Doney v Palmview Sawmill Pty Ltd
[2005] QSC 62
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- Notable Unreported Decision
- Doney v Palmview Sawmill Pty Ltd[2005] QSC 62
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Doney v Palmview Sawmill Pty Ltd[2005] QSC 62
Doney v Palmview Sawmill Pty Ltd[2005] QSC 62
SUPREME COURT OF QUEENSLAND
PARTIES: | |
FILE NO/S: | |
Trial Division | |
PROCEEDING: | Hearing |
ORIGINATING COURT: | |
DELIVERED ON: | 4 April 2005 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 21, 22, 23, 24, 25 and 28 February 2005 |
JUDGE: | McMurdo J |
ORDER: | Judgment to be entered for each of the second, third and fourth defendants against the plaintiffs |
CATCHWORDS: | TRADE AND COMMERCE – TRADE PRACTICES AND RELATED MATTERS – CONSUMER PROTECTION –FALSE REPRESENTATIONS – REPRESENTATIONS AS TO GOODS OR SERVICES – OTHER CASES – where first defendant sold timber poles to plaintiffs for use in pole house – whether first defendant made false representations that the poles were treated as to make them suitable for use in a pole house in breach of s 53 of the Trade Practices Act 1974 (Cth) TRADE AND COMMERCE – TRADE PRACTICES AND RELATED MATTERS – CONSUMER PROTECTION – MISLEADING, DECEPTIVE OR UNCONSCIONABLE CONDUCT – CHARACTER AND ATTRIBUTES OF CONDUCT – REPRESENTATIONS – whether first defendant acted in breach of s 52 of the Trade Practices Act TRADE AND COMMERCE – TRADE PRACTICES AND RELATED MATTERS – CONSUMER PROTECTION – MISLEADING, DECEPTIVE OR UNCONSCIONABLE CONDUCT – CHARACTER AND ATTRIBUTES OF CONDUCT – KNOWLEDGE OR INTENTION – where second, third and fourth defendants were directors of first defendant – where second defendant involved in managing business and the sale of the poles to the plaintiffs – where third defendant worked in the office of the first defendant – where fourth defendant operated the treatment plant of the first defendant – whether each of the second, third and fourth defendants were “knowingly concerned” in the breach of ss 52 and 53 of the Trade Practices Act by the first defendant Corporations Act 2001 (Cth) s 601AD Yorke v Lucas (1985) 158 CLR 661, followed |
COUNSEL: | M Burnett for the plaintiffs |
SOLICITORS: | Cranston McEachern for the plaintiffs |
[1] McMURDO J: The plaintiffs, Mr and Mrs Doney, are the owners and residents of a house at the Sunshine Coast which they caused to be built in 1993. It is described as a pole house, in that the building is supported by timber poles embedded in the ground and extending through the floors to the roof. In 1999, it became apparent that at least some of the poles were very decayed. Subsequent testing revealed that of the 36 poles in this house, all but five failed to meet the prescribed standard of treatment for timber used in this application. It is now undisputed that this house will have to be rebuilt and that Mr and Mrs Doney have suffered a loss of $540,000.00.
[2] The poles were treated and supplied by the company which was sued as the first defendant. It is now a de-registered company with the consequence that it has ceased to exist.[1] I shall refer to it still as the first defendant. The second, third and fourth defendants were its directors at the time that it supplied these poles by a sale to Mr Kerry Carmine, who was the builder of this house.
[3] As the case was ultimately argued, the plaintiffs’ claim against each of the second, third and fourth defendants is for damages pursuant to s 82 of the Trade Practices Act 1974 (Cth). The case is that the first defendant engaged in conduct in contravention of s 52 and made misrepresentations in contravention of s 53 of that Act, and that each of the defendants was involved in the contravention(s) by being knowingly concerned in them: s 75B(1)(c).
[4] As originally pleaded, the claim was not in reliance upon ss 52 and 53, but upon ss 74B, 74D and 75AG. It is unnecessary to consider the operation of those sections because the first defendant is de-registered and the plaintiffs now concede that the sections do not provide any basis for relief against the individuals.
[5] The issues for determination then are whether the company contravened ss 52 or 53, and if so whether each of the three defendants was knowingly involved in that contravention.
The Defective Timber
[6] Timber used in an application such as this house, where it is in contact with the ground and where some sections of the poles are exposed to the weather, will prematurely decay unless it is properly treated with a preservative. A preservative which is commonly used, and to an extent was used in these poles, has a generic description of CCA which refers to its components of copper, chromium and arsenic.
[7] The sale of treated timber is regulated by the Timber Utilisation and Marketing Act 1987 (Qld), which authorises the prescription of types and standards of preservative treatment for timber sold as treated timber and which requires those involved in treating timber to be licensed. In 1988 the first defendant became licensed to apply preservative to certain grades and types of timber. By s 15, the Chief Executive can approve a preservative treatment and assign to timber treated by that means a description of a certain “H level”. The prescribed treatment for timber to be used in contact with the ground as at 1993 was the H5 standard. Each prescribed treatment requires the preservative to be applied by reference to two parameters, which are penetration and retention. Penetration is a measure of how much of the cross section of a piece of timber has been treated, or in other words, how much of the timber contains the preservative. Retention measures the amount of the preservative in the timber after treatment. From 1987 until sometime after the supply of the timber in this house, treatment of a pole according to the H5 standard required penetration to a depth of one half of its radius. The required retention was that the preservative should contain certain minimum amounts of chromium, copper and arsenic as well as have total active ingredients of at least 0.60 per cent, expressed as a percentage of the mass of the penetrated section of the wood.
[8] Mr Michael Powell is a timber pathologist employed by the Queensland Forestry Research Institute. In early 2000, he inspected this house and removed core plugs from each pole to assess the penetration and retention of the preservative. According to his evidence, which is unchallenged and which I accept, nine of the 36 poles lacked the required penetration and they together with a further 22 poles failed to satisfy the prescribed standards for preservative retention, and in particular the requirement of total active elements of 0.60 per cent.[2] He said that unpenetrated areas within pine are very vulnerable to decay and termite attack and the lack of retention will lead to a decrease in the life expectancy of those poles by increasing their susceptibility to decay. He further concluded that given the in ground location of the poles and the exposure of some sections of each pole to the weather, it was necessary that these poles were treated to the required standard to have had a full life span, and that decay will cause them to rapidly lose strength and compromise the integrity of the whole structure of the house.
