Director-General, Department of Environment and Climate Change v Jack & Bill Issa Pty Ltd

Director-General, Department of Environment and Climate Change v Jack & Bill Issa Pty Ltd - [2009] NSWLEC 232 - NSWLEC 2009 case summary — Zoe

[26]

24 Much later, on 29 May 2008, Mr Mura wrote a letter to the Department of Environment and Climate Change providing them with certain information in which he referred to that correspondence with the council and, significantly, said that the inquiry to the council was made by "representatives" of the defendant: "As you know a representatives of Jack & Bill Issa Pty Ltd prior to purchase the land made a written enquiry to Cessnock council requesting information to clean or clear the land better say to remove any re-growth, dead tree, rotten tree, and other rubbish in order the land can be used for the grazing of cattle, the council advised that no permit was required. The representative also called your office by telephone and received the same answer or similar to the answer of the Cessnock Council. We proceeded with the work and removed excess rubbish in the property to avoid fire hazards and other inconveniences. A member of your department held a meeting at Mr Mura & Co's office and they were given all the information available, we presumed would have been the end of it. We have no other information to give you and we are at loss to understand why this is becoming a big problem…" 25 Mr Mura was called as a witness by the prosecutor. He said in evidence that if the council had said he could not do the clearing, he would not have bought the Land. 26 Mr Mura, told Jack Issa that he had received a letter from the council saying that the clearing could be done without any problems. 27 On or around 9 March 2006, Mr Mura contacted the Hunter-Central Rivers Catchment Management Authority and spoke with Mr David Russell, a Catchment Officer employed by the Authority. Mr Mura told Mr Russell, "I want to clean up the rubbish". CLEARING 28 At some time before March 2006, Mr Mura asked Mr Sternbeck if he would carry out some works to clear dead timber on the Land to reduce the fire hazard. Mr Sternbeck asked Mr Mura if he had permission for the works. Mr Mura told Mr Sternbeck that he had written to Cessnock City Council which had given him permission to clean up the dead timber to reduce the fire hazard. Mr Sternbeck agreed to carry out those works.

[38]

41 Mr Jones additionally carried out clearing works to clear a proposed site for a dwelling which Mr Mura had intended to build on the Land. The site included trees. The way in which Mr Jones cleared this area was different to the way in which he cleared the other timbered areas on the Land. In a recorded interview with departmental investigators on 2 June 2008, Mr Jones identified the area he cleared for the purpose of a house site by a solid square on the aerial photograph which is in evidence. 42 Mr Jones was shown photographs of the area cleared on the Land, which he identified as indicative of the type of clearing he carried out and of the stacks he had pushed up using the bulldozer. The photographs are in evidence. PAYMENT 43 Mr Jones issued three invoices, which his wife prepared, addressed to Mario Mura for the carrying out of the clearing works on the Land: an invoice dated 6 April 2007 for $4,000; an invoice dated 25 April 2007 for a further $5,680 indicating a total fee to that date of $9,680 for 88 hours of bulldozer hire (including Mr Jones' and Mr O'Hearn's labour); and an invoice dated 27 May 2007 for an additional $2,090 for a further 19 hours of bulldozer hire (including Mr Jones' and Mr O'Hearn's labour). 44 Mr Mura paid Mr Jones a total of $8,590 for the work by way of three cheques. In each case, the cheque butt nominated the payment as being for "land clearing". Each cheque was paid from the bank account of Mario Mura Service Pty Ltd, which had no association with the defendant. At the time and until 13 May 2008, Mr Mura was a director and secretary of Mario Mura Service Pty Ltd. 45 According to Mr Mura's evidence, he had intended to pay Mr Jones in cash on what appears to have been the first occasion but, when he got there, found he did not have enough cash and therefore paid by cheque. 46 Each invoice also bore an ACN (Australian Company Number) under Mr Mura's name. Mr Jones was asked about it. He said his wife got the number. Whether it was the ACN for Mario Mura Service Pty Ltd was not explored in evidence.

