence of the comma in one sub-section and its presence in the other. However, it is scarcely to be supposed that sub-s.(4) was so drafted with a view to departing from the model in sub-s.(3) from which it evolved. In this situation, we are not inclined to treat sub-s.(4) as relevantly different from sub-s.(3) which, according to its natural reading and subject to the influence of its context, would prima facie be read in a purposive sense.

5. In resolving the question of interpretation, no assistance is to be derived from the language of the sub-section itself. The juxtaposition of the prohibition against making improper use of position with the reference to gaining an advantage might perhaps be thought to support a purposive construction but the reference to causing a detriment possibly works the other way.

6. Some assistance can be gleaned from the rest of s.229. Section 229(1), which obliges an officer to "act honestly in the exercise of his powers and the discharge of the duties of his office", imposes a higher penalty 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 sub-section draws any distinction between an offence committed with an intent to deceive or defraud and an offence committed without such an intent. However, the penalty prescribed for an offence against sub-s.(4), as with sub-s.(3), is $20,000 or imprisonment for five years or both, which is the same penalty as that prescribed for an offence against sub-s.(1) where that offence is committed with intent to deceive or defraud. The magnitude of the penalty prescribed by sub-ss.(3) and (4) and its correspondence with that prescribed by sub-s.(1)(b) suggests that sub-ss.(3) and (4) should be given a purposive rather than a causative construction.

7. Section 229(6) does not assist. That sub-section enables a court to order a convicted person to pay compensation to a corporation where (a) the person is convicted of an offence against the section and (b) the court is satisfied that the corporation has suffered loss or damage as a result of the act or omission that constituted the offence. It would not be surprising if the court were given power to order the payment of compensation in circumstances where an officer's misuse of information or office resulted in a detriment to the corporation, even when that detriment was not intended. On the other hand, it is easy to understand that the power conferred upon the trial court to award compensation is necessarily conditioned upon a conviction for an offence, whatever the elements of that offence may be. And a corporation has remedies in equity against an officer who makes a profit in breach of his or her fiduciary duty. Accordingly, we are unable to divine anything in sub-s.(6) which assists the resolution of the question.

8. We are unable to discern any other indications of relevant statutory intention from the context. The historical and contextual relationship of s.229(4) with s.229(3) leads us to the conclusion that "to" in s.229(4) should be read as "in order to". Had we not come to that conclusion, we would have considered that the provision was ambiguous in that respect. In that event, all other indicia having failed, the provision, being penal in character, should be interpreted in favour of the strict, that is the purposive, meaning in preference to the causative meaning (4) R. v. Adams [1935] HCA 62; (1935) 53 CLR 563, at pp 567-568; Beckwith v. The Queen [1976] HCA 55; (1976) 135 CLR 569, at p 576; Waugh v. Kippen [1986] HCA 12; (1986) 160 CLR 156, at p 164.

9. In concluding that the purposive interpretation is to be preferred, we have not found it necessary to deal with s.23 of The Criminal Code (W.A.). The answer to the critical question turns simply on the construction of the provisions of s.229(4). Once, as a matter of interpretation, the conclusion is reached that "to" means "in order to", s.229(4) expressly declares purpose to be an element of the offence and purpose, in the context of that sub-section, is the equivalent of a specific intention(5) cf. Chandler v. Director of Public Prosecutions [1962] UKHL 2; (1964) AC 763, at pp 794-796. In terms of the second paragraph of s.23, "the intention to cause a particular result is expressly declared by s.229(4) to be an element of the offence constituted ... by an act or omission".

10. It follows that we do not agree with the respondent's contention, accepted by Murray J. in the Western Australian Court of Criminal Appeal, that s.229(4) is satisfied by a willed act performed by an officer or employee of a corporation which can be categorized as an improper act and which in fact gains an advantage or causes a detriment within the terms of the sub-section. Nor do we agree with the view expressed by Malcolm C.J. that s.229(4) is satisfied by a deliberate act or combination of acts done 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

(of) achieving a collateral purpose which will gain an

advantage for himself or another, or cause a detriment to

the company".

