Australian Securities and Investments Commission v Australian Property Custodian Holdings Limited

Date of hearing: 28-31 July 2014

Counsel for the Plaintiff: Mr I D Martindale QC, Mr R D Strong and Mr S J Maiden

Solicitor for the Plaintiff: Australian Securities and Investments Commission

Counsel for the First Defendant The First Defendant did not appear

Counsel for the Second Defendant: Mr P J Bick QC and Mr M Osborne QC

Solicitor for the Third Defendant: Millens Lawyers

Counsel for the Fourth Defendant: Mr A T Strahan

Solicitor for the Fourth Defendant: DLA Piper Australia

Solicitor for the Fifth Defendant: Norton Gledhill

Counsel for the Sixth Defendant: Mr D J Williams SC

Solicitor for the Sixth Defendant: Maddocks Lawyers

IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 594 of 2012

BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

AND: AUSTRALIAN PROPERTY CUSTODIAN HOLDINGS LIMITED (ACN 095 474 436) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (CONTROLLERS APPOINTED)

JUDGE: MURPHY J DATE OF ORDER: 2 December 2014 WHERE MADE: MELBOURNE

IN RELATION TO the First Defendant, Australian Property Custodian Holdings Limited (Receivers and Managers Appointed)(In Liquidation)(Controllers Appointed), THE COURT DECLARES THAT:

1. The first defendant, Australian Property Custodian Holdings Limited (Receivers and Managers Appointed)(In Liquidation)(Controllers Appointed) (APCHL), contravened s. 601FC(5) of the Corporations Act 2001 (Cth) (the Act) by reason of it having contravened s. 601FC(1)(b) of the Act, in that, in its capacity as responsible entity (the Responsible Entity) of the Prime Retirement and Aged Care Property Trust ARSN 097 514 746 (the Prime Trust), it failed to exercise the degree of care and diligence that a reasonable person would have exercised in the Responsible Entity's position, in that on 22 August 2006 its board of directors (the Board) passed a resolution (the Lodgement Resolution) to lodge with the Australian Securities and Investments Commission (ASIC) an amended constitution of the Prime Trust (the Amended Constitution), in circumstances where a reasonable person in the Responsible Entity's position would not have attempted to cause the amendments contained in the Amended Constitution (the Amendments) to take effect, because the Amendments purported to create rights in APCHL the purported exercise of which would result in a diminution in the assets of the Prime Trust, without providing any, alternatively any equivalent, benefit to members of the Prime Trust (the Members).
2. The first defendant, APCHL, contravened s. 601FC(5) of the Act, by reason of it having contravened s. 601FC(1)(c) of the Act, in that, in its capacity as Responsible Entity, it failed to act in the best interests of the Members and failed to give priority to the Members' interests over its own interests, by the Board resolving on 22 August 2006 to lodge the Amended Constitution with ASIC in circumstances where: (a) it did not give any consideration to whether the Lodgement Resolution was in the best interests of the Members; (b) the Lodgement Resolution was not in fact in the best interests of the Members; (c) a responsible entity in the position of APCHL could not reasonably have believed that the Lodgement Resolution was in the best interests of the Members; and (d) there was a conflict between: (i) the interests of APCHL in being paid the additional fees provided for by the Amendments and the interests of the Members in paying only the fees under the existing constitution of the Prime Trust (the Existing Constitution); and (ii) the interests of APCHL in being paid the additional fees and its duties to act in the Members' best interests.
3. The first defendant, APCHL, contravened s. 601FC(5) of the Act, by reason of it having contravened s. 601FC(1)(m) of the Act, in that, in its capacity as Responsible Entity, it failed to comply with the duty imposed on it by the Existing Constitution not to vary or attempt to vary the Existing Constitution in a manner that was in favour of or resulted in any benefit to APCHL, by the Board resolving to lodge the Amended Constitution with ASIC in circumstances where the Amendments were in favour of or resulted in a benefit to APCHL.
4. The first defendant, APCHL, contravened s. 601FC(5) of the Act, by reason of it having contravened s. 601FC(1)(c) of the Act, in that, in its capacity as Responsible Entity, it failed to act in the best interests of the Members and failed to give priority to the interests of the Members over the interests of APCHL, in that it, by the Board: (a) passed a resolution on 26 June 2007 in the following terms: "the Listing fee be taken by the Responsible Entity as Units in the Trust of which approximately ten per cent is to be issued to the Responsible Entity at the time of allotment and official quotation of Prime Trust's units on the ASX. The balance of the listing fee will be deferred and payable in tranches"; and (b) passed a resolution on 27 July 2007 to the effect that APCHL would take the first tranche of the 'listing fee' ostensibly payable pursuant to the Amendments (the Listing Fee) as units; in circumstances where: (c) it did not give any consideration to whether payment of the Listing Fee was in the best interests of the Members; (d) payment of the Listing Fee was not in fact in the best interests of the Members; (e) a responsible entity in the position of APCHL could not in the circumstances reasonably have believed that payment of the Listing Fee was in the best interests of the Members; and (f) each proposed payment of the Listing Fee gave rise to a conflict between the interests of APCHL and the interests of the Members which should have been resolved in favour of the Members by APCHL deciding not to make the payment.
5. The first defendant, APCHL, contravened s. 601FC(5) of the Act, by reason of it having contravened s. 601FC(1)(k) of the Act, in that, in its capacity as Responsible Entity, it failed to ensure that all payments out of the scheme property of the Prime Trust (Scheme Property) were made in accordance with the constitution of the Prime Trust, by: (a) on 3 August 2007, causing to be issued to itself in its personal capacity ordinary units in the Prime Trust with a value of $3,293,994 as and by way of a 10 per cent instalment of the Listing Fee (the First Scrip Instalment); (b) on 13 March 2008, transferring $329,399 of the monies held by it as Trustee of the Prime Trust to itself in its personal capacity in respect of GST on the First Scrip Instalment, (collectively, the First Instalment) notwithstanding that, as a matter of law, the payment of the First Instalment and each component of it was not provided for in the constitution of the Prime Trust.
6. The first defendant, APCHL, contravened s. 601FC(5) of the Act, by reason of it having contravened s. 601FC(1)(c) of the Act, in that, in its capacity as Responsible Entity, it failed to act in the best interests of the Members and failed to give priority to the interests of the Members over the interests of APCHL, in that it: (a) by the Board, passed a resolution on 7 April 2008 to amend the 26 June 2007 resolution such that: "[i]n the event of the removal of the Responsible Entity or if there is a restructure of the Responsible Entity such that interests associated with Bill Lewski cease to control the Responsible Entity (for example, by way of a stapling arrangement) prior to the end of the Deferral Period the unpaid balance will become immediately payable in cash to the Responsible Entity"; (b) by the Board, on or about 24 April 2008, approved the execution of a document entitled "Heads of Agreement - APCHL Restructure" (the Heads of Agreement); (c) on 28 April 2008, executed the Heads of Agreement; and (d) by the Board, passed a resolution on 27 June 2008 approving the execution by APCHL of a 'Deed of Acknowledgement of Listing Fee Payment' (the Deed of Acknowledgment) in circumstances where: (e) it did not give any consideration to whether payment of the Listing Fee was in the best interests of the Members; (f) payment of the Listing Fee was not in fact in the best interests of the Members; (g) a responsible entity in the position of APCHL could not in the circumstances reasonably have believed that payment of the Listing Fee was in the best interests of the Members; and (h) each proposed payment of the Listing Fee gave rise to a conflict between the interests of APCHL and the interests of the Members which should have been resolved in favour of the Members by APCHL deciding not to make the payment.
7. The first defendant, APCHL, contravened s. 601FC(5) of the Act, by reason of it having contravened s. 601FC(1)(k) of the Act, in that, in its capacity as Responsible Entity, it failed to ensure that all payments out of Scheme Property were made in accordance with the constitution of the Prime Trust, by: (a) on 27 June 2008, causing to be issued to Carey Bay Pty Ltd 9,020,386 units in the Prime Trust valued at $5,000,000; and (b) on 30 June 2008, transferring $27,610,548.30 of the monies held by it as trustee of the Prime Trust to itself in its personal capacity, (collectively, the Second Instalment) notwithstanding that, as a matter of law, the payment of the Second Instalment and each component of it was not provided for in the constitution of the Prime Trust. IN RELATION TO the SECOND Defendant, William Lionel Lewski, THE COURT DECLARES THAT:
8. The second defendant, William Lionel Lewski, contravened s. 601FD(3) of the Act by reason of him having contravened s. 601FD(1)(b) of the Corporations Act 2001 (Cth) (the Act), in that, in his capacity as a director of Australian Property Custodian Holdings Limited (Receivers and Managers Appointed)(In Liquidation)(Controllers Appointed) (APCHL) in its capacity as the responsible entity (the Responsible Entity) of the Prime Retirement and Aged Care Property Trust ARSN 097 514 746 (the Prime Trust), he failed to exercise the degree of care and diligence that a reasonable person would have exercised if he or she were in Mr Lewski's position, by acting as follows. On 22 August 2006, at a meeting of the board of directors of APCHL (the Board), Mr Lewski voted in favour of a resolution (the Lodgement Resolution) to lodge with the Australian Securities and Investments Commission (ASIC) an amended constitution of the Prime Trust (the Amended Constitution) to cause the amendments in the Amended Constitution to take effect (the Amendments). The Amendments that were the subject of the Lodgement Resolution purported to create rights in APCHL that, if exercised, would result in a diminution of the assets of the Prime Trust without providing any or any equivalent benefit to the Members of the Prime Trust (the Members). In so doing, Mr Lewski on 22 August 2006: (a) failed to consider and understand, and be satisfied that the Board had considered and understood, the effect of a deed of variation dated 22 August 2006, which contained the Amendments; (b) failed to consider whether, and be satisfied that, there was a legitimate reason for the Responsible Entity to make the Amendments; (c) failed to be satisfied that the Board had considered: (i) legal advice that the Amendments, if made without the approval of the Members, would comply with the Act and the existing constitution of Prime Trust (the Existing Constitution); or (ii) judicial advice that the Responsible Entity would be justified in making the Amendments without the approval of the Members; (d) failed to consider, and be satisfied that the Board had considered, whether the Amendments if made without the approval of the Members would comply with the Act and the Existing Constitution; (e) failed to consider, and be satisfied that the Board had considered, the effect of the Amendments on the rights and interests of the Members; (f) failed to be satisfied that the Board had considered the effect of the Amendments on the interests of APCHL, Mr Lewski and entities related to and associated with Mr Lewski; and (g) failed to consider and be satisfied that the Board had considered how, if at all, the conflict between the interests of the Members and the interests of APCHL could be resolved in favour of the Members.
9. The second defendant, William Lionel Lewski, contravened s. 601FD(3) of the Act by reason of him having contravened s. 601FD(1)(c) of the Act, in that, in his capacity as a director of the Responsible Entity, he failed to act in the best interests of the Members and failed to give priority to the interests of the Members over the interests of APCHL, in voting in favour of the Lodgement Resolution on 22 August 2006, in circumstances where: (a) he did not give any consideration to whether making the Amendments was in the best interests of the Members; (b) the Amendments were not in fact in the best interests of the Members; (c) a director of APCHL in the position of Mr Lewski could not reasonably have believed that the Amendments were in the best interests of the Members; and (d) there was a conflict between: (i) the interests of APCHL in being paid the additional fees provided for by the Amendments and the interests of the members in paying only the fees under the Existing Constitution; and (ii) the interests of APCHL in being paid the additional fees and its duties to act in the Members' best interests.
10. The second defendant, William Lionel Lewski, contravened s. 601FD(3) of the Act and so contravened s. 601FD(1)(e) of the Act, in that, in his capacity as a director of the Responsible Entity, he made improper use of his position as an officer of the Responsible Entity to provide an advantage to APCHL, in voting in favour of the Lodgement Resolution on 22 August 2006, in circumstances including the following: (a) the Lodgement Resolution advantaged APCHL, because the Amendments purported to create rights in APCHL that would, if exercised, benefit APCHL; (b) by voting in favour of the Lodgement Resolution, he used his position as a director of APCHL intending to cause the Amendments to become effective; and (c) the use of his position was improper because a person properly exercising the powers of a director of a trustee in the circumstances, which included the following (collectively, the Five Principal Factors): (i) the fees to be payable pursuant to the Amendments were payable to APCHL in its personal capacity (and through it to Mr Lewski) and were to come from property held on trust by APCHL for the members. APCHL was acting as a trustee; (ii) consideration of the Amendments created self-evident conflicts: (A) between APCHL's interest in becoming entitled to the additional fees through the Amendments and the Members' interests in having APCHL perform its services as Responsible Entity for the fees in the Existing Constitution; and (B) between APCHL's interest in becoming entitled to the additional fees payable pursuant to the Amendments and its statutory duty to act in the best interests of the Members and to give priority to their interests; (iii) the nature of the proposed additional fees was that: (A) APCHL was given contingent rights to take multiple fees to the value of 2.5% of the gross assets of the Prime Trust out of Prime Trust funds. Absent the Amendments the Members had the right to the services of APCHL as Responsible Entity without the additional fees; (B) the listing fee payable pursuant to the Amendments (the Listing Fee) imposed a fee if the Prime Trust was listed, in circumstances where under the Existing Constitution the Members were entitled to expect listing to occur without a fee if the directors considered that listing was in the Members' best interests (as they did); (C) the 'removal fee' payable pursuant to the Amendments imposed a fee for the exercise of the Members' right to remove APCHL as Responsible Entity, which the Members could require without a fee under the Existing Constitution; (D) the 'takeover fee' payable pursuant to the Amendments (the Takeover Fee) substantially increased the fee payable on a third party acquiring shares over certain thresholds; (E) the Takeover Fee could be payable on multiple occasions; and (F) the fees payable pursuant to the Amendments could be payable notwithstanding that another of the fees had previously been paid; (iv) the fees payable pursuant to the Amendments were substantial, each having a value of between about $11.25 million and $21.6 million at the time of the Amendments (which was in the order of 6.7% of the net scheme property of the Prime Trust after borrowings were taken into account); and (v) the fees payable pursuant to the Amendments were gratuitous in the sense that no, or no equivalent, countervailing benefit was provided to the Members in return for them - could not have considered it proper to pass the Lodgement Resolution and would have refused to use his position to permit the Amendments to become effective.
11. The second defendant, William Lionel Lewski, contravened s. 601FD(3) of the Act by reason of him having contravened s. 601FD(1)(e) of the Act in that, in his capacity as a director of the Responsible Entity, he made improper use of his position as an officer of the Responsible Entity to provide an indirect advantage to those persons who would benefit from the fees payable pursuant to the Amendments, in that: (a) the Amendments purported to create rights in APCHL that would, if exercised, by their benefit to APCHL benefit those with an ownership interest in APCHL or rights to share in or receive a proportion of its profits or revenue, namely Mr Lewski, several of his family members and companies associated with him; (b) by voting in favour of the Lodgement Resolution, he used his position as a director of APCHL intending to cause the Amendments to become effective; and (c) the use of his position was improper because a person properly exercising the powers of a director of a trustee in the circumstances, which included the Five Principal Factors, could not have considered it proper to pass the Lodgement Resolution and would have refused to use his position to permit them to become effective.
12. The second defendant, William Lionel Lewski, contravened s. 601FD(3) of the Act by reason of him having contravened s. 601FD(1)(f) of the Act in that, in his capacity as a director of the Responsible Entity, he failed to take all steps that a reasonable person would have taken if that reasonable person were in Mr Lewski's position to ensure that APCHL complied with the constitution of Prime Trust and the Act, in that: (a) in purporting to make the Amendments, APCHL did not comply with the Existing Constitution; (b) in purporting to make the Amendments, APCHL did not comply with s. 601FC(1)(m) of the Act; and (c) Mr Lewski voted in favour of the Lodgement Resolution: (i) intending to make the Amendments effective; (ii) without being satisfied that the Board had considered clear legal advice that in making the Amendments without the approval of the Members, the Responsible Entity would comply with the Act and the Existing Constitution; (iii) without taking any steps to cause APCHL to obtain judicial advice as to whether APCHL was empowered to make, and justified in making, the Amendments without the approval of the Members; (iv) without seeking the approval of the Amendments by the Members; and (v) without giving any consideration on 22 August 2006 to the Board's power to make the amendments or the need for proper legal advice or judicial advice.
13. The second defendant, William Lionel Lewski, contravened s. 209(2) of the Act (as modified by Part 5C.7 of the Act) by being involved (as that term is used in s. 79 of the Act) in a contravention by APCHL of s. 208 of the Act as modified by Part 5C.7 of the Act, as follows: (a) APCHL contravened s. 208 of the Act as modified by Part 5C.7 of the Act, in that: (i) on 3 August 2007, it caused to be issued to itself in its personal capacity ordinary units of the Prime Trust with a value of $3,293,994 as and by way of a 10 per cent instalment of the Listing Fee (the First Scrip Instalment); (ii) on 13 March 2008, it caused to be transferred $329,399 of the monies held by it as Trustee of Prime Trust to itself in its personal capacity in respect of GST on the First Scrip Instalment, (collectively, the First Instalment); (iii) on 27 June 2008, it caused to be issued to Carey Bay Pty Ltd 9,020,386 units in the Prime Trust valued at $5,000,000; and (iv) on 30 June 2008, it transferred $27,610,548.30 of the monies held by it as trustee of Prime Trust to itself in its personal capacity, (collectively the Second Instalment), without obtaining the approval of the Members and notwithstanding that, as a matter of law, the First Instalment and the Second Instalment and each component of them were not provided for in the constitution of Prime Trust; (b) Mr Lewski participated in the meetings of the Board on 26 June 2007 and 27 July 2007 and assented to the resolutions passed at those meetings that authorised the payment of the First Instalment to APCHL in circumstances where he knew that: (i) payment of the First Instalment was "a financial benefit" (as that expression is used in s. 208(1) of the Act); (ii) the First Instalment was given by APCHL as Responsible Entity; (iii) the First Instalment was given out of the scheme property of Prime Trust (Scheme Property); (iv) the First Instalment was given to APCHL itself; and (v) APCHL did not obtain the Members' approval for the payment of the First Instalment. (c) Mr Lewski: (i) on 28 April 2008 executed the Heads of Agreement; (ii) participated in the meeting of the Board on 27 June 2008 and the resolution passed at that meeting which authorised the execution on behalf of APCHL of the Deed of Acknowledgement under which APCHL agreed to pay the Second Instalment; when he knew that: (iii) payment of the Second Instalment was "a financial benefit" (as that expression is used within s. 208(1) of the Act); (iv) the Second Instalment was given by APCHL as Responsible Entity; (v) the Second Instalment was given out of Scheme Property; (vi) the Second Instalment was given partly to APCHL itself and partly to Carey Bay which was a related party of APCHL; and (vii) APCHL did not obtain the Members' approval for the payment of the Second Instalment.
14. The second defendant, William Lionel Lewski, contravened s. 601FD(3) of the Act by reason of him having contravened s. 601FD(1)(c) of the Act, in that, in his capacity as a director of the Responsible Entity, he failed to act in the best interests of the Members and failed to give priority to the interests of the Members over the interests of APCHL, in that he: (a) voted in favour of or otherwise assented to the resolution on 26 June 2007 in the following terms: "the Listing fee be taken by the Responsible Entity as Units in the Trust of which approximately ten per cent is to be issued to the Responsible Entity at the time of allotment and official quotation of Prime Trust's units on the ASX. The balance of the listing fee will be deferred and payable in tranches"; and (b) voted in favour of or otherwise assented to the resolution on 27 July 2007 to the effect that APCHL would take the first tranche of the Listing Fee ostensibly payable pursuant to the Amendments as units; and (c) participated in making the decision to pay the balance of the Listing Fee by: (i) executing the Heads of Agreement on 28 April 2008; (ii) attending in the meeting of the Board on 27 June 2008 and joining in the resolution passed at that meeting which authorised the execution on behalf of APCHL of the Deed of Acknowledgement under which APCHL agreed to pay the Second Instalment; (collectively the decisions to pay the Listing Fee) in circumstances where: (d) he did not give any consideration to whether making payment of the Listing Fee gave rise to any conflict of interest; (e) a director of APCHL in the position of Mr Lewski would have been alive to APCHL's conflict of interests and conflict of interest and duty, and would have considered and sought to resolve these conflicts in favour of the members before making a decision to pay the Listing Fee; (f) payment of the Listing Fee was not in fact in the best interests of the Members; (g) a director of APCHL in the position of Mr Lewski could not in the circumstances reasonably have believed that payment of the Listing Fee was in the best interests of the Members; and (h) the proposed payment of the Listing Fee gave rise to a conflict between the interests of APCHL and the interests of the Members which should have been resolved in favour of the Members by APCHL deciding not to make the payment.
15. The second defendant, William Lionel Lewski, contravened s. 601FD(3) of the Act by reason of him having contravened s. 601FD(1)(f) of the Act, in that, in his capacity as a director of the Responsible Entity, he failed to take all steps that a reasonable person would have taken if that reasonable person were in Mr Lewski's position to ensure that APCHL complied with the Act, in that he participated in making the decisions to pay the Listing Fee by: (a) voting in favour of or otherwise assenting to the resolutions on 26 June 2007 and 27 July 2007; (b) executing the Heads of Agreement on 28 April 2008; (c) attending the meeting of the Board on 27 June 2008 and joining in the resolution passed at that meeting which authorised the execution on behalf of APCHL of the Deed of Acknowledgement under which APCHL agreed to pay the Second Instalment; in circumstances where: (d) a reasonable person in his position would not have done so without obtaining: (i) clear legal advice or a judicial direction that the Amendments had been effective, that APCHL had a right to be paid the fee under the constitution of Prime Trust and the Act, and that payment of the fee would not contravene s. 208 of the Act (as amended by s. 601LC of the Act); or (ii) the approval of the Members for payment of the fee to be made; and (e) he did not take any step towards obtaining further legal advice or a judicial direction as to the Amendments or towards obtaining the Members' approval for the payment of the Listing Fee. IN RELATION TO the tHIRD Defendant, Mark Frederick Butler, THE COURT DECLARES THAT:
16. The third defendant, Mark Frederick Butler, contravened s. 601FD(3) of the Act by reason of him having contravened s. 601FD(1)(b) of the Corporations Act 2001 (Cth) (the Act), in that, in his capacity as a director of Australian Property Custodian Holdings Limited (Receivers and Managers Appointed)(In Liquidation)(Controllers Appointed) (APCHL) in its capacity as the responsible entity (the Responsible Entity) of the Prime Retirement and Aged Care Property Trust ARSN 097 514 746 (the Prime Trust), he failed to exercise the degree of care and diligence that a reasonable person would have exercised if he or she were in Mr Butler's position, by acting as follows. On 22 August 2006, at a meeting of the board of directors of APCHL (the Board), Mr Butler voted in favour of a resolution (the Lodgement Resolution) to lodge with the Australian Securities and Investments Commission (ASIC) an amended constitution of the Prime Trust (the Amended Constitution) to cause the amendments in the Amended Constitution to take effect (the Amendments). The Amendments that were the subject of the Lodgement Resolution purported to create rights in APCHL that, if exercised, would result in a diminution of the assets of the Prime Trust without providing any or any equivalent benefit to the Members of the Prime Trust (the Members). In so doing, Mr Butler on 22 August 2006: (a) failed to consider and understand, and be satisfied that the Board had considered and understood, the effect of a deed of variation dated 22 August 2006, which contained the Amendments; (b) failed to consider whether, and be satisfied that, there was a legitimate reason for the Responsible Entity to make the Amendments; (c) failed to be satisfied that the Board had considered: (i) legal advice that the Amendments, if made without the approval of the Members, would comply with the Act and the existing constitution of Prime Trust (the Existing Constitution); or (ii) judicial advice that the Responsible Entity would be justified in making the Amendments without the approval of the Members; (d) failed to consider, and be satisfied that the Board had considered, whether the Amendments if made without the approval of the Members would comply with the Act and the Existing Constitution; (e) failed to consider, and be satisfied that the Board had considered, the effect of the Amendments on the rights and interests of the Members; (f) failed to consider the effect of the Amendments on the interests of APCHL; (g) failed to consider the effect of the Amendments on the interests of the second defendant (Mr Lewski) and entities related to and associated with Mr Lewski; (h) failed to be satisfied that the Board had considered the effect of the Amendments on the interests of APCHL, Mr Lewski and entities related to and associated with Mr Lewski; and (i) failed to consider and be satisfied that the Board had considered how, if at all, the conflict between the interests of the Members and the interests of APCHL could be resolved in favour of the Members.
17. The third defendant, Mark Frederick Butler, contravened s. 601FD(3) of the Act by reason of him having contravened s. 601FD(1)(c) of the Act, in that, in his capacity as a director of the Responsible Entity, he failed to act in the best interests of the Members and failed to give priority to the interests of the Members over the interests of APCHL, in voting in favour of the Lodgement Resolution on 22 August 2006, in circumstances where: (a) he did not give any consideration to whether making the Amendments was in the best interests of the Members; (b) the Amendments were not in fact in the best interests of the Members; (c) a director of APCHL in the position of Mr Butler could not reasonably have believed that the Amendments were in the best interests of the Members; and (d) there was a conflict between: (i) the interests of APCHL in being paid the additional fees provided for by the Amendments and the interests of the members in paying only the fees under the Existing Constitution; and (ii) the interests of APCHL in being paid the additional fees and its duties to act in the Members' best interests.
18. The third defendant, Mark Frederick Butler, contravened s. 601FD(3) of the Act and so contravened s. 601FD(1)(e) of the Act, in that, in his capacity as a director of the Responsible Entity, he made improper use of his position as an officer of the Responsible Entity to provide an advantage to APCHL, in voting favour of the Lodgement Resolution on 22 August 2006, in circumstances including the following: (a) the Lodgement Resolution advantaged APCHL, because the Amendments purported to create rights in APCHL that would, if exercised, benefit APCHL; (b) by voting in favour of the Lodgement Resolution, he used his position as a director of APCHL intending to cause the Amendments to become effective; and (c) the use of his position was improper because a person properly exercising the powers of a director of a trustee in the circumstances, which included the following (collectively, the Five Principal Factors): (i) the fees to be payable pursuant to the Amendments were payable to APCHL in its personal capacity (and through it to Mr Lewski) and were to come from property held on trust by APCHL for the members. APCHL was acting as a trustee; (ii) consideration of the Amendments created self-evident conflicts: (A) between APCHL's interest in becoming entitled to the additional fees through the Amendments and the Members' interests in having APCHL perform its services as Responsible Entity for the fees in the Existing Constitution; and (B) between APCHL's interest in becoming entitled to the additional fees payable pursuant to the Amendments and its statutory duty to act in the best interests of the Members and to give priority to their interests; (iii) the nature of the proposed additional fees was that: (A) APCHL was given contingent rights to take multiple fees to the value of 2.5% of the gross assets of the Prime Trust out of Prime Trust funds. Absent the Amendments the Members had the right to the services of APCHL as Responsible Entity without the additional fees; (B) the listing fee payable pursuant to the Amendments (the Listing Fee) imposed a fee if the Prime Trust was listed, in circumstances where under the Existing Constitution the Members were entitled to expect listing to occur without a fee if the directors considered that listing was in the Members' best interests (as they did); (C) the 'removal fee' payable pursuant to the Amendments imposed a fee for the exercise of the Members' right to remove APCHL as Responsible Entity, which the Members could require without a fee under the Existing Constitution; (D) the 'takeover fee' payable pursuant to the Amendments (the Takeover Fee) substantially increased the fee payable on a third party acquiring shares over certain thresholds; (E) the Takeover Fee could be payable on multiple occasions; and (F) the fees payable pursuant to the Amendments could be payable notwithstanding that another of the fees had previously been paid; (iv) the fees payable pursuant to the Amendments were substantial, each having a value of between about $11.25 million and $21.6 million at the time of the Amendments (which was in the order of 6.7% of the net scheme property of the Prime Trust after borrowings were taken into account); and (v) the fees payable pursuant to the Amendments were gratuitous in the sense that no, or no equivalent, countervailing benefit was provided to the Members in return for them - could not have considered it proper to pass the Lodgement Resolution and would have refused to use his position to permit the Amendments to become effective.
19. The third defendant, Mark Frederick Butler, contravened s. 601FD(3) of the Act by reason of him having contravened s. 601FD(1)(e) of the Act in that, in his capacity as a director of the Responsible Entity, he made improper use of his position as an officer of the Responsible Entity to provide an indirect advantage to those persons who would benefit from the fees payable pursuant to the Amendments, in that: (a) the Amendments purported to create rights in APCHL that would, if exercised, by their benefit to APCHL benefit those with an ownership interest in APCHL or rights to share in or receive a proportion of its profits or revenue, namely Mr Lewski, several of his family members and companies associated with him; (b) by voting in favour of the Lodgement Resolution, he used his position as a director of APCHL intending to cause the Amendments to become effective; and (c) the use of his position was improper because a person properly exercising the powers of a director of a trustee in the circumstances, which included the Five Principal Factors, could not have considered it proper to pass the Lodgement Resolution and would have refused to use his position to permit them to become effective.
20. The third defendant, Mark Frederick Butler, contravened s. 601FD(3) of the Act by reason of him having contravened s. 601FD(1)(f) of the Act in that, in his capacity as a director of the Responsible Entity, he failed to take all steps that a reasonable person would have taken if that reasonable person were in Mr Butler's position to ensure that APCHL complied with the constitution of Prime Trust and the Act, in that: (a) in purporting to make the Amendments, APCHL did not comply with the Existing Constitution; (b) in purporting to make the Amendments, APCHL did not comply with s. 601FC(1)(m) of the Act; and (c) Mr Butler voted in favour of the Lodgement Resolution: (i) intending to make the Amendments effective; (ii) without being satisfied that the Board had considered clear legal advice that in making the Amendments without the approval of the Members, the Responsible Entity would comply with the Act and the Existing Constitution; (iii) without taking any steps to cause APCHL to obtain judicial advice as to whether APCHL was empowered to make, and justified in making, the Amendments without the approval of the Members; (iv) without seeking the approval of the Amendments by the Members; and (v) without giving any consideration on 22 August 2006 to the Board's power to make the amendments or the need for proper legal advice or judicial advice.
21. The third defendant, Mark Frederick Butler, contravened s. 209(2) of the Act (as modified by Part 5C.7 of the Act) by being involved (as that term is used in s. 79 of the Act) in a contravention by APCHL of s. 208 of the Act as modified by Part 5C.7 of the Act, as follows: (a) APCHL contravened s. 208 of the Act as modified by Part 5C.7 of the Act, in that: (i) on 3 August 2007, it caused to be issued to itself in its personal capacity ordinary units of the Prime Trust with a value of $3,293,994 as and by way of a 10 per cent instalment of the Listing Fee (the First Scrip Instalment); (ii) on 13 March 2008, it caused to be transferred $329,399 of the monies held by it as Trustee of Prime Trust to itself in its personal capacity in respect of GST on the First Scrip Instalment, (collectively, the First Instalment) (iii) on 27 June 2008, it caused to be issued to Carey Bay Pty Ltd 9,020,386 units in the Prime Trust valued at $5,000,000; and (iv) on 30 June 2008, it transferred $27,610,548.30 of the monies held by it as trustee of Prime Trust to itself in its personal capacity, (collectively the Second Instalment) without obtaining the approval of the Members and notwithstanding that, as a matter of law, the First Instalment and the Second Instalment and each component of them were not provided for in the constitution of Prime Trust; (b) Mr Butler participated in the meetings of the Board on 26 June 2007 and 27 July 2007 and assented to the resolutions passed at those meetings that authorised the payment of the First Instalment to APCHL in circumstances where he knew that: (i) payment of the First Instalment was "a financial benefit" (as that expression is used in s. 208(1) of the Act); (ii) the First Instalment was given by APCHL as Responsible Entity; (iii) the First Instalment was given out of the scheme property of Prime Trust (Scheme Property); (iv) the First Instalment was given to APCHL itself; and (v) APCHL did not obtain the Members' approval for the payment of the First Instalment; (c) Mr Butler on 24 April 2008 approved the execution on behalf of APCHL of the document entitled Heads of Agreement - APCHL Restructure (the Heads of Agreement) under which APCHL agreed to pay the Second Instalment when he knew that: (i) payment of the Second Instalment was "a financial benefit" (as that expression is used within s. 208(1) of the Act); (ii) the Second Instalment was given by APCHL as Responsible Entity; (iii) the Second Instalment was given out of Scheme Property; (iv) the Second Instalment was given partly to APCHL itself and partly to Carey Bay which was a related party of APCHL; and (v) APCHL did not obtain the Members' approval for the payment of the Second Instalment.
22. The third defendant, Mark Frederick Butler, contravened s. 601FD(3) of the Act by reason of him having contravened s. 601FD(1)(c) of the Act, in that, in his capacity as a director of the Responsible Entity, he failed to act in the best interests of the Members and failed to give priority to the interests of the Members over the interests of APCHL, in that he: (a) voted in favour of or otherwise assented to the resolution on 26 June 2007 in the following terms: "the Listing fee be taken by the Responsible Entity as Units in the Trust of which approximately ten per cent is to be issued to the Responsible Entity at the time of allotment and official quotation of Prime Trust's units on the ASX. The balance of the listing fee will be deferred and payable in tranches"; and (b) voted in favour of or otherwise assented to the resolution on 27 July 2007 to the effect that APCHL would take the first tranche of the Listing Fee ostensibly payable pursuant to the Amendments as units; (c) participated in making the decision to pay the balance of the Listing Fee by approving on 24 April 2008 the execution on behalf of APCHL of the Heads of Agreement under which APCHL agreed to pay the Second Instalment (collectively the decisions to pay the Listing Fee) in circumstances where: (d) he did not give any consideration to whether making payment of the Listing Fee gave rise to any conflict of interest; (e) a director of APCHL in the position of Mr Butler would have been alive to APCHL's conflict of interests and conflict of interest and duty, and would have considered and sought to resolve these conflicts in favour of the members before making a decision to pay the Listing Fee; (f) payment of the Listing Fee was not in fact in the best interests of the Members; (g) a director of APCHL in the position of Mr Butler could not in the circumstances reasonably have believed that payment of the Listing Fee was in the best interests of the Members; and (h) the proposed payment of the Listing Fee gave rise to a conflict between the interests of APCHL and the interests of the Members which should have been resolved in favour of the Members by APCHL deciding not to make the payment.
23. The third defendant, Mark Frederick Butler, contravened s. 601FD(3) of the Act by reason of him having contravened s. 601FD(1)(f) of the Act, in that, in his capacity as a director of the Responsible Entity, he failed to take all steps that a reasonable person would have taken if that reasonable person were in Mr Butler's position to ensure that APCHL complied with the Act, in that he participated in making the decisions to pay the Listing Fee by: (a) voting in favour of or otherwise assenting to the resolutions on 26 June 2007 and 27 July 2007; (b) approving on 24 April 2008 the execution on behalf of APCHL of the Heads of Agreement under which APCHL agreed to pay the Second Instalment in circumstances where: (c) a reasonable person in his position would not have done so without obtaining: (i) clear legal advice or a judicial direction that the Amendments had been effective, that APCHL had a right to be paid the fee under the constitution of Prime Trust and the Act, and that payment of the fee would not contravene s. 208 of the Act (as amended by s. 601LC of the Act); or (ii) the approval of the Members for payment of the fee to be made; and (d) he did not take any step towards obtaining further legal advice or a judicial direction as to the Amendments or towards obtaining the Members' approval for the payment of the Listing Fee. IN RELATION TO the fOURTH Defendant, Kim Jaques, THE COURT DECLARES THAT:
24. The fourth defendant, Kim Jaques, contravened s. 601FD(3) of the Act by reason of him having contravened s. 601FD(1)(b) of the Corporations Act 2001 (Cth) (the Act), in that, in his capacity as a director of Australian Property Custodian Holdings Limited (Receivers and Managers Appointed)(In Liquidation)(Controllers Appointed) (APCHL) in its capacity as the responsible entity (the Responsible Entity) of the Prime Retirement and Aged Care Property Trust ARSN 097 514 746 (the Prime Trust), he failed to exercise the degree of care and diligence that a reasonable person would have exercised if he or she were in Mr Jaques's position, by acting as follows. On 22 August 2006, at a meeting of the board of directors of APCHL (the Board), Mr Jaques voted in favour of a resolution (the Lodgement Resolution) to lodge with the Australian Securities and Investments Commission (ASIC) an amended constitution of the Prime Trust (the Amended Constitution) to cause the amendments in the Amended Constitution to take effect (the Amendments). The Amendments that were the subject of the Lodgement Resolution purported to create rights in APCHL that, if exercised, would result in a diminution of the assets of the Prime Trust without providing any or any equivalent benefit to the Members of the Prime Trust (the Members). In so doing, Mr Jaques on 22 August 2006: (a) failed to consider and understand, and be satisfied that the Board had considered and understood, the effect of a deed of variation dated 22 August 2006, which contained the Amendments; (b) failed to consider whether, and be satisfied that, there was a legitimate reason for the Responsible Entity to make the Amendments; (c) failed to be satisfied that the Board had considered: (i) legal advice that the Amendments, if made without the approval of the Members, would comply with the Act and the existing constitution of Prime Trust (the Existing Constitution); or (ii) judicial advice that the Responsible Entity would be justified in making the Amendments without the approval of the Members; (d) failed to consider, and be satisfied that the Board had considered, whether the Amendments if made without the approval of the Members would comply with the Act and the Existing Constitution; (e) failed to consider, and be satisfied that the Board had considered, the effect of the Amendments on the rights and interests of the Members; (f) failed to consider the effect of the Amendments on the interests of APCHL; (g) failed to consider the effect of the Amendments on the interests of the second defendant (Mr Lewski) and entities related to and associated with Mr Lewski; (h) failed to be satisfied that the Board had considered the effect of the Amendments on the interests of APCHL, Mr Lewski and entities related to and associated with Mr Lewski; and (i) failed to consider and be satisfied that the Board had considered how, if at all, the conflict between the interests of the Members and the interests of APCHL could be resolved in favour of the Members.
25. The fourth defendant, Kim Jaques, contravened s. 601FD(3) of the Act by reason of him having contravened s. 601FD(1)(c) of the Act, in that, in his capacity as a director of the Responsible Entity, he failed to act in the best interests of the Members and failed to give priority to the interests of the Members over the interests of APCHL, in voting in favour of the Lodgement Resolution on 22 August 2006, in circumstances where: (a) he did not give any consideration to whether making the Amendments was in the best interests of the Members; (b) the Amendments were not in fact in the best interests of the Members; (c) a director of APCHL in the position of Mr Jaques could not reasonably have believed that the Amendments were in the best interests of the Members; and (d) there was a conflict between: (i) the interests of APCHL in being paid the additional fees provided for by the Amendments and the interests of the members in paying only the fees under the Existing Constitution; and (ii) the interests of APCHL in being paid the additional fees and its duties to act in the Members' best interests.