[42]

51 In addition to the initial meeting between Mr Mura and Mr Jones on the Land prior to the works commencing, Mr Mura also met Mr Jones on the Land on three separate occasions during the period the clearing works were being carried out: - The first meeting on the Land during the period the works were being carried out was on 8 April 2007. This meeting occurred after Mr Jones had issued his first invoice (dated 6 April 2007). Mr Mura looked at the works which Mr Jones had carried out and instructed Mr Jones to "do a bit more". - The second meeting on the Land during the period the works were being carried out was on 29 April 2007. This meeting occurred after Mr Jones had issued his second invoice (dated 25 April 2007). Mr Mura instructed Mr Jones on this occasion to continue with the works. - The third meeting on the Land during the period the clearing works were being carried out was on 20 May 2007. 52 Mr Mura told Mr Issa that the clearing work had been carried out. He asked Mr Mura the reason and Mr Mura said, "a lot of undergrowth, a lot of fire hazards and for me to graze cattle I needed to do that". This indicates that a dual purpose of the clearing was communicated to Mr Issa: first, management of the Land though reduction of fire hazards; secondly, enhancement of the grazing capability of the Land. This was consistent with what Mr Mura indicated in his November 2005 letter to the council: see [22] above. According to Mr Issa, this discussion was about a month after the clearing had occurred. Mr Issa testified that there was no discussion about payment for the clearing or about a loan. 53 Mr Mura said in evidence in chief that he told Mr Jones that he wanted to build a weekender on the Land and wanted to make sure that it was fire safe so he would like to clear a piece of the Land. He agreed in evidence that there were trees on this land exceeding two foot in growth. In cross-examination, he agreed he did not tell Mr Issa that he wanted to build the house until after he directed Mr Jones to clear a block. Later he said in evidence that he mentioned to Mr Issa that he intended to build a weekender but whether it was before or after he gave instructions to Mr Jones, he could not remember. Mr Jack Issa was called as a witness by the defendant. In evidence Mr Issa appeared to deny that he had any discussion with Mr Mura about building anything on the Land. That is inconsistent with answers that Mr Issa gave in a pre-trial interview with investigators: "Q92 Well, there's been - well, our understanding is that he intended putting a house on the property, and there's a large area that's been just totally cleared, probably 80 by 100 metres, that's just got absolutely no vegetation on it at all. So you weren't aware that there was going to be a house put on? A. He said something about a shed or a house, but I didn't see no plans or any details.

[63]

84 In Lennard's, the acts of Mr Lennard, who was a director of the appellant company and managing director of the company that acted as the ship manager for the appellant company, were held to be the acts of the appellant company itself. Viscount Haldane L.C, in a celebrated speech, summoned the spectre of the "directing mind and will" of a corporation, which requires a search for those people with such a high degree of responsibility for the corporation's management that they can be said to be acting as the corporation rather than for the corporation, at 713: "…a corporation is an abstraction. It has no mind of its own any more than it has a body of its own; its active and directing will must consequently be sought in the person of somebody who for some purpose may be called an agent, but who is really the directing mind and will of the corporation, the very ego and centre of the personality of the corporation. That person may be under the direction of the shareholders in general meeting; that person may be the board of directors itself, or it may be, and in some companies it is so, that that person has an authority co-ordinate with the board of directors given to him under the articles of association, and is appointed by the general meeting of the company, and can only be removed by the general meeting of the company." 85 In Bolton, the directors of the company only met once a year, they left the management of the business to others, and it was the intention of those managers which was imputed to the company. Likening a company to the human body, Denning LJ (Hodson and Morris LJJ agreeing) at 172-173 worked "the directing mind and will" concept into his simile: "A company may in many ways be likened to a human body. It has a brain and nerve centre which controls what it does. It also has hands which hold the tools and act in accordance with directions from the centre. Some of the people in the company are mere servants and agents who are nothing more than hands to do the work and cannot be said to represent the mind or will. Others are directors and managers who represent the directing mind and will of the company, and control what it does. The state of mind of these managers is the state of mind of the company and is treated by the law as such…in the criminal law, in cases where the law requires a guilty mind as a condition of a criminal offence, the guilty mind of the directors or the managers will render the company itself guilty. That is shown by Rex v I.C.R. Haulage Ltd , to which we were referred, and in which the court said: 'Whether in any particular case there is evidence to go to a jury that the criminal act of an agent, including his state of mind, intention, knowledge or belief is the act of the company…must depend on the nature of the charge, the relative position of the officer or agent, and the other relevant facts and circumstances of the case'.