[9] The plaintiffs’ case focuses upon the defective retention levels. As against the prescribed retention of 0.60 per cent for total active elements, the results from Mr Powell’s testing ranged from 0.029 per cent to 1.385 per cent. More than one sample was tested from some of the poles so that in total some 65 samples were tested. Of these, 53 had a retention level of less than the prescribed 0.60 per cent and nearly half of them had a level of less than 0.30 per cent. As several witnesses explained, some timber will more readily accept the preservative than others from the same species, because timber is not an homogeneous material. The identical application of preservative could result in different levels of both penetration and retention from one pole to another and within different parts of the same pole. But what is required is the effective treatment of all parts of a pole into which the preservative should penetrate, because decay in part of a pole will affect both its strength and lifespan. Mr Jack Norton, who is employed by the Department of Primary Industries and Fisheries in a position with responsibility for compliance with the Timber Utilisation and Marketing Act, said there is some imprecision in the measurement of retention levels so that the Department allows a tolerance in applying the prescribed standard of 0.60 per cent. But even allowing for this tolerance, the same 31 of the 36 poles in this house would still fall below the required standard of retention.
[10] The defective treatment of those 31 poles, the actual or likely deterioration of them, and in turn the effect on the house with its consequent loss to the plaintiffs, is now admitted. The defendants agree that the plaintiffs have suffered a loss such that the amount of an award of damages, if any, should be $540,000.00.
Supply of the Poles
[11] The defendants’ pleadings do not admit that the plaintiffs’ builder bought the poles from the first defendant. There is no documentary evidence of the transaction, which is partly explained by Mr Doney’s evidence that the timber was paid for in cash. None of the defendants has a specific recollection of the plaintiffs or this transaction. But it is clear that the poles were supplied by the first defendant to the plaintiffs’ builder for use in this house. I accept the evidence of Mr Bruce Cook that as a delivery driver for the first defendant, he delivered the poles to the plaintiffs’ land. He was called by the second and fourth defendants.
[12] The plaintiffs allege that there was a meeting between them, their builder, and the second defendant at the first defendant’s premises, at which the first defendant made express or implied representations as to the suitability of these poles. Mr Doney’s evidence, if accepted in its entirety, would establish those representations. Mrs Doney was not called, but this is explicable on the basis that according to Mr Doney, she was not involved in much of the discussion but was sitting in a car for most of the time. The builder, Mr Carmine, was not called. He lives overseas and the plaintiffs were unsuccessful in their efforts to have him attend to give evidence.
[13] The second defendant gave evidence in which he said that he could not recall this meeting or indeed this transaction although he did not deny that they occurred. But he disputed some of Mr Doney’s version where it is inconsistent with what he said was his way of doing business. In addition, he said that where poles were supplied for a pole house, he usually said something about the desirability of testing the poles before their delivery. Mr Doney denied that anything of that kind was said in his presence.
[14] Mr Doney’s version is as follows. He is a self-employed information technology consultant. Before this house was built, Mr and Mrs Doney lived in Sydney. They had acquired the site as vacant land and were keen to build a pole house. They engaged Mr Carmine because they believed that he had experience in building such houses. They paid him a deposit, which Mr Doney thought was an amount of $2,000.00, towards the acquisition of the poles. There was some delay whilst Mr Carmine was apparently searching for suitable poles before he contacted Mr Doney in about May 1993, saying that he believed the appropriate poles were now available from a certain sawmill. Shortly afterwards, Mr and Mrs Doney flew to Maroochydore so that they could inspect the poles (and perhaps do other things towards having the house built). Mr Carmine met them at the airport and drove them to the first defendant’s sawmill at Palmview.
[15] Mr and Mrs Doney and Mr Carmine went first to the office where they spoke to the third defendant, Mrs Hewitt. She directed them to the yard to meet the second defendant. A large number of poles were stacked or laid out in the yard and Mr Doney and Mr Carmine in the company of the second defendant went about selecting ones for this house. They were pine poles which surprised Mr Doney because he expected that they would be hardwood. Mr Doney asked whether softwood would be suitable for his house. The second defendant replied that in softwood there was a lower percentage of heart wood which was explained as the hard core of the timber into which the preservative did not penetrate, so that, the second defendant said, there was a more satisfactory penetration of the preservative with pine and a better result than with hardwood. The second defendant told him that poles such as these would be suitable for bridges and marine use as well as in a house. He also said that the minimum life expectancy of these poles was 50 to 60 years. Mr Doney said to him that he required poles of at least 400mm in diameter and that “anywhere up to a metre in diameter would be acceptable”. He said to the second defendant that he wished to “over-engineer the structure” because the house was in an exposed position overlooking the ocean and he said that if there was a cyclone he wanted his to be “the last house standing on that hill”.
[16] After an hour or two, the necessary poles had been selected and there was a discussion about payment. Mr Doney was told that the mill would not release the poles until they had been paid for and he also knew from Mr Carmine, although it is not clear that this was said in the presence of the second defendant, that Mr Carmine was very keen to have the poles delivered and erected in the following week. The three men had a discussion to the effect that the way to make payment was by cash because of a possible delay whilst a cheque was cleared. It was agreed that Mr Doney and Mr Carmine would return to the sawmill later that day with the cash.
[17] Mr Doney and Mr Carmine went to a bank at Maroochydore where Mr Doney withdrew $10,000.00 in cash before returning to the sawmill. On their return, Mr Carmine alone went into the office and spoke to the third defendant before he and Mr Doney went back to the yard and again saw the second defendant. There was a discussion between Mr Carmine and the second defendant to which Mr Doney was not a party. The cash was handed over to the second defendant who put it in a nearby vehicle.
[18] Mrs Doney was not with them on the second occasion, but on the earlier occasion at the sawmill, she took some photographs, two of which were tendered. One shows a collection of timber poles which Mr Doney said were some of those which were inspected. Another photograph shows two men standing on timber poles. Mr Doney identified one man as Mr Carmine and the other as the second defendant.
[19] The second defendant said that he would not have said that the poles have a life of 50 to 60 years. He agrees that he could have said something to the effect that softwood took up the preservative better than hardwood because he said that was a fact. He cannot remember saying that softwood poles were suitable for bridges and marine use. He agreed that Mr Carmine appears in the photograph of the two men standing on the poles, but he denied that the other man was him. He said it was an employee of the sawmill. And he said that it was his practice to say something about testing poles for compliance with the required treatment standards if they were to be used inside a pole house: I shall return to his evidence on that matter and the effect to be given to it.
[20] In some respects, Mr Doney’s evidence seemed to involve some reconstruction. That is understandable when the events occurred nearly twelve years ago and it was not until 1999 that he would have had any reason to try to remember them. For example, his evidence that the second defendant appears in the photograph is probably incorrect. I cannot decide that simply from looking at the photograph. The second defendant would have no reason to deny that it was him if that was the case. He does not dispute that he had a meeting with Mr Carmine and Mr Doney at which he was told that poles were being selected for the Doney house. Other witnesses also identified the person in the photograph as that employee and not the second defendant. There are some other parts of Mr Doney’s evidence which are more significant. One is his recollection of being surprised that the poles were softwood. An engineer had prepared plans and a specification for this house which required that the poles should be of the minimum of 350mm in diameter and be “treated pine SWD”. Had Mr Doney studied what the engineer had prepared, he would have known that the poles were to be softwood. Mr Doney impressed me as an intelligent and careful man, but it is possible that he had not studied the engineer’s specification.