26. The fourth defendant, Kim Jaques, contravened s. 601FD(3) of the Act and so contravened s. 601FD(1)(e) of the Act, in that, in his capacity as a director of the Responsible Entity, he made improper use of his position as an officer of the Responsible Entity to provide an advantage to APCHL, in voting favour of the Lodgement Resolution on 22 August 2006, in circumstances including the following: (a) the Lodgement Resolution advantaged APCHL, because the Amendments purported to create rights in APCHL that would, if exercised, benefit APCHL; (b) by voting in favour of the Lodgement Resolution, he used his position as a director of APCHL intending to cause the Amendments to become effective; and (c) the use of his position was improper because a person properly exercising the powers of a director of a trustee in the circumstances, which included the following (collectively, the Five Principal Factors): (i) the fees to be payable pursuant to the Amendments were payable to APCHL in its personal capacity (and through it to Mr Lewski) and were to come from property held on trust by APCHL for the members. APCHL was acting as a trustee; (ii) consideration of the Amendments created self-evident conflicts: (A) between APCHL's interest in becoming entitled to the additional fees through the Amendments and the Members' interests in having APCHL perform its services as Responsible Entity for the fees in the Existing Constitution; and (B) between APCHL's interest in becoming entitled to the additional fees payable pursuant to the Amendments and its statutory duty to act in the best interests of the Members and to give priority to their interests; (iii) the nature of the proposed additional fees was that: (A) APCHL was given contingent rights to take multiple fees to the value of 2.5% of the gross assets of the Prime Trust out of Prime Trust funds. Absent the Amendments the Members had the right to the services of APCHL as Responsible Entity without the additional fees; (B) the listing fee payable pursuant to the Amendments (the Listing Fee) imposed a fee if the Prime Trust was listed, in circumstances where under the Existing Constitution the Members were entitled to expect listing to occur without a fee if the directors considered that listing was in the Members' best interests (as they did); (C) the 'removal fee' payable pursuant to the Amendments imposed a fee for the exercise of the Members' right to remove APCHL as Responsible Entity, which the Members could require without a fee under the Existing Constitution; (D) the 'takeover fee' payable pursuant to the Amendments (the Takeover Fee) substantially increased the fee payable on a third party acquiring shares over certain thresholds; (E) the Takeover Fee could be payable on multiple occasions; and (F) the fees payable pursuant to the Amendments could be payable notwithstanding that another of the fees had previously been paid; (iv) the fees payable pursuant to the Amendments were substantial, each having a value of between about $11.25 million and $21.6 million at the time of the Amendments (which was in the order of 6.7% of the net scheme property of the Prime Trust after borrowings were taken into account); and (v) the fees payable pursuant to the Amendments were gratuitous in the sense that no, or no equivalent, countervailing benefit was provided to the Members in return for them - could not have considered it proper to pass the Lodgement Resolution and would have refused to use his position to permit the Amendments to become effective.
27. The fourth defendant, Kim Jaques, contravened s. 601FD(3) of the Act by reason of him having contravened s. 601FD(1)(e) of the Act in that, in his capacity as a director of the Responsible Entity, he made improper use of his position as an officer of the Responsible Entity to provide an indirect advantage to those persons who would benefit from the fees payable pursuant to the Amendments, in that: (a) the Amendments purported to create rights in APCHL that would, if exercised, by their benefit to APCHL benefit those with an ownership interest in APCHL or rights to share in or receive a proportion of its profits or revenue, namely Mr Lewski, several of his family members and companies associated with him; (b) by voting in favour of the Lodgement Resolution, he used his position as a director of APCHL intending to cause the Amendments to become effective; and (c) the use of his position was improper because a person properly exercising the powers of a director of a trustee in the circumstances, which included the Five Principal Factors, could not have considered it proper to pass the Lodgement Resolution and would have refused to use his position to permit them to become effective.
28. The fourth defendant, Kim Jaques, contravened s. 601FD(3) of the Act by reason of him having contravened s. 601FD(1)(f) of the Act in that, in his capacity as a director of the Responsible Entity, he failed to take all steps that a reasonable person would have taken if that reasonable person were in Mr Jaques's position to ensure that APCHL complied with the constitution of Prime Trust and the Act, in that: (a) in purporting to make the Amendments, APCHL did not comply with the Existing Constitution; (b) in purporting to make the Amendments, APCHL did not comply with s. 601FC(1)(m) of the Act; and (c) Mr Jaques voted in favour of the Lodgement Resolution: (i) intending to make the Amendments effective; (ii) without being satisfied that the Board had considered clear legal advice that in making the Amendments without the approval of the Members, the Responsible Entity would comply with the Act and the Existing Constitution; (iii) without taking any steps to cause APCHL to obtain judicial advice as to whether APCHL was empowered to make, and justified in making, the Amendments without the approval of the Members; (iv) without seeking the approval of the Amendments by the Members; and (v) without giving any consideration on 22 August 2006 to the Board's power to make the amendments or the need for proper legal advice or judicial advice.
29. The fourth defendant, Kim Jaques, contravened s. 209(2) of the Act (as modified by Part 5C.7 of the Act) by being involved (as that term is used in s. 79 of the Act) in a contravention by APCHL of s. 208 of the Act as modified by Part 5C.7 of the Act, as follows: (a) APCHL contravened s. 208 of the Act as modified by Part 5C.7 of the Act, in that: (i) on 3 August 2007, it caused to be issued to itself in its personal capacity ordinary units of the Prime Trust with a value of $3,293,994 as and by way of a 10 per cent instalment of the Listing Fee (the First Scrip Instalment); (ii) on 13 March 2008, it caused to be transferred $329,399 of the monies held by it as Trustee of Prime Trust to itself in its personal capacity in respect of GST on the First Scrip Instalment, (collectively, the First Instalment) (iii) on 27 June 2008, it caused to be issued to Carey Bay Pty Ltd 9,020,386 units in the Prime Trust valued at $5,000,000; and (iv) on 30 June 2008, it transferred $27,610,548.30 of the monies held by it as trustee of Prime Trust to itself in its personal capacity, (collectively the Second Instalment) without obtaining the approval of the Members and notwithstanding that, as a matter of law, the First Instalment and the Second Instalment and each component of them were not provided for in the constitution of Prime Trust; (b) Mr Jaques participated in the meetings of the Board on 26 June 2007 and 27 July 2007 and assented to the resolutions passed at those meetings that authorised the payment of the First Instalment to APCHL in circumstances where he knew that: (i) payment of the First Instalment was "a financial benefit" (as that expression is used in s. 208(1) of the Act); (ii) the First Instalment was given by APCHL as Responsible Entity; (iii) the First Instalment was given out of the scheme property of Prime Trust (Scheme Property); (iv) the First Instalment was given to APCHL itself; and (v) APCHL did not obtain the Members' approval for the payment of the First Instalment. (c) Mr Jaques: (i) on 23 April 2008 approved the execution on behalf of APCHL of the document entitled Heads of Agreement - APCHL Restructure (the Heads of Agreement) under which APCHL agreed to pay the Second Instalment; (ii) participated in the meeting of the Board on 27 June 2008 and the resolution passed at that meeting which authorised the execution on behalf of APCHL of the Deed of Acknowledgement under which APCHL agreed to pay the Second Instalment; when he knew that: (iii) payment of the Second Instalment was "a financial benefit" (as that expression is used within s. 208(1) of the Act); (iv) the Second Instalment was given by APCHL as Responsible Entity; (v) the Second Instalment was given out of Scheme Property; (vi) the Second Instalment was given partly to APCHL itself and partly to Carey Bay which was a related party of APCHL; and (vii) APCHL did not obtain the Members' approval for the payment of the Second Instalment.
30. The fourth defendant, Kim Jaques, contravened s. 601FD(3) of the Act by reason of him having contravened s. 601FD(1)(c) of the Act, in that, in his capacity as a director of the Responsible Entity, he failed to act in the best interests of the Members and failed to give priority to the interests of the Members over the interests of APCHL, in that he (a) voted in favour of or otherwise assented to the resolution on 26 June 2007 in the following terms: "the Listing fee be taken by the Responsible Entity as Units in the Trust of which approximately ten per cent is to be issued to the Responsible Entity at the time of allotment and official quotation of Prime Trust's units on the ASX. The balance of the listing fee will be deferred and payable in tranches"; and (b) voted in favour of or otherwise assented to the resolution on 27 July 2007 to the effect that APCHL would take the first tranche of the Listing Fee ostensibly payable pursuant to the Amendments as units; (c) approving on 23 April 2008 the execution on behalf of APCHL of the Heads of Agreement under which APCHL agreed to pay the Second Instalment; (d) attending in the meeting of the Board on 27 June 2008 and joining in the resolution passed at that meeting which authorised the execution on behalf of APCHL of the Deed of Acknowledgement under which APCHL agreed to pay the Second Instalment; (collectively the decisions to pay the Listing fee) in circumstances where: (e) he did not give any consideration to whether making payment of the Listing Fee gave rise to any conflict of interest; (f) a director of APCHL in the position of Mr Jaques would have been alive to APCHL's conflict of interests and conflict of interest and duty, and would have considered and sought to resolve these conflicts in favour of the members before making a decision to pay the Listing Fee; (g) payment of the Listing Fee was not in fact in the best interests of the Members; (h) a director of APCHL in the position of Mr Jaques could not in the circumstances reasonably have believed that payment of the Listing Fee was in the best interests of the Members; and (i) the proposed payment of the Listing Fee gave rise to a conflict between the interests of APCHL and the interests of the Members which should have been resolved in favour of the Members by APCHL deciding not to make the payment.
31. The fourth defendant, Kim Jaques, contravened s. 601FD(3) of the Act by reason of him having contravened s. 601FD(1)(f) of the Act, in that, in his capacity as a director of the Responsible Entity, he failed to take all steps that a reasonable person would have taken if that reasonable person were in Mr Jaques's position to ensure that APCHL complied with the Act, in that he participated in making the decisions to pay the Listing Fee by: (a) voting in favour of or otherwise assenting to the resolutions on 26 June 2007 and 27 July 2007; (b) approving on 23 April 2008 the execution on behalf of APCHL of the Heads of Agreement under which APCHL agreed to pay the Second Instalment; (c) attending in the meeting of the Board on 27 June 2008 and joining in the resolution passed at that meeting which authorised the execution on behalf of APCHL of the Deed of Acknowledgement under which APCHL agreed to pay the Second Instalment; in circumstances where: (d) a reasonable person in his position would not have done so without obtaining: (i) clear legal advice or a judicial direction that the Amendments had been effective, that APCHL had a right to be paid the fee under the constitution of Prime Trust and the Act, and that payment of the fee would not contravene s. 208 of the Act (as amended by s. 601LC of the Act); or (ii) the approval of the Members for payment of the fee to be made; and (e) he did not take any step towards obtaining further legal advice or a judicial direction as to the Amendments or towards obtaining the Members' approval for the payment of the Listing Fee. THE COURT DECLARES IN RELATION TO the fIFTH Defendant, Michael Richard Lewis Wooldridge, THAT:
32. The fifth defendant, Michael Richard Lewis Wooldridge, contravened s. 601FD(3) of the Act by reason of him having contravened s. 601FD(1)(b) of the Corporations Act 2001 (Cth) (the Act), in that, in his capacity as a director of Australian Property Custodian Holdings Limited (Receivers and Managers Appointed)(In Liquidation)(Controllers Appointed) (APCHL) in its capacity as the responsible entity (the Responsible Entity) of the Prime Retirement and Aged Care Property Trust ARSN 097 514 746 (the Prime Trust), he failed to exercise the degree of care and diligence that a reasonable person would have exercised if he or she were in Dr Wooldridge's position, by acting as follows. On 22 August 2006, at a meeting of the board of directors of APCHL (the Board), Dr Wooldridge voted in favour of a resolution (the Lodgement Resolution) to lodge with the Australian Securities and Investments Commission (ASIC) an amended constitution of the Prime Trust (the Amended Constitution) to cause the amendments in the Amended Constitution to take effect (the Amendments). The Amendments that were the subject of the Lodgement Resolution purported to create rights in APCHL that, if exercised, would result in a diminution of the assets of the Prime Trust without providing any or any equivalent benefit to the Members of the Prime Trust (the Members). In so doing, Dr Wooldridge on 22 August 2006: (a) failed to consider and understand, and be satisfied that the Board had considered and understood, the effect of a deed of variation dated 22 August 2006, which contained the Amendments; (b) failed to consider whether, and be satisfied that, there was a legitimate reason for the Responsible Entity to make the Amendments; (c) failed to be satisfied that the Board had considered: (i) legal advice that the Amendments, if made without the approval of the Members, would comply with the Act and the existing constitution of Prime Trust (the Existing Constitution); or (ii) judicial advice that the Responsible Entity would be justified in making the Amendments without the approval of the Members; (d) failed to consider, and be satisfied that the Board had considered, whether the Amendments if made without the approval of the Members would comply with the Act and the Existing Constitution; (e) failed to consider, and be satisfied that the Board had considered, the effect of the Amendments on the rights and interests of the Members; (f) failed to consider the effect of the Amendments on the interests of APCHL; (g) failed to consider the effect of the Amendments on the interests of the second defendant (Mr Lewski) and entities related to and associated with Mr Lewski; (h) failed to be satisfied that the Board had considered the effect of the Amendments on the interests of APCHL, Mr Lewski and entities related to and associated with Mr Lewski; and (i) failed to consider and be satisfied that the Board had considered how, if at all, the conflict between the interests of the Members and the interests of APCHL could be resolved in favour of the Members.
33. The fifth defendant, Michael Richard Lewis Wooldridge, contravened s. 601FD(3) of the Act by reason of him having contravened s. 601FD(1)(c) of the Act, in that, in his capacity as a director of the Responsible Entity, he failed to act in the best interests of the Members and failed to give priority to the interests of the Members over the interests of APCHL, in voting in favour of the Lodgement Resolution on 22 August 2006, in circumstances where: (a) he did not give any consideration to whether making the Amendments was in the best interests of the Members; (b) the Amendments were not in fact in the best interests of the Members; (c) a director of APCHL in the position of Dr Wooldridge could not reasonably have believed that the Amendments were in the best interests of the Members; and (d) there was a conflict between: (i) the interests of APCHL in being paid the additional fees provided for by the Amendments and the interests of the members in paying only the fees under the Existing Constitution; and (ii) the interests of APCHL in being paid the additional fees and its duties to act in the Members' best interests.
34. The fifth defendant, Michael Richard Lewis Wooldridge, contravened s. 601FD(3) of the Act and so contravened s. 601FD(1)(e) of the Act, in that, in his capacity as a director of the Responsible Entity, he made improper use of his position as an officer of the Responsible Entity to provide an advantage to APCHL, in voting favour of the Lodgement Resolution on 22 August 2006, in circumstances including the following: (a) the Lodgement Resolution advantaged APCHL, because the Amendments purported to create rights in APCHL that would, if exercised, benefit APCHL; (b) by voting in favour of the Lodgement Resolution, he used his position as a director of APCHL intending to cause the Amendments to become effective; and (c) the use of his position was improper because a person properly exercising the powers of a director of a trustee in the circumstances, which included the following (collectively, the Five Principal Factors): (i) the fees to be payable pursuant to the Amendments were payable to APCHL in its personal capacity (and through it to Mr Lewski) and were to come from property held on trust by APCHL for the members. APCHL was acting as a trustee; (ii) consideration of the Amendments created self-evident conflicts: (A) between APCHL's interest in becoming entitled to the additional fees through the Amendments and the Members' interests in having APCHL perform its services as Responsible Entity for the fees in the Existing Constitution; and (B) between APCHL's interest in becoming entitled to the additional fees payable pursuant to the Amendments and its statutory duty to act in the best interests of the Members and to give priority to their interests; (iii) the nature of the proposed additional fees was that: (A) APCHL was given contingent rights to take multiple fees to the value of 2.5% of the gross assets of the Prime Trust out of Prime Trust funds. Absent the Amendments the Members had the right to the services of APCHL as Responsible Entity without the additional fees; (B) the listing fee payable pursuant to the Amendments (the Listing Fee) imposed a fee if the Prime Trust was listed, in circumstances where under the Existing Constitution the Members were entitled to expect listing to occur without a fee if the directors considered that listing was in the Members' best interests (as they did); (C) the 'removal fee' payable pursuant to the Amendments imposed a fee for the exercise of the Members' right to remove APCHL as Responsible Entity, which the Members could require without a fee under the Existing Constitution; (D) the 'takeover fee' payable pursuant to the Amendments (the Takeover Fee) substantially increased the fee payable on a third party acquiring shares over certain thresholds; (E) the Takeover Fee could be payable on multiple occasions; and (F) the fees payable pursuant to the Amendments could be payable notwithstanding that another of the fees had previously been paid; (iv) the fees payable pursuant to the Amendments were substantial, each having a value of between about $11.25 million and $21.6 million at the time of the Amendments (which was in the order of 6.7% of the net scheme property of the Prime Trust after borrowings were taken into account); and (v) the fees payable pursuant to the Amendments were gratuitous in the sense that no, or no equivalent, countervailing benefit was provided to the Members in return for them - could not have considered it proper to pass the Lodgement Resolution and would have refused to use his position to permit the Amendments to become effective.
35. The fifth defendant, Michael Richard Lewis Wooldridge, contravened s. 601FD(3) of the Act by reason of him having contravened s. 601FD(1)(e) of the Act in that, in his capacity as a director of the Responsible Entity, he made improper use of his position as an officer of the Responsible Entity to provide an indirect advantage to those persons who would benefit from the fees payable pursuant to the Amendments, in that: (a) the Amendments purported to create rights in APCHL that would, if exercised, by their benefit to APCHL benefit those with an ownership interest in APCHL or rights to share in or receive a proportion of its profits or revenue, namely Mr Lewski, several of his family members and companies associated with him; (b) by voting in favour of the Lodgement Resolution, he used his position as a director of APCHL intending to cause the Amendments to become effective; and (c) the use of his position was improper because a person properly exercising the powers of a director of a trustee in the circumstances, which included the Five Principal Factors, could not have considered it proper to pass the Lodgement Resolution and would have refused to use his position to permit them to become effective.
36. The fifth defendant, Michael Richard Lewis Wooldridge, contravened s. 601FD(3) of the Act by reason of him having contravened s. 601FD(1)(f) of the Act in that, in his capacity as a director of the Responsible Entity, he failed to take all steps that a reasonable person would have taken if that reasonable person were in Dr Wooldridge's position to ensure that APCHL complied with the constitution of Prime Trust and the Act, in that: (a) in purporting to make the Amendments, APCHL did not comply with the Existing Constitution; (b) in purporting to make the Amendments, APCHL did not comply with s. 601FC(1)(m) of the Act; and (c) Dr Wooldridge voted in favour of the Lodgement Resolution: (i) intending to make the Amendments effective; (ii) without being satisfied that the Board had considered clear legal advice that in making the Amendments without the approval of the Members, the Responsible Entity would comply with the Act and the Existing Constitution; (iii) without taking any steps to cause APCHL to obtain judicial advice as to whether APCHL was empowered to make, and justified in making, the Amendments without the approval of the Members; (iv) without seeking the approval of the Amendments by the Members; and (v) without giving any consideration on 22 August 2006 to the Board's power to make the amendments or the need for proper legal advice or judicial advice.
37. The fifth defendant, Michael Richard Lewis Wooldridge, contravened s. 209(2) of the Act (as modified by Part 5C.7 of the Act) by being involved (as that term is used in s. 79 of the Act) in a contravention by APCHL of s. 208 of the Act as modified by Part 5C.7 of the Act, as follows: (a) APCHL contravened s. 208 of the Act as modified by Part 5C.7 of the Act, in that: (i) on 3 August 2007, it caused to be issued to itself in its personal capacity ordinary units of the Prime Trust with a value of $3,293,994 as and by way of a 10 per cent instalment of the Listing Fee (the First Scrip Instalment); (ii) on 13 March 2008, it caused to be transferred $329,399 of the monies held by it as Trustee of Prime Trust to itself in its personal capacity in respect of GST on the First Scrip Instalment, (collectively, the First Instalment) (iii) on 27 June 2008, it caused to be issued to Carey Bay Pty Ltd 9,020,386 units in the Prime Trust valued at $5,000,000; and (iv) on 30 June 2008, it transferred $27,610,548.30 of the monies held by it as trustee of Prime Trust to itself in its personal capacity, (collectively the Second Instalment) without obtaining the approval of the Members and notwithstanding that, as a matter of law, the First Instalment and the Second Instalment and each component of them were not provided for in the constitution of Prime Trust; (b) Dr Wooldridge participated in the meetings of the Board on 26 June 2007 and 27 July 2007 and assented to the resolutions passed at those meetings that authorised the payment of the First Instalment to APCHL in circumstances where he knew that: (i) payment of the First Instalment was "a financial benefit" (as that expression is used in s. 208(1) of the Act); (ii) the First Instalment was given by APCHL as Responsible Entity; (iii) the First Instalment was given out of the scheme property of Prime Trust (Scheme Property); (iv) the First Instalment was given to APCHL itself; and (v) APCHL did not obtain the Members' approval for the payment of the First Instalment. (c) Dr Wooldridge: (i) on 24 April 2008 approved the execution on behalf of APCHL of the document entitled Heads of Agreement - APCHL Restructure (the Heads of Agreement) under which APCHL agreed to pay the Second Instalment; (ii) on 28 April 2008 executed the Heads of Agreement; when he knew that: (iii) payment of the Second Instalment was "a financial benefit" (as that expression is used within s. 208(1) of the Act); (iv) the Second Instalment was given by APCHL as Responsible Entity; (v) the Second Instalment was given out of Scheme Property; (vi) the Second Instalment was given partly to APCHL itself and partly to Carey Bay which was a related party of APCHL; and (vii) APCHL did not obtain the Members' approval for the payment of the Second Instalment.
38. The fifth defendant, Michael Richard Lewis Wooldridge, contravened s. 601FD(3) of the Act by reason of him having contravened s. 601FD(1)(c) of the Act, in that, in his capacity as a director of the Responsible Entity, he failed to act in the best interests of the Members and failed to give priority to the interests of the Members over the interests of APCHL, in that he: (a) voted in favour of or otherwise assented to the resolution on 26 June 2007 in the following terms: "the Listing fee be taken by the Responsible Entity as Units in the Trust of which approximately ten per cent is to be issued to the Responsible Entity at the time of allotment and official quotation of Prime Trust's units on the ASX. The balance of the listing fee will be deferred and payable in tranches"; (b) voted in favour of or otherwise assented to the resolution on 27 July 2007 to the effect that APCHL would take the first tranche of the Listing Fee ostensibly payable pursuant to the Amendments as units; (c) participated in making the decision to pay the balance of the Listing Fee by: (i) approving on 24 April 2008 the execution on behalf of APCHL of the Heads of Agreement under which APCHL agreed to pay the Second Instalment; (ii) executing the Heads of Agreement on 28 April 2008; (collectively the decisions to pay the Listing Fee) in circumstances where: (d) he did not give any consideration to whether making payment of the Listing Fee gave rise to any conflict of interest; (e) a director of APCHL in the position of Dr Wooldridge would have been alive to APCHL's conflict of interests and conflict of interest and duty, and would have considered and sought to resolve these conflicts in favour of the members before making a decision to pay the Listing Fee; (f) payment of the Listing Fee was not in fact in the best interests of the Members; (g) a director of APCHL in the position of Dr Wooldridge could not in the circumstances reasonably have believed that payment of the Listing Fee was in the best interests of the Members; and (h) the proposed payment of the Listing Fee gave rise to a conflict between the interests of APCHL and the interests of the Members which should have been resolved in favour of the Members by APCHL deciding not to make the payment.
39. The fifth defendant, Michael Richard Lewis Wooldridge, contravened s. 601FD(3) of the Act by reason of him having contravened s. 601FD(1)(f) of the Act, in that, in his capacity as a director of the Responsible Entity, he failed to take all steps that a reasonable person would have taken if that reasonable person were in Dr Wooldridge's position to ensure that APCHL complied with the Act, in that he participated in making the decisions to pay the Listing Fee by (a) voting in favour of or otherwise assenting to the resolutions on 26 June 2007 and 27 July 2007; (b) approving on 24 April 2008 the execution on behalf of APCHL of the Heads of Agreement under which APCHL agreed to pay the Second Instalment; (c) executing the Heads of Agreement on 28 April 2008, in circumstances where: (d) a reasonable person in his position would not have done so without obtaining: (i) clear legal advice or a judicial direction that the Amendments had been effective, that APCHL had a right to be paid the fee under the constitution of Prime Trust and the Act, and that payment of the fee would not contravene s. 208 of the Act (as amended by s. 601LC of the Act); or (ii) the approval of the Members for payment of the fee to be made; and (e) he did not take any step towards obtaining further legal advice or a judicial direction as to the Amendments or towards obtaining the Members' approval for the payment of the Listing Fee. IN RELATION TO THE SIXTH DEFENDANT, PETER CLARKE, THE COURT DECLARES THAT:
40. The sixth defendant, Peter Clarke, contravened s. 601FD(3) of the Act by reason of him having contravened s. 601FD(1)(b) of the Corporations Act 2001 (Cth) (the Act), in that, in his capacity as a director of Australian Property Custodian Holdings Limited (Receivers and Managers Appointed)(In Liquidation)(Controllers Appointed) (APCHL) in its capacity as the responsible entity (the Responsible Entity) of the Prime Retirement and Aged Care Property Trust ARSN 097 514 746 (the Prime Trust), he failed to exercise the degree of care and diligence that a reasonable person would have exercised if he or she were in Mr Clarke's position, by acting as follows. On 22 August 2006, at a meeting of the board of directors of APCHL (the Board), Mr Clarke voted in favour of a resolution (the Lodgement Resolution) to lodge with the Australian Securities and Investments Commission (ASIC) an amended constitution of the Prime Trust (the Amended Constitution) to cause the amendments in the Amended Constitution to take effect (the Amendments). The Amendments that were the subject of the Lodgement Resolution purported to create rights in APCHL that, if exercised, would result in a diminution of the assets of the Prime Trust without providing any or any equivalent benefit to the Members of the Prime Trust (the Members). In so doing, Mr Clarke on 22 August 2006: (a) failed to consider and understand, and be satisfied that the Board had considered and understood, the effect of a deed of variation dated 22 August 2006, which contained the Amendments; (b) failed to consider whether, and be satisfied that, there was a legitimate reason for the Responsible Entity to make the Amendments; (c) failed to be satisfied that the Board had considered: (i) legal advice that the Amendments, if made without the approval of the Members, would comply with the Act and the existing constitution of Prime Trust (the Existing Constitution); or (ii) judicial advice that the Responsible Entity would be justified in making the Amendments without the approval of the Members; (d) failed to consider, and be satisfied that the Board had considered, whether the Amendments if made without the approval of the Members would comply with the Act and the Existing Constitution; (e) failed to consider, and be satisfied that the Board had considered, the effect of the Amendments on the rights and interests of the Members; (f) failed to consider the effect of the Amendments on the interests of APCHL; (g) failed to consider the effect of the Amendments on the interests of the second defendant (Mr Lewski) and entities related to and associated with Mr Lewski; (h) failed to be satisfied that the Board had considered the effect of the Amendments on the interests of APCHL, Mr Lewski and entities related to and associated with Mr Lewski; and (i) failed to consider and be satisfied that the Board had considered how, if at all, the conflict between the interests of the Members and the interests of APCHL could be resolved in favour of the Members.
41. The sixth defendant, Peter Clarke, contravened s. 601FD(3) of the Act by reason of him having contravened s. 601FD(1)(c) of the Act, in that, in his capacity as a director of the Responsible Entity, he failed to act in the best interests of the Members and failed to give priority to the interests of the Members over the interests of APCHL, in voting in favour of the Lodgement Resolution on 22 August 2006, in circumstances where: (a) he did not give any consideration to whether making the Amendments was in the best interests of the Members; (b) the Amendments were not in fact in the best interests of the Members; (c) a director of APCHL in the position of Mr Clarke could not reasonably have believed that the Amendments were in the best interests of the Members; and (d) there was a conflict between: (i) the interests of APCHL in being paid the additional fees provided for by the Amendments and the interests of the members in paying only the fees under the Existing Constitution; and (ii) the interests of APCHL in being paid the additional fees and its duties to act in the Members' best interests.
42. The sixth defendant, Peter Clarke, contravened s. 601FD(3) of the Act and so contravened s. 601FD(1)(e) of the Act, in that, in his capacity as a director of the Responsible Entity, he made improper use of his position as an officer of the Responsible Entity to provide an advantage to APCHL, in voting favour of the Lodgement Resolution on 22 August 2006, in circumstances including the following: (a) the Lodgement Resolution advantaged APCHL, because the Amendments purported to create rights in APCHL that would, if exercised, benefit APCHL; (b) by voting in favour of the Lodgement Resolution, he used his position as a director of APCHL to cause the Amendments to become effective; and (c) the use of his position was improper because a person properly exercising the powers of a director of a trustee in the circumstances, which included the following (collectively, the Five Principal Factors): (i) the fees to be payable pursuant to the Amendments were payable to APCHL in its personal capacity (and through it to Mr Lewski) and were to come from property held on trust by APCHL for the members. APCHL was acting as a trustee; (ii) consideration of the Amendments created self-evident conflicts: (A) between APCHL's interest in becoming entitled to the additional fees through the Amendments and the Members' interests in having APCHL perform its services as Responsible Entity for the fees in the Existing Constitution; and (B) between APCHL's interest in becoming entitled to the additional fees payable pursuant to the Amendments and its statutory duty to act in the best interests of the Members and to give priority to their interests; (iii) the nature of the proposed additional fees was that: (A) APCHL was given contingent rights to take multiple fees to the value of 2.5% of the gross assets of the Prime Trust out of Prime Trust funds. Absent the Amendments the Members had the right to the services of APCHL as Responsible Entity without the additional fees; (B) the listing fee payable pursuant to the Amendments (the Listing Fee) imposed a fee if the Prime Trust was listed, in circumstances where under the Existing Constitution the Members were entitled to expect listing to occur without a fee if the directors considered that listing was in the Members' best interests (as they did); (C) the 'removal fee' payable pursuant to the Amendments imposed a fee for the exercise of the Members' right to remove APCHL as Responsible Entity, which the Members could require without a fee under the Existing Constitution; (D) the 'takeover fee' payable pursuant to the Amendments (the Takeover Fee) substantially increased the fee payable on a third party acquiring shares over certain thresholds; (E) the Takeover Fee could be payable on multiple occasions; and (F) the fees payable pursuant to the Amendments could be payable notwithstanding that another of the fees had previously been paid; (iv) the fees payable pursuant to the Amendments were substantial, each having a value of between about $11.25 million and $21.6 million at the time of the Amendments (which was in the order of 6.7% of the net scheme property of the Prime Trust after borrowings were taken into account); and (v) the fees payable pursuant to the Amendments were gratuitous in the sense that no, or no equivalent, countervailing benefit was provided to the Members in return for them - could not have considered it proper to pass the Lodgement Resolution and would have refused to use his position to permit the Amendments to become effective.
43. The sixth defendant, Peter Clarke, contravened s. 601FD(3) of the Act by reason of him having contravened s. 601FD(1)(e) of the Act in that, in his capacity as a director of the Responsible Entity, he made improper use of his position as an officer of the Responsible Entity to provide an indirect advantage to those persons who would benefit from the fees payable pursuant to the Amendments, in that: (a) the Amendments purported to create rights in APCHL that would, if exercised, by their benefit to APCHL benefit those with an ownership interest in APCHL or rights to share in or receive a proportion of its profits or revenue, namely Mr Lewski, several of his family members and companies associated with him; (b) by voting in favour of the Lodgement Resolution, he used his position as a director of APCHL to cause the Amendments to become effective; and (c) the use of his position was improper because a person properly exercising the powers of a director of a trustee in the circumstances, which included the Five Principal Factors, could not have considered it proper to pass the Lodgement Resolution and would have refused to use his position to permit them to become effective.
44. The sixth defendant, Peter Clarke, contravened s. 601FD(3) of the Act by reason of him having contravened s. 601FD(1)(f) of the Act in that, in his capacity as a director of the Responsible Entity, he failed to take all steps that a reasonable person would have taken if that reasonable person were in Mr Clarke's position to ensure that APCHL complied with the constitution of Prime Trust and the Act, in that: (a) in purporting to make the Amendments, APCHL did not comply with the Existing Constitution; (b) in purporting to make the Amendments, APCHL did not comply with s. 601FC(1)(m) of the Act; and (c) Mr Clarke voted in favour of the Lodgement Resolution: (i) to make the Amendments effective; (ii) without being satisfied that the Board had considered clear legal advice that in making the Amendments without the approval of the Members, the Responsible Entity would comply with the Act and the Existing Constitution; (iii) without taking any steps to cause APCHL to obtain judicial advice as to whether APCHL was empowered to make, and justified in making, the Amendments without the approval of the Members; (iv) without seeking the approval of the Amendments by the Members; and (v) without giving any consideration on 22 August 2006 to the Board's power to make the amendments or the need for proper legal advice or judicial advice.
45. The sixth defendant, Peter Clarke, contravened s. 209(2) of the Act (as modified by Part 5C.7 of the Act) by being involved (as that term is used in s. 79 of the Act) in a contravention by APCHL of s. 208 of the Act as modified by Part 5C.7 of the Act, as follows: (a) APCHL contravened s. 208 of the Act as modified by Part 5C.7 of the Act, in that: (i) on 3 August 2007, it caused to be issued to itself in its personal capacity ordinary units of the Prime Trust with a value of $3,293,994 as and by way of a 10 per cent instalment of the Listing Fee (the First Scrip Instalment); (ii) on 13 March 2008, it caused to be transferred $329,399 of the monies held by it as Trustee of Prime Trust to itself in its personal capacity in respect of GST on the First Scrip Instalment, (collectively, the First Instalment) (iii) on 27 June 2008, it caused to be issued to Carey Bay Pty Ltd 9,020,386 units in the Prime Trust valued at $5,000,000; and (iv) on 30 June 2008, it transferred $27,610,548.30 of the monies held by it as trustee of Prime Trust to itself in its personal capacity, (collectively the Second Instalment) without obtaining the approval of the Members and notwithstanding that, as a matter of law, the First Instalment and the Second Instalment and each component of them were not provided for in the constitution of Prime Trust; (b) Mr Clarke participated in the meetings of the Board on 26 June 2007 and 27 July 2007 and assented to the resolutions passed at those meetings that authorised the payment of the First Instalment to APCHL in circumstances where he knew that: (i) payment of the First Instalment was "a financial benefit" (as that expression is used in s. 208(1) of the Act); (ii) the First Instalment was given by APCHL as Responsible Entity; (iii) the First Instalment was given out of the scheme property of Prime Trust (Scheme Property); (iv) the First Instalment was given to APCHL itself; and (v) APCHL did not obtain the Members' approval for the payment of the First Instalment (c) Mr Clarke: (i) on 23 April 2008 approved the execution on behalf of APCHL of the document entitled Heads of Agreement - APCHL Restructure (the Heads of Agreement) under which APCHL agreed to pay the Second Instalment; (ii) participated in the meeting of the Board on 27 June 2008 and the resolution passed at that meeting which authorised the execution on behalf of APCHL of the Deed of Acknowledgement under which APCHL agreed to pay the Second Instalment; when he knew that: (iii) payment of the Second Instalment was "a financial benefit" (as that expression is used within s. 208(1) of the Act); (iv) the Second Instalment was given by APCHL as Responsible Entity; (v) the Second Instalment was given out of Scheme Property; (vi) the Second Instalment was given partly to APCHL itself and partly to Carey Bay which was a related party of APCHL; and (vii) APCHL did not obtain the Members' approval for the payment of the Second Instalment.
46. The sixth defendant, Peter Clarke, contravened s. 601FD(3) of the Act by reason of him having contravened s. 601FD(1)(c) of the Act, in that, in his capacity as a director of the Responsible Entity, he failed to act in the best interests of the Members and failed to give priority to the interests of the Members over the interests of APCHL, in that he (a) voted in favour of or otherwise assented to the resolution on 26 June 2007 in the following terms: "the Listing fee be taken by the Responsible Entity as Units in the Trust of which approximately ten per cent is to be issued to the Responsible Entity at the time of allotment and official quotation of Prime Trust's units on the ASX. The balance of the listing fee will be deferred and payable in tranches"; and (b) voted in favour of or otherwise assented to the resolution on 27 July 2007 to the effect that APCHL would take the first tranche of the Listing Fee ostensibly payable pursuant to the Amendments as units; (c) participated in making the decision to pay the balance of the Listing Fee by: (i) approving on 23 April 2008 the execution on behalf of APCHL of the Heads of Agreement under which APCHL agreed to pay the Second Instalment; (ii) attending in the meeting of the Board on 27 June 2008 and joining in the resolution passed at that meeting which authorised the execution on behalf of APCHL of the Deed of Acknowledgement under which APCHL agreed to pay the Second Instalment; (collectively the decisions to pay the Listing Fee) in circumstances where: (d) he did not give any consideration to whether making payment of the Listing Fee gave rise to any conflict of interest; (e) a director of APCHL in the position of Mr Clarke would have been alive to APCHL's conflict of interests and conflict of interest and duty, and would have considered and sought to resolve these conflicts in favour of the members before making a decision to pay the Listing Fee; (f) payment of the Listing Fee was not in fact in the best interests of the Members; (g) a director of APCHL in the position of Mr Clarke could not in the circumstances reasonably have believed that payment of the Listing Fee was in the best interests of the Members; and (h) the proposed payment of the Listing Fee gave rise to a conflict between the interests of APCHL and the interests of the Members which should have been resolved in favour of the Members by APCHL deciding not to make the payment.
47. The sixth defendant, Peter Clarke, contravened s. 601FD(3) of the Act by reason of him having contravened s. 601FD(1)(f) of the Act, in that, in his capacity as a director of the Responsible Entity, he failed to take all steps that a reasonable person would have taken if that reasonable person were in Mr Clarke's position to ensure that APCHL complied with the Act, in that he participated in making the decision to pay the Listing Fee by: (a) voting in favour of or otherwise assenting to the resolutions on 26 June 2007 and 27 July 2007; (b) approving on 23 April 2008 the execution on behalf of APCHL of the Heads of Agreement under which APCHL agreed to pay the Second Instalment; (c) attending in the meeting of the Board on 27 June 2008 and joining in the resolution passed at that meeting which authorised the execution on behalf of APCHL of the Deed of Acknowledgement under which APCHL agreed to pay the Second Instalment, in circumstances where: (d) a reasonable person in his position would not have done so without obtaining: (i) clear legal advice or a judicial direction that the Amendments had been effective, that APCHL had a right to be paid the fee under the constitution of Prime Trust and the Act, and that payment of the fee would not contravene s. 208 of the Act (as amended by s. 601LC of the Act); or (ii) the approval of the Members for payment of the fee to be made; and (e) he did not take any step towards obtaining further legal advice or a judicial direction as to the Amendments or towards obtaining the Members' approval for the payment of the Listing Fee. AND THE COURT ORDERS THAT:

Disqualification Orders

1. Pursuant to section 206C of the Corporations Act 2001 (Cth)("the Act"): 1.1 the second defendant, William Lionel Lewski, be disqualified from managing corporations for a period of fifteen years from the date of this order in respect of the contraventions of the Act referred to in the declarations of contravention numbered [8] to [15]. 1.2 the third defendant, Mark Frederick Butler, be disqualified from managing corporations for a period of four years from the date of this order in respect of the contraventions of the Act referred to in the declarations of contravention numbered [16] to [23]. 1.3 the fourth defendant, Kim Jaques, be disqualified from managing corporations for a period of four years from the date of this order in respect of the contraventions of the Act referred to in the declarations of contravention numbered [24] to [31]. 1.4 the fifth defendant, Michael Richard Lewis Wooldridge, be disqualified from managing corporations for a period of two years and three months from the date of this order in respect of the contraventions of the Act referred to in the declarations of contravention numbered [32] to [39]. Pecuniary Penalties
2. Pursuant to section 1317G of the Act: 2.1 the second defendant, William Lionel Lewski, pay to the Commonwealth a pecuniary penalty of $230,000 in respect of the contraventions of the Act referred to in the declarations of contravention numbered [8] to [15]. 2.2 the third defendant, Mark Frederick Butler, pay to the Commonwealth a pecuniary penalty of $20,000 in respect of the contraventions of the Act referred to in the declarations of contravention numbered [16] to [23]. 2.3 the fourth defendant, Kim Jaques, pay to the Commonwealth a pecuniary penalty of $20,000 in respect of the contraventions of the Act referred to in the declarations of contravention numbered [24] to [31]. 2.4 the fifth defendant, Michael Richard Lewis Wooldridge, pay to the Commonwealth a pecuniary penalty of $20,000 in respect of the contraventions of the Act referred to in the declarations of contravention numbered [32] to [39]. 2.5 the sixth defendant, Peter Clarke, pay to the Commonwealth a pecuniary penalty of $20,000 in respect of the contraventions of the Act referred to in the declarations of contravention numbered [40] to [47]. Costs
3. The second to sixth defendants pay the plaintiff's costs of and incidental to the proceeding. Other matters
4. The parties have liberty to apply in relation to the form of these orders and generally. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 594 of 2012

BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

AND: AUSTRALIAN PROPERTY CUSTODIAN HOLDINGS LIMITED (ACN 095 474 436) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (CONTROLLERS APPOINTED)

JUDGE: MURPHY J DATE: 2 December 2014 PLACE: MELBOURNE

A. INTRODUCTION 1 The plaintiff, the Australian Securities and Investments Commission ("ASIC") brought proceedings alleging that: (a) the first defendant, Australian Property Custodian Holdings Limited (Receivers and Managers appointed) (In Liquidation) (Controllers appointed) ("APCHL"); and (b) the second to sixth defendants, being five former directors of APCHL ("the Directors"); contravened ss 601FC and 601FD in Chapter 5C of the Corporations Act 2001 (Cth) ("the Act") which operate to regulate managed investment schemes, as well as contravening the prohibition on related party transactions without approval of the members. 2 I handed down the decision on liability in the proceeding on 12 December 2013 ("liability judgment"): (Australian Securities and Investments Commission v Australian Property Custodian Holdings Limited (Receivers and Managers Appointed)(In Liquidation)(Controllers appointed) (No 3) [2013] FCA 1342) I shall use the same defined terms and expressions in these reasons as in the liability judgment. The references to legislative provisions are, unless otherwise stated, a reference to a provision of the Act. 3 At all relevant times APCHL was the responsible entity of a registered managed investment scheme, the Prime Retirement and Aged Care Property Trust ("Prime Trust" or the "Trust") and was subject to the duties prescribed by s 601FC. APCHL, acting as a responsible entity, held and managed funds invested by the unitholders in the scheme ("the Members") holding them on trust for the Members. The Directors were officers of APCHL and were subject to the duties prescribed by s 601FD. 4 I found that APCHL and the Directors contravened multiple duties in ss 601FC and 601FD of the Act respectively as well as the prohibition on involvement in related party transactions in ss 208 and 209. The breaches revolve around the Directors' conduct: 1. on 22 August 2006 in passing a resolution to lodge amendments ("the Amendments") to the Prime Trust Constitution with ASIC so as to bring them into effect ("Lodgement Resolution") which allowed APCHL (and through it Mr Lewski) substantial additional fees, including a fee payable if the Trust was listed on the Australian Stock Exchange ("Listing Fee"). The Amendments had been passed on 19 July 2006, and the additional fees were contrary to an express prohibition in the Prime Trust Constitution ("Constitution") against amendments in favour of or to the benefit of APCHL; and 2. in 2007 and 2008 in making decisions to pay the Listing Fee to APCHL, and when paying the first and second instalments of that fee in 2007 and 2008. 5 In broad summary I found that APCHL through its Board of Directors ("the Board") contravened: (a) duties in s 601FC by passing the Lodgement Resolution on 22 August 2006 in that it failed to exercise the level of care and diligence that a reasonable person in its position as responsible entity would have exercised, failed to act in the best interests of the Members of the Prime Trust and failed to prioritise the Members' interests over its own interests, and failed to comply with the duty in the Constitution not to vary it in a manner which was in favour of or resulted in any benefit to APCHL; (b) duties in s 601FC by passing resolutions to pay the Listing Fee, and executing agreements to authorise payment of the fee in 2007 and 2008, and in paying the fee to APCHL in its personal capacity, in that it failed to act in the best interests of the Members and failed to prioritise the Members' interests over its own interests, and failed to ensure that all payments out of scheme property were made in accordance with the Constitution; and (c) s 208 by paying the Listing Fee to APCHL in its personal capacity in 2007 and 2008 as the fee was not validly included in the Constitution. 6 I found that each Director contravened: (a) duties in s 601FD by approving the Lodgement Resolution on 22 August 2006 in that he: (i) failed to exercise the degree of care and diligence that a reasonable person in his position would have exercised; (ii) failed to act in the best interests of the Members and failed to prioritise the Members' interests over the interests of APCHL and Mr Lewski; (iii) made improper use of his position as an officer of APCHL to advantage APCHL and indirectly Mr Lewski; and (iv) failed to take all reasonable steps that a reasonable person in his position would have taken to ensure that APCHL complied with the Constitution and the Act; (collectively "the Lodgement Resolution Contraventions"); (b) duties in s 601FD by passing resolutions to pay the Listing Fee, executing or approving the execution of agreements to authorise the fee, and making decisions to pay the fee to APCHL in instalments in 2007 and 2008 in that he: (i) failed to act in the best interests of the Members and failed to prioritise the Members' interests over the interests of APCHL; and (ii) failed to take all reasonable steps that a reasonable person in his position would have taken to ensure that APCHL complied with the Act; and (c) s 209 by being involved in APCHL's breach of the prohibition on related party transactions through its payment of the Listing Fee in two instalments in 2007 and 2008 ("Ancillary Liability Contraventions"). For reasons I explain I have decided to group the decisions to pay the separate instalments of the Listing Fee in 2007 and 2008 together with the Ancillary Liability Contraventions (which turn on the actual payment of the fee in the same years). I will refer to them as the "Decisions to Pay Contraventions". 7 In fact the Listing Fee was paid to persons and entities associated with Mr Lewski rather than to him personally but it is not contentious that he received the benefit of that fee. For simplicity I shall usually refer to the Listing Fee as having been paid to Mr Lewski. 8 The Directors' conduct gave rise to a serious breach of trust as a Listing Fee of $33 million was paid from trust property to APCHL (in its personal capacity) and through it to Mr Lewski. Those monies have never been repaid. 9 ASIC now seeks: (a) declarations of contravention against APCHL and each Director pursuant to s 1317E; (b) orders that each Director be disqualified from managing a corporation for a period of time pursuant to s 206C ("disqualification orders"); and (c) orders that each Director pay a pecuniary penalty pursuant to s 1317G. I will refer to the disqualification orders and pecuniary penalties as "penalties". 10 APCHL did not appear and effectively submits to judgment. I have made the declarations ASIC seeks and I do not directly deal with APCHL's contraventions in these reasons. However my reasons for the declarations are readily apparent and I am satisfied that they are just in all the circumstances. 11 The Directors seek to be wholly or partly relieved from liability pursuant to ss 1317S and/or 1318 ("the exoneration provisions") and they argue that declarations of contravention should not be made. In the event that they are not relieved from liability and declarations are made, they oppose the disqualification orders and pecuniary penalties that ASIC seeks. 12 For reasons I explain I have not relieved any Director from liability. Putting to one side whether or not the exoneration provisions permit the Court to relieve a party from a declaration of contravention as a form of "liability", in my view no Director met the test for exoneration. Further, even if a Director had met the test, in my view in all the circumstances no Director should be relieved wholly or partly from liability. 13 I have made the attached declarations of contravention in respect of each Director's contravening conduct. 14 Primarily because of the nature and seriousness of their contraventions and because of the need for personal and general deterrence I consider that each Director, except for Mr Clarke, must be disqualified from managing corporations for a period. I consider that each Director (including Mr Clarke) must suffer pecuniary penalties. 15 Mr Lewski's conduct in its context is the most culpable of the Directors by far and I have imposed a long disqualification and a large pecuniary penalty on him. The conduct by each of Dr Wooldridge, Mr Butler and Mr Jaques and its context was broadly similar and I have imposed penalties from a broadly similar starting point but reflecting their different personal circumstances, and much lower than Mr Lewski's. In the particular circumstances of Mr Clarke's conduct and its context I have imposed only a pecuniary penalty and I have not disqualified him. 16 The differences in the penalties turn on matters including the materially different role played by Mr Lewski compared to the other Directors, the different requirement for personal deterrence in respect to Mr Lewski, the different requirement for general deterrence having regard to Mr Lewski's conduct, the fact that Mr Lewski directly benefitted from the contraventions, the fact that he has retained $33 million that he wrongfully received, and the material difference between Mr Clarke's conduct and the conduct of the other Directors, as well as the different personal and mitigating circumstances that apply. 17 Mr Lewski was effectively the owner of APCHL, he was its main driver and the most influential person in the company. He had a material personal interest in receiving the additional fees which was in conflict with the Members' interest in having APCHL's services as responsible entity for the fees set out in the Constitution. Despite his conflict of interest (and despite the conflict between his interest in the fees and his duty to the Members) he instigated the Amendments which provided for substantial additional fees (including the Listing Fee) payable ultimately to him. Although he should not even have participated in the meeting he moved the Amendments, argued for them, and voted in their favour at the 19 July 2006 Board meeting. 18 It is relevant too that he sought legal advice to the effect that the Amendments did not require approval by the Members, in part out of a concern that if they were asked the Members would not approve the Amendments or at least would not approve them in the quantum sought. He played a role in the presentation of deficient legal advice ("Madgwicks Advice") to the Board. 19 Then at the 22 August 2006 Board meeting, despite his continuing conflict of interest, he voted in favour of the Lodgement Resolution in order to bring the Amendments into effect. Finally, in 2007 and 2008 he participated in the Board's Decisions to Pay the Listing Fee despite his continuing interest in the fee. 20 In short he orchestrated making the Amendments, bringing them into effect, and facilitating payment of the $33 million Listing Fee even though he was the primary beneficiary of that fee, payable from trust property. 21 In my view Mr Lewski subordinated the Members' interests to his own at every step. ASIC did not run its case on the basis that any Director's conduct was dishonest and I make no finding of dishonesty. 22 The conduct of Dr Wooldridge, Mr Butler, Mr Jaques and Mr Clarke was significantly less blameworthy than Mr Lewski's and in my view their contraventions were honest, although serious, failures. Shortly put, they failed to properly deal with Mr Lewski's self-evident conflict of interest regarding the Listing Fee, and rather than acting in the best interests of the Members' and putting the Members' interests first, they capitulated to the interests of Mr Lewski. They also failed to comply with the express prohibition in the Constitution against any amendment in favour of or resulting in a benefit to APCHL. Mr Clarke's conduct was though materially different and less culpable than the other Directors. 23 The question of penalties must be considered in the context that managed investment schemes are an important part of the Australian investment market, and for example, in 2012 the total funds under management in such schemes exceeded $850 billion. The inevitability of conflicts of interest between responsible entities operating managed investment schemes and the members of the schemes has long been recognised. The members are vulnerable to the responsible entity and its officers, and require protection against the obvious conflict between their interests and those of the responsible entity (or its controllers) in relation to, amongst other things, fees payable from scheme property to the responsible entity: see ALRC and CASAC Collective Investments: Other People's Money: Report No 65 (1993) ("ALRC Report No 65") to which Chapter 5C was the legislative response. 24 Investor protection is an important purpose of Chapter 5C: ALRC Report No 65; Explanatory Memorandum, Managed Investments Bill 1998 (Cth) 1; Parliamentary Debates, House of Representatives, 3 December 1997, 11928-11929. In service of this purpose Chapter 5C provides that directors owe statutory fiduciary obligations directly to the members of the scheme including to act in the best interests of the members and to prefer the members' interests if there is a conflict of interest. 25 The primary objective of the civil penalties regime is protection of the public, including by personal and general deterrence. The need to facilitate the adherence of other directors, particularly directors of responsible entities, to the required standard of conduct is essential to my decision. 26 Mr Lewski displayed no contrition and no real understanding of the seriousness of his breaches and I consider that if he is not disqualified there is a risk he will reoffend. The need to protect the public including by deterring him from repeating similar conduct is an important consideration behind his disqualification and its length. Amongst other things, the lengthy disqualification and significant pecuniary penalty attempt to put a price on his contraventions that will show him that the game is not worth the candle. 27 In my view it is unlikely that Dr Wooldridge, Mr Butler, Mr Jaques or Mr Clarke will reoffend and there is no need to set penalties so as to deter them from similar conduct. I have not done so. 28 General deterrence is a fundamental consideration in my decision to impose penalties on each Director. I have endeavoured to set penalties which mark the gravity of the breaches and send a strong message to other directors, particularly of responsible entities, that they must be conscientious in their commitment to the best interests of the members, careful to identify conflicts of interest and not to rationalise them away, and to exercise a high degree of caution and prudence when a conflict of interest is to be dealt with. Particularly because of the vulnerability of scheme members the officers of responsible entities must be made to understand that the Court will take a serious view of breaches of the duty to act in the best interests of the members and failure to prefer the members' interests when dealing with a conflict of interest. 29 I have however sought to balance the requirement for personal and general deterrence against the hardship that penalties may cause to each Director. This can be seen, for example, in the two year disqualification imposed on Dr Wooldridge for his Lodgement Resolution conduct when the nature and seriousness of his contraventions point to the need for a longer period. 30 I have made the following orders: (a) Mr Lewski be disqualified from managing a corporation for 15 years and pay a pecuniary penalty of $230,000; (b) Mr Butler be disqualified from managing a corporation for four years and pay a pecuniary penalty of $20,000; (c) Mr Jaques be disqualified from managing a corporation for four years and pay a pecuniary penalty of $20,000; (d) Dr Wooldridge be disqualified from managing a corporation for two years and three months and pay a pecuniary penalty of $20,000; and (e) Mr Clarke pay a pecuniary penalty of $20,000. The total duration of the disqualification and the total quantum of the pecuniary penalties imposed on each Director are actually slightly higher than these figures, but these figures reflect the fact that part of the penalties are to be served concurrently. 31 I thank the parties for the way in which they conducted their cases in this complex matter, and for the high quality of their oral and written submissions. I have directly drawn on the submissions at various points in these reasons.