11. It is a corollary of the interpretation which we favour that the accrual of an advantage or the suffering of a detriment is not an element of the offence. Thus, an officer who makes improper use of his or her office in order to gain an advantage is guilty of an offence, even if his or her purpose be thwarted as, for example, by the grant of an injunction preventing execution of an instrument or implementation of a transaction. Section 229(6) is consistent with this approach because it conditions the making of an order for payment on the corporation suffering loss or damage.

12. In the course of argument, it was suggested that it was not necessary to establish that an accused person perceived that the alleged advantage or detriment was an advantage or detriment. We do not read the provision in that way. Once one concludes that there is a purposive element in the offence, it is necessary to establish not merely that the accused intended that a result should ensue, but also that the accused believed that the intended result would be an advantage for himself or herself or for some other person or a detriment to the corporation.

13. The accused's state of mind is relevant not only to the requirement of purpose but also to the element of improper use of his or her position. If, for example, an accused person reasonably but mistakenly believed that a particular transaction which he or she authorized was genuinely for the benefit of the corporation, that belief may, in an appropriate case, be material in determining whether the accused person can be held criminally responsible for using his or her position in a manner which would objectively be seen to be improper.

14. It is not in contest that s.229(4), in so far as it prohibits an officer or employee from making improper use of his or her position, requires proof of a willed or deliberate act which constitutes making "improper use" of that position. Nor is it in contest that "to gain ... an advantage" and "to cause detriment" are alternatives. It is not necessary to establish both elements in order to make out an offence against sub-s.(4). However, the respondent took on the burden at the trial of establishing both elements in relation to each count charged in the indictment. Nothing turns on this because the appellant's argument is confined to the point of construction already discussed.

15. It is necessary now to refer to the trial judge's instructions to the jury with a view to determining whether they correctly stated the issues and, if not, whether any deficiency resulted in a miscarriage of justice. The trial judge instructed the jury that they must be satisfied, according to the criminal standard of proof:

(1) that the accused was an officer of the company, there being

no dispute about this element of the offence;

(2) that the accused used his position to gain an advantage for

himself and to cause detriment to the company;

(3) that his use of his position for that purpose was improper.

16. The judge told the jury that what was improper was to be determined by reference to the powers and duties of a person in the accused's position, namely, the chairman of directors of the company. The judge also told the jury that the conduct alleged to have been an improper use of that position need not be illegal and that conduct could amount to improper use of that position even if the person concerned believed it to be in the interests of the company. No objection is or was made to what his Honour said on that score.

17. What his Honour said by way of elaboration of the second element of the offence is of critical importance. Having read out sub-s.(4) to the jury, he did on more than one occasion repeat the words of the sub-section in a way that would have conveyed to the jury the need to be satisfied of the element of purpose. Thus, he said:

"(W)hen I read the section out to you it was said that an

officer was not to act this way to gain directly or

indirectly an advantage for himself or to cause detriment

to the corporation. In this particular case, the Crown

has alleged that, in fact, Mr Chew did both, namely gained an

advantage for himself and caused detriment to GCA."

Later, in speaking of the second and third elements to be proved, he said:

"Secondly, that he used his position in the manner

alleged in each case - the first one being, authorising the

payment by GCA of a certain sum - to gain advantage for

himself and to cause a detriment to GCA. So, of course, you

have to be satisfied that he authorised the payment and that

it caused an advantage to himself and caused a detriment to

GCA. Thirdly, that the use of his position for that purpose

was improper in the manner that I am going to talk about in

a moment." (emphasis added)

He then succinctly restated the three elements, saying that the third element was "that the use of his position for that purpose was improper".