[21] His evidence of a payment of $10,000.00 in cash is inconsistent with a letter which he wrote to the Queensland Forestry Research Institute on 27 January 2000, in which he said that his records included a cheque stub showing “payment of $22,212 to Carmine Constructions on 26/5/93 for timber. This was the first materials amount paid…thus would necessarily include payment for the poles.” He now says that the letter was in error. But the second defendant does not dispute that any supply for this house was paid for in cash. So whilst the letter is inconsistent with his evidence, it doesn’t seem to me that it casts significant doubt on his version as a whole.
[22] I find that there was a meeting at the first defendant’s yard on 10 June 1993 between Mr Doney, the second defendant and Mr Carmine in which there was discussion about the selection and supply of poles for the construction of a house for Mr and Mrs Doney. I find that the second defendant did say something to the effect that softwood took up the preservative better than hardwood. I am not persuaded that he said that the poles had a life of 50 to 60 years or that they could be used for bridges or marine use. It is just as likely that Mr Doney has heard that from someone else and is mistakenly attributing it to the second defendant. I accept that Mr Doney said that he wanted to “over-engineer” the house, but ultimately that is not significant and nor is whether the second defendant said that there was an expected life of 50 to 60 years.
[23] Subject to one matter, it was at least impliedly represented by the first defendant that the poles had been treated as required to make them suitable in a pole house. As was clear to the second defendant and the third defendant, and accordingly to the first defendant, the Doneys and their builder were there to acquire poles for a pole house. By offering poles for their inspection and acquisition, the first defendant was representing that the poles were suitable. Such statements as the second defendant made simply confirmed what was otherwise represented. And by representing that the poles were suitable, the first defendant impliedly represented that they complied with any prescribed or generally accepted standard which was relevant to that use, which would include the prescribed standards of preservative treatment. The possible qualification to all of that is the effect to be given to statements about testing poles before their use in a house, which the second defendant said it was his practice to make.
[24] His evidence-in-chief on this matter was as follows:
“Is there anything that you did say as a matter of practice to customers to building customers? – Every time we looked at poles, the practice was that we told them -----
When you say “we”, do you mean yourself? – I, yeah. I told them – told the builder – mostly I talked to the builder, and I don’t know if there was a practice, but -----
Just tell us what it was you would do or say? – The practice was: “There’s the poles.” And probably by the time we sorted the order out and it would be there, I would say, “You understand that these are treated to H5, but they are not tested. They are treated. They go through the process of treating to H5, and any pole that has anything to do with going inside the structure must be tested individually, and it takes two weeks and it cost $20 a sample.”
Why did you say that to people? – Because people had to have – well, they had the habit of coming back and wanting us to give them a piece of paper, they didn’t know what sort – I don’t know whether the engineer asked for it or who did. But they had the habit of coming back months later saying, “Can you give us a certificate to say these poles are H5?” Well, that’s what we said. “You can’t come back in a month’s time and get it. It’s got to be done right now and it takes two weeks.”
My understanding of that evidence, if it is accepted, is that the second defendant would tell builders that if they wanted some certification of compliance with the treatment standards then the poles would have to be tested before their delivery and at a cost. That would not have affected the nature of the first defendant’s conduct in representing that the poles had been treated to the required standard and were suitable for a pole house. Instead it would have been understood as advice as to how certification or proof of compliance with the standards, if that was to be required, should be obtained.
[25] In cross-examination the second defendant gave this evidence:
“All the way along – and we have discussed this earlier this afternoon – all the way along you knew that your poles were failing, the test results were coming back from DPI showing the poles were failing to meet the requisite standard? – Yeah. But you didn’t listen to what I said about everybody was told they were treated to H5 through the treatment plant and that they were – they were power poles. There was one in six were tested and they have to be individually tested and it’s $20 each and that was told to everybody.
Mr Doney wasn’t told that? – Well, he would have been. Well, Mr Carmine was and Mr Carmine knows the rules.
See, Mr Doney was there when the business was being transacted? – Oh, I told that to everybody because – because I had –
He made no -----? – I really had to tell everybody.
Well, wouldn’t you tell Mr Doney? He’s the customer? – Yeah. I would have. I don’t know if he didn’t understand.
But you didn’t tell him? – Well, I – I can’t say I didn’t.
No, you can’t say? – But maybe – he wanted the poles Monday morning by the sound of it. Maybe he didn’t want to hear.
See, you didn’t tell Mr Doney that, nor Mr Carmine, I suggest? – Oh, Mr Carmine, I told him. I told him every time.
… And so you knew that there was a good chance that these poles did not meet the H5 specification? – I would have told them that, yeah, that’s right.
Yeah, you told – you would have told them that if you’d told them to go and have them checked independently? – No. I told them we can, we do it.
See, you knew that the poles were questionable at the time you sold them? – We – well, well, every pole is.
Yeah, but you knew these poles were questionable? – Yeah, but every pole is. Every pole is questionable. Look, don’t you think ----
But you knew these poles were questionable? – Well, they all are. Every pole is.
But these poles on this day you knew were questionable? – No. I didn’t know that. How do you know? Would you know that?
Why would you tell us you would have told somebody to go and have them checked? – Because that’s what the Timber Board specifies, that every pole in the construction of the inside of a house must be individually tested. They – that is an understood thing in the treaters – oh, well I don’t know if it’s written, but to have them tested, because it’s critical that you got to pull the house down if they’re inside the building.”
… “The fact remains that when you sold these poles to him, you knew that they were suspect poles and there was every chance that they would fail? – No. What I said was every pole that goes in a construction inside a house has to be tested. And you will get paperwork from one to 36, and it will say what – the test result. And they don’t all have to be done; it’s only the ones inside. All those landscaping ones and veranda ones don’t have to be. The ones inside have to be. And it will all be written on a piece of paper, and it will have a failure result like all these here, that fail result. It will have the whole lot, every pole, and it will be on your invoice, and somehow that hasn’t happened.
And if that was your practice, you would make that your practice because you didn’t have any confidence that the poles were being properly treated? – Say that again, please.
If that was your practice, if it was indeed the case that as a matter of practice you thought you told people to get the poles tested? – Yes.
You did that because you didn’t have any confidence that your poles were being properly treated? – I haven’t got 100 per cent confidence in any pole. I’ve got to go as far as I can – when somebody puts a pole in a house, to go as far as I can to prove that I’ve done as much as I can, that it is treated to H5 and there is a test result there. I can’t go any further than that.”
