Johnson v Youden

Federal Court of Australia|1983-02-10|Before: Fisher J, Pisher J

TRADE PRACTICES - - consumer protection - misleading and deceptive conduct - sale of a business - misrepresentations as to turnover - judgment entered against corporation ~ question of liability of its Managing director - primary offence requiring no mens rea - whether 'liability of director absolute ~- "involvement" and "participation" in the commission of the primary offence - whether he was aware or had reason to suspect information incorrect - meaning of "aider or abettor" and "person knowingly concerned" - actual or constructive

Johnson v Youden [1950] 1 K.B. 544 [1950] 1 All E.R. 301 Reg v Glennan (1970) 91 W.N. (N.S.W.) 609

) SOUTH AUSTRALIA DISTRICT REGISTRY ) No. S.A. G.38 of 1981

ROSS MELVILLE LUCAS and TREASUREWAY STORES PTY. LTD. and KEVIN THOMAS MAHONEY

On 16 September 1982 I entered judgment in favour of the applicants against Ross Lucas Pty. Ltd. and Treasureway Stores Pty. Ltd ("Treasureway") 1n the sum of $73,000. At the request of the parties I refrained from proceeding further against Mr. Lucas and Mr. Mahoney because of the challenge to the jurisdiction of this Court which is awaiting determination by the High Court in the matter of Muller and

Another v Fencott and Others (1981-1982) 39 A.L.R. 496. The further

question 1s whether, assuming s.75B of the Trade Practices Act 1974

("the Act") 1s within the constitutional power of the Commonwealth,

I am obliged, on the facts as found, to enter judgment against

Mr. Lucas. This question which was also deferred is not only very difficult but fraught with draconian consequences, probably unforeseen,

for responsible and careful professional and businessmen.

The applicants seek judgment against Mr. Lucas jointly and severally with the other respondents for the amount of damages awarded them. They contend that he as a director of Ross Lucas Pty. Ltd. aided and abetted, counselled or procured or was knowingly concerned in or a party to the contravening conduct which I have found against Ross Lucas Pty. Ltd. Equally it could be said, aithough not pleaded, that he was a party to the contravening conduct of Treasureway. It is alleged that it follows that by the combined effect of s.82(1) and s.75B of the Act they are entitled to recover against him, as a person involved in the contravention, the amount

"82. (1). A person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV or V may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention". I have emphasised the crucial words.

Section 75B takes up the concept of a person involved ina transaction. It provides: "75B. A reference in this Part to a person involved in a contravention of a provision of Part IV or Part V shall be read as a reference to a person who -

(a) has aided, abetted, counselled or procured the contravention;

(b) has induced, whether by threats or promises or otherwise, the contravention;

(a) has conspired with others to effect the contravention."

In my judgment of 16 September 1982 I found that Ross Lucas Pty.

Ltd. had by acting as an agent for Treasureway unwittingly engaged

in misleading conduct and thereby contravened s.52 of the Act. I accepted that the section involved no question of antent on the part of Ross Lucas Pty. Ltd. and I referred to the comments of

Gibbs C..J. in Parkdale Custom Built Furniture Pty. Ltd. v Puxu Pty.

Ltd. (1982) 42 A.L.R. 1 at p.5 when he said: "A Corporation which has acted honestly and reasonably May therefore nevertheless be rendered liable to be restrained by injunction and to pay damages, if its conduct has in fact misled or deceived or is likely to mislead or deceive. The liability imposed by sec.52,

in conjunction with sec.80 and 82, is thus quite unrelated to fault."

Mr. Lucas was managing director of Ross Lucas Pty. Ltd. and the only officer of that company who had any dealings with Treasureway or Mr. Mahoney on the one hand and the applicants on the other. Ross Lucas Pty. Ltd. committed a contravention of s.52 by virtue of his conduct. He 1s joined as a party being "anvolved", in effect, as an accessory to the contravention which Ross Lucas Pty. Ltd. has committed per medium of his actions for which it 1s vicariously liable or which actions are the actions of the company under s.84(2) of the

If these proceedings had been by way of a prosecution, as they Might well have been as the appellants also allege a contravention of s.59(2) of the Act, and s.5 of the Crimes Act 1914 had been invoked, the words of Dixon J. (as he then was) in Mallan v Lee (1949) 80 C.L.R. 198 at p.216 would have relevance. At the latter page he said:

"Tt would be an invasion of the conceptions on which the

degrees of offending are founded to make the person actually committing the forbidden acts an accessory to the offence consisting in the vicarious responsibility for his acts."

