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R v Heilbronn[1999] QCA 95

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Brisbane

[R  v Heilbronn]

THE QUEEN

v

GREIG RONALD HEILBRONN

(Applicant) Appellant

 

McMurdo P

McPherson JA

Mackenzie J

Judgment delivered 26 March 1999

Judgment of the Court

APPEAL AGAINST CONVICTION DISMISSED. APPLICATION FOR LEAVE TO APPEAL AGAINST SENTENCE DISMISSED.

 

CATCHWORDS:

CORPORATIONS LAW – Administration of companies – Liquidation – Application of assets – Reinstatement – Knowingly and intending to defraud creditors – Improper use of position as officer of a company – Failure to deliver up all books belonging to the company to the liquidators.

ANZ Executors & Trustee Company Limited  v Qintex Australia Limited [1991] 2 QdR 360

Ash Properties Pty Limited v Pollnow (CA 321/85; Sept. 1, 1995)

Lazard Brothers & Co v Midland Bank Limited [1933] AC 289

R v Bilick & Starke (1984) 36 SASR 321, 326)

R v Birks (1990) 19 NSWLR 677

R v Clinton [1993] 1 WLR 1181

R v G [1997] 1 QdR 584, 587-587

Sankar v State of Trinidad and Tobago [1995] 1 WLR 194

Tymans Ltd v Craven [1952] 2 QB 100

Walker v Wimbourne (1976) 135 CLR 1, 6-7

COUNSEL:

The applicant/appellant appeared on his own behalf

Mr R Needham for the respondent

SOLICITORS:

The applicant/appellant appeared on his own behalf

Director of Public Prosecutions (Commonwealth) for the respondent

Hearing Date:

