Citation: R v Sigalla (No. 3) [2016] NSWSC 1919
Court: Supreme Court of New South Wales
Date: 3 November 2016
Judge(s): Adamson J
Background
The accused faced charges under s 184(2)(a) of the Corporations Act 2001 (Cth), which makes it an offence to dishonestly use one's position as a director with the intention of directly gaining a benefit. The charges related to two transactions in December 2006 involving TZ Limited, an ASX-listed company.
The accused had been formally appointed as a director of TZ Limited in January 2004 but resigned from the board in July 2004. He was not formally reappointed until January 2007. The critical question was therefore whether he held director status at the time the alleged offences were committed, in December 2006.
At trial, the accused applied for a directed verdict of acquittal on counts 1 and 2, arguing that, because he was not a formally appointed director at the relevant times, an essential element of the offence was absent.
Legal Issues
- Whether the accused was a "director" of TZ Limited in December 2006, given that he had formally resigned and had not yet been reappointed.
- Whether the extended definition of "director" in s 9 of the Corporations Act 2001 (Cth) applied to cover the accused's conduct during that period.
- Whether, applying the May v O'Sullivan test, the evidence was sufficient to require the counts to be left to the jury rather than the matter being disposed of by a directed acquittal.
Decision
Adamson J applied the established test for a no-case submission: whether, on the evidence as it stood at the close of the Crown case and taken at its highest, a jury could lawfully convict. Her Honour noted, following Doney v The Queen, that the quality or weight of the evidence is not a matter for the trial judge at this stage. Even tenuous, vague, or inherently weak evidence must go to the jury if it is capable of supporting a guilty verdict.
The Crown did not rely on the accused's formal appointment as a director. Instead, it invoked the extended definition in s 9 of the Corporations Act, which encompasses a person who, without valid appointment, either acts in the position of a director or whose instructions or wishes the directors are accustomed to act upon (commonly called a "shadow director").
The evidence the Crown relied upon was substantial in scope. A former director, Mr Kelliher, gave evidence that after the accused's resignation his dealings with the accused were "pretty much as they had been," with the accused continuing to drive high-level strategy, business planning, and capital raising. Another former director, Mr Leibowitz, confirmed the accused was his primary point of contact on business and operational matters. Emails between the accused and Mr Leibowitz shortly before Leibowitz resigned from the board in July 2006 were capable of bearing the interpretation that the accused directed that resignation. Further, an employee gave evidence that the accused continued to give directions to Mr Falconer on the management and direction of the company during the relevant interim period. The accused also signed a significant convertible note subscription deed as an authorised signatory on behalf of TZ Limited.
Taking that evidence at its highest, Adamson J concluded it could fulfil the requirements of the extended definition of "director." The question of whether the Crown case was established beyond reasonable doubt remained a matter for the jury. Accordingly, her Honour rejected the application for a directed verdict of acquittal on counts 1 and 2.
Orders Made
- Accused's application for a directed acquittal on counts 1 and 2 was refused.
Key Takeaways
- The extended definition of "director" in s 9 of the Corporations Act 2001 (Cth) reaches beyond formally appointed directors to include persons who act in that position or whose instructions the directors are accustomed to follow, sometimes described as shadow or de facto directors.
- In dismissing the no-case application, the Supreme Court reaffirmed that the May v O'Sullivan test requires a trial judge to ask only whether the evidence, taken at its highest, is capable of sustaining a conviction, not whether that evidence is of sufficient quality to make a conviction likely.
- Sufficient evidence of shadow director status can arise from a combination of factors: continued involvement in high-level decision-making after resignation, acting as the primary point of contact for board members, apparent influence over board composition, and signing major company contracts as an authorised signatory.
- A formal resignation from a board does not preclude criminal liability under s 184(2)(a) of the Corporations Act where the extended definition in s 9 is engaged by the conduct of the accused during the relevant period.
- Whether the evidence actually establishes the extended definition of "director" beyond reasonable doubt is a question for the jury, not for the trial judge at the no-case stage.
Legislation and Cases Referenced
Legislation
- Corporations Act 2001 (Cth), s 9 (definition of "director"), s 184(2)(a) (dishonest use of position as director)
Cases
- May v O'Sullivan (1955) 92 CLR 654
- Doney v The Queen (1990) 171 CLR 207