Special Committee Companies Bill, 1962 debate -
Tuesday, 9 Apr 1963

SECTION 293.

Mr. J. Lynch

I move amendment No. 91 :

In subsection (1), page 154, to delete lines 45 to 53 and substitute :

" he shall, in the case of an offence mentioned in paragraph (m), (n) or (o), be liable, on conviction on indictment, to penal servitude for a term not exceeding 5 years or to imprisonment for a term not exceeding 2 years or to a fine not exceeding £1,000 or to both such penal servitude or imprisonment and such fine and, in the case of an offence mentioned in any other paragraph, be liable on conviction on indictment, to imprisonment for a term not exceeding 2 years or to a fine not exceeding £500 or to both, or, in the case of any offence under this subsection, be liable, on summary conviction, to imprisonment for a term not exceeding 6 months or to a fine not exceeding £100 or to both.”

This only deals with the penalty. It brings the penalty into line with penalties provided elsewhere in the Bill. There are some minor changes in the wording also.

Major de Valera

There is one question I should like to ask. In sub-section (g), it is an offence " knowing or believing that a false debt has been proved . . ." Is there a precedent for that phrase " knowing or believing "?

Chairman

We are still on the amendment. Would the Deputy hold that question for the moment ?

Amendment agreed to.

Mr. J. Lynch

I move amendment No. 92 :

To delete subsection (3) and substitute:

" (3) Where any person pawns, pledges or disposes of any property in circumstances which amount to an offence under paragraph (o) of subsection (1), every person who takes in pawn or pledge or otherwise receives the property knowing it to be pawned, pledged or disposed of in such circumstances as aforesaid shall also be guilty of an offence and shall be liable to be punished in the same way as if he had been guilty of an offence under the said paragraph (o).”

The purpose of the amendment is to get rid of references to the word " misdemeanour " in subsection (3). It is not now the practice to declare offences of this kind to be misdemeanours or otherwise but simply to provide an appropriate penalty.

Amendment agreed to.

Question proposed : " That Section 293, as amended, stand part of the Bill".

Major de Valera

In paragraph (g) of subsection (1) the words "knowing or believing" suggest that you might have a false belief. Is there a precedent for the wording ? Is that the old wording ?

Mr. J. Lynch

It is, I think, the old wording contained in the Debtors Act, 1872.

Major de Valera

At the present time is there any point in keeping it ? However, I do not make any further point about it.

Chairman

How much of this section is new? The whole of it?

Mr. J. Lynch

It is all new, but there is a similar section in the Debtors Act of 1872. Incidentally, it was recommended by the Bankruptcy Committee in the late 1920's and our own Company Law Reform Committee expressed themselves in favour of improved provisions for the punishment of offences coming to light in the winding up.

Mr. Norton

Is subsection (3) new? Is it new in company law ?

Mr. J. Lynch

It is all new, as far as the Companies Acts are concerned.

Mr. Norton

Where did you get subsection (3) as it appears in the Bill?

Mr. J. Lynch

I think that, too, is in the Debtors Act of 1872.

Mr. Norton

And it was thought desirable to embody it with some up-to-date phraseology?

Mr. J. Lynch

That is right.

Major de Valera

There is a further question which I should like to ask in regard to the number of offences scheduled in subsection (1) subparagraph (o), which reads as follows :

within 12 months next before the commencement of the winding up or at any time thereafter pawns, pledges or disposes of any property of the company which has been obtained on credit and has not been paid for, unless such pawning, pledging or disposing is in the ordinary way of business of the company;

It is possible in the case of certain trading companies to have acquired—it depends on what you mean by property—something and to have bonafide disposed of it again in the ordinary course of business but, 12 months before a company is liquidated, you may not know a company is going to be liquidated. You may not know that 12 months before the commencement of the winding up and a management, in the ordinary course of business, may dispose of property it has acquired on credit. Of course, it says, “ in the ordinary way of business ” but what is the ordinary way of business? There may be an extraordinary way. It is just in these circumstances that, bonafide something like that may be done. Say a store is acquired or something like that and before it is paid for is disposed of.

Mr. J. Lynch

If a person is charged with an offence under that subparagraph or under any one of the other subparagraphs and if he proves there was no attempt to defraud, then he has a good defence under subsection (2).