[26] The relevant allegation in the Further Amended Defence of the second and fourth defendants is that: “the second defendant had an invariable practice of advising customers that the poles were produced for use as electricity poles and that customers seeking poles for pole houses should undertake individual testing on each pole to ensure suitability”. But according to the second defendant’s evidence customers wanting poles for houses were not told that the poles were produced for use as electricity poles. More importantly, as I understand the second defendant’s evidence, he did not advise that testing should be undertaken to ensure the suitability of each pole. His evidence in cross-examination, and more clearly, his evidence in examination-in-chief, was that people were told that any certification as to compliance should be obtained prior to delivery, and that this would involve a cost and some delay. That is indicated by his answer, in examination-in-chief, as to why he provided this advice about testing. I am prepared to accept that the second defendant would make statements of this kind usually if not invariably to builders. More probably than not, he had made it at some time to Mr Carmine on an earlier occasion which makes it less likely that he felt that he had to repeat it on this one. According to his evidence, he would still assert that the timber had been “treated to H5”. His evidence does not establish that he said that testing was required because of some real risk that the poles were unsuitable. Nor did he consistently say that he said anything about testing to, or in the presence of Mr Doney. Had the second defendant said in Mr Doney’s presence that each pole had to be tested to ensure its suitability I do not believe that Mr Doney would have gone ahead without that testing or some other assurance. It is relatively unlikely that such a warning of unsuitability was given but that it was misunderstood. If it was the second defendant’s usual practice to give a warning as to unsuitability rather than advice as to how and when certification should be obtained, then it would be expected that the second defendant would have given that warning in the discussion which did take place between Mr Doney and the second defendant.
[27] In summary, I find that there was a practice whereby the second defendant would say something of the testing of poles to be used in pole house construction, but that the effect of what he would say was not to warn that the poles could have been inadequately treated and be unsuitable, but to advise of how and when any required certification of compliance with the standards should be obtained, and as to what time and cost was involved. More probably than not, that advice was not repeated in the presence of Mr Doney. It is more likely that Mr Carmine had been told that on a previous occasion and there was no need then for the second defendant to have repeated it.
[28] Accordingly, the effect of any such advice as to when and how testing should be undertaken was not such as to alter the effect of the first defendant’s representations.
The First Defendant’s Contravention of Sections 52 and 53
[29] I have found that the first respondent made representations which are in substance of the kind which the plaintiffs allege. They also plead that there were like representations made by conduct of the fourth defendant. The alleged conduct of the fourth defendant is his delivery of the load of poles to the site. But he did not do so: I have accepted that Mr Cook delivered them. Whether the fourth defendant was involved in any contravention by the first defendant is a different question. His alleged involvement is not simply from his being the delivery driver.
[30] Some 31 of the 36 poles did not comply with the required standard of treatment and were not suitable for use in a pole house. The company’s conduct was misleading or deceptive or likely to mislead and deceive in contravention of s 52. The conduct also involved the making of a false representation or representations that the timber was of a standard, quality or grade, in contravention of s 53.
Causation
[31] At least at one stage in the argument, it was suggested that any such contravention of s 52 or 53 was not causative of the plaintiffs’ loss, but ultimately the point was not pressed. Mr and Mrs Doney had decided to build a pole house before going to the first defendant’s premises, and whether they realised it or not, the engineer who prepared the relevant specification had stipulated the use of softwood poles. However, their loss is not because they built a pole house or used softwood but because they built it with poles which were defective when by the first defendant’s conduct they were induced to assume otherwise. Plainly their loss is by the first defendant’s conduct in contravention of the Act. It is agreed that the loss should be quantified in the sum of $540,000.00.
Section 75B
[32] By s 82(1) of the Trade Practices Act, a person who suffers loss or damage by conduct of another person that was in done in contravention of a provision of Parts IV, IV A, IV B or V or of s 51AC may recover the amount of loss or damage by action against that other person or against any person involved in the contravention. Sections 52 and 53 are within Part V. The plaintiffs seek to establish that each of the second, third and fourth respondents was involved in what I have found was the first defendant’s contravention of those provisions.
[33] Section 75B(1) provides as follows:
“(1)A reference in this Part to a person involved in a contravention of a provision of Part IV, IVA, IVB, V or VC, or of section 75AU or 75AYA, 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;
(c) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or
(d) has conspired with others to effect the contravention.”
[34] The plaintiffs allege that each of the defendants was involved by being directly and knowingly concerned in or party to the contraventions: par (c). Before going to the facts of the respective cases against the defendants, it is necessary to discuss what must be proved against a person alleged to have been involved in a contravention in a sense within paragraph (c) of s 75B(1).
[35] What constitutes the necessary state of mind for a person to be involved in a contravention under s 75B was apparently settled by the judgment in Yorke v Lucas (1985) 158 CLR 661. Section 75B, like s 76(1)(c) to (f) and s 78(c) to (f), is couched in the language of the criminal law which provides the meaning of its terms.[3] It thereby imports the common law requirement of the criminal law that the person must have had the necessary intent. To form an intent to participate, so as to be criminally responsible for an offence by another, a person must have knowledge of what was described in the joint judgment as “the essential facts constituting the contravention” or “the essential elements of the contravention”. [4] In the context of a contravention of s 52, Brennan J held that the person must have “knowledge of the acts constituting the contravention and of the circumstances which give those acts the character which s. 52 defines, namely, ‘misleading or deceptive or … likely to mislead or deceive’”.[5] Accordingly, to be involved in a contravention of s 52 which is constituted by a misrepresentation or in a contravention of s 53, it was apparently held that the person must know of the fact of the representation and the fact of its falsity.
[36] In relation to par (a) of s 75B, Mason ACJ, Wilson, Deane and Dawson JJ said at 667 – 668:
“Upon the findings of the trial judge, however, Lucas lacked the knowledge necessary to form the required intent. A contravention of s. 52 involves conduct which is misleading or deceptive or likely to mislead or deceive and the conduct relied upon in this case consisted of the making of false representations. Whilst Lucas was aware of the representations – indeed they were made by him – he had no knowledge of their falsity and could not for that reason be said to have intentionally participated in the contravention.”
And in relation to par (c), their Honours said at 670:
“There can be no question that a person cannot be knowingly concerned in a contravention unless he has knowledge of the essential facts constituting the contravention. It cannot, therefore, be suggested that Lucas falls within the first limb of par. (c). … In the context of the paragraph, a person could only properly be said to be “party to” a “contravention” if his participation was in the context of knowledge of the essential facts constituting the particular contravention in question. … In our view, the proper construction of par. (c) requires a party to a contravention to be an intentional participant, the necessary intent being based upon knowledge of the essential elements of the contravention.”
After stating that s 75B(a) requires knowledge of the relevant acts and circumstances, Brennan J said at 677:
“As the net of civil liability for a contravention does not catch those who would not be caught if s. 52 created an offence, honest ignorance of the circumstances which give a representation a misleading or deceptive character or the character of a representation which is likely to mislead or deceive is inconsistent with civil liability under s. 75B(a). The operation of s. 75B(a) in conjunction with s. 52 may be incongruous, for s. 52 throws a strict liability on a corporation, but s. 75B(a) does not extend liability for a s. 52 contravention to a person who procures the corporation to engage in contravening conduct if that person is honestly ignorant of the circumstances that give that conduct a contravening character.