18. His Honour then proceeded once again to reiterate the three elements in this way:

"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." (emphasis added)

19. The trial judge should have isolated the element of purpose as a distinct element of which the jury should be satisfied before it could bring in a verdict of guilty. However, what he said was sufficient to alert the jury to the fact that the improper use of position must be for the purpose or purposes prescribed. In fairness to the trial judge, we should point out that purpose seems not to have been an issue at the trial. Indeed, counsel for the appellant did not seek any redirection on the element of purpose. The issue of purpose was first agitated in the Court of Criminal Appeal. In these circumstances, even if there was some deficiency in the instructions given to the jury on this point, that deficiency did not result in a miscarriage of justice.

20. The trial judge did not instruct the jury that they must be satisfied that the appellant had deliberately engaged in the conduct which amounted to an improper use of position. But, once again, this was not an issue at the trial and no direction was sought upon the point. And, having regard to the particular conduct relied upon by the Crown as amounting to improper use of position - authorization of the payment to Rothwells Ltd. (count 1), of the establishment of the commercial bill facility in favour of Wain Holdings Pty. Ltd. (count 2), of the acquisition of shares in GSC Pty. Ltd. (count 3) and of the acquisition of shares in Ikpen Pty. Ltd. and Maroly Holdings Pty. Ltd. (count 4) - it is inconceivable that it would have been in the interests of the appellant to have contended that he did not engage in that conduct deliberately.

21. In the result, we are of the opinion that no case has been established for setting aside the convictions "on the ground of a wrong decision of any question of law or that on any ground there was a miscarriage of justice" within the meaning of s.689(1) of The Criminal Code.

DEANE J. The detailed facts and the relevant statutory provisions are set out in the judgment of Toohey J. The primary question in the case is the relationship between the phrase "make improper use of his position" and the infinitives "to gain" and "to cause" in s.229(4) of the Companies (Western Australia) Code. That sub-section 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."

2. Prima facie, the combination of the words "make use of something " and the words "to gain or to cause something else " conveys both a purposive and causative relationship between the two phrases. As a matter of ordinary language, a person has not made use of something to gain or cause something else if he or she did not intend to gain or cause that other thing at all. Nor has a person made use of something to gain or cause something else if he or she did not gain or cause that other thing at all. That being so, the phrase "make use of a position to gain or cause" something prima facie connotes the use of position in order to and in fact to gain or cause the particular thing. That is to say, the prima facie meaning of the relevant words of s.229(4) encompasses both purpose and result and it is a mistake to see the identification of the meaning of the words as necessarily requiring a choice between a purposive and a causative connotation.

3. The offence created by s.229(4), being punishable by imprisonment for five years and/or a fine of $20,000, is a serious one. It is a well-settled rule of construction that the words of a statute creating such an offence must, unless they are unambiguous, be construed in favour of the subject. In the context of that rule of construction, there is no justification for reading down the prima facie meaning of the words of s.229(4) so as to exclude one or other of the purposive and the causative elements which are prima facie involved in the notion of using a position to gain an advantage or cause detriment. In that regard, it appears to me to be clear that the comma after "employee" in s.229(4) cannot, in the context of s.229(3) which was clearly intended to have a parallel operation and which contains no corresponding comma, properly be seen as evidencing a legislative intent to exclude any requirement that the use of position be for the purpose of gaining or causing a relevant advantage or detriment. The comma can be readily explained by the fact that the rest of the sub-section consists of two alternative groups of words which are equally dependent upon the preceding words.

4. It follows from what has been said above that an accused is not, in my view, guilty of an offence against s.229(4) unless he has made use of his position both for the purpose and with the result of gaining or causing a specified advantage or detriment.

5. The difference between the construction which I would give to s.229(4) and the construction which Mason C.J., Brennan, Gaudron and McHugh JJ. give to the sub-section is that their Honours consider that the words "make improper use of his position ... to gain ... or to cause" in s.229(4) do not connote a requirement of result as well as purpose. That difference in the construction of the sub-section does not preclude my agreement with the reasoning which leads their Honours to conclude that no case has been established for setting aside the appellant's convictions "on the ground of a wrong decision of any question of law or that on any ground there was a miscarriage of justice" within the meaning of s.689(1) of The Criminal Code (W.A.). As the extracts from the learned trial judge's summing up which their Honours set out make plain, his Honour clearly instructed the jury that they had to be satisfied not only that the appellant had the designated purpose in using his position to make the relevant payment but also that "the payment ... caused an advantage to himself and caused a detriment to GCA" (emphasis added). That direction, reflecting the approach adopted by the parties at the trial, was in error in that it required that the payment caused both an advantage to the appellant and a detriment to the corporation whereas s.229(4) requires only that it caused one or the other. In that respect, however, his Honour's directions were unduly favourable to the appellant.

