Supreme Court of Tasmania|1993-10-22|Before: Underwood J

McQuestin, David Malcolm v Australian Securities Commission, By Its Delegate, Peter Robotham Cranswick [1993] TASSC 118; (1993) 2 Tas R 30 (22 October 1993)

McQUESTIN, David Malcolm v. AUSTRALIAN SECURITIES COMMISSION, by its delegate,

Appeal from Justices - appeal against sentence - conviction for a breach of the Companies (Tas) Code s229(2) - automatic disqualification from holding directorship (s227(2)) is relevant to the question of expediency under the Probation of Offenders Act s7(1). Cobiac v Liddy [1969] HCA 26; (1969-1970) 119 CLR 257, applied.

Solicitors for respondent: Australian Securities Commission

UNDERWOOD J The events that give rise to this motion to review sentence, imposed for a breach of the Companies (Tasmania) Code s229(2), occurred on 13 June 1989. At that time, the applicant, and one Edmund Rouse, were directors of ENT Limited. The applicant had been employed by ENT Limited for nearly 30 years. He was appointed to the Board in 1982 and to the position of managing director in 1986. Mr Rouse was the chairman of directors. The learned magistrate was told that in 1985, Mr Rouse asked the finance director of ENT Limited, Mr Clarke, to put $50,000 - $60,000 of the company's money in cash in a tin box. The box was kept at the bank. Only Mr Rouse, Mr Clarke and another director, Mr Farrell had a key to it. On the applicant's appointment as managing director, he took over Mr Farrell's key to the tin box.

2. To the knowledge of the applicant, money was taken from the tin box on four occasions prior to 13 June 1989. On one of them the applicant, at Mr Rouse's request, withdrew $13,000 from the tin box and to the former's knowledge, this money was used for donations to political parties.

3. On 13 June 1989, Mr Rouse called the applicant to his office and asked him to get $10,000 from the box in used notes. Mr Rouse did not explain why he wanted the money and the applicant did not ask him. The applicant went to Mr Clarke and said "Rouse wants $10,000. Get it from the box. I dunno what he wants it for." The requested money was obtained and the applicant handed it to Mr Rouse. Again, nothing was said by either man about the intended use for the money. When the applicant handed it over he had in his mind that it would be repaid. It was put by the prosecutor to the learned magistrate that the request for used notes coupled with the applicant's belief that it would be refunded, should have alerted him, as a director of the company, to inquire whether the company's money was to be used for a purpose associated with the affairs of the company. As is now common knowledge in this State, the money was used by Mr Rouse in an attempt to bribe a member of Parliament. The applicant knew nothing of Mr Rouse's intentions at the time he handed over the money. In a statement he later made to the police and which was before the learned magistrate, the applicant said "At the time, I thought that Edmund was going to use the money to assist an employee, Jean Roffe, who was seriously ill".

4. As a result of these matters, on 6 December 1991, nearly two and a half years after the relevant events, a complaint was laid by a delegate of the Australian Securities Commission that on 13 June 1989, the applicant committed a breach of the Companies (Tasmania) Code, s229(2). The sub-section provides:

"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: $5000."

5. The particulars to the complaint were as follows

"(a) On the 13th day of June 1989 McQuestin

(i) was the managing director of ENT a company duly

incorporated in accordance with the provisions of the Code;

(ii) was asked by Edmund Alexander Rouse ("Rouse") to get

for him $10,000.00 in either used or random notes;

(iii) pursuant to Rouse's request caused $10,000.00 in cash

the property of ENT and being new notes to be removed from

a safety deposit box situated at the banking premises at

Westpac Banking Corporation at 75 Brisbane Street and to be

changed to used notes;

(iv) gave the $10,000.00 in used notes referred to in (iii)

to Rouse who used the money for a purpose unrelated to the

affairs of ENT.

(b) McQuestin failed to carry out any investigations or to

make any inquiries to ascertain whether or not the said

$10,000.00 was to be used for a purpose associated with the

affairs of ENT at the time and between the time

(i) Rouse asked McQuestin to get him the $10,000.00

referred to in particular (a)(ii); and

(ii) McQuestin gave Rouse the $10,000.00 referred to in

particular (a)(iv)."

6. The applicant pleaded guilty. On 28 January 1993, the applicant was convicted and fined $1,250. A consequence of that conviction is that by virtue of the Companies (Tasmania) Code, s227(2), a person who is convicted of a breach of s229 "shall not, within a period of five years after his conviction ... without the leave of the court, be a director or promoter of or be in any way (whether directly or indirectly) concerned in or take part in the management of, a corporation."

