Totality
508 I have conducted a final check on the aggregate penalties imposed on Mr Jaques and I am satisfied that the penalties imposed for each course of conduct and for his contravening conduct overall are just and appropriate in all the circumstances.
Mr Clarke
509 On the question of penalties Mr Clarke reiterates the same submissions he made in relation to exoneration (set out at [258]-[261]) and I will not reiterate them.
Factors relevant to Disqualification Order
Seriousness of the contraventions
510 Mr Clarke's conduct and it context is materially different and less culpable to that of the other Directors.
511 He was not present at the 19 July 2006 Board meeting, he had only been a Director for one day by the 22 August 2006 Board meeting, he had not read the Board papers for that meeting, and he did not see the Madgwicks Advice. Importantly, he had no knowledge about how inadequately the other Directors had undertaken their consideration of the Amendments at the earlier Board Meeting.
512 As he had not read the Board papers for the 22 August 2006 meeting, not considered and understood the Lodgement Resolution, not read or understood the Amendments which the Lodgement Resolution brought into effect, and did not ask the other Directors for any explanation of the Amendments or the Lodgement Resolution, he could not have had a proper understanding of what was being achieved by the Board's approval of the pre-prepared Lodgement Resolution.
513 One can accept that confronted with such a resolution a new director is likely to be reticent to question the earlier decision of the Board to pass the Amendments in the first place. But if Mr Clark was to properly participate in the Board meeting on 22 August 2006 he was obliged to read the Board papers, consider and understand the Lodgement Resolution, consider and understand the Amendments which the Lodgement Resolution brought into effect, and if he did not understand he was obliged to ask the other Directors.
514 That is, it may be expecting too much to expect a new director, in his first meeting, to question an earlier Board decision, but there is no doubt that when Mr Clarke took none of the steps that I describe he was obliged, at least, to abstain. What he could not do was approve the resolution without giving any attention whatsoever to the resolution or the facts underpinning it, which is what he did.
515 Mr Clarke's submissions that:
(a) "he believed that he had abstained";
(b) he "honestly… thought he was abstaining"; and
(c) the finding that he was a passive participant in the 22 August 2006 Board meeting "is entirely consistent with an intention to abstain (even if that intention failed when measured objectively)";
cannot be accepted. He did not give evidence nor did he submit in the liability hearing that he thought he was abstaining from the Lodgement Resolution, only that he was a passive participant at the meeting. He did not even accept that the Lodgement Resolution was before the meeting.
516 His position is akin to that of the US directors in Gillfillan in that he failed to take steps to consider and understand the resolution before the Board and he just waved it through without troubling himself to consider what effect it had. He took that approach when he had just been appointed a Director of a large responsible entity with gross assets of $568 million and had assumed important duties to the Members.
517 The seriousness of his conduct can be seen in the magnitude of the additional fees that were provided through the wrongful conduct and the importance of the statutory fiduciary duties that he breached. Although his Lodgement Resolution conduct was different from the other Directors the result was the same. Approval of the resolution allowed a $33 million breach of trust to occur.
518 His Decisions to Pay conduct is less serious for the same reasons as with Dr Wooldridge, Mr Butler and Mr Jaques.
Protection of the public including through personal deterrence
519 ASIC contends that a disqualification order is necessary because Mr Clarke has demonstrated no understanding of the nature or seriousness of his conduct and because he is not a suitable person to act as a company director. It submits that Mr Clarke should be disqualified for such period of time that permits him to consider the meaning of the judgment so that if he were subsequently to act in the office of a director he will understand the need to act with much greater care and prudence.
520 ASIC submits, and I accept, that Mr Clarke made no effort to understand the nature and effect of the Lodgement Resolution, simply went along with the decision of the other Directors, and failed to bring his own independent mind to the decision. In respect to the Decisions to Pay ASIC contends that he again did no more than go along with the decisions of the others.
521 While ASIC's contentions have merit, I am not satisfied that there is any real need to protect the public against the risk of Mr Clarke committing similar breaches in the future, or so as to deter him from similar conduct in the future.
522 I say this, first, because Mr Clarke now accepts that during his tenure as a director of APCHL he did not have sufficient training or experience to properly equip him to deal with the type of governance issues which are the subject of this proceeding. He had not previously served on the board of an entity which was listed or proposing to list and he had no experience of entities where there was the potential for substantial conflicts of interest to arise in a way which was not clearly flagged by advisors or staff. He says that he now realises that he should not have accepted the invitation to become a director of APCHL.