Nor, in my opinion, does par. (c) of s. 75B impose a stricter liability…. The requirement of knowledge under par. (a) is no less stringent under par. (c).”
[37] In Yorke, the trial judge had held that Mr Lucas, the respondent to the appeal, was not aware and had had no reason to suspect that the information which he was relaying on behalf of the corporation was false. In Yorke there was no need to explore whether a state of mind involving something less than actual knowledge, such as a wilful blindness to the truth, was sufficient. But several judgments since Yorke have held or suggested that something less than actual knowledge is sufficient. In Gokora Pty Ltd v Montgomery Jordan and Stevenson Pty Ltd [1986] ATPR 40-722, Wilcox J said at 47,917:
“In Yorke v. Lucas the High Court was not concerned with information given with careless or reckless disregard to the question of truth or falsity. On the contrary, Mr Lucas was seen as having acted carefully and honestly … I do not read the joint judgment as bearing in any way upon a case of reckless indifference to truth or falsity. The reference by Brennan J. to “honest ignorance of the circumstances”, however, suggests that his Honour would not have excluded such a case from the operation of sec. 75B. An assertion of a fact, made in reckless indifference to its truth or falsity, cannot easily be regarded as being the product of “honest” ignorance.”
In Crocodile Marketing v Griffith Vintners (1989) 28 NSWLR 539, Cole J disagreed with those comments, saying at 545-546:
“It is unnecessary for me to express any concluded view regarding whether lack of knowledge of the falsity of a representation or factual circumstance constituting a contravention of s 52 or s 53, such ignorance arising from carelessness or recklessness, constitutes involvement in a contravention within s 75B. It may be, as Wilcox J suggests, the matter was not resolved by the High Court in Yorke v Lucas. However, it would be, in my view, a significant step to convert the requirement of “knowledge” referred to by both the majority and Brennan J into “constructive knowledge” attaching to a person in consequence of either recklessness or the lesser carelessness so as to construe the intention of Parliament expressed in s 75B as attaching personal liability for corporate contravention of the Act. It may be that Brennan J in using the expression “honestly ignorant” was dealing with a circumstance where a person, to ensure avoidance of personal responsibility, consciously ensured that he remained ignorant of the falsity of representations or of facts. Such “dishonest ignorance” may not be regarded as ignorance at all. But such circumstance seems to me to be different in character to ignorance flowing from, perhaps, recklessness, and certainly from mere carelessness.
Counsel for the plaintiff encapsulated his submission by arguing that s 75B holds a person “involved” in a contravention if he was aware “or should have been aware” of the ingredients constituting contravention of s 52 or s 53. As Mr Aliprandi was the managing director of the defendant company, and had the capacity to have tests done to establish the truth or falsity of the representations and facts regarding the wine, failure to do so does not permit him to assert absence of knowledge of the contravention, so it was argued.
This is a slight departure from the circumstance addressed by Wilcox J in Gokora Pty Ltd because it seeks to impose or deem knowledge flowing from an unutilised capacity to determine a true factual position. This may not necessarily involve carelessness or recklessness. For instance, a person having the capacity or position to require a factual position to be determined may omit to do so confident that another company officer would have arranged for the factual circumstance to be determined, and would have advised him of any departure from an accepted factual situation. That may not be either carelessness or recklessness.
The propositions advanced on behalf of the plaintiff are not, in my view, supported by authority. Yorke v Lucas establishes that there is a requirement of knowledge of falsity and thus to have been involved intentionally in the contravention. I do not think one can say that a person intentionally participated in a contravention if, in fact, his unawareness of falsity (that being an ingredient of contravention) was due to a simple failure to direct the conduct of acts to establish a fact. Absence of knowledge, save perhaps in the exceptional circumstance of ignorance being dishonestly and deliberately maintained, denies the necessary intent in regard to contravention.”
[38] The comments in Gokora as to recklessness have not been followed, but some judgments have accepted that a wilful blindness, ie. a consciously ensured ignorance of the truth, could suffice: see for example the judgment of the Full Court of the Federal Court in ACCC v IMB Group Pty Ltd [2003] FCAFC 17 at [135] and the more recent judgment of Stone J in MBF v Cassidy [2003] FCAFC 289 at [87]; 205 ALR 402 at 429. But wilful blindness, absent actual knowledge of the falsity of a representation, was said to be insufficient in the judgment of the Full Court of the Federal Court in Westbay Seafoods (Aust) Pty Ltd v Transpacific Standardbred Agency Pty Ltd [1996] FCA 630 where their Honours said:
“That is because it is settled upon the authorities that nothing less than actual knowledge of the essential facts constituting a contravention of s 52 will suffice for a finding of liability against a person alleged to have been involved in the contravention within the meaning of s 75B. The authorities are fully discussed in Richardson and Wrench (Holdings) Pty Ltd v Ligon No 174 Pty Ltd (1994) 123 ALR 681 at 692-695. As is there noted, the law has been stated in the unreported Full Court decision Butt v Tingey (Davies, Neaves and Beazley JJ, 5 August 1993), as well as in several decisions at first instance. In a different context, another Full Court accepted, citing Richardson and Wrench (Holdings) Pty Ltd v Ligon No 174 Pty Ltd, that “’reckless indifference’ and ‘wilful blindness’ are not synonymous with ‘intention’ or ‘knowledge’”: Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (1995) 58 FCR 26 at 37, per Lindgren J, with whom Lockhart and Tamberlin JJ agreed.”[6]
[39] The question arises in this case because it is argued that if a defendant did not actually know that some of the poles had been defectively treated, then he or she was either wilfully blind or recklessly indifferent to that matter, and that on either of those bases, the defendant was a party to the contravention. Indeed the plaintiffs plead that each defendant was involved in the contravention because he or she knew or ought to have known that the poles had not been treated in accordance with the prescribed standards.