However it 1S significant that neither s.75B nor s.82 deem the accessory

tohave committed a contravention but rather proceed on the basis that

in one or other of the specified ways he was "involved" in the commission of the primary offence. Section 75B it can be said is procedural in the sense that it merely purports to indicate the various ways in which one person can be involved in the commission of a contravention by another to such an extent as to render it just that he contribute to recoupment of the loss suffered by others in consequence of the contravention. In this regard it contrasts with s.5 in that the accessory under s.75B does not necessarily commit

I made an my earlier judgment a number of relevant findings of fact in respect of the conduct of Mr, Lucas. I said:

"In respect of all these negotiations and representations I

accept without reservation the evidence of Mr. Lucas. He

was careful and conscientious in his testimony and had a good recollection of relevant happenings."

There is no doubt that Mr. Lucas was acting exactly in accordance with the instructions and information given to him as managing director of Ross Lucas Pty. Ltd. by Mr. Mahoney. He was sufficiently careful to obtain Mr. Mahoney's written confirmation on at least three occasions of the turnover figure and he heard Mr. Mahoney orally confirm it to Mr. Yorke. When he returned from an overseas trip he asked Mr. Mahoney for an up to date profit figure and he sought and obtained confirmation that the weekly turnover was $3,500 before he resumed his efforts to sell the business. My ultimate finding was that "Mr. Lucas conscientiously and carefully passed on to Mr. Yorke the instructions and informations he received from Mr. Mahoney and this finding 1s not disturbed by the evidence given by

The position then 1s and I find that Mr. Lucas was not aware and had no reason to suspect, that the information concerning turnover which he relayed to Mr. Yorke was incorrect. He made all appropriate enquiries from Mr. Mahoney and was entitled to be satisfied by the answers he was given, particularly as the turnover fagure which he was supplied received some support from the accounts of Treasureway. He did not know of or suspect, and had no reason to suspect, the 1naccuracy of the turnover figures and in no way could it be said that he acted recklessly or deliberately abstained from

The question arises whether in these circumstances Mr. Lucas can as a matter of law be said to have been involved in the contravention by Ross Lucas Pty. Ltd. or Treasureway as an aider and abettor, or person knowingly concerned by virtue of s.75B. I do not find this an easy question to answer as a matter of law although all too obvious is the just conclusion. All subsequent evidence tends to indicate that probably neither Treasureway nor Mr. Mahoney will be able to satisfy the award of damages. The Courts have on a number of occasions indicated their awareness that to push the principle to its limit may produce injustice. For example in

Reynolds v G.H. Austin & Sons Ltd. [1951} 2 K.B. 135 at p.149 Devlin J.

"...1f a man is punished because of an act done by another, whom he cannot reasonably be expected to influence or control, the law is engaged, not in punishing thoughtlessness or inefficiency, and thereby promoting the welfare of the community, but tn pouncing on the most convenient victim. Without the authority of express words, I am not willing to conclude that Parliament can intend... the useless and

The relevant authorities to which I was referred are not exactly on point, being directed rather to the position of an aider and abettor, under, for example, s.5 of the Crimes Act 1914, who is charged as an accomplice to the principal offence of which a company has been convicted. In his present situation the involvement of Mr. Lucas 1s more closely analagous to that of a joint tort-feasor. However in the same way as an accomplice is a person who is "particeps criminis",a person involved is one who participates in the contraventiai in that "he in some sort associate himself with the venture, that he participate in ait as in something he wishes to bring about, that

he seek by his action to make it succeed" (per Bright J. in Lenzi v

Miller [1965] S.A.S.R. 1 at p.15 citing from Judge Learned Hand in

At farst glance it might be assumed that because s.52 does not in itself involve any questions of intent or fault or more generally mens rea on the part of the primary offender, the same would be the case with the accomplice. In other words that there was no obligation on the applicants to establish to any extent the state of mind of the alleged accomplice. However 1n my opinion such 1s not the case and consideration is required of the circumstances before Mr. Lucas can be said to have been "involved" in the contravention as a result of the provisions of s.75B. In my opinion the authorities establish that it must be proved that Mr. Lucas was aware or should have been aware of the relevant facts before he can be said to have been

The statement of the position of an alleged aider and abettor

in relation to a statutory offence not involving mens rea of the

Chief Justice in Johnson v Youden [1950] 1 K.B. 544 appears to have

been accepted in Australia. On page 546 Lord Goddard C.J. said:

"Before a person can be convicted of aiding and abetting

the commission of an offence he must at least know the essential matters which constitute that offence. He need

not actually know that an offence has been committed,

because he may not know that the facts constitute an offence and ignorance of the law is not a defence. If a person knows all the facts and 1s assisting another person to do certain things, and it turns out that the doing of those things constitutes an offence, the person who 1s assisting is guilty of aiding and abetting that offence."