7. On the hearing of the motion to review, the central thrust of the submissions made by Mr Kable on behalf of the applicant was that, in all the circumstances of the case, the learned magistrate erred in failing to apply the provisions of the Probation of Offenders Act 1973, s7 and dispose of the complaint without proceeding to conviction. Adoption of this course would have avoided the automatic imposition of the statutory period of disqualification from acting as a director or being involved in the affairs of a corporation. The learned magistrate held that, in considering whether to exercise his discretion in favour of the applicant and apply the provisions of the Probation of Offenders Act, he could not take into account the fact that if convicted, the applicant would be disqualified from being a director for 5 years by virtue of the provisions of the Code s227(2). Three of the eight grounds set out into the motion to review are to the effect that in so doing, the learned sentencing magistrate fell into error and his discretion thereby miscarried.

8. The Probation of Offenders Act, s7(1) provides:

"Where a person is charged before a court of summary

jurisdiction with an offence punishable by such a court, and

the court thinks that the charge is proved, but is of the

opinion that having regard to -

(a) the character, antecedents, age, health, or mental

condition of the defendant;

(b) the trivial nature of the offence; or

(c) the extenuating circumstances under which the offence was

committed, it is inexpedient to inflict any punishment, or that it

is
without proceeding to conviction may -

(d) dismiss the complaint; or

(e) make a probation order against the defendant in which it

shall provide that the defendant appear for conviction and

sentence as provided in section 6(2)(a)."

9. On behalf of the respondent, Mr Santamaria submitted that the purpose of the Companies (Tasmania) Code s 227(2), was to protect the public and its provisions and effect are not matters which fall for consideration under any of the matters listed in pars(a)-(c) of s7(1) nor are they proper concerns upon a consideration of what might be expedient as enacted in that subsection.

10. The learned magistrate was referred to Stewart v Alter, Herscu, R Grollo and B Grollo, Full Court of Victoria (Unrep) 13 February 1984. In that case the same point was raised as is raised on this motion, expressed by Marks J at 4, that "the stipendiary magistrate's discretion miscarried because he gave consideration to the respondents facing disqualification as directors of companies if convictions were recorded, by virtue of the provisions of the Companies Code." In that case, the learned magistrate avoided that consequence by exercising a power conferred by the Magistrates (Summary Proceedings) Act, s80 and conditionally adjourning the information for twelve months without proceeding to a conviction. All the members of the Full Court were of the opinion that the statutory disqualification was not only relevant to the proper exercise of the sentencing discretion, but had particular relevance to the Victorian equivalent of the Probation of Offenders Act (Tas), s7(1). Marks J said at 14 of the unreported judgment:

"In my view this argument (that the statutory

disqualification provisions are protective and not punitive)

overlooks the important fact that irrespective of the

categorisation of the provisions of the Code, they have an

effect which could only be described as detrimental to, or

restrictive of, the rights which the respondents otherwise

would have.

The argument boils down, in my view, to the stipendiary

magistrate not being entitled to consider consequences which

were thought to be purely for the protection of the public as

though (sic) it follows that they would have adverse

consequences for the respondents. Such a view, I think,

would result in a very capricious and uncertain operation of

s80 of the Magistrates (Summary Proceedings) Act, the

provisions of which are, in my view, designed to enable a

court when considering sentence, to take into account,

generally speaking, the effects which the recording of

conviction might have on the individual concerned."

"... it appears to me to be plain that legislation which

imposes a penalty, not for the punishment of the person

penalised, but for the protection of the public, does not on

that account prevent the adverse consequences to such a

person arising from such an imposition from being considered

as a relevant circumstance in the selection of the sentence

required to be passed in relation to an offence arising from

the facts that attract the operation of that legislation.

Nor can it be said that the existence of a power in another

court to relieve from the consequences of the legislation in

question should, on that account, operate to prevent the

sentencing court from being free to give due weight to the

effect on the person being sentenced of the unrelieved

consequences of such legislation's operation."

12. Mr Santamaria submitted that Grollo had no application to Tasmania because of what he described as fundamental differences between the provisions of the Probation of Offenders Act (Tas), s7(1) and the Magistrates (Summary Proceedings) Act 1975, (Vic), s80(1). The latter legislation provided that the court may not proceed to conviction if "it appears to the court to be expedient to do so having regard to all the circumstances including the nature etc ...". Mr Santamaria submitted that the words emphasised did not appear in the Tasmanian legislation, and that as consequential statutory disqualification was irrelevant to any of the matters in s7(1)(a)-(c) and the concept of expediency, it could not be taken into account upon a consideration of whether the provisions of the Probation of Offenders Act should be applied. This argument was pressed upon the learned magistrate by counsel who appeared for the respondent in the court below. He referred the learned magistrate to New South Wales Bar Association v Evatt [1968] HCA 20; (1968) 117 CLR 177 and Clyne v New South Wales Bar Association [1960] HCA 40; (1960) 104 CLR 186. However, in my view, those cases were irrelevant to the issue before the learned magistrate. The question in both Evatt and Clyne was whether error had occurred in the exercise of the judicial discretion by an order striking off a barrister in Clyne's case and suspending a barrister in Evatt's case. There is a connection between the present case and Clyne and Evatt in that in the latter two cases the court said that the power to strike off or suspend a barrister was for the protection of the public rather than punitive in character and that can perhaps be said about the Companies (Tasmania) Code, s227(2). But there the similarity ends. In the present case, the question for the magistrate was whether the consequence of an order of conviction was a matter he could take into account when considering whether he should apply the provisions of Probation of Offenders Act, s7.