15 February 1999

REASONS FOR JUDGMENT - THE COURT

Judgment delivered 26/03/1999

  1. The appellant Greig Ronald Heilbronn was on 11 February 1998 convicted at his trial in the District Court of two counts of offences under the Corporations Law. Count 1 charged that, between 31 December 1993 and 2 March 1994, he had, contrary to that Law, contravened a civil penalty provision, knowingly and intending to defraud the creditors of Vesofe Pty. Ltd., in that, being an officer of Vesofe Pty. Ltd., he had made improper use of his position as officer to cause detriment to that company. Count 2 was a charge that, between 27 April 1994 and 26 July 1994, he, being such an officer, had failed to deliver up to the liquidator of Vesofe Pty. Ltd. all books in his possession belonging to the company. On the offence in count 1, he was sentenced to imprisonment for two years, to be released after serving 9 months on entering into a recognisance of $8,000 to be of good behaviour for three years; and on count 2, to a concurrent term of imprisonment for 9 months. The term of imprisonment had already been served some time before the hearing of this appeal and application for leave to appeal.
  1. The prosecution arose out of events that occurred in 1993 and 1994. In and before 1993, Heilbronn International Pty. Ltd. was a company which, under the name Dataquip Wholesale, was carrying on a business of importing or locally purchasing computer parts, assembling them, and supplying them to another company controlled by the appellant or to other outlets for retail sale. In doing so, Heilbronn International incurred liability to the Commonwealth for federal sales tax of which the amount had, by early 1993, risen to over $600,000. At the same time Heilbronn International was being threatened with deregistration by the Australian Securities Commission for failing to lodge annual returns. In 1990, the appellant had acquired a “shelf” company Vesofe Pty. Ltd., of which he became the shareholder and the controlling director, and in June 1993, he arranged for Vesofe to take over from Heilbronn International the business of purchasing, importing, assembling and selling computers. After this change in trading arrangements, the business was carried on by Vesofe under the name Dataquip Wholesale formerly used by Heilbronn International until 28 February 1994, when yet another company Prenpine Pty. Ltd. commenced trading using that name, as well as the staff and assets of Vesofe.
  1. In the meantime, however, the registration of Vesofe had, for failing to lodge returns under the Corporations Law, been cancelled by the Australian Securities Commission acting under the powers conferred by s. 572 of the Law. Under s. 574(1), the effect was that, at the end of the time referred to in that provision, Vesofe Pty. Ltd. was dissolved and it ceased to be a corporate entity. The appellant claimed the notice never reached him; but at the trial there was evidence which showed that in July 1993 the appellant knew that Vesofe had been deregistered.
  1. Despite this, the business continued to operate under the name Dataquip Wholesale as if Vesofe were still in existence, and to do so with the active participation of the appellant. He even went so far as to sign a letter dated 23 February 1994 (ex. 9) from Prenpine Pty. Ltd. addressed to the directors of Vesofe Pty. Ltd. advising that, as from 1 March 1994, “we” (meaning Prenpine) would be operating a PC manufacturing and wholesale sale operation. The letter went on to say that Prenpine would from 1.3.94 “take up the business premises at Mt. Ommaney”, which “you” (Vesofe) would be required to vacate. It contained an offer to purchase a selection of items from existing stock at a price equal to the lesser of stock purchase cost or wholesale market value, along with existing stocks of service parts at no cost to Prenpine. The balance, after deduction of an allowance for unexpired warranty liabilities for which Vesofe was to remain responsible, was to be paid “as funds became available, but no longer than 90 days (i.e. 31/5/94)”. The letter bears the corporate seal of the then defunct and non‑existent company Vesofe Pty. Ltd. purporting to authenticate the appellant’s signature as “a Director of Vesofe Pty. Ltd.” signifying his agreement on behalf of that company to the contents of ex.9. It is dated 25/2/94, and responded to the invitation in the body of ex.9 to “indicate ...your agreement” to the contents of the letter.
  1. Payments on account of sales tax had first ceased to be made in about January or February 1992, at the time when Heilbronn International was being threatened with deregistration.  Combined with additional tax for late payment, the indebtedness to the Commonwealth grew to some $680,000 by mid-July 1993, which was when Vesofe took over the wholesale business from Heilbronn International.  The Australian Taxation Office was aware of the take-over but not of the fact of Vesofe’s deregistration.  In the six or so months that followed, further liabilities for sales tax were incurred, but some payments were also received.  The Office seems to have treated the sales tax indebtedness as due upon a single running account attracting the presumption in Clayton’s Case that payments fell to be applied first in satisfaction of earlier indebtedness; but, in some instances at least, a particular payment was accompanied by instructions that it be appropriated in satisfaction of a specified current liability for sales tax, which was accruing monthly as tax returns were lodged.  As a result, although substantial sums were at times paid after July 1993, the total indebtedness at the end of January 1994 remained at $657,668.70, comprising $521,075.21 on account of unpaid sales tax and $136,593.59 representing additional tax imposed for late payment.
  1. As early as June 1993 the Australian Taxation Office had instituted an audit of the unpaid sales tax account, and in February 1994 a statutory notice of demand for the debt was issued and served.  In taking steps to have the company wound up, the discovery was made that it had already been deregistered and had ceased to exist in 1993.  Application was made to the Supreme Court to have it restored to the register; and, on 28 April 1994, Williams J.  ordered (ex.47) that the company be reinstated to the register and, at the same time, that it be wound up.  Mr Harris and Mr Roach were appointed liquidators.
  1. Section 1317FA (1) of the Corporations Law makes it an offence for a person to contravene a civil penalty provision knowingly and intending to defraud someone. Section 232(6) is a provision of that kind.  It prohibits an officer of a corporation from making improper use of his position as officer to gain, directly or indirectly, an advantage for himself or for any other person, or to cause detriment to the corporation.  In some circumstances, there are advantages in conducting business under a name of a company that, because of its dissolution, has ceased to exist.  Liabilities cannot be validly incurred on behalf of a non-existent entity; nor can it be sued to judgment.  See Lazard Brothers & Co.  v.  Midland Bank Limited [1933] A.C. 289. That state of affairs is capable of being reversed by an order for reinstatement of the company; but, unless assets are likely to be forthcoming, the cost and delay incurred in obtaining such an order serve as a powerful disincentive to any creditor contemplating that step; and, unless and until carried through to completion, the advantage of having, controlling, using and disposing of the assets in the meantime remains with the person who happens to be in possession of them, which, in this instance was the appellant.
  1. It was on the latter aspect of the appellant’s conduct that the prosecution focussed its case at the trial.  The Crown gave particulars of the improper use alleged by count 1 to have been made by the appellant of his position as director in contravening the prohibition imposed by s. 232(6).   Those particulars averred (1) that the appellant caused Vesofe to cease trading; (2) that he caused Prenpine to take over all of its business and operations, its stock and assets, including the business name Dataquip Wholesale and associated good will; (3) that he did so without ensuring that a proper price was paid for it; and (4) that the business and operations were transferred without making an adequate documentary record of the transaction.   Ground 3 of the notice of appeal complains that the jury were provided with a copy of these particulars headed "Facts"; but there is nothing in the record to support that complaint, and the prosecution denies it.
