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Court of Criminal Appeal 24 September 2007

KWOK v Regina

[2007] NSWCCA 281

Fraud & dishonesty
CORPORATIONS LAW: NO DETRIMENT TO THE CORPORATION SHOWN SENTENCING:

Citation: KWOK v Regina [2007] NSWCCA 281
Court: Court of Criminal Appeal, New South Wales
Date: 24 September 2007
Judge(s): Santow JA; Hidden J; Howie J

Background

The appellant was the chief executive officer and a director of a publicly listed company, Envirostar Energy Limited (EEL). EEL entered into commercial leases over land in Queensland and Victoria for the purpose of constructing a green energy power plant. The land in each case was owned by separate companies connected to the appellant through close family members, his son and his wife, neither of whom shared his surname.

The appellant facilitated EEL's entry into both leases without disclosing his family associations with the landowner companies. The Crown argued that this concealment amounted to a dishonest use of his position as director, with the intention of gaining an advantage for those associated companies.

The appellant was convicted by a jury on two charges under s 184(2)(a) of the Corporations Act 2001 (Cth) and sentenced in the District Court to what amounted to 24 months' periodic detention with a 14-month non-parole period. He appealed both conviction and sentence.

  • Whether the trial judge erred in failing to direct the jury on dishonesty using the two-limbed test from R v Ghosh [1982] QB 1053, which requires both that conduct departs from ordinary standards of honesty and that the defendant knew ordinary people would regard it as dishonest
  • Whether the distinction between acting "improperly" and acting "dishonestly" was adequately put to the jury for the purposes of the statutory offence
  • Whether the amendment to the indictment, which narrowed the period of each offence to end just before the Criminal Code (Cth) Chapter 2 amendments took effect on 15 December 2001, was a procedural irregularity warranting intervention
  • Whether the sentences imposed were manifestly excessive or the product of sentencing error

Decision

Conviction appeal dismissed. The Court upheld the trial judge's approach to the dishonesty direction. A Ghosh-style direction had in fact been offered to defence counsel during the trial and declined. The Crown later sought the direction anyway; the trial judge refused to impose it over defence counsel's objection. Because the end date of each charge was amended to 14 December 2001, the pre-Code definition of dishonesty derived from Peters v R (1998) 192 CLR 493 applied throughout, making a Ghosh direction unnecessary.

The Court confirmed that concealment of a material interest by a director is capable of establishing dishonesty under s 184(2)(a). The appellant's active concealment of his family connections to the lessor companies, rather than mere non-disclosure, supported the jury's finding of dishonesty. Importantly, the Crown was not required to prove any financial detriment to EEL. The advantage secured for the associated companies, namely the certainty that leases would be granted, was sufficient to satisfy the statutory element.

Sentence appeal allowed. The Court identified two errors in the sentencing process below. First, the trial judge failed to determine the appropriate term of imprisonment for each offence before considering how that term should be served, contrary to established principle. Second, there was no adequate basis for imposing a longer sentence on the second count than the first when the two offences were relevantly indistinguishable in their criminality. The Court noted the deceptive conduct appeared unlikely to have altered EEL's ultimate decision, which informed the assessment of overall culpability.

Applying the totality principle from Pearce v The Queen (1998) 194 CLR 610, the Court re-sentenced the appellant, producing a modest overall reduction. No error was found in the trial judge's reliance on general and personal deterrence as sentencing considerations.

Orders Made

  • Appeal against conviction dismissed
  • Leave to appeal against sentence granted; sentence appeal allowed
  • Sentences imposed in the District Court quashed; in lieu:
  • First count: 9 months' imprisonment to be served by way of periodic detention
  • Second count: 9 months' imprisonment commencing 6 months after the first count commences, to be served by way of periodic detention, with release on a recognisance release order after serving 3 months of that sentence

Key Takeaways

  • Under s 184(2)(a) of the Corporations Act 2001 (Cth), a director's active concealment of a personal or family interest in a transaction can establish the dishonesty element even where the corporation suffers no financial detriment and the terms of the transaction were not shown to be unfavourable.
  • The Court of Criminal Appeal confirmed that the relevant test for dishonesty applicable to conduct prior to 15 December 2001 (when Criminal Code (Cth) Chapter 2 took effect for Commonwealth offences) was that established in Peters v R, not the two-limbed Ghosh test.
  • A Ghosh direction will not be required where the charge period is confined to dates before the Criminal Code amendments took effect, and where defence counsel at trial actually declined the offer of such a direction.
  • In sentencing for multiple offences, a sentencing court must first determine the appropriate term for each individual offence before addressing totality and the mode of service, rather than working backwards from a desired overall outcome.
  • Where two offences are relevantly indistinguishable in their criminality, imposing a materially longer sentence for the second than the first represents a structural error capable of rendering the overall sentence excessive.

Legislation and Cases Referenced

Legislation:
- Corporations Act 2001 (Cth) ss 184(2)(a), 206B(1)(b)
- Corporations Law s 1317FA
- Criminal Code (Cth) Ch 2
- Crimes Act 1914 (Cth) ss 16A(1), 16A(2), 20(1)(b)
- Companies Act 1981 (Cth) s 229(4)
- Law and Justice Legislation Amendment (Application of Criminal Code) Act 2001 (Cth)
- Treasury Legislation Amendment (Application of Criminal Code) Act (No. 3) 2001 (Cth)

Cases:
- R v Ghosh [1982] QB 1053
- Peters v R (1998) 192 CLR 493
- Pearce v The Queen (1998) 194 CLR 610
- R v Byrnes (1995) 183 CLR 501
- Chew v The Queen (1992) 173 CLR 626
- Macleod v The Queen (2003) 214 CLR 230
- Weiss v The Queen (2005) 224 CLR 300
- Cahyadi v R [2007] NSWCCA 1
- R v Harris [2007] NSWCCA 130
- R v Zamagias [2002] NSWCCA 17
- R v Miah [1974] 1 WLR 683