13. The general duty of a sentencing officer is to take into account all the circumstances surrounding the commission of the offence and all the circumstances of the offender. As a matter of first principle, it seems to me that statutory disqualification from directorship consequential upon conviction, is a circumstance of the offender and must be taken into account. Further, I am of the view that this consequence can be taken into account upon consideration of the applicability of the Probation of Offenders Act (Tas), s7(1), notwithstanding the difference between the words of that Act and those of the Victorian legislation. In Cobiac v Liddy [1969] HCA 26; (1969-1970) 119 CLR 257 the court considered the Offenders Probation Act (1913-1963) (SA) s4, the terms of which are identical to Probation of Offenders Act (Tas), s7(1). The following passage is taken from the joint judgment of Barwick CJ, Kitto and Owen JJ at 265:

"The only point taken on appeal, in argument and dealt with

in the judgments below was that there was no material upon

which he could exercise his discretion under s4(1)I but at

least the appellant's age was undoubtedly a fact which the

magistrate was entitled to consider. Age in this context is

a relative matter, relative to all the circumstances which

exist or are about to exist. The expediency which the

magistrate is required to consider is not limited to the age

itself, although age is one of the factors which give rise to

the question whether it is expedient in all the circumstances

to exercise the powers given by the subsection. In our

opinion, the magistrate was entitled to consider whether,

having regard to the age of the appellant in the

circumstances which included the penalties which he had

resolved to impose on the other charges, penalties which

included the fact that he would be disqualified for the rest

of his life from driving a motor car, and having regard also

to the fact that to send the appellant to gaol would subject

him to distress by reason of his being thereby prevented

from caring for his aged sister, it was expedient to take the

course prescribed in s4(1)I rather than to convict him".

14. The above passage is entirely apposite to the present case. The learned magistrate found that the applicant's character was excellent, his reputation, until the occurrence of the relevant events unblemished, and that he was a responsible family man. In the light of those findings it was entirely appropriate for the learned magistrate to consider whether, having regard to the applicant's character, the consequential statutory disqualification was such that it would be inexpedient to inflict any punishment. His finding, "I therefore conclude that I cannot take into account the automatic but uncertain disqualification pursuant to s227(2)" reflects an error of law that vitiated the proper exercise of the sentencing discretion.

15. The motion to review relies upon other alleged specific errors. At 1-2 of his reasons for judgment, the learned magistrate said, with respect to the handing over of $10,000 in used notes:

"(the applicant) thought it was for political donations, but

this explanation is clearly unsatisfactory, for why then

would the notes need to be used and therefore untraceable.

He has said he believed the money was to be refunded. If so,

it could not have been for a political donation at least by

the company which the money belonged to, (sic) and there is

no suggestion Mr Rouse was thought to be making personal

donations of that magnitude."

16. Mr Santamaria conceded that there was no material before the learned sentencing magistrate to sustain the finding that the applicant thought the money was to be used for political donations. The only evidence concerning the applicant's belief with respect to the intended use of the money was that set out earlier in these reasons for judgment. Ground 8 of the motion, which pleads this error of law is made out.

17. As part of the extenuating circumstances surrounding the commission of the offence it was put to the learned magistrate that the applicant trusted Mr Rouse and that such trust was reasonably based in that he had never previously known Mr Rouse to have acted unlawfully. For reasons which I confess I do not entirely understand, the learned magistrate said, "the belief in Mr Rouse is then, at best, not a significant matter and at worst, is not material." He then went on to accept the prosecutor's submission that there were no matters of an extenuating character in the circumstances surrounding the commission of the offence. In so holding he fell into error. It was accepted by Mr Kable, that Mr Rouse's request for used notes was one that would have caused a director acting in the proper discharge of his duties towards his company, at the very least, to have made inquiry, about the purpose for which the money was required. Indeed, acceptance of this was the rationale for the plea of guilty. The plea acknowledges that the applicant's omission to inquire was a failure to adhere to the standard of care to which he was required to adhere by the Act. The degree of departure from the standard is a relevant factor in the sentencing process and a well-founded and long established belief in the honesty of Mr Rouse mitigated against the seriousness of the breach of duty that the applicant owed the company.