DAWSON J. This appeal concerns the proper construction of s.229(4) of the Companies (Western Australia) Code ("the Companies Code"). Before turning to the question which arises it is convenient to set out the relevant portions of s.229. They are as follows:

"(1) An officer of a corporation shall at all times act

honestly in the exercise of his powers and the discharge of

the duties of his office.

Penalty -

(a) in a case to which paragraph (b) does not

apply - $5,000; or

(b) 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 - $20,000 or imprisonment for 5 years,

or both.

(2) An officer of a corporation shall at all times

exercise a reasonable degree of care and diligence in the

exercise of his powers and the discharge of his duties.

Penalty: $5,000.

(3) An officer or employee of a corporation, or a

former officer or employee of a corporation, shall not make

improper use of information acquired by virtue 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.

(4) 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.

(5) For the purposes of this section, 'officer', in

relation to a corporation, means -

(a) a director, secretary or executive officer of the

corporation ..."

2. The question of construction is whether sub-s.(4), in speaking of improper use of a position to gain an advantage or to cause detriment, requires proof of an intention to gain an advantage or to cause detriment or whether the words of the sub-section speak merely of improper use of a position which occasions gain or detriment.

3. The word "to" when used by way of an infinitive to qualify a previous clause adverbially may indicate purpose. On the other hand, it may be used to indicate occasion or result. Thus, for example, the words "to gain" in s.229(4) may mean "in order to gain" or "with the purpose of gaining". Conversely, they may mean "occasioning gain" or "with the result of gaining". The difference is significant, for if the words in the sub-section mean "in order to gain" or "with the purpose of gaining" and are not directed solely to a result, s.23 of The Criminal Code (W.A.) (assuming that it would otherwise apply) would have no application. Section 23 relevantly provides:

"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."

Section 23 would have no application for, if s.229(4) were to be read as requiring the improper use of the position of which it speaks to be for the purpose or with the intention of gaining an advantage or causing detriment, it is clear that the sub-section would expressly import an intention to cause a particular result as an element of the offence which it creates. It is therefore convenient to turn directly to the construction of s.229(4) and, in particular, to the meaning of the expressions "to gain ... an advantage" and "to cause detriment", in order to see whether an intention to cause a particular result is required.

4. The context in which those expressions are used affords little assistance. The presence of a comma immediately before the words "to gain" may be thought to indicate that the words which follow are used disjunctively rather than conjunctively and hence to indicate result alone rather than purpose or intention. But s.229(3) which is similarly constructed omits a comma in the same place and it is clear enough that sub-s.(4) was derived from the predecessor to sub-s.(3)(6) See Companies Act 1961 (W.A.), s.124(2). It can scarcely be thought that the insertion of a comma in sub-s.(4) was intended to give a different meaning to the words "to gain ... an advantage" and "to cause detriment" in sub-s.(4). Whilst punctuation may sometimes be helpful as an aid to construction, in these circumstances it would be wrong, in my view, to allow the presence of a comma to control the meaning of the sub-section.

5. Some assistance is, I think, to be gained by reference to s.229(1). There a higher penalty - $20,000 or imprisonment for 5 years, or both - is prescribed where the offence on the part of an officer of a corporation of failing to act honestly in the exercise of his powers and the discharge of the duties of his office is committed with intent to deceive or defraud. The higher penalty corresponds with the penalty prescribed for breach of s.229(4), affording some indication that the legislature had in mind a blameworthy purpose in addition to the improper use of the relevant position. There is clearly some overlap between s.229(1) and s.229(4), and an officer who has made improper use of his position without any purpose of gaining an advantage for himself or any other person or of causing detriment to the corporation may well have been guilty of failing to act honestly in the exercise of his powers or the discharge of the duties of his office so as to attract the lesser penalty prescribed by s.229(1)(a).