523 Second, he accepts that he was insufficiently prepared for his first Board meeting, that he did not appreciate the significance of the Lodgement Resolution including that he did not understand that the effect of it was to confer a substantial benefit on Mr Lewski.
524 Third, contrary to ASIC's submission, Mr Clarke's expression of remorse and contrition is unqualified.
525 Fourth, he has suffered a great deal of adverse media attention through the proceeding and the liability judgment. This has caused severe damage to his reputation, and distress and embarrassment to him and his family.
526 Fifth, I do not accept ASIC's contention that his evidence in the hearings shows that he is unfit to be a director. While I criticised aspects of his evidence in the liability judgment my remarks were directed at the unreliability of those parts of his evidence rather than to suggest that the subject conduct was dishonest. In my view his failures were honest, but serious, mistakes.
527 Sixth, he had no intention to make a personal gain from the relevant conduct and he did not.
528 Seventh, I have little doubt that Mr Clarke will exercise care before he accepts an appointment as a director in the future, or that he will accept appointment only after deciding that it is within his experience and expertise.
529 I have no reason to doubt Mr Clarke's honesty and his frank acceptance of his insufficient experience, the severe reputational damage he has suffered, his embarrassment and financial loss, and his unqualified contrition, mean that he is quite unlikely to make the same mistakes again.
General deterrence
530 I do not accept Mr Clarke's contention that, because of the particular circumstances of his case, deterrence would not be undermined if no penalty is imposed. It is critical that other directors be put off taking such a careless approach to the business of a corporation, particularly of a large responsible entity like APCHL. It would provide a poor lesson to other directors, particularly of responsible entities, if a director who gave no proper attention to the business of a meeting and approved a resolution that allowed a $33 million breach of trust to occur and thereby caused a substantial loss, did not suffer a penalty.
531 There is a strong need to deter other directors from similar conduct to that of Mr Clarke. It is important too that persons who are appointed as company directors on the strength of their technical or commercial acumen, as Mr Clarke suggests he was, are strongly reminded of the need to also satisfy the important obligations of a director, and the real risks they face if they do not.
532 In my view the real question is whether it is necessary to achieve general deterrence through disqualification of Mr Clarke or whether it can be achieved by a pecuniary penalty.
Evidence of character and contribution to society
533 Mr Clarke has given a great deal of honorary service to the community over many years and has held many prominent positions within community organisations, local government and not-for-profit groups. His commitment to the community is especially apparent through his work as a councillor and Mayor of the City of Heidelberg, as a councillor of the City of Melbourne, as Co-Chair of the Docklands Co-ordination Committee, on the boards of major public hospitals, and with the YMCA and other community groups.
534 He has given substantial pro bono time to a large number of advisory committees, task forces and reference groups in the fields of planning, architecture and urban renewal at Federal, State and city council levels over several decades.
535 The following witnesses provided affidavits as to Mr Clarke's character, capacity and contribution to society:
(a) Hector Davis OAM JP, a retired former company director, served for many years as a councillor on the Heidelberg City Council including three terms as Mayor, and has also been a Commissioner of the City of Manningham. He has held a large number of honorary community positions. He has observed Mr Clarke at close quarters since he was a young man, and says he is dedicated to his religious beliefs and deeply committed to the community. He says that Mr Clarke gave outstanding service to the Heidelberg community, which led to his appointment to the Board of the Austin Hospital and the Board of the Heidelberg Repatriation Hospital. He describes Mr Clarke as a dedicated person who would always act honestly and in the best interests of the people with whom he is associated.
(d) Brian Shanahan OAM, Community Relations and Migration Consultant, has held many positions and has been very active in the community, including holding senior offices in a variety of well-known community groups and associations. He served for eight years as a councillor of the City of Melbourne was also a councillor and Mayor of the City of Essendon. He has known Mr Clarke since November 2004 when they were both elected to Melbourne City Council and he describes him as a conscientious and honest councillor who devoted a great deal of time and energy to his constituents and to less fortunate members of the community. He says that when Mr Clarke was elected to the position of Chair of the Melbourne City Council Planning Committee he performed that role with great skill, impartiality and respect for all sides.
536 The character evidence, together with the roles Mr Clarke has successfully undertaken in local government, on important advisory committees, task forces and reference groups in the fields of planning, architecture and urban renewal, on public hospital boards, as Co-Chair of the Docklands Co-ordination Committee and as Chairman of Places Victoria, tend to show that he is an honest, intelligent, capable and hard-working person.
537 He has given great service to the community and in my view this mitigates the applicable penalty.
Understanding of the proper role of a director
538 It is plain that Mr Clarke did not properly understand the role of a director at the time of the contraventions. It was unacceptable for him to attend and participate in the 22 August 2006 Board meeting in the way that he did, and this points to a need to protect the public by disqualifying him from managing corporations in the future.