B. THE APPROACH TO MULTIPLE CONTRAVENTIONS 32 Each Director committed multiple contraventions of the Act over a two year period. A threshold question is how to characterise their contraventions to best reflect their common elements, and whether any penalties in respect of the contraventions should be consecutive or concurrent. 33 As could be expected ASIC argues for the largest possible number of separate contraventions or courses of conduct, and the Directors argue for the smallest possible number. However it should be kept in mind that the number of contraventions or courses of conduct identified may not reflect in the total penalties. Amongst other things this is because a contravener may not be punished twice for the same conduct, and because the totality principle requires the Court to step back before finally setting the penalties so as to check that the aggregate penalty is not unjust or disproportionate overall. 34 In some circumstances it may not even be necessary for the Court to determine the precise number of contraventions arising from a party's conduct: Australian Competition and Consumer Commission v Neighbourhood Energy Pty Ltd [2012] FCA 1357 at [44] per Marshall J; Australian Competition and Consumer Commission v Pepe's Ducks Ltd [2013] FCA 570 at [39] per Bromberg J. 35 The Court will not adopt a mathematical approach to the assessment of the appropriate penalty. Assessment of the appropriate penalty must be a discretionary judgment synthesising all factors relevant to a particular case while paying due regard to the maximum penalty for each contravening act and the totality principle: Australian Competition and Consumer Commission v TPG Internet Pty Ltd (No 2) [2012] FCA 629 ("ACCC v TPG (No 2)") at [140]; Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249 ("Optus v ACCC") at [54] per Keane CJ, Finn and Gilmour JJ, citing Australian Competition and Consumer Commission v Telstra Corporation Ltd (2010) 188 FCR 238 per Middleton J at [250]-[251]. 36 As a general rule separate contraventions arising from separate acts will attract the imposition of a separate penalty for each contravention: Registrar of Aboriginal and Torres Strait Islander Corporations v Matcham (No 2) (2014) 97 ACSR 412 ("Matcham (No 2)") at [197] per Jacobson J. However, if it is appropriate to treat the contraventions as part of a single multi-faceted course of conduct only a single penalty is appropriate for all contraventions: Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383 ("Mornington Inn") at [41] per Stone and Buchanan JJ; Johnson v The Queen (2004) 205 ALR 346 ("Johnson") per Gleeson CJ; Attorney-General v Tichy (1982) 30 SASR 84 at 92-93 per Wells J. 37 The course of conduct principle recognises that where there is an interrelationship between the legal and factual elements of two or more contraventions, care must be taken so that the contravener is not punished twice for what is essentially the same conduct: Matcham (No 2) at [199]; Construction, Forestry, Mining and Energy Union and Another v Cahill (2010) 269 ALR 1 ("CFMEU v Cahill") at [39] and [41] per Middleton and Gordon JJ and per Moore J agreeing at [1]; Royer v Western Australia [2009] WASCA 139 ("Royer") at [22] per Owen JA. 38 The interrelationship may be legal, in the sense that it arises from the elements of the contraventions, or it may be factual because of a temporal or geographical link or the presence of other circumstances compelling the conclusion that the contraventions arose out of substantially the same act, omission or occurrence: Royer at [22]. The assessment of this interrelationship is necessarily a fact specific enquiry, to be judged according to the particular circumstances of each case: Matcham (No 2) at [200]. 39 In Matcham (No 2) at [201], Jacobson J (citing Clean Energy Regulator v MT Solar Pty Ltd [2013] FCA 205 at [75] ("MT Solar") per Foster J) explained the overarching objective of the course of conduct principle as: …to ensure that the sentence or penalty fairly reflects the substance of the offending conduct, rather than a purely mathematical total for each separate offence which may be technically identified. 40 I respectfully adopt the general approach to multiple contraventions explained by Jacobson J in Matcham (No 2), where his Honour said at [195]-[198]: [195] First, if multiple provisions are simultaneously breached by the same wrongful act it is appropriate to impose a penalty for only the most serious of the multiple offences. [196] This approach reflects a fundamental principle of sentencing practice that double punishment should be avoided for the commission of multiple offences which contain common elements. The punishment to be exacted should reflect what the offender has done. [197] Second, separate contraventions arising from separate acts should ordinarily attract the imposition of a separate penalty appropriate for each contravention. However, it may be appropriate in some cases to treat the contraventions as part of a single multi-faceted "course of conduct". [198] Third, the court is required to conduct a final check to ensure that the total or aggregate penalty is not unjust or disproportionate to the circumstances of the case. If it is unjust or out of proportion, the penalty is to be moderated in accordance with the totality principle. [Citations omitted] 41 However, even if offences are properly characterised as arising from one transaction or a single course of conduct the Court is not required to apply the course of conduct principle if the resulting penalty fails to reflect the degree of criminality involved in the circumstances. The course of conduct principle is merely a discretionary tool that the Court may utilise in exercising sentencing discretion if the Court considers it appropriate: CFMEU v Cahill at [41]; Royer at [21]. 42 I found that by approving the Lodgement Resolution on 22 August 2006 the Directors purported to bring into effect the Amendments which made substantial additional fees payable to APCHL, and through it to Mr Lewski, upon the occurrence of any of three specified events. Upon lodgement of the Amended Constitution on 23 August 2006 APCHL's purported entitlement to the additional fees came into effect. 43 The Prime Trust was listed on the ASX in 2007 which triggered APCHL's entitlement to the Listing Fee. The Directors then made decisions to pay the first instalment of the Listing Fee in 2007 and that instalment was paid at that time. They then made decisions to pay the second instalment in 2008 (being the balance of the fee) and that instalment was then paid. 44 ASIC contends that I should group the Directors' contraventions into three separate courses of conduct the first of which is their conduct in approving the Lodgement Resolution in 2006. The two further courses of conduct it proposes are their decisions to pay the first instalment of the Listing Fee in 2007, and their decisions to pay the second instalment in 2008 (collectively the "Decisions to Pay"). It contends that I should impose separate and cumulative penalties for each of the three courses of conduct it identifies. It submits that the Ancillary Liability Contraventions in 2007 and 2008 should be grouped within the Decisions to Pay the Listing Fee in those years. 45 I accept that the Ancillary Liability Contraventions should be grouped with the Decisions to Pay Contraventions as ASIC argues. The ancillary liability breaches arise from the Directors' involvement in APCHL's payment of the Listing Fee in 2007 and 2008 which in turn result from APCHL's and the Directors' Decisions to Pay the fee in 2007 and 2008. The Decisions to Pay the Listing Fee and its actual payment are closely interrelated. 46 I do not though accept ASIC's contention that the Decisions to Pay the Listing Fee in 2007 and in 2008 should be treated as two separate courses of conduct. 47 It is correct, as ASIC argues, that: (a) a lengthy period of time elapsed between the decision to pay the first instalment of the Listing Fee in 2007 and the Decisions to Pay the second instalment of that fee in 2008; (b) the payment of the second instalment of the Listing Fee in 2008 was conditional when the 2007 Decisions to Pay the first instalment were made; and (c) the Directors took later separate action for the purpose (or at least with the effect) of making the conditional second instalment payable in circumstances where the conditions previously specified had not been met. I see some force in ASIC's contention that the set of actions in 2007 occurred at a separate time to the set of actions in 2008, and that each set of actions called for separate and distinct considerations by the Directors of their respective responsibilities, such that they should be treated as separate courses of conduct. 48 However, the Decisions to Pay the first instalment in 2007 and the Decisions to Pay the second instalment in 2008 involved separate instalments of the same fee and are quite interrelated: Matcham (No 2) at [207]. Although a year elapsed between the 2007 and 2008 Decisions to Pay the two instalments, both sets of actions involved similar considerations by the Directors, similar breaches of duty and similar lack of care. 49 The Directors contend that the contraventions should be grouped into one course of conduct. They contend that the Decisions to Pay the Listing Fee arose from the passage of the Lodgement Resolution which brought the Listing Fee into effect through the Amended Constitution, and that a likely consequence of the Lodgement Resolution was that the Directors would in the event of listing make a decision to pay the fee. 50 In the alternative some Directors argue that the contraventions should be grouped into two separate courses of conduct, being their conduct in: (a) passing the Lodgement Resolution on 22 August 2006; and (b) making the Decisions to Pay the two instalments of the Listing Fee on various dates in 2007 and 2008 and in the Ancillary Liability Contraventions. 51 I have no difficulty in accepting that there is a common thread running through the Lodgement Resolution conduct and the Decisions to Pay conduct, or that this is a factor that supports treating all of the contraventions as involving one course of conduct: see CFMEU v Cahill at [37]. However, while the Decisions to Pay the Listing Fee (and the actual payment of that fee) in a sense flow out of the passage of the Lodgement Resolution, to characterise these two courses of conduct as one would be to characterise the wrongful conduct with a high level of generality without proper regard for their distinctive features: Matcham (No 2) at [215]. In my view the Directors' approval of the Lodgement Resolution in 2006 on the one hand, and their Decisions to Pay the first instalment of the Listing Fee in 2007 and the second instalment in 2008 on the other, were distinct in quality, time and effect and are separate and distinct courses of conduct: see Matcham (No 2) at [213]; Optus v ACCC at [53]; CFMEU v Cahill at [37]. 52 I have approached the issues of relief and penalties on the basis that the contraventions involve two separate courses of conduct. The first is the Lodgement Resolution conduct and the second is the Decisions to Pay conduct in 2007 and 2008 (which includes the ancillary liability conduct). C. PRINCIPLES REGARDING RELIEF FROM LIABILITY 53 Each Director contends that he should be wholly or partly relieved from liability pursuant to ss 1317S and 1318. The legislative provisions 54 Section 1317S(2) provides: Relief from liability for contravention of civil penalty provision … (2) [Circumstances where court may provide relief] If: (a) eligible proceedings are brought against a person; and (b) in the proceedings it appears to the court that the person has, or may have, contravened a civil penalty provision but that: (i) the person has acted honestly; and (ii) having regard to all the circumstances of the case…, the person ought fairly to be excused for the contravention; the court may relieve the person either wholly or partly from a liability to which the person would otherwise be subject, or that might otherwise be imposed on the person because of the contravention. 55 It is uncontroversial that the present case is an "eligible proceeding" as defined as it is a proceeding for the contravention of civil penalty provisions against the Directors. 56 Section 1318(1) provides: Power to grant relief (1) [Discretion to relieve person from liability] If, in any civil proceeding against a person to whom this section applies for negligence, default, breach of trust or breach of duty in a capacity as such a person, it appears to the court before which the proceedings are taken that the person is or may be liable in respect of the negligence, default or breach but that the person has acted honestly and that, having regard to all the circumstances of the case, including those connected with the person's appointment, the person ought fairly to be excused for the negligence, default or breach, the court may relieve the person either wholly and partly from liability on such terms as the court thinks fit. It is uncontentious that the present case is a civil proceeding against officers of a corporation for negligence or breach of duty within the meaning of s 1318. 57 The grounds upon which the court may relieve a person from liability under ss 1317S or 1318 are substantially similar and both allow a broad discretion to relieve a defendant from liability, in whole or in part: MacDonald v Australian Securities and Investments Commission (2007) 73 NSWLR 612 at [22] per Spigelman CJ. 58 The exoneration provisions do not relieve a party of liability by removing the breach, but instead operate to excuse the contravener from the liability that would otherwise flow from the breach. As Austin J explained in Australian Securities and Investments Commission v Vines and Others (2005) 65 NSWLR 281 ("Vines") at [50]: The exoneration provision permits the court to grant relief from "liability" (including liability that may exist). In civil penalty proceedings, liability arises from the making of orders after a finding of contravention, rather than directly from the finding of the contravention itself. See also Deputy Commissioner of Taxation v Dick (2007) 242 ALR 152 at [78] per Santow JA. The scope of available relief 59 There is no issue that the exoneration provisions allow the Court to relieve the Directors from the disqualification and pecuniary penalty orders sought, but the Directors also seek relief from declarations of contravention. The question arises as to whether the Court has power under ss 1317S and 1318 to grant such relief. 60 Section 1317E(1) provides for a declaration of contravention in mandatory terms. It states: [Civil penalty provisions] If a court is satisfied that a person has contravened 1 [one] of the following provisions, it must make a declaration of contravention: …. (Emphasis added). The section then proceeds to list various provisions, including ss 209(2), 601FC(5) and 601FD(3) which I have found the Directors contravened. 61 ASIC submits that ss 1317S and 1318 do not permit the Court to disregard the mandatory requirement of s 1317E which provides that the Court must make a declaration of contravention where it is satisfied that a defendant has breached a relevant civil penalty provision. The Directors contend to the contrary and point to the language of ss 1317S and 1318. 62 Central to the issue is whether the making of a declaration of contravention is itself a "liability" within ss 1317S and 1318 to which a person would otherwise be subject but may be relieved. ASIC argues that it is not. Some support for this argument can be found in the remarks of Austin J in Vines at [50] extracted above at [58]. 63 ASIC contends that, save for its status as conclusive evidence of the matters referred to in s 1317E(2), a declaration of contravention does not subject the person to any consequence as a matter of law other than the declaration itself. It notes that a declaration gives rise to no damages, disqualification, fine or liability to compensate. While accepting a declaration of contravention represents a stigma for an offender, ASIC contends that it is no more of a stigma than the findings already made upon which the declaration is based. 64 ASIC points to cases in which the Court has made orders under s 1317S relieving an applicant wholly from liability but has still made declarations of contravention: see for example Australian Securities and Investments Commission v Whitlam (No 2) (2002) 42 ACSR 515 ("Whitlam (No 2)"); McLellan (in his capacity at liquidator of The Stake Man Pty Ltd) and Another v Carroll (re The Stake Man Pty Ltd) (2009) 76 ACSR 67 per Goldberg J. However the issue as to whether a declaration is a liability from which the defendants could be relieved was not agitated in these cases. 65 The Directors argue that as a matter of statutory construction ss 1317E must be read as subject to the exoneration provisions, and contend that a declaration of contravention is a "liability" because: (a) it is a necessary precondition for a disqualification or pecuniary penalty order; and (b) by reason of a declaration's status as conclusive evidence of the matters referred to in s 1317E(2), a defendant is greatly exposed to and prima facie liable to a claim for damages by a person affected by the conduct. They contend that a declaration is disadvantageous to them, and should be seen as a liability. 66 In Australian Securities and Investments Commission v Plymin (No 2) (2003) 21 ACLC 1237 ("Plymin (No 2)") at [7] Mandie J said that the predecessor provision to s 1317S: …may operate in relation to all or any of the orders which the Court may make, including a declaration, a prohibition order, a pecuniary order and an order for compensation. If it appears to the Court having regard to all the circumstances of the case that the person ought fairly to be excused for the contravention, the Court is empowered not to subject the person to any liability or to subject the person to some only of the available orders, or perhaps, in some cases to part only of some liability. (Emphasis added.) 67 It is not clear however whether there was any dispute before Mandie J on this issue, and his Honour did not provide a reasoned analysis supporting his conclusion. Nor did his Honour decide that the defendants should be relieved from declarations of contravention. In fact the Directors were unable to take me to any decision where, by exercise of the power in the exoneration provisions, a defendant has been relieved from a declaration of contravention. The relevant considerations for relief from liability 68 As Middleton J observed in Australian Securities and Investments Commission v Healey (No 2) (2011) 196 FCR 430 ("Healey (No 2)"at [84], an application for relief under ss 1317S and 1318 involves three stages of inquiry: (a) whether the applicant for relief has acted honestly; (b) whether having regard to all the circumstances the applicant ought fairly to be excused; and (c) whether the applicant should be relieved from liability wholly or in part, and if partly, to what extent. It is for each Director to satisfy the Court under these limbs.

The "acted honestly" test 69 In the context of an application for relief under ss 1317S and 1318, a person acts honestly if that person's conduct was without "moral turpitude" meaning: (a) without deceit or conscious impropriety; and (b) without intent to gain an improper benefit or advantage; and (c) without carelessness or imprudence to such a degree that it negated the performance of the duty in question. Healey (No 2) at [88]; Hall and Others v Poolman and Others (2007) 65 ACSR 123; ("Poolman") at [325] per Palmer J; Australian Securities and Investments Commission v MacDonald and Others (No 12) (2009) 259 ALR 116 ("MacDonald (No 12)") at [22] per Gzell J. 70 A mere absence of dishonesty does not satisfy this requirement. The Court must be positively satisfied that the applicant for relief has acted without moral turpitude: Morley v ASIC (No 2) (2011) 83 ACSR 620 ("Morley") at [28] per Spigelman CJ, Beazley and Giles JJA; Healey (No 2) at [87]; Re HIH Insurance Ltd (in prov liq) and HIH Casualty and General Insurance Ltd (in prov liq); Australian Securities and Investments Commission v Adler and Others (2002) 42 ACSR 80 ("Adler") at [166]-[168] per Santow J. 71 The applicant for relief bears the onus of establishing that he or she acted honestly: Dominion Insurance Company of Australia Limited (In Liq) and Another v Finn (1989) 7 ACLC 25 ("Dominion") at 33-34 per Powell J; Gamble and Another v Hoffman and Another (1997) 24 ACSR 369 at 387 per Carr J; Vines at [7]; James Hardie Industries NV v Australian Securities and Investments Commission (2010) 247 ALR 85 at [567] per Spigelman CJ, Beazley and Giles JJA. 72 The question as to whether an applicant for relief ought fairly to be excused is a value judgment rather than an exercise of discretion: Morley at [16]; Vines v Australian Securities and Investments Commission (2007) 62 ACSR 1 ("Vines v ASIC") per Spigelman CJ at [558] with whom Ipp JA agreed; at [802] per Santow JA. The Directors have the burden of persuading me in relation to this evaluative judgment: Dominion at 33-34; Vines at [7].

Factors relevant to whether an applicant should be relieved 73 The authorities indicate that a broad range of matters are relevant to whether an applicant for relief "ought fairly to be excused" and also to whether to exercise the discretion to grant relief, many of which are helpfully set out by Austin J in Vines. They include the following: (a) That a person acted honestly does not mean that they should be relieved from liability. The limbs of inquiry under ss 1317S and 1318 are successive and in persuading the court in the evaluative judgment and then in the exercise of the discretion, more issues may arise than whether the person acted honestly: Morley at [50]. (b) It will be appropriate to excuse a person from liability in circumstances "where the person concerned has acted honourably, fairly, in good faith and in a common sense manner as judged by the standards of others of a similar professional background": Australian Securities and Investments Commission v Edwards (No 3) (2006) 57 ACSR 209 ("Edwards (No 3)") at [10] per Barrett J; Maelor Jones Investments (Noarlunga) Pty Ltd and Others v Heywood-Smith (1989) 54 SASR 285 ("Maelor Jones") at 295 per Olsson J.. (c) A person may be excused from liability even though the contravening conduct has been found to be unreasonable: Vines at [41]. (d) In cases involving negligence or breach of duty, in which there is an element of "unreasonableness" in the contravention, the extent of the defendant's departure from the required standard of behaviour or the "degree of unreasonableness" is a relevant consideration in making the evaluative judgement and exercising the residual discretion: Healey (No 2) at [90]; Plymin (No 2) at [101]; Vines at [39]. (e) Whether a defendant obtained and followed competent expert advice may be relevant to whether the contravening conduct can be regarded as reasonable in the circumstances: Vines at [41]; Maelor Jones at 293.. (f) The seriousness of the contravention is important in the evaluative judgment and the exercise of the subsequent discretion to relieve. Establishing whether the contravention is serious includes considering the importance of the provision contravened in terms of public policy, the degree of flagrancy of the contravention, and the consequences of the contravention in terms of harm to others: Vines at [52]; Morley at [50]-[52]. (g) The seriousness of the potential consequences of a contravention may be taken into account: Healey (No 2) at [89]. (h) Relief should not be granted where it would do serious disservice to the administration of company law into the commercial community: Vines at [54]; Commonwealth Bank of Australia v Friedrich and Others (1991) 5 ACSR 115 ("Friedrich") at 199 per Tadgell J. (i) It is unnecessary to make specific findings about causation of loss for the purpose of exercising the discretion. It is sufficient to consider the degree of plausibility, in a general sense, of the contention that the contravening conduct caused or did not cause loss. The stronger the likelihood that losses have been caused the more powerfully this factor is against a grant of relief, and the weaker the likelihood that the contravening conduct caused loss, the weaker is the serious contravention factor: Vines at [56]; Friedrich; Plymin. (j) The presence or absence of contrition after the event may be relevant to the exercise of the Court's discretion to relieve a party from liability: Vines at [51]; Whitlam (No 2) at [15]. (k) Whether the applicant was paid for undertaking the contravening conduct is also relevant: Vines at [57]; Maelor Jones at 290-295. (l) Having regard to the fact that company directors and officers occupy a more entrepreneurial position than trustees, a court will be "a little less severe" in the case of company directors than in the case of trustees: Vines at [58]; Manpac Industries Pty Ltd v Ceccatini (2002) 20 ACLC 1304 at [75] ("Manpac Industries") per Young CJ. (m) Testimonials as to the defendant's service to the community, the effect of the proceedings on his reputation and career, and the suffering caused to him and his family may be relevant to relief: Whitlam (No 2) at [17], [24]-[25]; Vines at [59]. (n) Unreasonableness in post-contravention conduct may be taken into account: Vines at [41]; Pacific Acceptance Corporation Ltd v Forsyth (1970) 92 WN (NSW) 29 at 119 per Moffit J. (o) Various negative criteria point against the granting of relief, as summarised in Vines at [60], including: (i) obtaining of personal gain: Lasscock's Nurseries Ltd (In Liq) v Lyons & Leader Ltd [1940] SASR 251 ("Lasscock's Nurseries") at 264 per Napier J; Permakraft (NZ) Ltd (In Liq) v Nicholson and Others (1982) 1 ACLC 488 ("Permakraft") at 510 per White J; (ii) impropriety such as deceptiveness or personal gain: Healey (No 2) at [89]; and (iii) consciousness of another's impropriety: Adler at [169]. 74 The Court is bound to consider all of the circumstances of the case when determining whether the defendant ought fairly to be excused and whether to exercise the discretion: Morley at [50]; Maelor Jones at 292; Re Turner Barker v Ivimey [1897] 1 Ch D 536 at 542 per Byrne J. It must be the case that if a matter is relevant to be considered by the Court in deciding on the questions of disqualification and pecuniary penalty it must be relevant in deciding whether to grant relief from liability: Healey (No 2) at [91]; Vines at [50]. Accordingly the factors that may be considered include the lists of considerations in Adler at [56] and [125]-[126]. 75 It is significant to my decision on exoneration that the requirement for general deterrence is relevant in the exercise of the discretion to grant relief from liability: Morley at [125]; Healey (No 2) at [89]-[91]. In Morley the NSW Court of Appeal said at [125]: …general deterrence is in our view an important consideration given the nature and significance of the…contravention. As well, it is necessary that relief be granted appropriate to mark significant failure in performance of the duties of a senior executive of a large public corporation and to maintain public confidence in the law's upholding of corporate standards. The approach taken 76 In the circumstances of the present case it is unnecessary to decide whether the Court has power to grant relief from a declaration of contravention, and I do not do so. It is unnecessary, first, because I am not satisfied that any Director established that he acted honestly within the meaning of the exoneration provisions. Second, assuming that any Director could establish that he acted honestly, in all the circumstances he should not in my view be excused from liability, either wholly or partly, and I would decline to exercise my discretion to relieve him. 77 I approach the merits of each Director's application for relief on the assumption that the Court has power to relieve him from the declarations of contravention sought. I will explain my refusal to grant relief after dealing with the nature and seriousness of the contraventions.