Major de Valera

I would be a little bit afraid of that in so far as normal management might indicate that a company was having normal trading difficulties at a particular time. If a company was hitting a rough spot it might be that the management was trying to make the best of the situation and this may be rather an inhibiting section. I find it very hard to be more definite than that.

Mr. J. Lynch

You must take the section as a whole and take " in the ordinary way of business " in paragraph (o) with the " intent to defraud " clause in subsection (2).

Major de Valera

Is that not putting the management in the position which the law does not like of proving themselves innocent rather than making somebody else prove them guilty? It is certainly an inhibition.

Chairman

But the onus shifts only when it was done " in the ordinary was of business ".

Mr. Norton

Twelve months before the business gives up, say a person sets out to pawn or pledge certain goods. He knows what is coming and this may be his method of parking away certain valuable pieces of property. That is all right. Then there is the person who receives these articles and advances money on them. They are his property. They may, in fact, actually be bought on the basis that, some day or other, the person who pledged them in the first instance may redeem them. The second person, however, again in the ordinary way of business, having held them for a certain period, may dispose of them. It is tough to put him in the position of having to prove his innocence and that he would have to rely on subparagraph (o) of subsection (1) or on subsection (2). I think he stands in a somewhat different light from a person who pledges goods. I think his position has to be understood.

Mr. J. Lynch

In the first place, subparagraph (o) of subsection (1) refers only to officers of the company. The person who receives goods in pawn or in pledge comes into the picture only under subsection (3). If such a person takes in those goods " in pawn or pledge or otherwise receives the property knowing it to be pawned, pledged or disposed of in such circumstances as aforesaid " he is guilty of an offence. All he need prove if he is charged under subsection (3) is that he did not know nor could he have known that the pawning was done for fraudulent purposes.

Mr. Norton

The only place where he can prove that probably is in a court. A citizen might discover himself charged today and there might be an item in the newspaper about it, maybe a column. The case might be over by the evening and the person completely acquitted. However, having seen the newspaper article, a lot of people might say : " Did you see that? It was a queer business. He got away."

Mr. J. Lynch

But every individual is exposed to that from day to day under the Larceny Act.

Mr. Norton

We are here, in respect of this Bill, to protect the citizens and, if we can, we are bound to take the opportunity to do so. It would be tough to have to go into court and to prove myself innocent.

Mr. Booth

Surely it is not a question of that? The prosecution would have initial proof that there was guilty knowledge. With any criminal offence, the prosecution has first of all to establish a case.

Mr. J. Lynch

I think that the State would have to establish the fraud on the part of the seller of these goods first. If there is fraud on the part of the seller, the onus then shifts on the purchaser to prove he received those goods in innocent circumstances. I do not think it is unreasonable that a person who, having received goods which were dealt with in pawn or pledged fraudulently, should have some obligation to prove he did not know they were so dealt with fraudulently.

Mr. Booth

He would surely have to establish that, on the face of it, it was a bona fide transaction. He would have not to go into tremendous detail. He would have to establish that, in fact, there was no smell about the transaction.

Mr. J. Lynch

If you did absolve a person like that from liability to be prosecuted then the fraudulent officer of a company would be quite willing to take a rap and dispose of the property all over the place.

Mr. Norton

I see the difficulty in segregating them, as it were, and putting one in a different position from the other.

Major de Valera

In any event, the point you raise here is one of wording. We are at one about the principle. Nobody objects to that. The point is whether the wording would be too wide.

Mr. D. Costello

Do the words " obtained on credit " in respect of which this offence is created, cover goods let on hire purchase ? One of the commonest forms of fraud being perpetrated nowadays is the sale of motor cars which are on hire purchase terms.

Mr. J. Lynch

I cannot answer that off hand.

Chairman

I am afraid that is one that will be argued out in court.

Mr. D. Costello

It is a matter of some concern. We are quite right to make this an offence in respect of disposing of property which has been obtained on credit. We should also make it an offence in respect of somebody who gets a car on hire purchase. I do not think a matter of hire purchase need necessarily be a matter of credit. It is quite a different type of transaction.

Mr. J. Lynch

It is very likely covered in the Hire-Purchase Acts, though I cannot remember now.

Mr. D. Costello

It would probably come under the heading of fraud anyway and could be a subject of criminal prosecution apart from this section but the question is whether it would be desirable to include in subsection (1) (o) the words "or any goods which are on hire purchase."

Mr. J. Lynch

I will look into that point anyway.

Question put and agreed to.