Lord Goddard was dealing with a situation in which a purchaser,

intending to pay to a builder £250 more than the permitted price, concealed this fact from his solicitors which situation he elaborated as follows in his judgment as reported in [1950] 1 All E.R. 301 at p.302:

"In regard to the respondents (three solicitors), the

Justices found that, until April 6, 1949, none of them

knew anything about the-extra £250 which the builder was receiving, and that the first two respondents, Mr. Henry Wallace Youden and Mr. George Henry Youden, did not know

about it at any time, as the builder deliberately concealed

the fact and even refused to give the purchaser a receipt

for that £250. The justices, therefore, were right, 1n our opinion, in dismissing the information against the first two respondents on the ground that they could not be guilty of aiding and abetting the commission of the offence as they did not know of the matter which constituted the offence. If they had known that the builder was receiving the extra 4250 and had continued to ask the purchaser to complete, they would have committed

an offence by continuing to assist the builder to offer the property for sale, contrary to the provisions of s.7(1) of the Act of 1945 (Building Materials & Housing Act) and, as ignorance of the law 1s no defence, they would have been

guilty of the offence even if they had not realised that they were committing an offence, but a person cannot be convicted

of aiding and abetting the commission of an offence if he

does not know of the essential matters which could constitute the offence." (emphasis added)

The Chief Justice differentiated between the position of the two respondents who had no reason to suspect and that of the third

respondent who was put upon his enquiry and alerted to a possible

evasion of the Act. In these circumstances, when he called upon the purchaser to complete, the latter respondent was "clearly aiding and

abetting the builderin the offence which the builder was committing".

This statement of the law as reported in the authorised report

was followed by the Full Court of the Supreme Court of South Australia

in Lenzi v Miller at page 11. Napier C.J. and Trayets J, said on that

"In his argument for the appellant, Mr. Wilson relied upon Johnson v Youden for the proposition that 'no one can be convicted cf aiding and abetting the commission of an offence 1f he does not know of the essential matters which would constitute the offence'. We respectfully agree with that, although we prefer the form which Chamberlain J. cites from Archbold (34th ed. (1959) par. 4136), subject to the substitution of 'the' for 'an', as follows:- 'A person cannot be convicted of aiding and abetting the commission of an offence unless he knew the facts which must be proved to show that an!' (or, as we should say, the) 'offence has been committed'."

The Full Court in that case upheld the conviction of the appellant even though the prosecution did not prove that he knew the motor vehicle was not insured, which lack of insurance was of the essence of the offence, because it held he should have suspected that the

The Court of Criminal Appeal of New South Wales also approved

in Reg v Glennan (1970) 91 W.N. (N.S.W.) 609 the principle as stated

by Lord Goddard. After referring to Johnson v Youden, various

English authorities and Lenzi v Miller the judgment of the Court

proceeded on page 614 as follows and I set out these paragraphs in full

because they are very relevant to the matter before me:

"Tt is to be observed that the decisions to which we have referred concern statutory offences which are absolute in the sense that the intention of the perpetrator was not a

However, with respect to these authorities the comment should be made that, when examined in the light of other decisions, they appear to fall short of establishing that actual knowledge

of all the facts essential to the commission of the offence

is a necessary pre-requisite to the conviction of an aider

and abettor. Thus, it has been said that the requisite element of knowledge or intention 1s made out 1f it appears that

the defendant has deliberately shut his eyes to the fact,

or has deliberately abstained from obtaining knowledge

by making enquiry (Davis, Turner & Co. Ltd. v Brodie;

[1954] 1 W.L.R. 1364, Poultry World Ltd. v Conder [1957]

Crim L.R. 803, Bateman v Evans (1964) 108 S.J.522).

It may, therefore,be concluded that, in the case of statutory offences 1n which intention is not a necessary element, the law does not require actual knowledge on the part of the aider

and abettor of all the essential facts of the offence. The element of knowledge or intention required of an aider and abettor might perhaps be more accurately expressed by saying that it nust be shown that he either knew or suspected the existence of facts which would constitute the commission of the offence or,perhaps, that he acted recklessly, not caring whether the facts existed or not. Mere failure to make an enquiry which, 1£ made, would yield knowledge of an essential fact,

1s not in itself enough to constitute knowledge of the fact, for 1t 1S accepted that to act negligently does not make a person an aider and abettor (Callow v Tillstone; (1900) 83 L.T. 411, see also Bowker v Premier Drug Co. [1928] 1 K.B. 217).