[40] The judgments in Yorke extensively cited Giorgianni v R (1985) 156 CLR 473 in which the court unanimously set aside the conviction of an accessory to offences of culpable driving causing grievous bodily harm in contravention of the Crimes Act 1900 (NSW). The appellant was the lessee of a truck which, when driven by his employee, collided with other vehicles when its brakes failed causing the death of several people. He was not present at the time of the collision, but he was convicted on the basis that he was a party to the offences committed by his employee. He and the employee had worked on the truck some days before the accident. The trial judge told the jury that the prosecution had to show that the appellant knew that the brakes were defective and could fail, or that he acted recklessly, not caring whether they were. His conviction was set aside because, according to each of the judgments, mere recklessness was not sufficient to constitute the necessary intent. Wilson, Deane and Dawson JJ said at 506-507:
“Those offences require intentional participation in a crime by lending assistance or encouragement. They do not, of course, require knowledge of the law and it is necessary to distinguish between knowledge of or belief in the existence of facts which constitute a criminal offence and knowledge or belief that those facts are made a criminal offence under the law. The necessary intent is absent if the person alleged to be a secondary participant does not know or believe that what he is assisting or encouraging is something which goes to make up the facts which constitute the commission of the relevant criminal offence. He need not recognize the criminal offence as such, but his participation must be intentionally aimed at the commission of the acts which constitute it. It is not sufficient if his knowledge or belief extends only to the possibility or even probability that the acts which he is assisting or encouraging are such, whether he realizes it or not, as to constitute the factual ingredients of a crime. If that were sufficient, a person might be guilty of aiding, abetting, counselling or procuring the commission of an offence which formed no part of his design. Intent is required and it is an intent which must be based upon knowledge or belief of the necessary facts.”
As to wilful blindness to the truth, their Honours said at 507-508:
“The fact of exposure to the obvious may warrant the inference of knowledge. The shutting of one’s eyes to the obvious is not, however, an alternative to the actual knowledge which is required as the basis of intent to aid, abet, counsel or procure. … In the report of Poultry World Ltd. V. Condor, a Divisional Court is said to have decided that a person could not be convicted of aiding and abetting unless he had knowledge of the facts which constitute the offence or unless he deliberately abstained from obtaining such knowledge. In the commentary upon the decision, however, it is made clear that the court took the view that the offence of aiding and abetting could not be established unless there was proof of knowledge or ‘…such negligence as to amount to deliberate shutting of the eyes, i.e. connivance’. Connivance can, of course, only be established on the basis of knowledge, whether proved directly or by inference.”
[41] At least on one view of the judgment of the view of Gibbs CJ, wilful blindness could be a sufficient alternative to actual knowledge rather than merely evidence from which it could be inferred. At 487 His Honour said:
“Suspicion of the existence of facts, although relevant when the accused has deliberately shut his eyes, does not by itself amount to or take the place of knowledge for present purposes. Further, it is not correct to say that a person may be convicted of aiding, abetting, counselling or procuring the commission of an offence simply because he has acted recklessly. Dr. Edwards, in Mens Rea in Statutory Offences (1955), pp. 196-205, asserts that a person who deliberately closes his eyes to what is going on connives at it and that there is a close analogy between connivance and recklessness. However connivance, or wilful blindness, is only relevant to the liability of a secondary party to an offence because it virtually amounts to knowledge. Recklessness, in the sense of not caring whether the facts exist or not, would be relevant only if it too was virtually equivalent to knowledge, in other words only if it amounted to wilful blindness.”
Mason J said at 495:
“As we have seen, knowledge of all the essential facts giving rise to the dangerous driving is necessary to constitute commission of the offence on the part of the applicant. But it is not necessary that there should be actual knowledge of all the essential facts constituting the offence in order to establish secondary participation. It is enough if the defendant has deliberately shut his eyes to a relevant fact or has deliberately abstained from obtaining knowledge by making an inquiry for fear that he may learn the truth: cf. Reg. v. Crabbe. On this aspect of the case, notwithstanding my participation in the judgment of the Court of Criminal Appeal in Reg. v. Glennan, I am now in agreement with what the Chief Justice has written, including his comments on the passage in the judgement in Reg. v. Glennan.”
[42] From Yorke, and its extensive reference to and reliance upon Giorgianni, there are two principles which are important for the outcome of the present case. The first is that a mere reckless indifference to the truth should not be equated with knowledge of the essential facts of the contravention. Secondly, a wilful blindness to the facts could be relevant for the operation of s 75B only where it is evidence from which actual knowledge could be inferred or (perhaps) where it involves some connivance in that the person has deliberately avoided any enquiry for fear of learning the truth. It is unnecessary to express a view on whether that last alternative is sufficient, because I have concluded that neither knowledge of the facts, nor wilful blindness in that sense of connivance, is established against any defendant in this case. In my view, Yorke is against the plaintiffs’ case that the defendants are liable if they ought to have been aware of the facts or that they were simply recklessly indifferent to them. Whilst the reference by Brennan J to “honest ignorance of the circumstances” was apparently intended to exclude an ignorance through wilful blindness in the sense of connivance, I respectfully disagree with the comment in Gokora that reckless indifference to truth or falsity would of itself be sufficient. The difference between wilful blindness in this sense and mere recklessness was demonstrated by Giorgianni. And as Lord Devlin said in Roper v Taylor’s Central Garages (Exeter) Limited [1951] 2 TLR 284 at 289:
“There is a vast distinction between a state of mind which consists of deliberately refraining from making inquiries, the result of which the person does not care to have, and a state of mind which is merely neglecting to make such enquiries as a reasonable and prudent person would make….The case of shutting the eyes is actual knowledge in the eyes of the law; the case of merely neglecting to make inquiries is not knowledge at all – it comes within the legal conception of constructive knowledge, a conception which, generally speaking, has no place in the criminal law.”
[43] Mr Burnett for the plaintiffs argued that the issue should be approached more broadly, by asking whether each defendant was dishonestly ignorant, by reference to what was said as to dishonesty in Peters v The Queen (1998) 192 CLR 493 and in particular at 504. In this context, where a person is said to have been knowingly concerned in or party to a false representation, there is some overlap between dishonesty and criminal intent. But there is a risk in being diverted to a more general enquiry of a defendant’s dishonesty, because what might constitute dishonesty in other contexts might not provide the requisite intent for s 75B. For example, recklessness in the making of a false representation is sufficient to make the representor liable for the tort of deceit.[7] But that context is different, at least because it involves the responsibility for a person’s own conduct and not a criminal responsibility for an offence committed by another. The plaintiffs’ submission that something short of wilful blindness can suffice appears to have no support in any judgment concerning s 75B except for Gokora.
History of the Treatment Business
[44] The plaintiffs’ case against each defendant is built upon the problems experienced at this sawmill for some years, in ensuring that timber was treated to the prescribed standards. It is said that given this history, the defendants must have known (or ought to have known) that all or some of the timber supplied to the plaintiffs was sub-standard.
[45] The treatment of timber is essentially a two-staged process. The first stage involves the drying of the timber and the second involves the application of the solution containing the preservative. If the timber is not properly dried, then a proper treatment is jeopardised, because sufficient solution may not soak into the timber for the required penetration and retention to be achieved.