[65]

(emphasis added) 86 The decision in Bolton was approved in Tesco at 170 where Lord Reid said: "I must start by considering the nature of the personality which by a fiction the law attributes to a corporation. A living person has a mind which can have knowledge or intention or be negligent and he has hands to carry out his intentions. A corporation has none of these: it must act through living persons, though not always one or the same person. Then the person who acts is not speaking or acting for the company. He is acting as the company and his mind which directs his acts is the mind of the company. There is no question of the company being vicariously liable. He is not acting as a servant, representative, agent or delegate. He is an embodiment of the company or, one could say, he hears and speaks through the persona of the company, within his appropriate sphere, and his mind is the mind of the company. If it is a guilty mind then that guilt is the guilt of the company. It must be a question of law whether, once the facts have been ascertained, a person in doing particular things is to be regarded as the company or merely as the company's servant or agent. In that case any liability of the company can only be a statutory or vicarious liability." 87 Nothing in these judgments required that only the acts of a director could be considered the acts of the company: Nationwide News Pty Ltd v Naidu [2007] NSWCA 377, NSWLR 471 at [231]; The Lady Gwendolen [1965] P 294 at 343. In The Lady Gwendolen the conduct of the head of the company's traffic department, which assumed responsibility for running the company's ships, although he was not a director, was held to be the conduct of the company itself so far as concerned anything to do with the company's ships. In Nationwide News Pty Ltd v Naidu the appellant company's Fire and Safety Officer, who was in charge of all its security requirements, was found to be its "mind and will" so far as the management of its security requirements were concerned. 88 The defendant is a small, private company. The application of the "directing mind and will" concept to a small, private company is illustrated by Entwells Pty Ltd v National & General Insurance Co Ltd (1991) 5 ACSR 424. In that case Ipp J, in the Supreme Court of Western Australia, considered the circumstances in which the acts of directors of a small family company were to be identified with the company. The plaintiff was a family company, the directors and shareholders of which were Mr Nikolic, his wife and their son Sasha. The plaintiff owned a supermarket where a fire had broken out destroying a considerable portion of the contents. The defendant had insured the plaintiff against fire damage. The court found that either Mrs Nikolic or Sasha connived at the burning down of the store and that they were joint managing directors with the approval of the plaintiff. The plaintiff could not recover for a loss caused by its own deliberate act. His Honour held that the conduct of Mrs Nikolic or Sasha was to be regarded as the conduct of the plaintiff. Accordingly, the plaintiff's claim for indemnity against the insurer failed. After reviewing the authorities, Ipp J held at 429: "The 'active and directing' will of a company may be constituted by the minds of several persons, each acting separately and independently of the others. In such event, the acts and mind of one of such persons, when so acting, may be the acts and mind of the company itself.

[72]

One possibility is that the court may come to the conclusion that the rule was not intended to apply to companies at all; for example, a law which created an offence for which the only penalty was community service. Another possibility is that the court might interpret the law as meaning that it could apply to a company only on the basis of its primary rules of attribution, i.e. if the act giving rise to liability was specifically authorised by a resolution of the board or an unanimous agreement of the shareholders. But there will be many cases in which neither of these solutions is satisfactory; in which the court considers that the law was intended to apply to companies and that, although it excludes ordinary vicarious liability, insistence on the primary rules of attribution would in practice defeat that intention. In such a case, the court must fashion a special rule of attribution for the particular substantive rule. This is always a matter of interpretation: given that it was intended to apply to a company, how was it intended to apply? Whose act (or knowledge, or state of mind) was for this purpose intended to count as the act etc. of the company? One finds the answer to this question by applying the usual canons of interpretation, taking into account the language of the rule (if it is a statute) and its content and policy." (emphasis added) 90 The Meridian rules of attribution provide a framework for analysis. The decision has frequently been followed or approved in various contexts: see the cases listed in ABC Developmental Learning Centres Pty Ltd v Wallace [2006] VSC 171, 161 A Crim R 250 at [6], affirmed [2007] VSCA 138, 172 A Crim R 269; North Sydney Council v Roman [2007] NSWCA 27, 150 LGERA 419 at [28] - [39]. 91 It is necessary to identify, in each statutory context, the rules of attribution to determine the persons whose acts are to be attributed, or which acts of persons are to be attributed, to the company or other organisation for the purposes of the legislative scheme: Director General, Department of Education and Training v MT [2006] NSWCA 270, 67 NSWLR 237 at [17]. In that case Spigelman CJ (Ipp JA and Hunt AJA agreeing) said: "16 The law of agency is not an adequate or complete basis for institutional law. When determining whether conduct or knowledge or mental state of an individual employee or agent should be attributed to a corporation, an organic approach has been developed, which approach goes beyond the individualistic inclinations of the law of agency. (See e.g. Smorgon v Australia and New Zealand Banking Group Ltd (1976) 134 CLR 475 at 482-483; Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146 at 159-160, 201-202; Ross Grantham '"Attributing Responsibility to Corporate Entities: A Doctrinal Approach' (2001) 19 C&SLJ 168.) In many cases, the conduct of persons in actual control of particular operations of the company will constitute the company for particular statutory purposes. (See e.g. The Lady Gwendolen [1965] P 294 at 343-344; AAPT Ltd v Cable and Wireless Optus Ltd (1999) 32 ACSR 63 at [91]-[92]...)