6. In the end, however, I think that the answer is provided by more general considerations. Sub-sections (3) and (4) raise the question of what constitutes improper use, on the one hand, of information acquired by an officer or employee of a corporation by virtue of his position and, on the other hand, of the position itself as an officer or employee of a corporation. It seems to me that an objective standard must be applied in determining what amounts to impropriety in either context. It is clear enough that a director of a company may act improperly with no intention of acting dishonestly or otherwise than in the best interests of the company as a whole. Whitehouse v. Carlton Hotel Pty. Ltd.(7) [1987] HCA 11; (1987) 162 CLR 285 is an example where the allotment of shares by a governing director was thought by him to be in the best interests of the company but was held to be for the impermissible purpose of defeating the voting power of the existing shareholders. Where a director does something by the use of his position which is for an impermissible purpose it must, I think, amount to an improper use of that position, however much he believes his actions to be in the interests of the company(8) See Jeffree v. NCSC (1990) WAR 183, at p 194. Notwithstanding that impropriety is to be determined objectively, it has been observed, correctly I think, by Jacobs J. in Grove v. Flavel(9) (1986) 43 SASR 410, at pp 416-417 that what was improper for the purposes of the predecessor to s.229(3), s.124(2) of the uniform Companies Act 1961, "cannot be determined by reference to some common, uniform, or inflexible standard which applies equally to every person who is an officer, but rather must be determined by reference to the particular duties and responsibilities of the particular officer whose conduct is impugned". And it should also be said that, whilst impropriety is to be determined objectively, nevertheless the state of mind of the particular officer or employee may be relevant; for example, where a power may be exercised for permissible and impermissible purposes, the purpose for which it is actually exercised will clearly be relevant(10) See, e.g., Harlowe's Nominees Pty. Ltd. v. Woodside (Lakes Entrance) Oil Co. N.L [1968] HCA 37; (1968) 121 CLR 483; Whitehouse v. Carlton Hotel Pty. Ltd. (1987) 162 CLR, at p 294.

7. It would, I think, be curious if s.229(3) and (4), having regard to the high penalty provided by each sub-section, required no mental element other than the voluntariness of an act which, viewed objectively, is improper. Impropriety on the part of an officer resulting in an unintended gain to himself or another or unintended detriment to the corporation would embrace such a wide range of offences attracting varying degrees of opprobrium that I am unable to conclude that the legislature intended such an effect. In my view, the proper construction of both sub-s.(3) and sub-s.(4) is that which requires an intention on the part of the officer or employee to gain an advantage for himself or another or to cause detriment to the corporation. It is a natural construction of those sub-sections which, I think, accords better with the other provisions of the section.

8. Sub-sections (3) and (4) of s.229 may be contrasted with sub-s.(1) of s.229 which requires an officer or employee of a corporation to act honestly in the exercise of his powers and the discharge of the duties of his office. Section 124(1) of the uniform Companies Act 1961 is the forerunner of s.229(1) (although s.124(1) also included the duty to use reasonable diligence which now appears in s.229(2)). In Marchesi v. Barnes(11) [1970] VicRp 56; (1970) VR 434 Gowans J. concluded that, in requiring a director to act honestly, s.124(1) imposed the common law obligation to act bona fide in the interests of the company, making it an offence to fail to do so. However, he expressed the view that for there to be a breach of this obligation imposed by s.124(1) there had to be "a consciousness that what is being done is not in the interests of the company, and deliberate conduct in disregard of that knowledge"(12) ibid., at p 438. He added that "(t)his constitutes the element of mens rea in the criminal offence created by the statute"(13) ibid. This approach has been followed in relation to s.229(1) in Morgan v. Flavel(14) (1983) 1 ACLC 831, at p 838, Flavel v. Roget(15) (1990) 1 ACSR 595, at pp 606-607, Corporate Affairs Commission v. Papoulias(16) (1990) 20 NSWLR 503, at p 506 and Feil v. Commissioner of Corporate Affairs(17) (1991) 9 ACLC 811, at pp 816-817.