[46] Some timber mills employ relatively more sophisticated techniques for the drying process than do others. At the first defendant’s premises, the practice was to leave large poles stacked in the open in a yard, where, the second defendant said they would be left to dry for six months. It was not put to him that this was an inadequate means of drying the timber. There was no exploration in the evidence as to the time required for drying timber poles with a relatively large diameter compared with smaller poles. Importantly, it was put to none of the defendants that he or she knew or believed that any of the plaintiffs’ 36 poles had not been racked out and dried in this way or for this length of time. The test results on the subject poles were far worse that results on similar sized poles or other softwood at the sawmill in the couple of years prior to this transaction. Taken alone, that comparison might have indicated that there was some shortcoming in the specific treatment of these poles which in turn could have invited speculation that such an unusual matter could not have been innocently overlooked by the defendants. But that was not explored in the evidence, and it is not argued that there is any significance in the relatively very poor results from the tests of these poles. Instead, the plaintiffs argue that each of the defendants knew that for some years the first defendant had failed to produce treated timber which consistently complied with the standards and that each defendant understood that this was the result of shortcomings in the overall process of drying the timber and applying the preservative. From this, they argue that each defendant knew (or ought to have known) that all or at least some of the subject timber was not treated to the required standards.
[47] It is necessary then to discuss the success or otherwise of the first defendant’s attempts to produce a compliant product. In early 1988, the sawmill became licensed to treat certain grades of timber. Thereafter it was subjected to the testing routinely conducted by the Department of Primary Industries in order to monitor the performance of a mill. The history almost from the outset was at least one of the samples within every test being non-compliant. By May 1991 the Department was writing to the first defendant in terms which threatened a suspension of its licence to treat timber. In his letter of 2 August 1991 to the second defendant Mr Norton wrote in the following terms:
“In the May sampling of your plant, eight out of twelve H5 hardwood samples failed. Darcy I must be honest and tell you that I recommended to my manager that your authorization to treat timber be suspended. The main reason that suspension hasn’t gone ahead is because the sizes that you claim are treated to H5 levels are quite small and not likely to be used in a H5 situation.”
Yet the mill continued to produce some failures in the tests. Further letters in strong terms were written by the Department. The results of the testing were copied to the sawmill.
[48] In early 1991 the sawmill had become authorised to treat softwoods as well as hardwoods. That followed the Department’s testing of a number of samples of treated round pine, each of which was passed as satisfactorily meeting the required standards of penetration and retention. In every case the retention within a sample in that test showed a level of total active ingredients of several times the prescribed 0.60 per cent. In the period between that test and the supply of the plaintiffs’ timber, the Department conducted tests at the sawmill on seven occasions: three in 1991, three in 1992 and the last on 30 April 1993. On every occasion there was at least one failed result for hardwood. Over those seven occasions, a total of 84 samples of hardwood were tested which produced a total of 24 failures. In the last test, conducted on 30 April 1993, five of the twelve H5 hardwood samples tested were assessed as unsatisfactory.
[49] However, the success rate with pine was much better. On five of those seven occasions, all of the pine was passed. Over the seven occasions there were 42 samples of H5 pine tested for a total of three failures, and in the last of those tests (April 1993) there were no failures. The one failure in the July 1992 testing produced a result of 0.59 per cent as against the required 0.60 per cent. This would seem to have been within the tolerance as described by Mr Norton. The other failures were two of the samples tested in November 1992 which were measured respectively at 0.573 per cent and 0.586 per cent. At least the second of those was probably also within the tolerance. Those two failures involved comparatively large poles having diameters of 250mm and 260mm. The pine poles tested in April 1993, each of which passed, ranged from 120mm to 130mm. It is true, as the plaintiffs point out, that there was little testing of pine poles of the size of those which were supplied to the plaintiffs. Nevertheless the test results for treated pine were quite different overall from those for hardwood. Mr Norton agreed that the treatment of softwood was in some ways easier and involved a different solution strength.
[50] I find that each of the defendants knew that the mill was consistently failing in some samples of the timber which was being tested. The fourth defendant commenced to work in the treatment process from about early September 1992. Like the second defendant, he was involved in discussions with people from the Department as to difficulties which the mill was having in achieving consistent compliance with the required standards. The third defendant was involved in the administrative side of the business working from the office. I infer that she also was aware of the consistent failures of some test samples and that the mill was struggling to achieve compliance. She saw incoming mail from the Department. She also spoke to Departmental officers when they visited the mill. And although she and the second defendant did not have a close relationship, this was still a family operation in which she could not have been unaware of the substantial and continuing problem of achieving compliance, although she may have been unaware of what precisely was being done within the treatment plant itself to cure the problem. Clearly the second defendant knew that the mill was consistently failing for some samples in a test.
[51] Mr Norton, whose evidence I accept, said that the chemical analysis of the poles in this house is consistent with poor quality control of the treatment process which is particularly indicated by the inconsistency from one pole to another. He said it was also consistent with the treatment of poles which contained excessive moisture content. He has studied those records of the sawmill which are called charge sheets. These were in a printed form which provided for the recording of certain details each time timber was treated with preservative. Mr Norton said that the charge sheets show that there was no accurate measurement or assessment of the strength of the solution. He said this indicates that the charge, that is the application of the preservative, “would be either over-treated or under-treated”, which is consistent with the very broad range of results of the years of testing for both retention and penetration. In his view the charge sheets indicate that the treatment process was “not being controlled as tightly as it could be – as it should be.” He was also concerned about the inconsistency throughout the charge sheets in the recorded amount of absorption of the solution.
[52] Some efforts were being made to achieve compliance. The sawmill was being advised by Mr John White, who worked for a supplier of the preservative used by the mill. Part of the service he provided to customers such as this sawmill, was advice as to the appropriate amounts of preservative to use in order to achieve the required standards. He had regular contact with the second defendant from 1988 and with the fourth defendant from about 1991. Every five or six weeks he would visit the mill and would often provide advice. He described this as “a low-volume plant” and he said the method of drying the timber employed by them was commonly used. He recalled a particular complication for the sawmill as it was changing from a solution containing what was described as a salt formulation to an oxide formulation. The reason for this change was not that the salt formulation was ineffective but that the electricity authorities preferred the oxide treatment for environmental reasons. For some time this involved the treatment tanks having a solution which was partly a salt formulation and partly an oxide formulation. This complicated the assessment of the appropriate solution strength. I find that the defendants were well aware of this as a complication in the achievement of consistently compliant levels of retention. But significantly, Mr White said that he was “never called into adjudicate on failed pine; always hardwood”. The effect of his evidence, which I accept, is that some genuine effort was being made to achieve compliance but the defendants at the same time knew that their efforts were not achieving complete success.
The Defendants’ Knowledge
[53] I find that each of the defendants knew that the first defendant was offering for sale softwood poles which were represented as treated to the H5 standard and suitable for pole house construction. The defendants had different levels of knowledge about this particular transaction. Plainly, the second defendant was aware of it. I infer that so too was the third defendant. This was a relatively large supply by this mill, and the third defendant had met the Doneys in company with Mr Carmine, whom she knew from previous dealings. The fourth defendant probably knew of the supply for the Doney house although the evidence is not as clear in his case. But in any event, the fourth defendant, like his parents, knew that the mill was producing and marketing these pine poles as purporting to comply with the H5 standard. So if the fourth defendant was unaware of the specific transaction with Mr and Mrs Doney, he was nevertheless aware that representations of the relevant kind were being made on behalf of the first defendant.