[78]

22 Subsequent development of the case law has emphasised particular features of the legislative scheme under consideration, for example the protective nature of the statutory regulation. (See for example, in the case of occupational health and safety legislation, Linework Limited v Department of Labour [2001] 2 NZLR 639; R v Commercial Industrial Construction Group Pty Ltd [2006] VSCA 181 and, in the case of a child protection statute, ABC Developmental Learning Centres Pty Ltd v Wallace (2006) 161 A Crim R 250.) Each statutory regime must be considered separately, although the case law that has developed, particularly after Meridian Global Funds Management Asia Ltd , will prove instructive about the kinds of indicators that point one way or another." 92 The process of attribution of criminal responsibility was addressed in Presidential Security Services of Australia Pty Ltd v Brilley [2008] NSWCA 204, 73 NSWLR 241 per Allsop P: "4 The liability of a company for any particular breach of the criminal law will depend, in significant part, upon the nature, elements and terms of the offence. To the extent that the offence is created by statute, the process of 'attribution' of criminal responsibility will principally be, or be at least based on, statutory interpretation of the provision creating the offence: Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500. … 7 There is a body of authority supporting the proposition that for a company to be attributed with the intentions of a person for the purposes of criminal responsibility that person must be acting in furtherance of the company's interests, or at least not against them: Director of Public Prosecutions v Gomez [1993] AC at 464-5, 491-2 and 496-97; Attorney-General's Reference (No 2 of 1982) [1984] 1 QB 624; R v Philippou (1989) 89 Cr App R 290; Attorney-General's Reference (No 1 of 1985) (1985) 41 SASR 147; Durovic v R (1994) 4 Tas R 113; Rowe v Transport Workers Union of Australia (1998) 90 FCR 95; R v Rozeik [1996] 3 All ER 281; Canadian Dredge & Dock Co v R [1985] 1 SCR 662. There is authority to the contrary: R v Roffell [1985] VR 511." 93 Ipp JA (Allsop P and Beazley JA agreeing) held: "144 The fact that a company is capable of committing a crime and may be indicted for an offence does not, however, mean that the inherent characteristics of an artificial person are not relevant to whether a company may be found guilty of certain offences, particularly those offences of which mens rea is an element.

[82]

