Directors Beware: Criminal Liability May Arise From Breaches By The Company
The decision in ACCC (Australian Competition and Consumer Commission) v Davies  FCA 1017, shows that directors may open themselves to personal criminal liability for any breaches that may have been committed by the company. The judgment of Reeves J in the Federal Court of Australia is also an important reminder to directors that their actions may result in gaol time for any failure to comply with a statutory notice.
Robert Paul Davies was the sole director and shareholder of Natural Food Vending Pty Ltd (NFV). The ACCC alleged that Mr Davies had committed an offence under s 155(5)(a) of the Trade Practices Act 1974 (Cth) (the TPA) by aiding, abetting, counselling or procuring NFV’s failure to comply with a notice issued to the company under s 155(1) of the TPA (the notice).
Notice was served to NFV at its registered office on 10 November 2010, and Mr Davies was personally served with the same notice the following day at his place of residence. The notice required NFV to provide certain information and documents relating to a number of claims made by NFV in relation to its business. The company failed to comply with the notice requirements when it did not provide the required information to the ACCC by 2pm on 1 December 2010.
There was no dispute that NFV had failed to comply with the notice by the stated deadline that was contrary to s 155(5)(a) of the TPA.
A charge was made against Mr Davies stating that NFV had committed an offence against s 155(5)(a) of the TPA by failing to comply with the notice issued under s 155(1) of the TPA. Therefore, the ACCC claimed that Mr Davies had “aided, abetted, counselled or procured the commission” of NFV’s offence, and as a consequence, under s 11.2(1) of the Criminal Code 1995 (Cth) (the Code), Mr Davies was deemed to have committed an offence against s 155 of the TPA.
The ACCC in support of the charge stated that Mr Davies was served notice at both the registered office of NFV, and also personally at his residential address.
On 30 November 2010, Mr Davies met with Peter Ngan signing documents appointing Mr Ngan as liquidator of NFV which took effect on 1 December 2010. Mr Davies failed to inform Mr Ngan of the s 155(1) notice or the interest of the ACCC in NFV, and as a result, the company missed its notice deadline and was therefore in breach of s 155 of the TPA.
The Court outlined three elements that the ACCC had to prove beyond reasonable doubt, which were (at 35):
(a) NFV committed an offence against s 155(5)(a) of the TPA by failing to comply with the notice under s 155(1) of the TPA: as per s 11.2(2)(b) of the Code;
(b) Mr Davies in fact aided, abetted, counselled or procured the commission of that offence by the NFV: as per s 11.2(2)(a) of the Code; and
(c) Mr Davies intended that his conduct would aid, abet, counsel or procure the commission of the offence by NFV: as per s 11.2(3)(a) of the Code.
Focusing specifically on the failure to comply with the notice by the designated deadline, Reeves J found that NFV had committed an offence against s 155(5) of the TPA by failing to provide notice by the deadline. Section 11.2 of the Code states that a person is guilty of the relevant offence if:
(1) A person who aids, abets, counsels or procures the commission of an offence by another person is taken to have committed that offence and is punishable accordingly.
(2) For the person to be guilty:
(a) the person’s conduct must have in fact aided, abetted, counselled or procured the commission of the offence by the other person; and
(b) the offence must have been committed by the other person.
(3) For the person to be guilty, the person must have intended that:
(a) his or her conduct would aid, abet, counsel or procure the commission of any offence (including its fault elements) of the type the other person committed; or
(b) his or her conduct would aid, abet, counsel or procure the commission of an offence and have been reckless about the commission of the offence (including its fault elements) that the other person in fact committed.
(3A) Subsection (3) has effect subject to subsection (6).
Ultimately, Reeves J found that by the omission of not complying with the notice, Mr Davies had aided and abetted, counseled or procured the offence by NFV and based on his conduct, had demonstrated the intention to do so. There was no evidence to show that Mr Davies had taken any action to comply with the notice, but rather, Mr Davies was willing to pay Mr Ngan a significant amount of money to ensure that the (at 47) “problem would pretty much go away as far as the ACCC investigation goes”, and instructing Mr Ngan to liquidate the company.
The case is illustrative that a person may find they are criminally liable if they are judged to have aided in an offence, and failing to comply with statutory notice.
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