D. PRINCIPLES REGARDING PENALTIES 78 ASIC seeks orders disqualifying each Director from managing a corporation under s 206C, as well as orders imposing a pecuniary penalty on each Director under s 1317G. I now deal with the principles and considerations regarding the imposition of such penalties. 79 The question of any disqualification order is to be decided before deciding on the imposition of a pecuniary penalty: Healey (No 2) at [101]; Australian Securities and Investments Commission v Citrofresh International Ltd (ACN 064 551 426) and Another (No 3) (2010) 268 ALR 303 ("Citrofresh") at [15] per Goldberg J; Rich v Australian Securities and Investments Commission (2004) 220 CLR 129 ("Rich") at [45] per McHugh J; Australian Securities Commission v Forem-Freeway Enterprises Pty Ltd and Others (1999) 30 ACSR 339 ("Forem-Freeway") at 349-350 per Madgwick J;.

Disqualification orders 80 Section 206C provides: Court power of disqualification - contravention of civil penalty provision (1) On application by ASIC, the Court may disqualify a person from managing corporations for a period that the Court considers appropriate if: (a) a declaration is made under: (i) section 1317E (civil penalty provision) that the person has contravened a corporation/scheme civil penalty provision; or (ii) section 386 1 (civil penalty provision) of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 that the person has contravened a civil penalty provision (within the meaning of that Act); and (b) the Court is satisfied that the disqualification is justified. (2) In determining whether the disqualification is justified, the Court may have regard to: (a) the person's conduct in relation to the management, business or property of any corporation; and (b) any other matters that the Court considers appropriate. … 81 As I have made declarations of contravention, the first precondition for making a disqualification order is satisfied. If the Court is satisfied that disqualification is justified, it may disqualify a person from managing corporations for a period that it considers appropriate. The Court must be satisfied both that the disqualification order should be made and that the period of disqualification is justified: Gillfillan v Australian Securities and Investments Commission (CA 2012/194766) (2012) 92 ACSR 460 ("Gillfillan") at [193] per Sackville AJA. Subsections (1)(b), (2)(a) and (2)(b) provide the court with a wide discretion to consider any matter it considers appropriate as long as it considers "the person's conduct in relation to the management, business or property of any corporation". 82 The judgment of Santow J in Adler is accepted as a leading authority with respect to the exercise of power under ss 206C and 206E: Rich at [48] per McHugh J. In Adler at [56] Santow J conveniently identified the legal principles developed to that point with respect to disqualification orders ("the Santow factors"). I respectfully adopt his Honour's summary of principles as follows: The cases on disqualification gave orders ranging from life disqualification to 3 years. The propositions that may be derived from these cases include: (i) Disqualification orders are designed to protect the public from the harmful use of the corporate structure or from use that is contrary to proper commercial standards. (ii) The banning order is designed to protect the public by seeking to safeguard the public interest in the transparency and accountability of companies and in the suitability of directors to hold office. (iii) Protection of the public also envisages protection of individuals that deal with companies, including consumers, creditors, shareholders and investors. (iv) The banning order is protective against present and future misuse of the corporate structure. (v) The order has a motive of personal deterrence, though it is not punitive. (vi) The objects of general deterrence are also sought to be achieved. (vii) In assessing the fitness of an individual to manage a company, it is necessary that they have an understanding of the proper role of the company director and the duty of due diligence that is owed to the company. (viii) Longer periods of disqualification are reserved for cases where contraventions have been of a serious nature such as those involving dishonesty. (ix) In assessing an appropriate length of prohibition, consideration has been given to the degree of seriousness of the contraventions, the propensity that the defendant may engage in similar conduct in the future and the likely harm that may be caused to the public (x) It is necessary to balance the personal hardship to the defendant against the public interest and the need for protection of the public from any repeat of the conduct. (xi) A mitigating factor in considering a period of disqualification is the likelihood of the defendant reforming. (xii) The eight criteria to govern the exercise of the court's powers of disqualification set out in Commissioner for Corporate Affairs v Ekamper (1987) 12 ACLR 519 have been influential. It was held that in making such an order it is necessary to assess: • character of the offenders; • nature of the breaches; • structure of the companies and the nature of their business; • interests of shareholders, creditors and employees; • risks to others from the continuation of offenders as company directors; • honesty and competence of offenders; • hardship to offenders and their personal and commercial interests; and • offenders' appreciation that future breaches could result in future proceedings: (xiii) Factors which lead to the imposition of the longest periods of disqualification (that is disqualifications of 25 years or more) were: • large financial losses; • high propensity that defendants may engage in similar activities or conduct; • activities undertaken in fields in which there was potential to do great financial damage such as in management and financial consultancy; • lack of contrition or remorse; • disregard for law and compliance with corporate regulations. • dishonesty and intent to defraud; • previous convictions and contraventions for similar activities. (xiv) In cases in which the period of disqualification ranged from 7 - 12 years, the factors evident and which lead to the conclusion that these cases were serious though not "worst cases", included: • serious incompetence and irresponsibility; • substantial loss; • defendants had engaged in deliberate courses of conduct to enrich themselves at others' expense, but with lesser degrees of dishonesty; • continued, knowing and wilful contraventions of the law and disregard for legal obligations; • lack of contrition or acceptance of responsibility, but as against that, the prospect that the individual may reform. (xv) The factors leading to the shortest disqualifications, that is disqualifications for up to 3 years were: • although the defendants had personally gained from the conduct, they had endeavoured to repay or partially repay the amounts misappropriated; • the defendants had no immediate or discernible future intention to hold a position as manager of a company; • in Donovan's case, the respondent had expressed remorse and contrition, acted on advice of professionals and had not contested the proceedings. (Citations omitted.) 83 These considerations must now be considered in light of Rich: Healey (No 2) at [105]; Australian Securities and Investments Commission v Lindberg (2012) 91 ACSR 640 ("Lindberg") at [81] per Robson J; Healey (No 2) at [105]. Contrary to principle (v) identified above by Santow J in Adler, McHugh J in Rich at [52] noted that the objective of a disqualification order cannot be characterised as purely protective. McHugh J explained at [52] that: …factors taken into account in the criminal jurisdiction - retribution, deterrence, reformation, contrition and protection of the public - are also central to determining whether an order of disqualification should be made. Following Rich, it is clear that disqualification orders may be imposed not only for protective purposes, but also for the objectives of punishment and deterrence: Australian Securities and Investments Commission v Vizard (2005) 145 FCR 57 at [35] per Finkelstein J. 84 In Rich at [47]-[58], McHugh J extracted four general categories of matters to which courts have had regard when deciding whether to impose a disqualification order and, if so, for what period namely: (a) the nature and seriousness of the contraventions; (b) protection of the public; (c) retribution and deterrence; and (d) mitigating factors. I respectfully adopt these categories. 85 In Rich at [47] McHugh J set out some examples of contraventions that have previously been held to warrant a disqualification order: Contraventions under the Corporations Act and its predecessor legislation that have been found to enliven the court's discretion include breaches of directorial duties of honesty, good faith and due care and diligence, making improper use of the position of director to gain an advantage for that person or for others to the detriment of the company, making inappropriate use of company funds, engaging in misleading and deceptive conduct, permitting corporations to trade while insolvent, operating unregistered schemes unlawfully or carrying on a business such as a securities business or an investment advice business without a licence and failing to comply with administration obligations. (Citations omitted.) 86 Whether a contravention is serious may be judged, at least in part, by the actual or potential consequences of the contraventions: Lindberg at [134]. For example, in Forem-Freeway at 350-351, Madgwick J referred to serious breaches of duty by the directors and imposed a substantial disqualification order, noting that: … Losses were thereby caused to many people who could doubtless ill-afford it and whose only folly was naive trust in pursuit of a bargain, as well as to corporations well able to look out for themselves and to absorb losses, and to others. 87 While I respectfully agree with the Santow factors (as modified by Rich) it must be kept in mind that they are just guidelines and each case must turn upon its own considerations: Australian Securities and Investments Commission v Beekink and Others (2007) 238 ALR 595 ("Beekink") at [112] per Mansfield, Jacobson and Siopis JJ; Re One.Tel Ltd (In liq): Australian Securities and Investments Commission v Rich and Others [2003] 44 ACSR 682 ("Re One.Tel") at [26] per Bryson J.

Deterrence by disqualification orders 88 The need for deterrence, both general and personal, is fundamental in determining whether to impose a disqualification order and if so for what period: Rich at [50]-[52]. As the Victorian Court of Appeal said, per Warren CJ, Charles JA and O'Bryan JA, in Elliott v Australian Securities and Investments Commission and Another (2004) 10 VR 369 at [137]: Many of the propositions and factors listed by Santow J bear a similarity to sentencing principles. Matters going to aggravation and mitigation in relation to contraventions of s 588G need to be considered and accorded proper weight. But above all else protection of the public and deterrence, specific and general, must also be given appropriate consideration. (Emphasis added.) 89 The need for general deterrence may be a relevant consideration even where there is no requirement for personal deterrence. In Beekink the Full Court found (at [89]-[91]) that the primary judge fell into error by focusing on personal deterrence and paying too much attention to the exemplary character of the director, who was guilty only of a lapse in attention which the primary judge considered was unlikely to recur. The Full Court held that the primary judge gave too much weight to personal considerations affecting the director and erred in not taking general deterrence into account. 90 I respectfully endorse the remarks of Finkelstein J in Australian Competition and Consumer Commission v ABB Transmission and Distribution Limited and Others (No 2) (2002) 190 ALR 169 at [16], made in relation to a different regulatory regime, where his Honour said: It is generally accepted that protection of society is the ultimate end of punishment. Traditionally this end is sought to be achieved by the imposition of punishment that serves four functions: deterrence, retribution, reformation and incapacitation. By deterrence I mean both specific deterrence, where the punishment imposed is sufficiently unpleasant to deter the person from committing further breaches of the law, and general deterrence where the punishment is set to deter potential offenders from committing that offence. The object of general deterrence is to prevent future harmful conduct and should be seen as a fundamental goal of sentencing. For that reason general deterrence justifies the imposition of what might otherwise be regarded as a harsh penalty (that is a penalty that takes into account not only the offender's conduct, but the criminal propensity of others) for the individual concerned, to bring about a greater benefit for society as a whole. (Emphasis added.) 91 It must be accepted that the importance of general deterrence means that sometimes a penalty will be imposed which is higher, perhaps considerably higher, than the penalty that would otherwise be imposed, having regard only to the circumstances of that offender: Australian Competition and Consumer Commission v High Adventure Pty Ltd [2006] ATPR 42-091 ("High Adventure") at [11] per Heerey, Finkelstein and Allsop JJ, cited with approval in Lindberg at [87]. 92 Of course, care must be taken to avoid excessive measures and it is necessary to weigh in the balance the hardship that is likely to be caused to the offender. As Bryson J eloquently put it in Re One.Tel at [26], "[n]o-one should be sacrificed to the public interest." This phrase was also taken up in Beekink at [113]. In Morley at [126] the New South Wales Court of Appeal explained the phrase in the following terms: Protection of the public, including by general deterrence, is at the heart of disqualification orders, and a delinquent officer against whom a disqualification order is made is not sacrificed. The phrase is a reminder that the public interest and the need to protect the public from repeated conduct or like conduct of others is balanced against the hardship to the officer. I agree. Without sacrificing an offender on the altar of the public interest the Court must do its duty to ensure that the primary object of deterrence is not undermined.

Pecuniary penalties 93 Section 1317G provides: Pecuniary penalty orders Corporation/scheme civil penalty provisions (1) A Court may order a person to pay the Commonwealth a pecuniary penalty of up to $200,000 if: (a) a declaration of contravention by the person has been made under section 1317E; and (aa) the contravention is of a corporation/scheme civil penalty provision; and (a) the contravention: (i) materially prejudices the interests of the corporation or scheme, or its members; or (ii) materially prejudices the corporation's ability to pay its creditors; or (iii) is serious. 94 The preconditions provided in s 1317G(1) are satisfied as I have made declarations of contraventions against each Director and I consider the contraventions are serious. 95 There is no reason why the Court should not impose a pecuniary penalty as well as a disqualification order in respect of a single contravention or single course of conduct. Both disqualification orders and pecuniary penalties are available for punishment and deterrence, provided there is a good reason to make such orders: Healey (No 2) at [118]; Citrofresh at [21];. 96 Santow J helpfully collected the following principles and propositions regarding pecuniary penalties in Adler at [125]-[126] which are a useful guide: [125] It is well established that the principal purpose of a pecuniary penalty is to act as a personal deterrent and a deterrent to the general public against a repetition of like conduct. In Donovan, the court said: If compliance with the appropriate standards of commercial conduct within the management of corporations by deterrents is the objective, then any penalty should be no greater than is necessary to achieve this objective. Otherwise severity above that figure would be oppressive. [126] Following a review of the relevant cases, I have attempted to summarise the propositions that may be derived. I recognise that, as with banning orders, there is no simple mechanical process for quantifying the appropriate penalty but some guidance can be derived from the principles and factors that are identified below….These propositions have guided me in the present case: (i) the pecuniary penalty has a punitive character, but it is principally a personal and general deterrent to prevent the corporate structure from being used in a manner contrary to commercial standards. The penalty should be no greater than is necessary to achieve this object. (ii) to determine whether compensation is to be paid and in what amount it is necessary to consider the prospect of the respondent paying such compensation and the hardship to the defendant from such payment. Compensation has been ordered for an amount less than that lost even though there was little prospect of any of it being recovered. (iii) the capacity of the defendant to pay is a relevant consideration in determining a pecuniary penalty. (iv) in assessing a pecuniary penalty it is important to consider the consequences of an associated disqualification order for the defendant. If the making of such an order has significant consequences, they may operate as a factor in favour of a lesser penalty. Where the disqualification order does not have significant consequences for the defendant, the prohibition order is likely to be only marginally relevant. (v) it is important to assess whether the order will prejudice the rehabilitation of the defendant. (vi) the size of the penalty is a question of discretion. The circumstances of one case should not dictate the size of the penalty on another case (vii) in Australian Securities Commission v Forem-Freeway civil compensation of $200,000 was ordered. This amount was lower than the losses to the company concerned. This amount was ordered, even though it was highly unlikely that the amount would ever be paid as the respondent was bankrupt. In this case it was held that precision in the amount was therefore unnecessary. (viii) a fine was not ordered in Australian Securities Commission v Forem-Freeway. However the ASC was given liberty to apply at a later stage in relation to this matter. The court held that the personal hardship to the respondent, the unintended punitive consequences of the other orders and the lack of capacity to pay, justified such order. (ix) factors leading to the order of a penalty in the range of $20,000 - $40,000 included: • defendant was aware of impropriety of actions; • no intention to deprive company permanently of funds; • amounts in question not large; • no deliberate falsification of accounts; • cases classed as being serious misconduct, but not worst cases. (x) relevant factors leading to the court to order the lower range penalties in the range of $4000-$5000 included: • remorse and contrition shown; • efforts to repay misappropriated funds; • acted upon the advice of professionals; • did not contest the proceedings, or sought to save costs in proceedings; • tended to not involve dishonesty, but negligence or carelessness; • previous unblemished character; • further contraventions unlikely. (Citations omitted.) 97 Similarly, in Matcham (No 2) at [234] Jacobson J explained that the civil penalty regime and the circumstances of the case called for attention to the six factors set out in Trade Practices Commission v CSR Ltd (1991) ATPR 41-076 ("CSR") at 51,152 per French J (as his Honour then was) together with a factor listed in Adler. Jacobson J listed the relevant factors as follows: (1) The first is the nature and extent of the contravening conduct, including the length of time over which it extended, the number of payments obtained and the amounts in question. (2) The second is the loss and harm arising from the conduct, including the charitable nature of the corporation, the public purposes it was intended to serve and the lost opportunities to provide health care for disadvantaged Indigenous persons. (3) The third is the circumstances in which the conduct took place, including the position held in the corporation by the contravener and the degree of dishonesty or carelessness involved in the corporation. (4) The fourth is any relevant matters personal to the contravener, such as hardship… (5) The fifth is any steps taken to rectify the harm caused by the wrongdoing. (6) The sixth is any [contrition] or cooperation with the authorities. (7) Another factor identified by Santow J in Adler (No 1) at 126 was the consequences of an associated disqualification order made against a defendant. 98 I agree with the considerations listed in Adler and Matcham (No 2) but I use them as a guide rather than a rigid catalogue. They are only a guide because the quantification of a pecuniary penalty is not an exact science but a question of discretion. While the listed considerations derived from other cases may provide guidance, difficulties inevitably arise in attempting to discern a universal formula for the quantification of pecuniary penalties by reference to previous cases. Each case must turn upon its own considerations and the circumstances of one case should not dictate the size of a penalty in another: Adler at [70] and [126]; Beekink at [117]-[120]; Healey (No 2) at [121]. 99 The Full Court in Beekink (at [118]-[119]) highlighted the difficulty with quantifying the amount of a pecuniary penalty by reference to other cases and explained: There are three difficulties in attempting to classify the amounts of pecuniary penalties by reference to common factors in other cases. First, the breaches tend to take a wide variety of forms. Second, the value of money erodes over time. The third reason is that in recent years the courts have been more concerned with the need for the imposition of higher civil penalties to reflect community expectations of the standards to be imposed on company directors. (Citations omitted) ASIC provided a table setting out various court decisions on disqualification orders and pecuniary penalties but I found it of little assistance.

Deterrence by pecuniary penalty 100 It is well-established that the principal purpose of a pecuniary penalty under a civil penalty regime is to act as a personal and general deterrent against the repetition of like conduct: Adler at 126; Matcham (No 2) at [228]; Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 at [65]-[66] per French CJ, Crennan, Bell and Keane JJ with Gageler J agreeing; Healey (No 2) at [224]; Beekink at [115]; High Adventure at [11]; CSR at 51,152 per French J. For example, in CSR at 52,152, French J stated that the objective of the civil penalty regime under the Trade Practices Act 1974 (Cth) was to: …put a price on contravention that is sufficiently high to deter repetition by the contravener and by others who might be tempted to contravene the Act. 101 The central importance of deterrence was emphasised by the Full Court in High Adventure at [11] where the Court said: [By] focusing on the detriment to the respondents the judge ignored both the seriousness of the contravention as well as the need to fix upon an appropriate penalty by reference to the need to deter future contraventions. As the cases to which the judge was referred show, the principal, if not the sole, purpose for the imposition of penalties for a contravention of the antitrust provisions in Pt IV is deterrence, both specific and general. This rule is so well entrenched that citation of authority is unnecessary. Moreover, as deterrence (especially general deterrence) is the primary purpose lying behind the penalty regime, there inevitably will be cases where the penalty that must be imposed will be higher, perhaps even considerably higher, than the penalty that would otherwise be imposed on a particular offender if one were to have regard only to the circumstances of that offender. In some cases the penalty may be so high that the offender will become insolvent. That possibility must not prevent the Court from doing its duty for otherwise the important object of general deterrence will be undermined. (Emphasis added). 102 Of course, the need for deterrence must be weighed against the hardship to the offender. The amount of the penalty imposed should be no greater than is necessary to achieve deterrence: Matcham (No 2) at [229]; Healey (No 2) at [224]; Beekink at [115]. In deciding whether to impose a pecuniary penalty and in quantifying the amount of a pecuniary penalty the Court must have regard to the capacity of the defendant to pay such an amount and the hardship caused to the defendant from such payment: Adler at 126; Forem-Freeway at 351. It is also necessary to consider the consequences of an associated disqualification order. If a disqualification order has significant consequences this may operate as a factor in favour of a lesser pecuniary penalty: Beekink at [116]; Adler at 126. 103 However the public purpose is paramount. It is impossible to be precise in balancing the need for deterrence against the personal hardship to the offender through imposition of a pecuniary penalty. Personal hardship caused to an offender is less important than the need to protect the public through personal and general deterrence: Matcham (No 2) at [165]; Beekink at [83]-[87]. 104 As I have said, it must be accepted that the importance of general deterrence means that sometimes a pecuniary penalty will be imposed which is higher than would otherwise be imposed, having regard only to the circumstances of the offender. In fixing the quantum of a penalty, the court should not leave room for an impression of weakness in its resolve to achieve deterrence: Matcham (No 2) at [230]; NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 294-295 per Burchett and Kiefel. 105 The presence or absence of contrition in the circumstances may be a relevant consideration as it may go to the likelihood that the contravener will commit similar breaches in the future: Citrofresh at [42]. 106 Careful attention must also be paid to the maximum pecuniary penalty set for each contravention because they have been legislated for, they invite comparison between the worst possible case and the case before the court, and in that regard they provide a yardstick to be taken and balanced with the other relevant factors: See Markarian v The Queen (2005) 228 CLR 357 ("Markarian") at [31] per Gleeson CJ, Gummow, Hayne and Callinan JJ: MT Solar Pty Ltd at [67]-[68] per Foster J; ACCC v TPG (No 2) at [140]. The quantification of a pecuniary penalty is a discretionary judgment that must involve a weighing of all relevant factors rather than starting from a predetermined figure and making incremental additions or subtractions for each separate factor: Markarian at [39]; MT Solar at [72].