150 The situation is different, however, where mens rea does not form part of the offence. Parliament may create offences of strict or absolute liability, and it has long been accepted that, in such a case, the application of vicarious liability principles is not inhibited." 94 In Director of Public Prosecutions Reference (No 1 of 1996) (Vic) [1998] 3 VR 352 at 355, 96 A Crim R 513 at 516 Callaway JA said: "Sometimes only the board of directors acting as such or a person near the top of the corporation's organisation will be identified with the corporation itself. On other occasions someone lower, and perhaps much lower in the hierarchy will suffice." 95 In considering whether there is a special rule of attribution, it is necessary to interpret the statute applying the usual canons of interpretation, taking into account the nature of the offence and the language and policy of the statute. In cases concerned with a protective regulatory regime, the conduct of officers or employees involved in the actus reus of the offence has been attributed to the company: Director-General v MT (above) at [17]. Some of those cases were analysed in ABC Developmental Learning Centres Pty Ltd v Wallace [2006] VSC 171, 161 A Crim R 250 at [11] - [14] per Bell J as follows: "11 The need to ascertain the nature of the offence and the policy of the statute comes through strongly in the decided cases. For example, in Meridian itself, officers of the company acquired substantial securities in a public company without making disclosure to the market. Their actions were taken to be the actions of the company, which was prosecuted, in the words of Lord Hoffmann, because the policy of the statute was 'to compel, in fast-moving markets, the immediate disclosure of the identity of persons who become substantial security holders' in public companies [1995] 2 AC 500 at 511C. In McNicholas Construction Co Ltd v Customs and Excise Commissioners [2000] STC 553 at 574g, the actions of all of the employees involved in the making and receiving of supplies were counted as the actions of the company in a tax prosecution because the policy of the statute was to discourage the dishonest evasion of tax. In Linework Ltd v Department of Labour [2001] 2 NZLR 639 at 645, the omissions of the foreman in charge of a work site counted as the omissions of the company in an occupational health and safety prosecution because the statute was concerned with the safety of employees at work and required the employer to provide on-the-job supervision of safety practices.

[92]

(a) the defendant was dormant prior to Mr Mura becoming a director. Therefore there is no history of any ongoing business or business relationship between officeholders; (b) there is no history of either director doing any previous act which bound the defendant other than purchasing the Land; (c) the sole object of the defendant was to purchase and hold the Land for a long term capital gain, not to also carry on a farming or grazing business on it; (d) the prior friendly relationship of Mr Issa was such that he wanted to help Mr Mura financially by letting him run a grazing business for himself on the Land; (e) Mr Mura had no express authority to bind the company except in relation to negotiating the purchase of the Land; (f) it was Mr Mura's idea to proceed with the purchase through a company structure as it enabled him to borrow funds; (g) Mr Mura and Mr Issa put equal or similar funds into the company; (h) in all his dealings with Mr Sternbeck and Mr Jones, Mr Mura never held himself out as acting in other than in his personal capacity; (i) Mr Mura's intention was to conduct a grazing business for his personal benefit; (j) Mr Jones' invoices were all addressed to Mr Mura personally; (k) no money of the defendant was used or sought to pay Mr Jones invoices. Mr Mura's evidence was that, initially, he had his own cash to pay Mr Jones; (l) Mr Mura conceded that there was no paper work, contract or agreement in relation to any loan; and that he had no express authority to lend the company money unilaterally; (m) if the defendant was carrying on a grazing business, it may be expected that: (i) a bank account would be opened in its name and funds debited; (ii) there should be evidence in the BAS of GST paid or whether losses were made, but there is no such evidence; (iii) there should have been some sort of discussion concerning wages; (iv) Mr Issa would have ensured he had some knowledge of the business; (v) there should have been some discussion of how they were going to make money; and (vi) if Mr Mura had suggested this was a company business, Mr Issa's evidence was that he would not have agreed. DISCUSSION 103 The heart of the present matter is a crime that occurred on the Land by the conduct of one of only two directors and equal shareholders of a company that had no employees and only one asset, the Land. 104 So far as they go, I generally accept the factual propositions put in the defendant's submissions although I am satisfied on the evidence that Mr Issa put a little more money into the defendant company than Mr Mura. 105 The prosecutor argues that the business of grazing cattle should be regarded as the defendant's business because (a) of the words in the contractual documents referred to at [21] above and (b) because the defendant stood to benefit from the grazing of cattle by gaining exemption from land tax (s 10AA Land Tax Management Act 1956) and by obtaining a favourable rating (s 515 Local Government Act 1993). The benefits are uncontroversial but I do not accept the submission. The said documents are not conclusive as to whose farming business it was intended to be. I accept the evidence of Mr Jack Issa and Mr Mura that the defendant company's only interest in the Land was as an investment from which a medium to long term capital gain was expected, and that the cattle grazing business was entirely Mr Mura's venture arising from Mr Jack Issa's sympathy for his friend Mr Mura's financial predicament. 106 I am satisfied that the clearing furthered the defendant's interests and that the payments by Mr Mura to the clearing contractor were made on behalf of, and were loans to, the defendant. They were loans which Mr Mura did not expect to be repaid until the Land was eventually sold. My reasons are as follows.

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