539 Against this, I note that the subject contraventions are the only stain on Mr Clarke's record as a director or in his other work. While Mr Davis and Mr Shanahan were not in a position to speak to Mr Clarke's understanding of the role of company director the thrust of their evidence is that he is honest, intelligent, capable and hard-working. Mr Clarke's successful work in the areas and roles I have described also tends to show that he is an honest, intelligent, capable and hard-working person.
540 It is significant that Mr Clarke now frankly accepts that at that time of the contraventions he was insufficiently experienced and ill-equipped to act as a director of APCHL and that he was insufficiently prepared for the 22 August 2006 Board meeting. The breaches occurred at his first meeting of the APCHL Board. It would be surprising if his understanding of the role of a company director has not advanced substantially as a result of the proceedings.
541 Mr Clarke gives an unqualified statement of remorse and contrition. I consider his recognition of his own wrongdoing and his apology for it indicates a capacity for reform.
542 It is likely in my view that Mr Clarke now understands the role of a company director.
Contrition
543 Mr Clarke says that he has been personally devastated by coming to realise that he fell short of what was required of him and that he failed to represent the unitholders in the best possible way. He deposes that:
I never deliberately acted against the interests of the unitholders, or for any personal gain, or indeed to provide a windfall gain to Mr Lewski or his associated entities. I supported what I understood to be lawful determinations reviewed and supported by legal advice. However in hindsight it is clear that I needed to do more than that, and specifically I should have either actively opposed the relevant resolutions, or explicitly abstained from voting on them.
I apologise to the unitholders for not fulfilling my duties and meeting their expectations. (Emphasis added.)
His statement of remorse and contrition operates to mitigate his penalty.
The need to balance personal hardship against the public interest
544 Mr Clark has suffered intense adverse media reports as a result of the proceeding and the liability judgment. This has had a significant effect on Mr Clarke's reputation and upon his family.
545 He has also suffered significant damage in his involvement in the Liberal Party, and damage to his possible political career. He has been actively involved in politics throughout his adult life and has served in various honorary positions in the Liberal Party, including Victorian State Vice-President.
546 Since commencement of the Supreme Court proceedings his political contacts, including current state and federal Ministers, have been careful about their relationships with him and have kept their distance. Although he understands the reasons for their approach this has been hurtful to him. Further, until the proceedings he considered that he had a good chance of being preselected by the Liberal Party for the State seat of Eltham and believed he had a good chance of entering Victorian State Parliament at the election just held. As he is now 58 years old he says that election was his last realistic chance of commencing a parliamentary career.
547 Mr Clarke has also suffered significant financial loss including:
(a) He was appointed to the role of Chairman of Places Victoria in 2011 on a five-year term being paid about $80,000 per annum. As a result of the Supreme Court proceedings he was required to step down in August 2012 and he formally resigned his position in February 2013. He has suffered a loss of income of about $300,000 over the three years and eight months balance of his term.
(b) He was invited to join the board of a not for profit entity named Ethan Affordable Housing ("Ethan") on a remunerated basis, with a view to potentially becoming its Chairman. As a result of the Supreme Court proceedings the invitation was withdrawn.
(c) Ethan also planned to purchase an existing aged care facility and Mr Clarke was asked to assist in obtaining the necessary regulatory approvals with a view to becoming its Chief Executive Officer if and when it was approved. Because of the legal proceedings the Federal Department of Aged Care refused to consider Mr Clarke as a suitable person and refused to accept him as a consultant rather than as CEO.
(d) Following his resignation from APCHL he commenced to provide full-time consultancy services to an aged care provider and retirement village company, Arton Pty Ltd ("Arton"), and be became a director of its related entity Cumberland View Aged Care Services Pty Ltd. He was earning about $300,000 per annum through this work. .Following the Supreme Court proceedings Arton terminated his consultancy services and required his resignation from the related entity.
548 The evidence is that Mr Clarke now has only month to month consultancies in the property industry and some other minor ad hoc advisory work. There is no continuity to his employment and his ability to participate at a senior level in the aged care and retirement village industry where he has worked over the past 15 years has been severely inhibited.
549 Mr Clarke no longer holds any directorship and given the reputational damage he has suffered it cannot be known whether he will be able to return to his former positions, or obtain new ones. However, he has previously shown an ability to earn about $380,000 per annum and if he is disqualified he must continue to suffer a significant loss of income.