  1. There was ample evidence at the trial to justify the jury in concluding beyond doubt that one or more of these four particulars, and especially (2) and (3), were proved beyond reasonable doubt. Corporate assets must be used for corporate purposes: ANZ Executors & Trustee Company Limited  v. Qintex Australia Limited [1991] 2 Qd.R. 360; directors’ powers may be exercised only for the benefit of the company, and not for collateral purposes such as the private advantage, or that of another corporation: Walker v. Wimbourne (1976) 135 C.L.R. 1, 6-7.  By stripping Vesofe of its assets and transferring them to Prenpine without ensuring that Vesofe would be paid or its liabilities discharged, the appellant was able to continue using those assets, including the name Database Wholesale, to carry on business without immediately liquidating the indebtedness already incurred.  The transfer under ex.9 afforded an advantage to the appellant and a detriment to Vesofe and, through it, to its creditors such as the Commonwealth, which involved the improper use, within the meaning of s. 232(6), of his position as director and officer of that company.
  1. In a summing up noteworthy for its lucidity, his Honour explained this and other matters to the jury.  Under s. 1317FA(c) the question also arose whether the appellant’s actions alleged to constitute the contravention of s. 232(6) had been carried out “knowingly” and “intending to defraud ... someone”. It can scarcely be doubted that he acted “knowingly”.  Despite what he now says about his mental state at that time, he did not act in a fit of distraction or absent-mindedness, but with a perceptible degree of deliberation and prior planning.  The appellant had conducted in corporate form a business or businesses of the same kind before February 1994, and had on a previous occasion in June 1993 transferred assets from one company to another in similar circumstances.  If (which was never suggested) it is necessary to go further and ask whether he also realised that his actions were improper, it is a question that admits of only one answer.  Transferring the only assets of an entity without effectively providing for the discharge of its liabilities is a form of misappropriation that, by any standard, is a misuse of corporate power.  The appellant was plainly conscious of the implications of what he was doing.  In that regard, ex.9 tells strongly against him.  In the innumerable submissions emanating from the appellant in these proceedings, ex.9 scarcely, if at all, rates mention.  Yet if it was intended to operate according to its terms, it shows his purpose was to separate the assets of the business from the liabilities resulting from prior trading by Vesofe and to transfer the assets to Prenpine.  If, as is possible, ex.9 was really a sham, it shows his object was to cover his conduct with a spurious appearance of regularity. Either conclusion suffices to establish the element of knowingly in s. 1317FA(2).
  1. The same is true of the further requirement in that provision of intending to defraud.  If the appellant did not intend to defeat or delay payment of Vesofe’s indebtedness, there was no discernible reason for arranging to transfer the assets of that company to Prenpine. The existing liability for sales tax was substantial, and the appellant had every reason for knowing that the Australian Taxation Office would not resign itself to abandoning the amount due.  The Office was pressing for payment, and Ms. Heston of the sales tax section gave evidence that the appellant approached her with a plan to discharge the arrears within the space of a few months.  He was supposed to follow it up with a formal written proposal, which however was never presented.  The Office took steps to have the company wound up, and a statutory notice of demand for the debt was issued in mid-February 1994.  It was followed a few days later by the transfer in ex.9, which, on the appeal, the appellant frankly admitted was prompted by receipt of the demand. If it was, as the appellant claimed on appeal, intended to benefit the Commonwealth and other creditors by keeping the business going, it is surprising he did not tell the Taxation Office about it.  In opposing the application for winding up, the appellant, on the very day (28 April 1994) the order was made, filed an affidavit deposing that in February 1994 he had become aware of the statutory notice claiming the unpaid sale tax and decided “it was necessary to cease any further trading at the end of February ...”.  He said nothing in the affidavit about ex.9, or the transfer to Prenpine which had taken place some two months before.
  1. The affidavit was admitted in evidence at the trial as ex.44.  On appeal, one of the  appellant’s many subsidiary complaints, was that the trial judge had directed the jury that the prosecution evidence was “not contradicted by any sworn evidence” from the appellant.  Because the affidavit had been sworn by the appellant and was in evidence, that observation was, he insisted, plainly incorrect and misleading. In fact, however, what his Honour said in directing the jury was that “the Crown case comes before you uncontradicted by any sworn evidence in this court room from” the accused.  In the context, it is perfectly clear that what his Honour was referring to was evidence given in the court room.  Elsewhere, the learned judge was careful to explain to the jury the evidentiary status of ex.44, which he said had been “prepared for a hearing before a Court and is a sworn document”.  He told the jury it contained some statements against, and some in favour of the appellant, and that, in having regard to the whole of it, they could reject it altogether; or accept parts of it as being true, or reject parts as being untrue, “assessing it against all the evidence which you have heard in this trial”.
  1. Appearing as it does for the first time on appeal, the point is completely without merit.  It does, however, serve to illustrate the appellant’s capacity to understand and present his submissions on appeal in a rational manner.  His physical and mental condition on the appeal hearing is relevant only because the appellant, who appeared before us in person, insisted that he was not qualified to conduct his appeal without counsel; that he was physically exhausted and mentally confused; and that he ought to have an adjournment to enable him to obtain legal aid or to prepare his appeal more thoroughly.  Having on four or more prior occasions been granted an adjournment for these purposes, the appellant’s application for a further adjournment was refused by the Court, which then proceeded to hear this appeal.  It is worth recording the firm impression of all members of the Court at the hearing that, as the transcript demonstrates, he proved competent, both physically and mentally, to present reasoned and even persuasive submissions on more or less complex matters of law and fact.   In his various submissions to this Court, the appellant was, for example, thoroughly at ease in referring to matters such as proof on the balance of probabilities and the rule in Browne v. Dunn.
  1. At the end of that day, the appellant was required to reduce his remaining submissions to the form of a written outline, which, despite previous warnings, he had failed to do.  The first half or more of the time allotted to the hearing was taken up with the appellant’s claim for a further adjournment in order to pursue another application for legal aid and legal representation on the appeal.  As well as continually stressing his physical and mental infirmities, and his lack of legal ability to conduct the appeal, he said he wished to procure large numbers of documents which had not been tendered at the trial.  Predictably, criticism was then directed against his former legal representatives for their alleged responsibility for this supposed omission.  At no time was a proper evidentiary basis laid for adducing any of this new material.  The appellant was nevertheless invited or permitted to describe the documents and to say what he believed they would establish.