9. In Australian Growth Resources Corporation Pty. Ltd. v. Van Reesema(18) (1988) 13 ACLR 261, King C.J., with whom Cox J. agreed, did not refer to Marchesi v. Barnes, but said of s.229(1) that, having regard to the distinction made in the penalty provision between acts done with intent to deceive or defraud the company et cetera and other acts, the sub-section recognized that an officer may fail to act honestly within the meaning of that sub-section without fraud. He concluded(19) ibid., at p 272:

"(Section 229(1)) therefore embodies a concept analogous to

constructive fraud, a species of dishonesty which does not

involve moral turpitude. I have no doubt that a director

who exercises his powers for a purpose which the law deems

to be improper, infringes this provision notwithstanding

that according to his own lights he may be acting honestly."

For my own part I cannot, with respect, equate dishonesty in the context of s.229(1) with mere impropriety. As I have said, the use of power for an impermissible purpose, viewed objectively as it should be, may be improper, but it is not necessarily dishonest. Whether the element of dishonesty is adequately encompassed by the remarks of Gowans J. in Marchesi v. Barnes is something which does not fall for decision in this case, but it is, I think, necessary to give to the word "honestly" in a provision creating a criminal offence a somewhat wider scope than King C.J. was prepared to give it in Australian Growth Resources Corporation Pty. Ltd. v. Van Reesema.

10. The offence created by s.229(2) - failing to exercise a reasonable degree of care and diligence in the exercise of an officer's powers and the discharge of his duties - does not seem to import a mental element, the test being limited to what may reasonably be expected of a director in the circumstances(20) See Byrne v. Baker [1964] VicRp 57; (1964) VR 443, at p 450. What is significant is that the penalty provided for this offence - $5,000 - is substantially less than that provided for a breach of sub-ss.(3) and (4).

11. Were it necessary to do so, it would be possible to rely upon the principle that a penal provision should be construed strictly(21) See R. v. Adams [1935] HCA 62; (1935) 53 CLR 563, at pp 567-568; Beckwith v. The Queen [1976] HCA 55; (1976) 135 CLR 569, at p 576; Murphy v. Farmer [1988] HCA 31; (1988) 165 CLR 19, at pp 28-29. Clearly, if the alternative construction which I have rejected were adopted, both sub-ss.(3) and (4) would have a considerably wider ambit. But I am able to reach my conclusion without reliance upon that principle. Nor do I place any reliance upon the presumption that mens rea forms part of a statutory offence - a presumption which seems presently to be undergoing a resurgence(22) See Cameron v. Holt [1980] HCA 5; (1980) 142 CLR 342, at pp 346, 348; He Kaw Teh v. The Queen [1985] HCA 43; (1985) 157 CLR 523, at pp 528-529, 552-554, 565-568, 591; cf. Proudman v. Dayman [1941] HCA 28; (1941) 67 CLR 536, at p 540; Bergin v. Stack [1953] HCA 53; (1953) 88 CLR 248, at p 261. Reliance upon that presumption would be inappropriate if Ch V Pt I of The Criminal Code applies to offences under the Companies Code, a point which I have no need to decide in this case. I may add specifically that, since as a matter of construction the relevant provision, s.229(4), does expressly declare an intention to cause a particular result to be an element of the offence created, I have no need to resort to s.23 of The Criminal Code, even if Ch V Pt I does apply.

12. I have had the advantage of reading the reasons for judgment of Mason C.J., Brennan, Gaudron and McHugh JJ. and agree with them, for the reasons which they give, that, notwithstanding some deficiencies in the trial judge's charge to the jury, there was no miscarriage of justice in this case.