550 The personal hardship he will suffer through disqualification must be balanced against the public interest.
Factors relevant to Pecuniary Penalty
Punishment
551 ASIC contends that the Court should impose a pecuniary penalty on Mr Clarke in light of the seriousness of his contraventions and the quantum of the harm done to the Trust. Any penalty must reflect the punitive purpose of the civil penalty regime. I note again that such a penalty need not go beyond the level necessary to deter Mr Clarke or other directors from acting contrary to the required standards of behaviour.
Personal Deterrence
552 As I said at [519]-[529] there is no real need to deter Mr Clarke from committing similar breaches in the future as he is quite unlikely to reoffend.
General Deterrence
553 I reiterate my remarks at [530]-[531]. There is a strong need to deter other directors from conduct similar to that of Mr Clarke and it is important to remind other directors appointed to company boards because of their technical or commercial acumen that their obligations do not end there.
Hardship/incapacity to pay
554 Mr Clarke seeks that his financial position be kept confidential but I cannot meet his request. I am unable to properly set out my reasons without going to the detail of his financial circumstances.
555 He filed a statement of financial position which did not record any real estate under his name and did not advise whether he and his wife have a family home, even if it is in his wife's name. Putting that issue to one side, the statement shows that his savings are exhausted and his liabilities exceed his assets by about $620,000, mostly as a result of unpaid legal expenses. His current month to month consultancies yield approximately $20,000 gross per month.
556 His financial position is poor and in my view Mr Clarke will have real difficulty meeting his debts and in paying any pecuniary penalty. Although the public interest is more important than his incapacity to pay, his incapacity is a factor to be weighed in the balance.
Contrition
557 I reiterate my remarks at [543].
Mr Clarke's penalties
558 In all the circumstances I have decided not to disqualify Mr Clarke from managing corporations.
559 Centrally this is because his Lodgement Resolution conduct and its context is materially different to and less culpable than that of the other Directors. Importantly, he had no knowledge about the inadequacy of the other Directors' consideration of the relevant issues at the 19 July 2006 Board meeting and he was never provided the deficient Madgwicks Advice.
560 His failures were different as on 22 August 2006 he had only been a Director for one day and he had not read the Board papers. He had no understanding whatsoever about the Amendments or the Lodgement Resolution to bring them into effect, and unlike the other Directors he did not understand that he was dealing with APCHL's and Mr Lewski's conflict of interest.
561 Of course, his lack of understanding arose from his own failure to give any attention to the business of the meeting but in all the circumstances I am not satisfied that he should be disqualified from managing corporations.
562 His waving through the Lodgement Resolution is likely to have seemed an insignificant act at the time, yet he has experienced severe damage to his reputation, his career in the aged care and retirement industry has suffered enormously, and he has lost income of about $380,000 per annum. In my view he is an intelligent, capable and hard-working man of good character, there is no requirement for personal deterrence as he is quite unlikely to reoffend, he now properly understands the role of a Director, and he is contrite. There is force to his contention that he has already paid enough for his failure on his first day as a Director.
563 Provided the objective of general deterrence is served there is no purpose in disqualifying him. I consider that the need for general deterrence dictates that he must suffer a sufficient penalty to discourage other directors from similar conduct, but a pecuniary penalty will suffice in the particular circumstances of his breaches.
564 I consider that a pecuniary penalty is appropriate as follows:
(e) $17,500 dollars for his Lodgement Resolution Contraventions; and
(f) $5000 for his Decisions to Pay Contraventions.
565 For the same reasons as with the other Directors I consider that half of the pecuniary penalty for the Decisions to Pay Contraventions should be served concurrently with the pecuniary penalty for his Lodgement Resolution conduct. This reduces the effective penalty to $20,000.
566 As I did not disqualify Mr Clarke I closely considered imposing a higher pecuniary penalty. I did not do so largely because he is unlikely to be able to pay such a penalty. He will have difficulty in paying the penalty set. He is 58 years old, he has no assets, he currently owes more than $400,000, he is engaged on month-to-month consultancies and there is no continuity to his employment, and his income is insufficient to even pay off his existing debts.
567 It is impossible to be precise in weighing the public interest in general deterrence and punishment against questions of personal hardship and incapacity to pay, although it is plain that the public interest is more important. In Mr Clarke's particular circumstances I consider a pecuniary penalty of $20,000 represents the appropriate balance.
568 I will hear him on the question of time to pay if that is necessary.
Totality
569 I have conducted a final check on the aggregate penalties imposed on Mr Clarke and I am satisfied that the penalties imposed for each course of conduct and for his contravening conduct overall are just and appropriate in all the circumstances.