18. It is unnecessary for me to consider the remaining grounds of appeal. The order that the applicant pay a fine of $1,250 will be quashed. It remains for me to impose sentence in lieu of that imposed by the magistrate.

19. Understandably, because of the connection with the notorious attempted bribery case, the sentencing of the applicant was given minute and detailed attention by all persons involved. A great deal of material was put before the learned magistrate and he listened to a great deal of argument both written and oral from both sides of the bar table. But, with respect to those who think otherwise, this is really a straightforward matter. It is unrelated to the criminal conduct of Mr Rouse, in the sense that the applicant had no knowledge of the use to which Mr Rouse was going to put the money. The applicant's duty was to exercise the same degree of care as a reasonably competent managing director of a large public company would have exercised in all the circumstances of the case. He failed to do this by neither investigating nor inquiring, between the time Mr Rouse asked him for the money and the time he gave it to him, to find out whether the money was to be used for a purpose associated with the affairs of ENT Limited. At the time of this failure, the applicant had a well-founded belief in the honesty of Mr Rouse, a belief that the money was for a sick employee of the company and a belief that it would be repaid. Putting firmly out of mind the use to which the money was later put, such a breach of duty could not be categorised as anything other than minor. The sum involved was relatively small having regard to the assets and income of the company. The applicant's general character is clearly impeccable. As the learned magistrate found, "his services were and are highly valued by ENT Limited, by its office bearers, employees, shareholders and bankers. He is, it appears, widely regarded as next to indispensable to the company."

20. Since the commission of the offence the applicant has managed the company so well that its affairs have prospered in difficult circumstances. There can be no doubt that neither the company nor its shareholders nor its creditors suffered detriment by reason of the commission of the offence. If any detriment was suffered it would have been due to the criminal conduct of Mr Rouse, the enormity of which completely overshadowed the commission of this offence. The applicant has already suffered greatly from a perceived connection between his offence and the crime committed by Mr Rouse. On 6 July 1989 he was charged with attempting to obstruct the due course of justice by concealing and destroying evidence of a crime and in result resigned from all ENT Limited licensee companies. Following committal proceedings, he appeared in the Supreme Court where all proceedings were abandoned by the Director of Public Prosecutions. In the course of abandoning the prosecution against the applicant, the Director of Public Prosecutions said:

"I am satisfied that Mr McQuestin was in no way involved in

the attempt to bribe Mr Cox. From an examination of all the

material gathered in the police investigation it is clear

that Mr McQuestin was not knowingly involved in this matter

and only became aware of Mr Rouse's involvement in it after

the press reported that Mr Alloy had been charged in

Victoria."

21. That should have been the end of the matter but, as is well known, on 27 November 1990 the appointment of a Royal Commission to inquire into the "Rouse bribery affair" was announced. The applicant had to give evidence and be cross-examined at that enquiry and exposed to all the publicity that attended it. He was involved in Supreme Court proceedings in relation to the Royal Commission hearing. This charge was not laid until one month after the Commissioner's report was delivered; almost exactly 21/2 years after the occurrence of the relevant events.

22. I accept, as was submitted, that penalty for a breach of the Companies (Tasmania) Code s229(2), must contain an element of general deterrence in order to maintain the policy of the legislation and to protect the general public. However, general deterrence is only one factor to be taken into account in the proper exercise of the sentencing discretion. There are others. In this case there is the minor nature of the offence, the excellent character and antecedents of the applicant to which I have referred, and the personal detriment he has suffered between the commission of the offence now. It would be disproportionate to the circumstances to impose a penalty that would carry with it the consequence of the applicant losing his job and being disqualified from working in a similar capacity for 5 years unless this Court otherwise orders. Having regard to the applicant's character and antecedents, the circumstances surrounding the commission of the offence and the operation of s227(2) it inexpedient to inflict any punishment.

23. The orders of the court are that the order of the learned magistrate made on 28 January 1993 be quashed and in lieu thereof, the complaint is dismissed pursuant to the Probation of Offenders Act, s7(1)(d).

Probation of Offenders Act 1973

(Summary Proceedings) Act 1975

McQuestin, David Malcolm v Australian Securities Commission, By Its Delegate, Peter Robotham Cranswick [1993] TASSC 118;

At a glance

Court

Decision date

Before

Source

Judgment (37 paragraphs)

McQuestin, David Malcolm v Australian Securities Commission, By Its Delegate, Peter Robotham Cranswick [1993] TASSC 118; (1993) 2 Tas R 30 (22 October 1993)

Parties

Legislation Cited (2)

Cases Cited (3)