[54] The critical question in relation to each defendant is then whether he or she knew of the falsity of the representations, or was at least wilfully blind to it. The case against each defendant of course must be considered separately.
[55] It is unnecessary for the plaintiffs to establish that the defendants knew the precise extent of the non-compliance of the timber. If he or she knew or believed that some of the timber which the mill was offering for sale as H5 treated was in truth non-compliant, then there was the requisite knowledge of the falsity of the representation and intent to participate in a contravention.
[56] I infer that each of the defendants knew that there was a real, as distinct from a theoretical, chance that not all of the poles offered as H5 complied with the standards. That possibility was demonstrated by the consistently poor test results. For some years the Department had been writing to the effect that the level of compliance was inadequate, as each of the defendants was aware. None of them believed that any problem had been eradicated. The extent of the problem was apparently greater with hardwood. Each of the defendants must have been less concerned as to non-compliance in relation to pine poles. The test samples themselves would not have indicated any high probability of failure with pine. But there had been some failures with pine, and in my conclusion each of the defendants must have been aware that there was, as I have described it, more than a theoretical possibility not all pine poles were compliant. However, it is not sufficient that his or her knowledge or belief extended only to the possibility or even the probability of a false representation, because with that state of mind, there would not be the necessary intent: see Giorgianni at 506-507.
[57] The results of the Department’s testing, the results of independent testing arranged by this sawmill, and the numerous discussions which the second defendant had with Departmental officers, Mr White and others as to problems in the treatment process, need not have caused any of the defendants to know or believe that pine poles then offered for sale in June 1993 were non-compliant. Importantly, the results for pine were very much better than for hardwood, and the most recent testing had produced no failures for pine.
[58] The treatment process at this sawmill, which was largely under his control, had a number of shortcomings as Mr Norton identified. But it does not follow that the second defendant knew or believed that amongst the pine poles being supplied there were some which were defective. Whilst the second defendant did not impress me as a careful man, nor did he impress me as dishonest. It was argued that I could make use of what were described as false denials to conclude that he was dishonest and that he knew the facts which made the relevant representations false. It was said that he gave false evidence as to his practice in saying something about testing the product, and that I should conclude that he was deliberately untruthful about this in an effort to disguise his knowing participation. As I have discussed, his evidence on this matter did not establish his pleaded case. I accept his evidence as far as it goes, and in so far as it falls short of the pleaded case, I would not infer from that that he is dishonest. If some parts of his evidence do suggest that he had a practice of warning that timber might be defective, he was not being deliberately untruthful in that evidence. Had he intended to defend this case by falsely claiming that he told Mr Doney that the poles could be defective and he should have them tested, his evidence would not have been given as it was.
[59] Nor am I persuaded that he was in any relevant sense wilfully blind to the truth. He did know that the fact of compliance or non-compliance could be established by a test. It was within his power to cause a test to be undertaken. But he was not wilfully blind in the relevant sense. To the extent that he may have thought about testing poles, I am unpersuaded that he deliberately avoided testing because he feared discovery of the truth. There are other and more likely explanations for not having these poles tested. The first is that Mr Carmine and his clients wanted the poles without any delay. The second is that, as he said and as I accept, the testing would have cost about $20.00, representing a cost to the sawmill of more than $700.00 in this transaction.
[60] I have reached similar conclusions in the cases of the third and fourth defendants. Against the third defendant it is submitted that she “she sought to down-play her involvement” in the transaction, and that I should thereby conclude that she was deliberately untruthful in her evidence and was seeking to disguise her intentional participation in the relevant conduct. I am quite unpersuaded that any of her evidence was deliberately false and in particular her evidence as to her involvement in this transaction. There is some tension between her evidence and that of the second defendant as to what she knew of the receipt of the cash in this transaction. I am unable to resolve any conflict in that respect. The second and third defendants were not in a close relationship by this stage and there is evidence that she was complaining of his extravagant habits in the context of the business having financial difficulties. It is not unlikely that in that circumstance he would keep from her the fact of his receipt of a large sum of cash.
[61] Nor did the fourth defendant impress me as a dishonest person. His knowledge of the treatment process was certainly no greater than that of the second defendant and his experience was somewhat less. He was a director of the first defendant company and employed full time in the operation, but my impression is that it was the second defendant who was effectively in charge. I am unpersuaded that he knew or believed that pine poles then offered for sale were not treated to the required standard and unsuitable for a pole house.
[62] For similar reasons to those which apply to the case against the second defendant, I am not satisfied that either of the third of fourth defendants was wilfully blind to the truth in the relevant sense.
[63] The defendants submitted that I should not infer that any of them had the necessary intent unless no other inference was reasonably open. I have not accepted that submission, which seems to be inconsistent with the standard of proof being on the balance of probabilities.
[64] Apart from proving intent, it would also be necessary for the plaintiffs to establish against each defendant that he or she had some practical connection with the contravention in the sense of being a participant in it.[8] The practical connection is stronger in the case of the second defendant than in the case of the third defendant. If anything, the fourth defendant was the least involved. To the extent that there was a contravention by the specific discussion between the second defendant, Mr Carmine and Mr Doney, I would not conclude that the third or fourth defendant was involved in that contravention. But the first defendant contravened the Act by its conduct in offering these poles for sale and representing them as treated to the H5 standard. In the context of this relatively small business, that conduct involved the participation of each of the three directors. The third defendant worked at the effective shopfront where she met customers such as Mr Carmine and the Doneys when timber was impliedly represented as suitable. The second and fourth defendants were supervising the process of treatment to the end that they could be sold as treated to the H5 standard.
Conclusion
[65] The plaintiffs have failed to establish that more probably than not, the requisite intention of any defendant for that defendant to have been knowingly concerned in, or party to, the first defendant’s contraventions of ss 52 and 53. There must be judgment for each of the second, third and fourth defendants against the plaintiffs. I shall to hear the parties as to costs.
Footnotes
[1] Corporations Act 2001 (Cth) s 601AD.
[2] His report at page 5 summarises the defects as 11 poles of defective penetration and a further 20 of defective retention, but from the detail of his report it appears that the numbers are as I have described. The difference is not significant for the outcome.
[3]At 669 (Mason ACJ, Wilson, Deane, and Dawson JJ); 673 (Brennan J).
[4]At 670.
[5] At 677.
[6] Allstate Life Insurance was not a case concerning the state of mind required for s 75B but rather that required for the tortious inducement of breach of contract.
[7] Derry v Peek (1889) 14 App Cas 337.
[8] R v Tannous (1987) 10 NSWLR 303 at 308.