TOOHEY J. The appellant appeals against his conviction of offences under s.229(4) of the Companies (Western Australia) Code ("the Companies Code"). The sub-section 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."

2. 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 LTD 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."

3. 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 sub-section 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.

4. The appellant's analysis of the sub-section 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.

5. 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 C.J. concluded(23) Chew v. The Queen (1991) 4 WAR 21, at p 57:

" 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(24) ibid., at pp 57-58 the implications for s.229(4) of The Criminal Code (W.A.) ("the Criminal Code"), in particular s.23. It will be necessary to look at the operation of the Criminal Code later in this judgment.

6. At this stage it is relevant to consider the view of the sub-section taken by Murray J., the other member of the majority. His Honour said(25) ibid., at p 74:

"(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 sub-section(26) ibid:

"(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."

7. Wallwork J. (who was in dissent and would have allowed the appeal) said(27) ibid., at p 83:

" 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."

8. 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)."

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

10. 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 sub-sections impose obligations on "officers" (a term which includes directors(28)) Companies Code, s.229(5)(a), 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".

11. 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. Sub-section (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"(29) Companies Code, s.229(10) point up that sub-s.(4) is intended to do more than restate fiduciary or other civil duties owed by a director. Sub-section (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"(30) Brennan v. The King [1936] HCA 24; (1936) 55 CLR 253, at p 263.

12. 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"(31) Grove v. Flavel (1986) 43 SASR 410, at p 417. See also McNamara v. Flavel (1988) 13 ACLR 619, at p 625. 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(32) See, by way of illustration, Wright v. Frisina (1983) 7 ACLR 532; Kinsela v. Russell Kinsela Pty. Ltd. (1986) 4 NSWLR 722. 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 sub-section. There can be no offence unless what the accused has done answers the description of making improper use of his position.

13. 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 sub-section. That, in effect, was the approach taken by Murray J.

14. 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 sub-s.(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.

15. 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(33) See Murphy v. Farmer [1988] HCA 31; (1988) 165 CLR 19, at pp 28-29. 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 sub-section 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 par.(b) a higher penalty for contravention of the sub-section 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 sub-section 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 sub-s.(4).

16. 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 sub-s.(1). Sub-section (4), like sub-s.(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 sub-s.(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.

17. It is necessary to see whether this view of the sub-section, 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"(34) Criminal Code, s.36. 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."

18. 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(35) The Companies (Application of Laws) Act 1981 (W.A.) applies the provisions of the Companies Act 1981 (Cth), as if amended as set out in Schedule 1 to the former Act, "as laws of Western Australia": s.6. The Minister may from time to time authorise the publication of the Companies Act as thus amended and the document thereby published may be cited as the Companies (Western Australia) Code: ss.10(1) and 10(2)(d). 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 sub-section of s.23 of the Criminal Code(36) Widgee Shire Council v. Bonney [1907] HCA 11; (1907) 4 CLR 977, at pp 981-982; Thomas v. McEather (1920) StRQd 166, at pp 174-175. See also Ward v. The Queen (1972) WAR 36.

19. 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 sub-section 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(37) Although the point did not arise for consideration, there is no reason why s.24 of the Criminal Code - the "mistake of fact" provision - should not apply to a charge under s.229(4) of the Companies Code..

20. In the course of his charge to the jury, the trial judge read to them sub-sections of s.229, including of course sub-s.(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.

21. 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.(38) [1987] HCA 11; (1987) 162 CLR 285. His Honour amplified these remarks.

22. 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.

23. 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."

24. 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.

25. 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 sub-section, 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.

26. 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 sub-s.(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.

27. 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"(39) Criminal Code, s.689(1). The appeal should therefore be dismissed.

See Companies Act 1961

(Application of Laws) Act 1981

Chew v R [1992] HCA 18;

At a glance

Court

Decision date

Before

Source

Judgment (100 paragraphs)

Chew v R [1992] HCA 18; (1992) 173 CLR 626 (3 June 1992)

Parties

Legislation Cited (2)

Cases Cited (17)