Parity principle 107 Each of the five Directors were involved in the same events and parity of sentencing is an important consideration in my decision. 108 In Gillfillan at [194]-[195] the New South Wales Court of Appeal, per Sackville AJA (with whom Beazley and Barrett JJA agreed), said: The terms of s 206C(2) are wide enough to permit the court to have regard to penalties imposed on other contravenors whose contraventions are the same or at least very similar. However, if the penalty imposed on one contravenor is to be regarded as the yardstick for the penalty to be imposed on another contravenor, care must be taken to identify the points of similarity and difference. If identical penalties are to be imposed, attention should be directed to whether the contravenor's circumstances warrant equal treatment. 109 Some of the authorities in relation to parity were helpfully collected by Gzell J in MacDonald (No 12) at [319]-[322] (and approved in Healey (No 2) at [126]). His Honour set them out as follows: [319] In Postiglione v R (1997) 189 CLR 295; 145 ALR 408; [1997] HCA 26 it was held that the parity principle of sentencing requires that there should not be a marked disparity between sentences imposed on co-offenders which gives rise to a justifiable sense of grievance. [320] In Lowe v R (1984) 154 CLR 606 at 609; 54 ALR 193 at 194; [1984] HCA 46 Gibbs CJ said it was obviously desirable that persons who have been parties to the commission of the same offence should, if other things are equal, receive the same sentence. But other things are not always equal and such matters as the age, background, previous criminal history and general character of the offender, and the part which he or she played in the commission of the offence, have to be taken into account. [321] As Finkelstein J said in Australian Competition and Consumer Commission v ABB Transmission and Distribution Ltd (No 2) (2002) 190 ALR 169; [2002] FCA 559 at [40]: Next there is the parity principle. The principle is that "[w]here other things are equal persons concerned in the same crime should receive the same punishment; and where other things are not equal a due discrimination should be made": R v Tiddy (1969) SASR 575 at 577. The principle requires little explanation. Consistency in punishment is an attribute of a rational and fair system of justice. [322] Other things being equal, there must be, as Austin J said in Vines 2005 at [45], a persuasive rationale for any difference in the disqualification periods for each of the defendants. I respectfully agree.

Totality principle 110 The totality principle requires the Court to conduct a final check to ensure that the aggregate penalty imposed for a course of conduct is not unjust or disproportionate to the circumstances of the case. If it is unjust or disproportionate, the penalty is to be moderated in accordance with the totality principle. This is done by determining the appropriate pecuniary penalty for each contravention and applying a discount to the aggregate amount: ACCC v Telstra at [228]-[230]; Ponzio v B & P Caelli Constructions Pty Ltd and Others (2007) 158 FCR 543 at [145]-[147] per Jessup J. 111 The Court is bound to apply the totality principle where applicable and failure to do so may be an appealable error: Matcham (No 2) at [292]; Mornington Inn at [9] per Gyles J; Johnson at [35] per Gummow, Callinan and Heydon JJ, (Gleeson CJ and Kirby J agreeing at [1] and [38]). 112 In Gillfillan at [189]-[190], Sackville AJA explained the nature of the totality principle and the quantification of penalties in cases involving multiple contraventions: [189] In Mill v R (1988) 166 CLR 59 at 63; 83 ALR 1 at 3; [1988] HCA 70 (Mill), the High Court described the totality principle as a recognised principle of sentencing formulated to assist a court when sentencing an offender for a number of offences. Its effect is: … to require a sentencer who has passed a series of sentences, each properly calculated in relation to the offence for which it is imposed and each properly made consecutive … to review the aggregate sentence and consider whether the aggregate is "just and appropriate" (quoting - Thomas, Principles of Sentencing (2nd ed 1979), at 56-57). [190] In Pearce v R (1998) 194 CLR 610; 156 ALR 684; [1998] HCA 57 (Pearce), a majority of the court understood Mill to require the sentencing judge to fix an appropriate sentence for each offence and then to consider cumulation or concurrence, as well as questions of totality: at [45] per McHugh, Hayne and Callinan JJ, with whom Gummow J agreed. In [Vines v ASIC (2007) 63 ACSR 505], Spigelman CJ stated (at [19]) that directly analogous considerations to those identified in Pearce apply to civil penalties in a case involving multiple contraventions.

E. THE NATURE AND SERIOUSNESS OF THE CONTRAVENTIONS

The Declarations of Contravention 113 The starting point in understanding the nature and seriousness of each Director's breaches is the declarations of contravention made as they detail each Director's contravening conduct. The only differences in the declarations are slight variations in respect of: (a) Mr Clarke's intent when passing the Lodgement Resolution; (b) Mr Lewski's contraventions by improperly using his position to give himself a personal benefit whereas the other Director's contraventions were improperly using their positions to give him a benefit; and (c) the method of each Director's participation in the 2008 Decisions to Pay. 114 The declarations of contravention are lengthy and they are attached to these reasons. To avoid repetition I will not set them out in full and the following represents the declarations generically rather than individually for each Director.

The Directors' Lodgement Resolution Contraventions 115 These declarations are as follows. 1. Each Director contravened s 601FD(3) by reason of him having contravened s 601FD(1)(b) in that, in his capacity as a director of APCHL in its capacity as the responsible entity of the Prime Trust, he failed to exercise the degree of care and diligence that a reasonable person would have exercised if he or she were in his position, by acting as follows. On 22 August 2006, at a meeting of the Board of APCHL, he voted in favour of the Lodgement Resolution to lodge with ASIC the Amended Constitution to cause the Amendments in the Amended Constitution to take effect. The Amendments that were the subject of the Lodgement Resolution purported to create rights in APCHL that, if exercised, would result in a diminution of the assets of the Prime Trust without providing any or any equivalent benefit to the Members of the Prime Trust. In so doing, the Director on 22 August 2006: (a) failed to consider and understand, and be satisfied that the Board had considered and understood, the effect of a deed of variation dated 22 August 2006, which contained the Amendments; (b) failed to consider whether, and be satisfied that, there was a legitimate reason for the Responsible Entity to make the Amendments; (c) failed to be satisfied that the Board had considered: (i) legal advice that the Amendments, if made without the approval of the Members, would comply with the Act and the Existing Constitution; or (ii) judicial advice that the Responsible Entity would be justified in making the Amendments without the approval of the Members; (d) failed to consider, and be satisfied that the Board had considered, whether the Amendments if made without the approval of the Members would comply with the Act and the Existing Constitution; (e) failed to consider, and be satisfied that the Board had considered, the effect of the Amendments on the rights and interests of the Members; (f) failed to be satisfied that the Board had considered the effect of the Amendments on the interests of APCHL, Mr Lewski and entities related to and associated with Mr Lewski; and (g) failed to consider and be satisfied that the Board had considered how, if at all, the conflict between the interests of the Members and the interests of APCHL could be resolved in favour of the Members. 2. Each Director contravened s 601FD(3) by reason of him having contravened s 601FD(1)(c) in that, in his capacity as a director of the responsible entity, he failed to act in the best interests of the Members and failed to give priority to the interests of the Members over the interests of APCHL, in voting in favour of the Lodgement Resolution on 22 August 2006, in circumstances where: (a) he did not give any consideration to whether making the Amendments was in the best interests of the Members; (b) the Amendments were not in fact in the best interests of the Members; (c) a director of APCHL in his position could not reasonably have believed that the Amendments were in the best interests of the Members; and (d) there was a conflict between: (i) the interests of APCHL in being paid the additional fees provided for by the Amendments and the interests of the members in paying only the fees under the Existing Constitution; and (ii) the interests of APCHL in being paid the additional fees and its duties to act in the Members' best interests. 3. Each Director contravened s 601FD(3) and so contravened s 601FD(1)(e), in that, in his capacity as a director of the responsible entity, he made improper use of his position as an officer of the responsible entity to provide an advantage to APCHL, in voting in favour of the Lodgement Resolution on 22 August 2006, in circumstances including the following: (a) the Lodgement Resolution advantaged APCHL, because the Amendments purported to create rights in APCHL that would, if exercised, benefit APCHL; (b) by voting in favour of the Lodgement Resolution, he used his position as a director of APCHL intending to cause the Amendments to become effective; and (c) the use of his position was improper because a person properly exercising the powers of a director of a trustee in the circumstances, which included the Five Principal Factors (as previously described); could not have considered it proper to pass the Lodgement Resolution and would have refused to use his position to permit the Amendments to become effective. 4. Each Director contravened s 601FD(3) by reason of him having contravened s 601FD(1)(e) in that, in his capacity as a director of the responsible entity, he made improper use of his position as an officer of the responsible entity to provide an indirect advantage to those persons who would benefit from the fees payable pursuant to the Amendments, in that: (a) the Amendments purported to create rights in APCHL that would, if exercised, by their benefit to APCHL benefit those with an ownership interest in APCHL or rights to share in or receive a proportion of its profits or revenue, namely Mr Lewski, several of his family members and companies associated with him; (b) by voting in favour of the Lodgement Resolution, he used his position as a director of APCHL intending to cause the Amendments to become effective; and (c) the use of his position was improper because a person properly exercising the powers of a director of a trustee in the circumstances, which included the Five Principal Factors, could not have considered it proper to pass the Lodgement Resolution and would have refused to use his position to permit them to become effective. 5. Each Director contravened s 601FD(3) by reason of him having contravened s 601FD(1)(f) in that, in his capacity as a director of the responsible entity, he failed to take all steps that a reasonable person would have taken if that reasonable person were in his position to ensure that APCHL complied with the constitution of Prime Trust and the Act, in that: (a) in purporting to make the Amendments, APCHL did not comply with the Existing Constitution; (b) in purporting to make the Amendments, APCHL did not comply with s. 601FC(1)(m); and (c) he voted in favour of the Lodgement Resolution: (i) intending to make the Amendments effective; (ii) without being satisfied that the Board had considered clear legal advice that in making the Amendments without the approval of the Members, the Responsible Entity would comply with the Act and the Existing Constitution; (iii) without taking any steps to cause APCHL to obtain judicial advice as to whether APCHL was empowered to make, and justified in making, the Amendments without the approval of the Members; (iv) without seeking the approval of the Amendments by the Members; and (v) without giving any consideration on 22 August 2006 to the Board's power to make the amendments or the need for proper legal advice or judicial advice. 116 In respect of Mr Clarke the declarations that correspond to declarations 3(b), 4(b) and 5(c) above do not provide that he passed the Lodgement Resolution "intending" to make the Amendments effective. While the effect of his failure to give proper consideration to the Lodgement Resolution was that the Amendments came into effect I consider that in waving that resolution through in the way that he did he gave such little thought to the effect of what he was doing that he formed no intention about the Amendments.

The Directors' Decisions to Pay Contraventions 6. Each Director contravened s 209(2) (as modified by Part 5C.7) by being involved (as that term is used in s 79) in a contravention by APCHL of s 208 as modified by Part 5C.7, as follows: (a) APCHL contravened s 208 as modified by Part 5C.7, in that: (i) on 3 August 2007, it caused to be issued to itself in its personal capacity ordinary units of the Prime Trust with a value of $3,293,994 as and by way of a 10 per cent instalment of the Listing Fee ("the First Scrip Instalment"); (ii) on 13 March 2008, it caused to be transferred $329,399 of the monies held by it as Trustee of Prime Trust to itself in its personal capacity in respect of GST on the First Scrip Instalment, (collectively, "the First Instalment"); (iii) on 27 June 2008, it caused to be issued to Carey Bay Pty Ltd 9,020,386 units in the Prime Trust valued at $5,000,000; and (iv) on 30 June 2008, it transferred $27,610,548.30 of the monies held by it as trustee of Prime Trust to itself in its personal capacity, (collectively "the Second Instalment") without obtaining the approval of the Members and notwithstanding that, as a matter of law, the First Instalment and the Second Instalment and each component of them were not provided for in the constitution of Prime Trust; (b) he participated in the meetings of the Board on 26 June 2007 and 27 July 2007 and assented to the resolutions passed at those meetings that authorised the payment of the First Instalment to APCHL in circumstances where he knew that: (i) payment of the First Instalment was "a financial benefit" (as that expression is used in s. 208(1)); (ii) the First Instalment was given by APCHL as Responsible Entity; (iii) the First Instalment was given out of the Scheme Property of Prime Trust; (iv) the First Instalment was given to APCHL itself; and (v) APCHL did not obtain the Members' approval for the payment of the First Instalment. (c) he: (i) in April 2008 approved the execution of the Heads of Agreement (in the case of Mr Butler, Mr Jaques, Dr Wooldridge and Mr Clarke) or executed that document (in the case of Mr Lewski and Dr Wooldridge); (ii) (in the case of Mr Lewski, Mr Jaques and Mr Clarke) participated in the meeting of the Board on 27 June 2008 and the resolution passed at that meeting which authorised the execution on behalf of APCHL of the Deed of Acknowledgement under which APCHL agreed to pay the Second Instalment; when he knew that: (iii) payment of the Second Instalment was "a financial benefit" (as that expression is used within s 208(1)); (iv) the Second Instalment was given by APCHL as Responsible Entity; (v) the Second Instalment was given out of Scheme Property; (vi) the Second Instalment was given partly to APCHL itself and partly to Carey Bay which was a related party of APCHL; and (vii) APCHL did not obtain the Members' approval for the payment of the Second Instalment. 7. Each Director contravened s 601FD(3) by reason of him having contravened s 601FD(1)(c) in that, in his capacity as a director of the responsible entity he failed to act in the best interests of the Members and failed to give priority to the interests of the Members over the interests of APCHL, in that he: (a) voted in favour of or otherwise assented to the resolution on 26 June 2007 in the following terms: "the Listing fee be taken by the Responsible Entity as Units in the Trust of which approximately ten per cent is to be issued to the Responsible Entity at the time of allotment and official quotation of Prime Trust's units on the ASX. The balance of the listing fee will be deferred and payable in tranches"; and (b) voted in favour of or otherwise assented to the resolution on 27 July 2007 to the effect that APCHL would take the first tranche of the Listing Fee ostensibly payable pursuant to the Amendments as units; and (c) participated in making the decision to pay the balance of the Listing Fee by: (i) either approving the execution of the Heads of Agreement, or executing that document, in April 2008; (ii) (in the case of Mr Lewski, Mr Jaques and Mr Clarke) attending in the meeting of the Board on 27 June 2008 and joining in the resolution passed at that meeting which authorised the execution on behalf of APCHL of the Deed of Acknowledgement under which APCHL agreed to pay the Second Instalment; (collectively "the decisions to pay the Listing Fee") in circumstances where: (d) he did not give any consideration to whether making payment of the Listing Fee gave rise to any conflict of interest; (e) a director of APCHL in his position would have been alive to APCHL's conflict of interests and conflict of interest and duty, and would have considered and sought to resolve these conflicts in favour of the members before making a decision to pay the Listing Fee; (f) payment of the Listing Fee was not in fact in the best interests of the Members; (g) a director of APCHL in his position could not in the circumstances reasonably have believed that payment of the Listing Fee was in the best interests of the Members; and (h) the proposed payment of the Listing Fee gave rise to a conflict between the interests of APCHL and the interests of the Members which should have been resolved in favour of the Members by APCHL deciding not to make the payment. 8. Each Director contravened s 601FD(3) by reason of him having contravened s 601FD(1)(f) in that, in his capacity as a director of the responsible entity, he failed to take all steps that a reasonable person would have taken if that reasonable person were in his position to ensure that APCHL complied with the Act, in that he participated in making the decisions to pay the Listing Fee by: (a) voting in favour of or otherwise assenting to the resolutions on 26 June 2007 and 27 July 2007; (b) either approving the execution of the Heads of Agreement, or executing that document, in April 2008; (c) (in the case of Mr Lewski, Mr Jaques and Mr Clarke) attending the meeting of the Board on 27 June 2008 and joining in the resolution passed at that meeting which authorised the execution on behalf of APCHL of the Deed of Acknowledgement under which APCHL agreed to pay the Second Instalment; in circumstances where: (d) a reasonable person in his position would not have done so without obtaining: (i) clear legal advice or a judicial direction that the Amendments had been effective, that APCHL had a right to be paid the fee under the constitution of Prime Trust and the Act, and that payment of the fee would not contravene s 208 (as amended by s 601LC); or (ii) the approval of the Members for payment of the fee to be made; and (e) he did not take any step towards obtaining further legal advice or a judicial direction as to the Amendments or towards obtaining the Members' approval for the payment of the Listing Fee.

APCHL's contraventions 117 APCHL's contraventions largely mirror the Directors' contraventions and they are attached to these reasons. They are not contested and I will not set them out again.

Short summary of the facts 118 The factual background to the contraventions is fully set out in the liability judgment but I now provide a shortened summary to assist in understanding the seriousness of the contraventions. 119 Mr Lewski was the owner of APCHL and the driving force behind the company. As he was the owner, a Director, and Chief Executive Officer he held a position of substantial influence. In the relevant period APCHL was acting as the responsible entity of the Prime Trust and was holding and managing the funds invested by the Members, holding them on trust for the Members. The Directors were officers of APCHL with statutory fiduciary duties under the Act that are akin to the general law obligations of a trustee.

The intention to publicly list Prime Trust 120 Public listing of the units in Prime Trust was always in the contemplation of APCHL and the Directors. The first prospectus issued by APCHL in 2001 (as well as the later PDSs) advised prospective investors that the Trust would be terminated by 31 December 2007 unless APCHL had not passed a resolution to list the units of the Trust on an appropriate stock exchange by 31 July 2007. From registration of the scheme in 2001 the Constitution contained a clause to that effect, which also provided that those dates could be varied with the approval of the Members: see cl 1.1 (uu). 121 In fact on 4 May 2006 APCHL's solicitors wrote to ASIC advising that its objective was to "move prudently and systematically towards listing" before December 2007. 122 I found that by mid-June 2006 it was likely that the Prime Trust would be listed on the ASX sometime in the next 12-18 months. 123 The imposition of a substantial fee payable to APCHL from trust property in the event that units in the Prime Trust were listed on a stock exchange was therefore a matter of real significance to the Members.

Seeking advice from Madgwicks 124 On 20 June 2006 Mr Lewski sought legal advice from APCHL's solicitors, Madgwicks, regarding APCHL's power to pass the Amendments to the Constitution to introduce substantial additional fees payable to APCHL (in its personal capacity) from Prime Trust funds. It is relevant that Madgwicks and the relevant partner, Rick Goldberg, were also the solicitors for other Lewski entities (and perhaps for Mr Lewski himself) but there is no evidence that the Directors other than Mr Lewski knew this. 125 From 20 June 2006 Mr Lewski had conferences with Mr Goldberg as well as with employee solicitors of that firm. I found that Mr Lewski sought the Amendments be made without the need for approval by the Members, doing so out of a concern, at least in part, that the Members would not approve the additional fees or at least not in the substantial quantum he sought. 126 Mr Lewski had a material personal interest in the Amendments as he stood to receive a substantial payment if the Amendments were passed and units in Prime Trust were listed on the ASX as planned. Notwithstanding his material personal interest Mr Lewski played the central role in obtaining written legal advice provided by Madgwicks on 14 July 2006 ("Madgwicks Advice") including having a role in the presentation and content of that advice.

The prohibition on amendments in favour of APCHL in the Constitution 127 There was a significant obstacle to the Directors making or bringing into effect the proposed Amendments because the Constitution contained: (a) cl 34.1 which prohibited any variation to the Constitution other than in accordance with cl 25; and (b) cl 25.1(a) provided that, subject to cl 25.1(b), APCHL could amend the Constitution but any such amendment "shall not be in favour of or resulting in any benefit" to APCHL. Clause 25.1(b) merely provided that any amendment must comply with the Corporations Act.

The 19 July 2006 Board meeting 128 At the 19 July 2006 Board meeting each Director (except Mr Clarke who had not yet been appointed) considered the Amendments and each had the Madgwicks Advice before him. The advice was unusual and uncertain as it provided that the Directors should choose between two competing and mutually exclusive "potentially" available interpretations of the power to make amendments in favour of APCHL in the Constitution. Importantly, the advice provided that on one construction the Directors had no power to pass the Amendments, and on the other it did. The Madgwicks Advice did not even advise which interpretation was preferred. The Directors, none of whom were legally qualified, were invited to decide which interpretation to prefer. 129 The proposed Amendments were to introduce substantial additional fees upon the occurrence of specified events, namely: (a) a new Listing Fee, to be payable if units in the Prime Trust were listed on the ASX; (b) a new Removal Fee, to be payable if APCHL was removed as the responsible entity; and (c) an additional Takeover Fee, to be payable if the Prime Trust was subject to a takeover, as defined. 130 Each Director's consideration of the Amendments should have been informed by Five Principal Factors (as defined in the liability judgment) namely that: (1) the new and increased fees were payable to APCHL in its personal capacity (and through it to Mr Lewski) and were to come from property held on trust by APCHL for the Members. APCHL was acting as a trustee; (2) consideration of the Amendments created self-evident conflicts: (a) between APCHL's interest in becoming entitled to the additional fees through the Amendments and the Members' interests in having APCHL perform its services as responsible entity for the fees in the Constitution; and (b) between APCHL's interest in becoming entitled to the additional fees payable pursuant to the Amendments and its statutory duty to act in the best interests of the Members and to give priority to their interests; (3) the nature of the proposed additional fees was that: (a) APCHL was given contingent rights to take multiple fees to the value of 2.5% of the gross assets of the Prime Trust out of Prime Trust funds. Absent the Amendments the Members had the right to the services of APCHL as responsible entity without the additional fees; (b) the Listing Fee imposed a fee if the Prime Trust was listed, in circumstances where under the Constitution the Members were entitled to expect listing to occur without a fee if the directors considered that listing was in the Members' best interests (as they did); (c) the Removal Fee imposed a fee for the exercise of the Members' right to remove APCHL as responsible entity which the Members could require without a fee under the Constitution; (d) the Takeover Fee substantially increased the fee payable on a third party acquiring shares over certain thresholds; (e) the Takeover Fee could be payable on multiple occasions; and (f) the fees payable pursuant to the Amendments could be payable notwithstanding that another of the fees had previously been paid; (4) the fees payable pursuant to the Amendments were substantial, each having a value of between about $11.25 million and $21.6 million at the time of the Amendments (which was in the order of 6.7% of the net scheme property of the Prime Trust after borrowings were taken into account); and (5) the fees payable pursuant to the Amendments were gratuitous in the sense that no, or no equivalent, countervailing benefit was provided to the Members in return for them. 131 The Five Principal Factors indicated that APCHL and the Directors were required to exercise a high level of care and diligence and to be cautious in dealing with APCHL's and Mr Lewski's conflicts of interest and conflicts of interest and duty. 132 Despite the Five Principal Factors and the unusual and uncertain advice provided by Madgwicks the Directors passed the Amendments at the 19 July 2006 Board meeting.

The necessary delay following passage of the Amendments 133 It is significant that the Amendments did not come into effect at that time. Section 601GC(2) provides that amendments to a scheme Constitution do not come into effect until the amendments or a consolidated Constitution are lodged with ASIC. 134 The Directors were aware of and relied upon the fact that the Amendments were not yet in effect as it allowed APCHL to undertake a number of important steps before deciding to lodge the Amended Constitution with ASIC. These steps included that: (a) Kidder Williams, Prime Trust's corporate adviser, reviewed the Amendments and the planned issue of options; (b) a new Management Agreement and a new Compliance Consultancy Service Agreements were prepared which were disclosed to prospective Members in a Supplementary PDS; and (c) a Supplementary PDS was prepared and approved by the Board, which disclosed to prospective Members the substantial additional fees payable to APCHL. 135 APCHL and the Directors deliberately refrained from lodging the Amended Constitution because it was necessary to attend to these matters and because, if the Amendments came into effect before the Supplementary PDS, they may have breached the Act by failing to ensure that the PDS correctly informed prospective members of the additional fees payable.