  1. Stated in general terms, it was that the documents he had in mind would, among other things, show that, in carrying out the transactions that were the subject of count 1, he had no intention of defrauding anyone, which is the essence of the matters raised in ground 10 of the notice of appeal.  What he had done was, he claimed, designed to enable the business to survive and pay its debts.  One group of documents would, he claimed, establish that between June 1993 and February 1994, Heilbronn International had paid out large sums of its own money to meet the wages of employees and to satisfy liabilities incurred by Vesofe in purchasing and importing goods for sale in the course of trading.  So much may, for present purposes, be accepted; even if it was or were to be established in evidence, it could not affect the verdict.  It serves only to demonstrate that Vesofe owed substantial, or even more substantial, amounts to Heilbronn International which, like the indebtedness to the Commonwealth, was never discharged.  In any event, the offence charged in count 1 was not that the appellant had, with intent to defraud, made improper use of his powers as director of Heilbronn International to the detriment of Vesofe, but that he had done so by transferring the business and assets of Vesofe to Prenpine without paying or providing for payment of Vesofe’s liabilities.  That was the substance of the fraudulent intention alleged against him.  For that purpose, evidence that Heilbronn International had at various times paid wages for, or supplied goods to, Vesofe without being paid for them in return was irrelevant except perhaps as tending to show who at all times really controlled the business.
  1. Underlying the appellant’s submission on this point there was at times a misplaced perception that, if Heilbronn International had not been paid for the goods supplied, they somehow remained its property and never became the property of Vesofe.  On that assumption, it followed, or so it was submitted, that the assets transferred to Prenpine in late February 1994 must at that date also have been the property of Heilbronn International and not of Vesofe.  The appellant, it follows, had consequently been wrongly charged in count1 with using his powers as director of Vesofe so to transfer them.  Indeed, as the submission proceeded, the appellant began to suggest that, after June 1993, the business had in fact continued to be carried on by Heilbronn International as the “de facto operator”, so that it was not Vesofe at all, but Heilbronn International that had transferred the assets to Prenpine in February 1994.  It is an interpretation of events that ignores more than one evidentiary obstacle, not the least of which is ex.9, which is the appellant’s own written acknowledgement as director that the assets were being transferred by Vesofe, and no one else.  Apart from that, it is enough to say that the version being contended for on appeal was never the basis on which the trial was conducted or the notice of appeal was drawn, which was that the business had been conducted by Vesofe from June or July 1993 until 28 February 1994, when the assets were transferred by Vesofe to Prenpine.  At the trial several former employees also gave evidence to the effect that it was the basis on which everyone had acted at the time of the transfer.
  1. Evidence was given for the prosecution about the value of the stock transferred to Prenpine under the terms of ex.9.  On that matter, the Crown witnesses included various former Vesofe employees named Khanesar, Mansfield, Ransch, Djachenko, Pastellas and Perrett.  The appellant himself did not testify at the trial; but evidence was given by a defence witness named McKinnon, who provided an expert analysis of the December stocktake sheets and the information in staff memoranda concerning stock levels.  Other documents and witnesses yet to be identified and located would, the appellant claimed, show that much of the stock apparently in the possession of Vesofe at the time of the transfer to Prenpine had in fact been sold before the transfer had taken place. The evidence at the trial about stock values was, he submitted, therefore overstated to the extent of at least $100,000, or perhaps much more than that. What happened to the balance proceeds of sale is not explained. So far as the evidence goes, they simply receded into airy nothing.
  1. For this purpose, the appellant was disposed on appeal to adopt as the date of effective transfer, not 1 March 1994 stated in ex.9 “as of” which Prenpine would be operating the manufacturing operation, but a different and somewhat later date of 14 March 1994.  The matter is said to be complicated by the fact that computers built by Vesofe in February 1994 were in some instances not fully completed or invoiced until March 1994, when a “backlog” of orders was cleared.  The question was canvassed with Mr Mansfield and Mr Hopley in their evidence at the trial.  It was, however, of no importance precisely when, or on whose behalf, the computers were in fact finally completed and invoiced for retail sale.  Before 1 March 1994, they were the property of Vesofe for which Prenpine was, in terms of para.2 of ex.9, at that date required to pay the lesser of cost or wholesale value irrespective of when they were finally completed and invoiced to the retail buyer.  The few minor things which then remained to be done in order to complete them could not have affected their value much if at all.  The essence of the offence charged in count 1 and the accompanying particulars was that the appellant exercised his powers as director to effect a transfer of the goods without ensuring that Vesofe was paid for them.  That is something on which no amount of further documentary evidence of the kind envisaged by the appellant is capable of assisting his appeal.  The issue at the trial was not the precise quantum or value of the goods involved, but the fact that the appellant arranged to transfer them in that way.  His actions were equally capable of being considered fraudulent even if the amounts involved were smaller than those proved by the Crown.  In the appellant’s most recent submission to this Court, he now boldly asserts that none of the assets of Vesofe “were ... transferred to or acquired by any party whatsoever”.  That is quite contrary to ex.9 and to the evidence adduced at the trial.
  1. The truth is that the various difficulties now being thrown up by the appellant can be traced back to the way in which the corporate trading was being conducted during the years 1993 and 1994.  When Heilbronn International was threatened with deregistration in 1993, he acted to transfer to Vesofe the business conducted under the name Dataquip Wholesale.  Vesofe was in turn itself deregistered and, when threatened with winding up in 1994, the appellant arranged to transfer the business under that name to Prenpine.  There is, on one view of it, an element of artificiality in speaking of what the appellant did with the assets of Vesofe in 1993 and 1994 because, as he knew at that time, the company had been deregistered and ceased to exist.  Under the general law, dissolution of a corporation has the effect of terminating the authority of its agents and of vesting its property in the Crown.  These consequences of dissolution at common law have been superseded by the provisions of ss. 575 to 579 of the Corporations Law, which now provide that the property vests in the Australian Securities Commission (s. 576) and that, for specified purposes, the Commission can act on behalf of and exercise the powers of the company.  If in the case of Vesofe, that state of affairs had remained undisturbed, it might have been difficult to sustain the charge in count 1. Once Vesofe was dissolved, the appellant’s capacity to exercise any powers as its director also ceased and, with it, his authority to arrange for transfer of its assets.  Exhibit9 would, in consequence, have been void, or at least ineffective to transfer assets vested in the Commission.
  1. The law that acted to extinguish the corporation, is, however, equally capable of resurrecting it. That is the effect of s. 574 of the Corporations Law. Cancelling the registration of a company has, under s. 574(1) the consequence of dissolving it, subject only to the express reservation in para.(a) that “the liability (if any) of every officer ... of the company continues and may be enforced as if the company had not been dissolved”.  Those are strong words, even if in terms they are limited to preserving a “liability” of an officer, subject to whatever qualification may be involved in the parenthetical expression “if any”.  It is not, however, necessary here to investigate the implications (if any) of that qualification, because of the provisions of s. 574(3) enabling the Court to order reinstatement of the registration of the company.  The consequence of an order of that kind is stated in s. 574(4).  On lodging an office copy with the Commission, the company is deemed to have continued in existence as if its registration had not been cancelled.  That then, was the effect of the order, once it was lodged, that was made by the Supreme Court on 28 April 1994.