But the circumstances of a given case may be such as to

reveal not merely a failure to make an enquiry, but a failure to make an enquiry which is of such a kind as to suggest that the defendant had deliberately abstained from acquiring knowledge because he suspected the existence of a fact which would have been ascertained on inquiry, or that the defendant has acted recklessly in the sense that he did not care whether the facts existed or not (Carter v Mace [1949] 2 All E.R. 714: cf.

David Turner & Co. Ltd. v Brodie [1954] 1 W.L.R. 1364)."

Of Lenzi v Miller the Court of Criminal Appeal said on

"The decision in Lenzi v Miller is not inconsistent with what we have said, for the Full Court was of the opinion that on the evidence the appellant had actual knowledge that the motor trailer was uninsured and it was a case in which the appellant as owner of the trailer at least had strong grounds for suspecting that it was uninsured, even if the circumstances were insufficient to show actual knowledge of the fact."

In the case before the Court of Criminal Appeal, although actual knowledge of the relevant facts was not proved, the alleged aider and abettor was aware of all the circumstances which gave rise to the commission of the offence and thus had reason to suspect the crucial element, namely an excess percentage of alcohol in the blood

Johnson v Youden was approved by the House of Lords in Rv

Further support, at least on the ground of consistency of approach, for the conclusion that the liability of an aider and abettor 1s not an absolute liability, but involves some mental element, is to be found in the structure of s.75B of the Act. It provides for four categories of persons who are persons involved in a contravention. Two at least of these categories by their very nature necessarily

involve establishment of a mental element, namely a person "knowingly

concerned in, or party to the contravention" (c) and a person who

"has conspired with others to effect the contravention" (d).

The use of the word "knowingly" indicates the need to establish a certain state of mind, the mere fact of being concerned in or a party to a contravention being insufficient. As Lord Hewart C.J. said

1n Gaumont British Distributors Limited v Henry [1939] 2 K.B. 711 at

"...when one finds put up as a danger signa] or a signpost... the words 'If any person knowingly' does certain things,

1t seems to me that discussions about mens reas are of something less than academic interest. The knowledge

on the part of the alleged offender 1s described prominently as an essential ingredient of the offence."

Conspiracy also entails a mental element on the part of a conspirator, in that agreement is the essential foundation of the offence. It consists of the agreement of two or more persons to do an unlawful act and not until there is an agreement 15 there a

On the facts of this present matter the making of the statements concerning turnover were not of themselves, but because of the particular circumstances, namely in the context of the actual turnover, contraventions of s.52. In my opinion the position concerning the actual turnover was a material clement in the contravention by Treasureway and Ross Lucas Pty. Ltd. Knowledge of these facts were not necessary to establish a contravention by Ross Lucas Pty. Ltd. but actual or constructive knowledge 1s necessarily involved in establishing a contravention by a person who is alleged to have

The words of the Court of Criminal Appeal in Reg v Glennan at page 613 are very much in point:

"But 1t does not follow that knowledge of the facts necessary

to constitute the statutory offence is not a material element

in the conviction of an aider and abettor. Notwithstanding

the absence of a requisite intention as an ingredient in the offence, it 18 necessary to show that the defendant participated in the commission of an offence. Where the offence consists

of the doing of an act which viewed in isolation is innocent,

but which, when done in particular circumstances, or by a

particular person, becomes a prohibited act, participation in the offence 1s not established by proving that the defendant

assisted or encouraged the doing of the act in circumstances where 1t had for him the appearance of an innocent occurrence."

It follows that it was necessary for the applicants to establish that Mr. Lucas "participated" in the offence of Ross Lucas Pty. Ltd.

an the above sense. Whether his conduct amounted to participation

is a question of fact and a matter of degree, see R v Coney [1882]

8 Q.B.D. 534 as approved in Lenzi v Miller at page 11. In this

matter 1t is my finding that it can not be said that Mr. Lucas participated in the relevant sense in the contravention. It had

for him the "appearance of an innocent oecurrence" and he had no reason to suspect or see it otherwise. He did not know and knowledge should not be imputed to him of all the facts which gave rise to the

contraventions. Applying the principles of law enunciated in Lenzi

v Miller and Reg v Glennan I conclude that it would not be correct

to find that Mr. Lucas was involved in the contravention. He can not be said to have aided, abetted, counsclled or procured the contraventions and he certainly was not knowingly concerned in or a party to the contravening conduct whether it be on the part of

Ross Lucas Pty. Ltd. or Treasureway. I dismiss the applicants' claims against Mr. Lucas and reserve for subsequent consideration

t certify that this and the J preceding pages are a true copy of the Reasons for Judgment of Mr. Justice Fisher. .

At a glance

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Judgment (131 paragraphs)

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