A case of wine and commissions

Tuesday 2 June 2015

Authors: Ian Gault and Andy Glenie

​​​In a rare decision under the Secret Commissions Act 1910 (Act), the High Court has maintained its strict line against commercial bribery.1

Decision

Mr Scutts worked for a wine company called NZWC. In 2011, he negotiated a contract for NZWC to supply wine to an Australian company called LMG.

He had also negotiated an agreement with LMG whereby it would pay him A$1 for every case of NZWC wine which it sold at retail. A company associated with Mr Scutts submitted 16 invoices to LMG, and received payments totalling more than $50,000. When NZWC later merged with another company, the agreement was uncovered and reported to the Serious Fraud Office.

The Crown alleged that Mr Scutts had committed an offence against section 8 of the Act. It had to prove beyond reasonable doubt that:

  • Mr Scutts had advised NZWC to enter into the contract with LMG;

  • Mr Scutts had agreed to receive the payments from LMG as a reward for giving that advice to NZWC; and

  • NZWC did not know of that agreement.

Only the second element proved contentious. The Court dismissed the defendant’s claim that the payments were for legitimate marketing services, and concluded that Mr Scutts had in fact reached the agreement with LMG well before the contract with NZWC was finalised. He was found guilty on all counts.2

Implications

The case serves as a reminder of several important points:

  • Commercial transactions are not immune from the criminal law. 

  • Secret side-deals are dangerous. If an agent is to benefit from a transaction, the arrangement should be disclosed.

  • Section 8 is but one of several offences established under the Act (which also prohibits undisclosed gifts, false invoices, and aiding and abetting offences). If in doubt, seek advice.


1 R v Scutts [2015] NZHC 1108.

2 The Court also found Mr Scutts guilty of sixteen associated counts of dishonest use of a document under section 228(b) of the Crimes Act 1961.​


Disclaimer

This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.

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  • Ian Gault

    Partner & Deputy Chairman Auckland
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