  1. Section 574(5) expressly authorises the Court, in making such an order, to give directions and make such provisions as seem just “for placing the company and all persons in the same position, so far as possible, as if the company’s registration had not been cancelled”.  No such directions or provisions were included in the order here.  In his submission on appeal, the appellant sought to contrast the language in which the power of reinstatement is given to the Court by s. 574(3) with that of s. 574(2), which invests a similar power of reinstatement in the Commission.  For present purposes, the only material difference is that s. 574(2) proceeds to add “and thereupon the company shall be deemed to have continued in existence as if its registration had not been cancelled”.  The appellant suggested it involved a difference in substance between the two provisions that was capable of being removed or adjusted only if the Court exercised its power under s.574(5) of ordering the company and all persons to be placed in the same position as if the registration had not been cancelled.  This, however, ignores the express provision in 574(4) that, on lodging the Court order, the company is deemed to have continued in existence as if its registration had not been cancelled.  The language of s. 574(4) is the same as that used in s. 574(2) in investing the power of reinstatement in the Commission.  The only difference is that the Court is, but the Commission is not, armed with a power to give directions of the kind specified in s. 574(5).
  1. The appellant’s submission resembles, and is presumably traceable to, the dissenting judgment of Jenkins L.J. in Tymans Ltd.  v. Craven [1952] 2 Q.B. 100; but, despite the high authority of his Lordship in matters of company law, it is the decision of the majority in that case that has prevailed not only in England but also in Australia.  See, for example, in New South Wales the decision in Ash Properties Pty.  Limited v. Pollnow (CA 321/85; Sept. 1, 1995).  A similar conclusion was arrived at  in Re Otway Coal Co. [1953] V.L.R. 557, 562, shortly after Tyman’s v. Craven was reported, where the English decision was cited in argument.  There a sale of corporate assets by the receiver of a company after it had been deregistered and dissolved was held to be validated by an order, containing no special directions of the kind referred to in s. 574(4), that restored the company to the register and retrospectively continued its existence.  There are many other reported cases in which the provision has been read as meaning what it says, and as giving full effect to the language of s. 574(4); but mention may be made of Re Lindsay Bowman Ltd. [1969] 1 W.L.R. 1443 and Jekos Holding Pty. Ltd. v. Australian Horticultural Finance Pty.  Ltd.  (No.2) [1995] 1 Qd.R. 612.  The language of the provision has been repeated in various re-enactments of companies legislation undertaken in recent times, so that there has been every opportunity to alter it if those decisions were regarded unsatisfactory.
  1. In the light of these authorities the appellant’s submission on this point cannot be accepted.  It may, however, be another matter whether it is legitimate, in criminal proceedings like these, to give retrospective validating effect to Vesofe’s corporate personality and powers, and to the appellant’s  actions in purporting to act as its director.  But to state the question in that form is, at least to some extent, to misconceive it.  The plain effect of s. 574(4) is that, once an order for reinstatement is made and lodged, the company “shall be deemed to have continued in existence as if its registration had not been cancelled”.  It is the statutory provision that operates to resurrect the corporation, and it does so without qualification or exception.  Once the company is resurrected in that way, its corporate existence is to be regarded as if it had never been interrupted.  The Court’s power under s. 574(5) to give directions for placing the company and other persons in the same position, so far as possible, as if the company’s registration had not been cancelled was not exercised here.  Even if it had been, there is nothing in that provision which authorises directions to be given for placing the company or anyone else in the same position as if registration had not been reinstated or the existence of the company not revived.
  1. The power conferred by s. 574(5) enables the Court to give only such directions as may be “just”.  It is, in the circumstances disclosed here, difficult to identify any injustice to the appellant.  Minds schooled in the traditions of the common law instinctively recoil from suggestions of retrospective criminal responsibility. But this is not an instance of that kind.  For contravening s. 232(6) the appellant was liable to prosecution and conviction. Such proceedings might or would have been frustrated by the fortuitous dissolution of Vesofe under s. 574(1).  Section 574(4) restores the position to what it was, or would have been, apart from dissolution.  No element of retrospective criminal liability or sanction is involved.  If it were, it would be necessary to consider the purpose for which the statutory fiction in s. 574(4) was introduced (cf: R.  v. Bilick & Starke (1984) 36 S.A.S.R. 321, 328).  Here there is no occasion to go beyond the terms of that provision.  If in providing that the company is deemed to continue, it was intended to exclude criminal prosecution as a consequence of reinstatement,  no such intention is declared in s. 574(4).  Attempting to imply such an intention encounters the problem, mentioned by Lord Evershed M.R. in Tyman’s Ltd. v. Craven [1952] 2 Q.B. 100, 110, that it is difficult to formulate the qualification that would have to be read into the general words of the subsection, or to find any satisfactory reason for holding that those general words are, in this sense, retrospective to a limited extent only.  Presumably, it would involve interpreting s.574(4) as if the company were deemed to continue in existence except for the purpose of prosecuting its directors.  A reinstated company would then be a corporation for some purposes; but not for others.  However, while the notion of qualified legal capacity is intelligible, there is high authority for saying that the notion of qualified legal personality is not: see Williams v. Hursey (1959) 103 C.L.R 30, 52 (Fullagar J.).  It is not a conception that is expressly stated by or that ought to be implied into the quite unqualified language of s. 574(4).
  1. Once it is accepted that the terms of s. 574(4) must be given their ordinary effect, as meaning that the company’s existence continues as if it had not been dissolved, there is no reason for holding that the appellant cannot be made criminally responsible for what he did as director of Vesofe.  Considered on their own, the terms of the statutory provisions are wide enough to comprehend his actions in that capacity. In addition, the expression “director” is declared by s. 60(1)(a) to include a person occupying or acting in the position of director whether duly authorised or not.  By s. 60(1)(b), it includes a person in accordance with whose directions the directors of a body corporate are accustomed to act.  By its terms, the definition in s. 60(1) operates “in relation to a body corporate”; but that requirement was satisfied here when the registration of Vesofe was reinstated by the court order made on 28 April 1993.  Quite apart from s. 60, a person who acts as director is, under the general law, liable as such. See Coventry & Dixon’s Case (1880) 14 Ch.D. 660, the principle of which has been applied to criminal responsibility imposed by a statutory provision that referred to a “director, manager or public officer” of any body corporate or public company. See R.  v. Lawson [1905] 1 K.B. 541.
  1. Once the corporate existence of Vesofe was restored by the order made on 28 April 1993, the company was deemed to have continued in existence without interruption.  The appellant was in fact its director at all times, and liable to prosecution as such.  There is in law no valid reason why he should not have been prosecuted and convicted of the offence in count 1.  Ground 1 of the notice of appeal therefore cannot be sustained.
  1. Ground 2 of the notice of appeal challenges the appellant’s conviction on count 2.  It charged that between 27 April 1994 and 26 July 1994 the appellant, being an officer of Vesofe, failed to deliver up to the liquidator all books belonging to the company.  April 27, 1994 was the day before the winding up order was made; July 26 was related to the fact that, until then, Mr Raasch continued working as an employee in an attempt to bring up to date some of Vesofe’s accounting records, in particular the debtors’ ledger, which he later gave to the appellant.  Section 590(1)(b)) of the Corporations Law is contravened if a past or present office of a company:

“(b) does not deliver up to or in accordance with the directions of, the appropriate officer:

...

  1. all books in the person’s possession belonging to the company ...”.

By s. 589(1)(a) that provision applies to a company in the course of winding up; and under s. 589(5)(a) “appropriate officer” means the liquidator.

  1. The form of s. 590(1)(a) is such that the provision is contravened if the failure to deliver up is to the liquidator himself or herself, or to some other person or in some other manner that accords with the liquidator’s directions.  Section 590 does not specify a time within which such delivery is to be effected, but s. 530A(1) provides that “as soon as practicable after” a company is ordered to be wound up by the Court, each officer of the company must deliver to the liquidator all books in his possession, or tell the liquidator where those books are.  A letter dated 29 April 1994 (ex.40) from Mr Harris as liquidator was delivered to the appellant requiring him to “deliver up forthwith all property in your custody or control including books and records”, which are the words used in s. 590(1)(b) of the Corporations Law. It was accompanied by a formal written demand to similar effect, which defined the words "books". The demand refers to s. 483(1) of the Corporations Law.  It is framed to accord with Form 21 of the Corporations (Queensland) Rules 1993 and is authorised by Rule 89 of those Rules.  It is not to the point that the appellant may in the same letter also have been required to deliver a report as to the affairs of the company, which he claims he was unable to do.  That was not the charge against him in these proceedings. Both the letter and the formal demand required the books to be delivered and were given to the appellant on 13 May 1994. At a meeting with the liquidator’s representative which had been held on 12 May, the appellant was, at his request, orally permitted an extension until 27 May 1994, which was later confirmed by the liquidator in writing (cf. ex.36), to comply with this requirement.  Apart from an out-of-date debtors’ ledger or listing, the liquidator received no books from the appellant until after the issue of a warrant for his arrest in February 1995, when some of the books were suddenly delivered through an intermediary.  In March 1995, some further books and records of Vesofe were located in a storage shed or sheds at Indooroopilly or Sherwood. In April 1995 the appellant himself was intercepted at Sydney Airport in the course of trying to leave Australia on an aircraft bound for Hong Kong, for which he was using someone else’s passport.  He was found then to be in possession of some further documents relating to Vesofe.
  1. The evidence thus establishes that he was directed by the liquidator to deliver up all books of Vesofe, and that he failed to do so, either forthwith, or as soon as practicable after winding up, or within the time specified by or on behalf of the liquidator, or at all. The jury would have been justified on the evidence at the trial in concluding that the tactic adopted by the appellant was throughout one of deliberate evasion.  On appeal, it was contended that the charge in count 2 should have been laid under s. 530A rather than s. 590, or a combination of both; but it is s. 590(1) that makes it a “contravention” not to deliver the books up, while the function of s. 530A primarily is to specify the nature and extent of the duty, as well as the time at which it is to be performed; i.e. “as soon as practicable” after the winding up order has been made. In any event, the Crown elected to charge the appellant on indictment, and not with an offence under s.530A, and it is with the former that we are now concerned.
  1. With respect to the charge in count 2 of not delivering books, his Honour gave the jury extensive directions extending over some six or seven pages of transcript.  There was really no defence to the charge, but some reliance was placed on a document (ex.12) found in the appellant’s possession at Sydney Airport purporting to be a copy of a letter dated 27 May 1994 to the liquidator explaining that, due to a computer failure, some important company files had been lost.  The letter said that the appellant was having the data re-entered and “if you approve I will continue the process until the records are completed”.  The exhibit  also contained a request for an extension of time.  The liquidator or his agent said he had never seen this letter; it was not on the liquidator's file, and the Crown claimed it was a fabrication.  In summing up, the learned judge reminded the jury of it, and explained that it was a matter for them to decide whether any weight was to be given to it.  His Honour’s directions in relation to count 2 are unexceptionable, and ground 2 of the notice of appeal cannot be sustained.
  1. Grounds 1 and 2 in the notice of appeal are followed by a further 10 separate grounds.  Some of them, such as grounds 3, 4, and 5, are impossible to address without adequate particulars based on admissible material. In the form in which they stand at present, they amount to no more than assertions, which can be met only by counter-assertion.  There was no failure to provide the jury with a fair summing up of the defence case on either charge (ground 3).  His Honour summarised and adequately put to the jury the defence evidence or submissions with respect to matters such as the state of Vesofe’s books and records, the appellant’s efforts to arrange payment of the sales tax debts, his opposition to the winding up, the disputed value of stock, the effect of ex.9, and other matters. The directions on the standard of proof and circumstantial evidence (ground 4) are in the conventional form.   His Honour told the jury that the onus of proof rested on the Crown, and he explained:

"The standard of proof which must be reached before you can return a verdict of guilty is proof beyond reasonable doubt. That is a phrase of ordinary common English and means exactly what it says. It flows from everything which I have said, if you are satisfied beyond reasonable doubt that [it] is guilty your duty is to convict him. If you are not satisfied to that standard, your duty is to acquit him"

On the matter of drawing inferences, he directed in the following terms:

"The defence argue that other inferences are open on the evidence. Inferences which suggest a different motive or motives on the part of the accused which are not criminal conduct. If you come to the view that a reasonable inference is open on the evidence which is consistent with innocence, you must give the benefit of the doubt to the accused; only if you are satisfied that there is no reasonable inference open consistent with innocence, would you then use that allegation against the accused."

The hearsay evidence referred to in ground 5 is not identified or identifiable; if any was admitted, it was not objected to at the trial, nor was it made the subject of a request for redirections.

  1. The newspaper article referred to in grounds 6, 7 and 8 included an unfavourable reference to Dataquip.  The trial judge’s decision not to discharge the jury because of it was a matter within the scope of his discretion, and the question was in the end not further pursued by counsel for the defence.  His Honour’s decision not to unduly focus the attention of the jury on a newspaper article about which they might otherwise have been ignorant, but simply to emphasise the need to consider and act only on the evidence before them, accords with common practice in relation to publications of that character and level of relative insignificance, particularly in the context of a trial of this duration.  He specifically directed the jury to disregard anything they might have heard or read outside the court room.
  1. Ground 11(a) contains a statement (introduced by the words “it is believed by the appellant”) that “certain members of the jury may have overheard a conversation between the appellant and his wife on the day before the verdict was returned, which “could have” caused the jury to form an adverse view of the appellant.  No details of the conversation have ever been given in admissible form, and, if it was in fact overheard by the jurors in question, there is therefore simply no means by which this Court is capable of assessing its significance.  As it is, the account of it that is given in the most recent written submission of the appellant shows that the conversation was quite innocuous.  It may have reflected adversely on the acuity of the media ("I got away. I gave them the slip.") but could not have influenced the outcome of the trial, which by then had reached the stage where final addresses on both sides were almost complete. There is no substance in the appellant's complaint that his counsel did not raise the matter with the trial judge.
  1. Ground 10 claims that the verdict was, in various respects, unsafe and unsatisfactory.   Reduced to essentials, the particulars given seek to challenge the finding of intention to defraud implicit in the verdict on count 1, by stressing the efforts made by the appellant to keep Vesofe trading and afloat between June 1993 and April 1994 by paying arrears of sales tax, as well as employees’ wages, production costs, and so on.  His attempts to persuade the Australian Taxation Office to come to an arrangement are recounted in the notice of appeal, as is his opposition to the making of the winding up order in April 1994.  As has been pointed out, little or any of this bears upon, or serves to excuse or even explain, his action in arranging for the transfer of Vesofe’s assets to Prenpine without taking proper steps to ensure they were paid for.  The issue about the value of stock transferred was one that was canvassed at the trial, and is adverted to earlier in these reasons.  It is in the end quite plain that the jury could on the evidence before them, reasonably have concluded as they did that the appellant intended to defraud the Australian Taxation office; and that no adequate (or, indeed, any) consideration was paid or provided by Prenpine to Vesofe for the assets transferred.  If there was additional evidence to the contrary which was not adduced at the trial, it is not shown that it was not available at that time or that it has any material relevance.
  1. Ground 11 incorporates the now all-but-conventional complaint about the incompetence of counsel (in this instance, both senior and junior) and solicitors who acted for the appellant at this trial, and the inadequacy of preparation for the trial, and the standard of the representation they provided.  The authorities, including R. v. Birks (1990) 19 N.S.W.L.R. 677, were reviewed in R. v. G [1997] 1 Qd.R. 584, 587-587, and again more recently in this Court in R. v. Paddon (C.A. 122/98; Aug. 28, 1998), where it was said that, before an appellant court will intervene on this ground, something in the nature of “flagrant incompetence” producing a miscarriage of justice must be shown.  Apart from such exceptional cases, an appellate court is, for the reasons explained in R. v. G [1997] 1 Qd.R. 584-591, almost never in possession of the information needed to make a proper assessment of the reasons why a defence case was conducted at trial in the way it was.  To indulge the temptation of speculating on insufficient material is one of the recurrent frailties of human nature.   Here there is simply no sufficient basis for concluding that the appellant was not adequately represented at his trial, or that the defence case was not sufficiently prepared. The matters alleged in paras. 11(a) to (d) are not substantiated by admissible material of any kind capable of demonstrating flagrant or any other level of incompetence.
  1. The written submissions recently received from the appellant relate in awesome detail what are said to be various conversations and conferences between the appellant and his counsel in the course of the trial, in which the appellant claims on numerous occasions to have given instructions for particular witnesses to be called at the trial, questions to be asked in cross-examination, and submissions to be made in the closing address to the jury.  These instructions are said not to have been followed, with the consequence, or so the appellant claims, that his defence at the trial was prejudiced.  Underlying all of these complaints is the notion that the appellant had the right to dictate to counsel what they should say and do at the trial, and that they were bound to follow his instructions in every detail and particular.  Such an impression of counsel’s function is completely at variance with the principle stated in Halsbury’s Laws of England (4th ed.), vol.3(1), paras.518, 519, at 420-421, which is that, unless and until his instructions are withdrawn, “counsel has, with respect to all matters that properly relate to the conduct of the case, unlimited authority to do whatever he considers best for the interests of the client”.
  1. The broad thrust of that proposition may now need some qualification in the light of recent decisions, notably R. v. Clinton [1993] 1 W.L.R. 1181, and Sankar v. State of Trinidad and Tobago [1995] 1 W.L.R. 194; but it remains generally true to say that the remedy of a client, who is dissatisfied with counsel’s unwillingness to follow his instructions, is to dismiss him or her; and, if that course is not followed, it is not open to the client later to complain about it on appeal.  It is only “in exceptional cases”, that the conduct of counsel in declining to follow the client’s instructions will be considered as having led to a miscarriage of justice that will attract intervention by an appellate court.  In R. v. Clinton [1993] 1 W.L.R. 1181, 1187, the Court of Appeal, in discussing an earlier decision, said:

“The court was rightly concerned to emphasise where counsel had made decisions in good faith after proper consideration of the competing arguments and where appropriate after due discussion with his client, such decisions could not possibly be said to render a subsequent verdict unsafe or unsatisfactory”.

  1. The present case is not an example of the kind where the verdict is shown to be unsafe or unsatisfactory.  Even if the complaints levelled by the appellant against his counsel and solicitor were before this Court in an admissible form, they would not justify the conclusion that there was a miscarriage of justice at his trial.  The appellant would not, on any view, have been an easy client to represent at a trial even in respect of offences as relatively simple as those with which he was charged here.  He has a tendency, observable in this and other proceedings before this Court, to insist on raising, and to persist in arguing, innumerable matters that are either irrelevant, or at best of only slight or marginal relevance, to the questions at issue.  Neither his counsel nor his solicitors would have done him a professional service by following, or even investigating in detail, all the instructions he gave them at the hearing. The trial commenced on 12 January 1998 and concluded on 10 February 1998. There is an affidavit from a Ms. Shilton of the Legal Aid Office exhibiting a letter dated 6 February 1998, which confirms the appellant's instructions not to call a total of 59 named witnesses; to which the appellant says a reply was mailed on 9 February 1998, which was the day on which (apart from one minor detail) the summing up was completed. As to his complaint about counsel's closing address, the appellant had been persuaded to follow the practice of reducing to writing his successive sets of instructions.  By Friday, 6 February 1998, which was when counsel’s closing address to the jury was due to begin, the applicant’s “client instructions” had, according to his own account of it, reached no. A125 in respect of count 1, and no. A126 in respect of count 2.  Those two final sets of instructions, which were produced on the morning of that day, extended to 30 typed pages, in which he claims he had nevertheless been “unable to complete making reference to all of the matters” that he “considered important for Closing Address”.  That was at 7.30 a.m. on 6 February.  He began a consultation with junior counsel at 8.15 a.m. and left at 8.50 a.m. to go to court, where the trial was due to resume at 9.00 a.m.  He says it was not until 9.10 a.m. that he succeeded in catching a glimpse of senior counsel in conversation with her junior, only to hear her saying “I can’t be expected to take in all this at this time - just leave it to me”.
  1. It is scarcely surprising that, when she was about to begin addressing the jury, senior counsel for the appellant did not wish to be distracted by having to read a further 30 typed pages of instructions, whether complete or incomplete, on what he thought she should say.  If his instructions were equal in quality and relevance to the 131 pages of “Outline” submissions recently provided by the appellant to this Court, the scarce time available could certainly have been, and no doubt was, used by her to much better effect.  Nothing short of a royal commission of inquiry, which it is not the function or within the power of this Court to undertake, would be capable of investigating the detail of every complaint now made by the appellant about the conduct of his legal representatives at the trial.
  1. On the material properly before this Court, there is every reason for concluding that there was no miscarriage of justice at the trial and that the appellant was rightly convicted.  The appeal against conviction therefore fails.  As to sentence, it has been mentioned that the effective penalty imposed on the appellant was imprisonment for two years to be released after serving 9 months on entering into a recognisance in an amount of $8,000 to be of good behaviour for three years.  The appellant was born in 1946, and so was some 48 years old when he committed these offences in 1994, and 51 when sentenced.  Until 1994 he had no previous convictions, but, by the time of the trial, he had a record of various offences, including forging and uttering in connection with his attempt to leave Australia in 1995, for which he received a short prison sentence.
  1. His current mental and physical condition are capable of attracting some sympathy.  He has a business and accounting background, in the course of which he has engaged in more than one unsuccessful enterprise.  By all accounts, he has been a hard worker who, one suspects, undertook through Dataquip a business which, if it was ever soundly based, proved to be beyond his ability to manage and control.  In his use of the business name Dataquip to cover the activities and true identities of different corporate entities, an element of deliberation and calculation is plainly evident. It is one that strikes at the very foundation of effective trading and commercial relations, and it almost inevitably culminated in the fraud perpetrated in February 1994. His actions have caused, and are continuing to cause, a great deal of loss and expense to public funds, for which the appellant demonstrates no remorse whatever.  By comparison, an effective sentence of imprisonment for 2 years to be released on a bond after serving 9 months, is slight, more especially when the need for both general and particular deterrence is borne in mind.
  1. The sentence imposed below was well within the limits of a proper discretion, and the application for leave to appeal against it should be refused.  Both the appeal against conviction and the application for leave to appeal against sentence must be dismissed.
Close

Editorial Notes

  • Published Case Name:

    R v Heilbronn

  • Shortened Case Name:

    R v Heilbronn

  • MNC:

    [1999] QCA 95

  • Court:

    QCA

  • Judge(s):

    McMurdo P, McPherson JA, Mackenzie J

  • Date:

    26 Mar 1999

Litigation History

EventCitation or FileDateNotes
Appeal Determined (QCA)[1999] QCA 9526 Mar 1999Appeal against conviction dismissed; application for leave to appeal against sentence refused: McMurdo P, McPherson JA, Mackenzie J

Appeal Status

Appeal Determined (QCA)

Cases Cited

Case NameFull CitationFrequency
ANZ Executors & Trustee Co Ltd v Qintex Australia Ltd[1991] 2 Qd R 360; [1990] QSCFC 67
2 citations
Browne v Dunn (1893) 6 R 67
1 citation
In re Canadian Land Reclaiming and Colonizing Company (1880) 14 Ch D 660
1 citation
Jekos Holdings Pty Ltd v Australian Horticultural Finance Pty Ltd (No 2) [1995] 1 Qd R 612
1 citation
Lords in Lazard Bros. and Co. v Midland Bank Limited (1933) AC 289
2 citations
R v Bilick and Starke (1984) 36 SASR 321
2 citations
R v Birks (1990) 19 N.S.W.L.R 677
2 citations
R v Green [1997] 1 Qd R 584
3 citations
R v Paddon[1999] 2 Qd R 387; [1998] QCA 248
1 citation
R. v Clinton [1993] 1 WLR 1181
3 citations
R. v Lawson [1905] 1 KB 541
1 citation
Re Lindsay Bowman Ltd [1969] 1 W.L.R 1443
1 citation
Re Otway Coal Co. Ltd (1953) VLR 557
1 citation
Sankar v State of Trinidad and Tobago [1995] 1 WLR 194
2 citations
Tymans Ltd v Craven [1952] 2 QB 100
3 citations
Walker v Wimborne (1976) 137 C.LR 1
1 citation
Walker v Wimbourne (1979) 37 CLR 1
1 citation
Williams v Hursey (1959) 103 C.L.R 30
1 citation

Cases Citing

Case NameFull CitationFrequency
Kingston Futures Pty Ltd v Waterhouse[2013] 1 Qd R 507; [2012] QSC 2121 citation
R v Ellison [2012] QCA 1131 citation
1

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