The 22 August 2006 Board meeting and passage of the Lodgement Resolution 136 At the 22 August 2006 Board meeting, the outstanding steps including the Supplementary PDS having having been attended to, the Directors passed the Lodgement Resolution. As I have said, this was a resolution to lodge the Amendments with ASIC so that the Amended Constitution would take effect as the governing Constitution from that date. It operated to authorise and direct lodgement of the Amended Constitution so that it came into effect. 137 The Lodgement Resolution Contraventions arise directly from the Directors' 22 August 2006 approval of the Lodgement Resolution which brought the Amendments into effect, rather than from the earlier approval of the Amendments on 19 July 2006. ASIC only relied on the approval of the Amendments at the 19 July 2006 Board meeting as part of the background to APCHL's contravening conduct.

The Directors consideration at the 19 July and 22 August 2006 Board meetings 138 At the 19 July 2006 Board meeting the Directors gave scant if any consideration, and at the 22 August 2006 Board meeting the Directors gave no consideration at all, to the following important matters: (a) the conflict between APCHL's (and Mr Lewski's) interests in receiving the additional fees and the Members' interests in having APCHL's services for the existing fees; (b) the conflict between APCHL's (and Mr Lewski's) interests in receiving the additional fees and their duty to give priority to the Members' interests in in the event of a conflict; (c) the fact that the additional fees were gratuitous in the sense that no, or no equivalent, countervailing benefit was to be provided to the Members; (d) the nature of the additional fees in that: (i) the Listing Fee imposed a fee if the Trust was listed when the Members were presently entitled to expect listing to occur without a fee; (ii) the Removal Fee imposed a fee for the exercise of the right to remove APCHL as responsible entity which was a right that the Members could presently exercise without a fee; (iii) the Takeover Fee substantially increased the fee payable on the acquisition of units over certain thresholds, which could be payable on multiple occasions; and (iv) the Amendments gave APCHL rights to take multiple fees of 2.5% of gross assets out of scheme property; (e) the fact that it was wrong to provide Mr Lewski the Listing Fee from Trust property so as to incentivise him to support listing when he was already obligated to do so; (f) the fact by bringing the Amendments into effect through lodgement they were capitulating to APCHL's and Mr Lewski's interests rather than giving priority to the Members' interests; (g) the unusual and uncertain nature of the Madgwicks Advice in regard to the power to pass the Amendments under the Constitution; (h) which of the potentially available interpretations of the Board's power to amend under cl. 25.1 of the Constitution provided in the Madgwicks Advice should be preferred; (i) the giving of a financial benefit to APCHL (despite the Madgwicks Advice stating that "[i]f APCHL gives a financial benefit to itself or a related party out of Trust property, it must obtain the approval of the Unitholders…"); (j) the power to pass the Amendments under the Act, and whether the Amendments adversely affected Members' rights to have the scheme administered for the fees provided in the Constitution; and (k) leaving aside any question of power, whether APCHL should impose the additional fees.

Lodgement of the Amended Constitution 139 APCHL lodged the Amended Constitution with ASIC on 23 August 2006 and from that date APCHL and the Directors treated the additional fees as having been validly included in the Constitution. In its 2006 Annual Financial Report APCHL stated that the additional fees were brought into effect by a Board resolution on 22 August 2006.

Listing of units in the Prime Trust 140 On 23 January 2007 Kidder Williams wrote to the ASX on behalf of APCHL advising that APCHL intended to list units in the Prime Trust on that exchange. 141 On 3 August 2007 the Prime Trust units were listed on the ASX.

The Decisions to Pay the Listing Fee and the payment of the Listing Fee 142 On 26 June and 27 July 2007 the Directors passed resolutions making decisions to pay the Listing Fee in four tranches. They decided to pay the first tranche of 10% on listing by way of units in Prime Trust. The remaining three tranches were to be paid in 2008, 2009 and 2010 by way of 50% cash and 50% units, subject to achievement of performance hurdles. 143 The 26 June 2007 resolution said nothing about a change to these arrangements if there was a restructure of APCHL which had the effect that Mr Lewski was no longer in control, but the Listing PDS which was approved at the same meeting did. 144 The first instalment totalling $3,623,393 was then paid from trust property by APCHL (acting as the responsible entity) to itself (in its personal capacity) as follows: (a) on 3 August 2007 APCHL issued units to itself to a value of $3,293,994; and (b) on 13 March 2008 APCHL paid $329,399 in respect of the GST on the earlier payment. 145 In March 2008 Mr Lewski became aware of the disconformity between the 26 June 2007 resolution and the Listing PDS that I referred to above. Mr Goldberg provided a letter of advice to Mr Lewski which recorded Mr Lewski's instructions that the minutes should be "rectified" because they erroneously omitted to refer to APCHL's immediate entitlement to the balance of the Listing Fee (without it being paid in three tranches and subject to performance hurdles) if Mr Lewski ceased to control APCHL. 146 Of course, whether Mr Lewski ceased to control APCHL was within his power as he was its effective owner. 147 At the 7 April 2008 Board meeting the Directors passed a resolution drafted by Mr Goldberg which provided for immediate payment of the balance of the Listing Fee if Mr Lewski ceased to control APCHL. At the same meeting it was clear that Mr Lewski had already reached an in-principle agreement to transfer control of APCHL to Kidder Williams and it appears that Mr Lewski was to provide vendor finance to Kidder Williams so that it could take control. 148 In my view the restructure to enable early payment of the Listing Fee and without performance hurdles was another part of Mr Lewski's orchestration of the events that culminated in his receipt of that fee. 149 On 16 April 2008 Dr Wooldridge sought independent legal advice from Blake Dawson but the advice he received proceeded on the assumption that APCHL (in its personal capacity) had a valid entitlement to the Listing Fee. On 23 and 24 April 2008 Dr Wooldridge, Mr Butler, Mr Jaques and Mr Clarke approved a resolution authorising APCHL to execute a binding Heads of Agreement which had the effect of transferring control of APCHL to Kidder Williams. 150 On 28 April 2008 Dr Wooldridge and APCHL's CEO executed the Heads of Agreement on behalf of APCHL and Mr Lewski executed it on behalf of his personal interests. In doing so in my view Mr Lewski subordinated the Members' interests to his own interests. 151 The Heads of Agreement authorised the payment of the second instalment of the Listing Fee being the entire balance of the fee rather than in tranches. 152 At the 27 June 2008 Board meeting, attended only by Mr Lewski, Mr Jaques and Mr Clarke, the Directors present gave effect to the Heads of Agreement by resolving to execute a Deed of Acknowledgement of Listing Fee Payment. The Deed of Acknowledgement provided that the balance of the Listing Fee was to be paid by way of $24,645,953 in cash, and $5,000,000 in units in Prime Trust. 153 Mr Lewski and Mr Jaques executed the Deed of Acknowledgement on behalf of APCHL, purporting to do so on behalf of APCHL both in its capacity as responsible entity and in its personal capacity. Mr Lewski also executed the Deed of Acknowledgement on behalf of two of his associated companies. 154 The second instalment of the Listing Fee was then paid from scheme property and: (a) on 27 June 2008 APCHL caused to be issued to Carey Bay Pty Ltd, a company associated with Mr Lewski, 9,020,386 units in the Prime Trust valued at $5,000,000; and (b) on 30 June 2008 APCHL paid $27,610,548.30 to itself, in its personal capacity. 155 Each Director's unchallenged evidence is that he believed that the Amended Constitution allowed payment of the Listing Fee. However, in making the Decisions to Pay, no Director reflected on: (a) his inadequate consideration of the important matters listed at [138] at the 19 July 2006 Board meeting when passing the Amendments (except for Mr Clarke), and at the 22 August 2006 meeting when approving the Lodgement Resolution; (b) the fact that Mr Lewski had instigated the Listing Fee and had proposed and voted in its favour notwithstanding his obvious conflict of interest and conflict of interest and duty; (c) the fact that Mr Lewski participated in the 26 June and 27 July 2007 Board meetings and approved the resolutions to pay the Listing Fee, notwithstanding his obvious conflicts; (d) the fact that Mr Lewski participated in the 27 June 2008 Board meeting by approving the resolution to do everything necessary to give effect to the Deed of Acknowledgement (which provided for payment of the balance of the Listing Fee) notwithstanding his obvious conflicts; or (e) whether there was any doubt as to the validity of the Amendments.

The Directors' Contentions 156 With the exception of Mr Clarke (who had not been appointed a Director as at the 19 July 2006 Board meeting) there is a deal of commonality in the Directors' contentions that their contraventions were not serious, or at least not as serious as ASIC contends. These contentions underpin their exoneration applications and, if they are not to be exonerated, their approach to penalties. 157 In large part their submissions boil down to ten main propositions and it is usually unnecessary to specify which Director(s) make the contention.

1. The contention regarding attachment of Deed of Variation No 7 158 Mr Butler submits that the Madgwicks Advice was consistent with the Board having power to pass the Amendments because it had as an attachment the unsigned Deed of Variation No 7 which contained the Amendments. He contends that this reduces the seriousness of the contraventions. 159 I do not agree. In my view the attachment of the unsigned Deed of Variation to the Madgwicks Advice merely reflected that firm's advice that the Directors should interpret the Constitution for themselves and sign the Deed if they decided that they had the power to pass the Amendments. It does not indicate that the Lodgement Resolution Contraventions are not serious. 160 The Madgwicks Advice proffered two mutually exclusive "potentially" available interpretations of the Constitution, and did not even recommend which of the interpretations Madgwicks preferred. In light of the Five Principal Factors it was not reasonable for a person in each Director's position to rely on that advice to pass amendments allowing for substantial additional fees to be paid from scheme property to APCHL in its personal capacity (and through it to Mr Lewski). 161 Importantly, a reasonable director in each Director's position (except Mr Clarke who did not see the Madgwicks Advice) would not have passed the Lodgement Resolution in reliance on the advice.
2. The contention that the Directors did not read the Madgwicks Advice as the Court did 162 Some Directors submit that, although I found that the Madgwicks Advice was equivocal as to the Board's power to make the Amendments and did not clearly advise the Directors as to its power to approve the Amendments under cl 25.1, that was not how the Directors read the advice at the time. I accept this. 163 Each Director (except for Mr Clarke who was not present) gave evidence that at the 19 July 2006 Board meeting: (a) he believed that he understood the effect of the Amendments; (b) he was satisfied that there was a legitimate reason to make the Amendments; and (c) he believed that the Madgwicks Advice advised the Board that it had the power to pass the Amendments without requiring the approval of the Members. 164 Dr Wooldridge and Mr Lewski also testified that their acceptance of the Madgwicks Advice was informed by Madgwicks' earlier Options Advice of 11 April 2006. The Options Advice also did not refer to the prohibition on amendments in favour of APCHL in cl 25.1 of the Constitution, and explained the distinction between Members' rights and Members' interests in terms which, as Dr Wooldridge and Mr Lewski said, supported their understanding of the Board's power to pass the Amendments without obtaining the Members' approval. 165 I accept that, at the time, the Directors did not see the Madgwicks Advice as equivocal and accept that the seriousness of the Lodgement Resolution Contraventions should be assessed in the context of the deficiencies of that advice. To an extent the Directors were entitled to expect that, if the proposed Amendments gave rise to the risks and need for caution that I have found, then Madgwicks would have alerted them. 166 However, although I take the deficiencies of the Madgwicks Advice into account, each Director's contraventions remain serious. This is not a case where directors exercising a proper level of care and diligence (including being cautious as to the members' interests in the presence of a conflict of interest) breached their duties under the Act because they were misled by legal advice received. 167 Amongst other things: (a) the Five Principal Factors indicated that the Directors were required to exercise a high level of care and caution, particularly because of APCHL's and Mr Lewski's conflicts of interest and duty; (b) the Madgwicks Advice expressly referred to cl 25.1 of the Constitution which operated to prohibit APCHL from making amendments that were "in favour of or resulting in any benefit" to APCHL. A reasonable director in each Director's position would have adequately considered that prohibition, and no Director did so; (c) the Madgwicks Advice provided that they should decide between two competing and mutually exclusive "potentially" available interpretations of the power to pass amendments in favour of APCHL. It did not even advise which interpretation was to be preferred. The Directors were not legally qualified and a reasonable director in each Director's position would not have chosen to himself interpret the Constitution; (d) a reasonable director in each Director's position would have been concerned by the unusual and equivocal nature of the Madgwicks Advice on the central point on which advice had been sought. This would have set him or her on a train of inquiry in relation to the question, and led to the obtaining of proper legal advice or perhaps a judicial direction: Adler at 372(b); Re Property Force Consultants Pty Ltd (in liq) [1997] 1 Qd R 300 at 311-312 per Derrington J. (e) the statutory power of amendment in s 601GC(1)(b) was not engaged as the Directors gave no consideration to the Members' rights to have the scheme managed and administered in accordance with the Constitution. The Directors could not reasonably have considered that the Amendments would not adversely affect Members' rights; and (f) in any event, the Madgwicks Advice (and the earlier Options Advice) went to the question of the Board's power to pass the Amendments rather than to whether the Board should pass them in all the circumstances. Whatever power existed to pass the Amendments, having regard to the Five Principal Factors a reasonable director in each Director's position would not have done so. 168 In fact APCHL's and Mr Lewski's conflicts of interest and conflicts of interest and duty were self-evident. A reasonable director would not have required legal advice to recognise and properly deal with these conflicts and would have put the Members' interests first. 169 Had the Directors exercised a proper level of care and diligence and taken an appropriately cautious approach they would not have accepted and followed the Madgwicks Advice. The Directors were entitled to rely on legal advice but not at the expense of their non-delegable duty of care: Australian Securities and Investments Commission v Healey and Others (2011) 196 FCR 291 at [162] per Middleton J. If they had exercised ordinary care they would have known that the Madgwicks Advice was not to be relied on: Daniels and Others (Formerly Practicing as Deloitte Haskins & Sells) v Anderson and Others (1995) 37 NSWLR 438 at 502-504 per Clarke and Sheller JJA.
3. The contention that Madgwicks worked actively to disguise the significance and risks of the Amendments 170 Mr Jaques submits that he was: …entitled to expect that Madgwicks would not, in advising APCHL, misstate the effect of the proposed Deed, work actively to disguise the significance of what Mr Lewski proposed, or understate the risks of what the Board was contemplating. In effect he contends that his Lodgement Resolution Contraventions (and those of the other Directors except for Mr Lewski) must be treated as less serious because the Directors were deliberately misled by Madgwicks. 171 I have no difficulty in accepting that if the Directors acted in the way they did because they were deceived by Madgwicks, provided they pursued the Members' best interests and exercised reasonable care and diligence, then their contraventions should be seen as less serious. However I cannot accept Mr Jaques' contention. 172 ASIC did not need to impugn Madgwicks' conduct in order to make out its case. It did not call Mr Goldberg, and it did not submit that Madgwicks provided deliberately misleading advice to the Directors. In the liability hearing no Director testified that Madgwicks actively worked to mislead him and no Director made such a submission. No Director called Mr Goldberg in either the liability hearing as was open for them to do (or in the penalty hearing). 173 In fact the Directors made little criticism of the Madgwicks Advice in the liability hearing and no Director testified that he was misled by the advice. The Directors stood shoulder to shoulder and each contended that he gave proper consideration to the relevant matters and committed no breach. 174 While I have real concerns regarding the Madgwicks Advice and it is possible to see Madgwicks' conduct in the way Mr Jaques submits, it would be wrong to now make the grave finding that a well-known Melbourne law firm or Mr Goldberg, acted in the way Mr Jaques belatedly contends. The serious questions that surround the advice provided by Madgwicks and Mr Goldberg are better dealt with in APCHL's damages claim in the Supreme Court of Victoria.
4. The contention that the Directors did not act dishonestly in passing the Lodgement Resolution 175 The Directors note that ASIC did not advance a case that any of them acted dishonestly in passing the Lodgement Resolution (or in passing the Amendments in the first place). 176 I accept this contention. I have not made a finding that any Director's conduct was dishonest which reduces the seriousness of the contraventions. In particular: (a) I am satisfied that Dr Wooldridge is an honest man and I see his contraventions as honest (albeit serious) mistakes; and (b) Mr Butler, Mr Jaques and Mr Clarke's contraventions were also honest, but serious, mistakes. While I criticised aspects of their evidence in the liability judgment, those remarks were directed at the unreliability of parts of their evidence rather than to a conclusion that they were not honest men. 177 While I make no finding that Mr Lewski's conduct was dishonest I see his conduct (and its context) as quite different to that of the other Directors.
5. The contention that Madgwicks' 7 August 2006 letter advised that "poison pills" are not illegal 178 Some Directors point to Madgwicks' letter of 7 August 2006 which provided that an article published by ASIC at the time did not indicate that "poison pills provisions (i.e. fees for the removal of the RE) [were] contrary to the law". 179 In my opinion the article is of little assistance to each Director's argument. Amongst other things: (a) the article related to removal fees rather than to listing fees; (b) the article dealt with the legality of "poison pill" provisions which is different to the central questions before the Directors, being whether they had power to introduce new fees contrary to an express prohibition in the Constitution and whether in all the circumstances they should do so; (c) there was no real threat of an opportunistic takeover justifying the new Removal Fee or the increased Takeover Fee; (d) the Removal Fee provided little further protection for the Members against low-ball takeover offers; and (e) the Members had the right under the Constitution to remove APCHL as responsible entity without paying a fee. The introduction of the substantial Removal Fee entrenched APCHL as responsible entity of the Prime Trust whether the Members wanted that or not.
6. The contention that payment of the Listing Fee did not cause the collapse of Prime Trust 180 The Directors contend that there is insufficient evidence before the Court to allow the conclusion that the collapse of Prime Trust was attributable to payment of the Listing Fee. 181 I accept this. I have not dealt with the applications for relief and penalties on the basis that payment of the Listing Fee in breach of trust caused the later collapse of Prime Trust.
7. The contention that passage of the Lodgement Resolution did not cause a $33 million deficiency 182 Some Directors argue that each Director's approval of the Lodgement Resolution does not mean that the Prime Trust was ultimately $33 million worse off than it would have been but for that resolution. They say this because the Constitution provided for a Vesting Fee (set at 2.5% of the gross assets of the Trust like the Listing Fee) to be payable on 31 December 2007 unless APCHL had passed a resolution on or before 31 July 2007 to seek listing on a stock exchange. 183 They contend that as Prime Trust had a fixed duration, unless it decided to list the Trust, APCHL would receive fees for managing the Trust for its duration and then the Vesting Fee on its termination. They contend that if the Listing Fee had not been brought into effect and (importantly) if listing had not occurred APCHL would have become entitled to the Vesting Fee in a similar quantum to the Listing Fee, and the Court therefore cannot be satisfied that passage of the Lodgement Resolution caused a $33 million deficiency. 184 That the Vesting Fee was to be calculated on the same basis as the Listing Fee is uncontentious, and there is no question that (absent listing) APCHL would have become entitled to the Vesting Fee unless APCHL and the Members agreed to defer termination of the Trust or unless APCHL was removed in the interim. The Lodgement Resolution Contraventions must be viewed in that context. 185 However, the submissions by some Directors, particularly Mr Lewski, as to what would have happened had the Listing Fee not been introduced are speculative. 186 Contrary to the thrust of these contentions, it cannot be known that Prime Trust would not have proceeded to listing if the Listing Fee was not introduced. Even in the absence of the Listing Fee, the Constitution provided for ongoing management fees and a substantial Exit Sale Fee or Asset Sale Fee payable to APCHL (and through it to Mr Lewski). If the Listing Fee was not introduced the continuing success of the Trust may have meant that (with the Members' approval) APCHL decided to continue the Trust so as to enjoy the benefit of the ongoing management fees and eventually one of the substantial Exit Sale Fee or Asset Sale Fee. 187 The evidence also indicates that Mr Lewski and associated entities held a substantial number of units in Prime Trust. Even if the Listing Fee was not introduced he would enjoy the benefits of a successful listing through those units. 188 One thing is clear enough. If (as the Directors say) the Board's decision to list the Trust was in the Members' interests then listing was the likely outcome even if the Listing Fee was not passed, unless Mr Lewski improperly sought to frustrate the listing process (and was allowed to do so by the other Directors). 189 Nor is it likely that APCHL may have retired as responsible entity of the Trust if the Listing Fee was not introduced, as Mr Lewski seems to suggest. I see it as quite unlikely that APCHL would have retired when it successfully managed Prime Trust and thereby enjoyed ongoing management fees and had the ability to earn the substantial Exit Sale Fee or Asset Sale Fee in the future. Even if APCHL did retire this would not necessarily have meant that listing would not have proceeded under another responsible entity or that listing would necessarily have been unsuccessful. 190 It is also quite unlikely that Mr Lewski would have resigned as a Director of APCHL if the Listing Fee was not introduced. Mr Lewski had a significant personal and financial stake in the business, and if he resigned his control over its management and direction would be substantially reduced. 191 Even if Mr Lewski did resign, this would not necessarily have meant that listing would not have proceeded or that listing would have been unsuccessful. Mr Lewski was significant to the success of Prime Trust and his absence might have reduced the prospects for a successful listing, but there evidence that institutional investors saw his ongoing role at APCHL as a negative. Further, had APCHL sought the Members' approval of the substantial additional fees and properly explained that the fees were largely gratuitous, the market may well have seen Mr Lewski's continued involvement in APCHL in a more negative light. 192 Central to my view of the seriousness of the Lodgement Resolution Contraventions is the fact that the Amendments were brought into effect in breach of statutory fiduciary duties, against the Members' interests, and without the Members' approval in circumstances where Mr Lewski was concerned to avoid seeking their approval. Lodgement of the Amended Constitution allowed a $33 million breach of trust to occur. Speculation as to what would have happened, including whether the Vesting Fee would have been paid had the contraventions not occurred, is not crucial to my decision. 193 The issue of whether the Trust suffered a loss of $33 million is strenuously contested and is part of the Supreme Court proceedings against the Directors and others by APCHL. In Vines at [55] Austin J recognised the reality that, when considering the appropriateness of civil penalties, an assessment of the losses caused by contraventions can "give rise to some awkward and difficult questions of causation, especially where (as here) it is not otherwise necessary to decide that the contraventions have caused particular losses to investors." His Honour noted at [56]: It was sufficient for Tadgell J in Commonwealth v Friedrich and for Mandie J in ASIC v Plymin (No 2) to advert to the effect of the defendants' contravening conduct in general terms, without making any specific findings about causation for the purposes of exercising the discretion. Consistently with that approach, it seems to me adequate, in the case of negligently misleading statements, to consider the degree of plausibility, in a general sense, of the contention that the contravening conduct caused or did not cause loss, having regard to the applicable principles of causation. The stronger the likelihood that loss has been caused, the more powerful this factor becomes as a factor against granting leave. Conversely, the weaker the likelihood is that the contravening conduct caused loss, the weaker is the "serious contravention" factor. 194 I respectfully agree. I make no specific finding that the Directors conduct caused a $33 million loss. However, as I indicate below, in a general sense I consider it likely that the Directors' conduct did cause a substantial loss. 195 I say this because the Directors' conduct allowed $33 million to be unlawfully diverted from Prime Trust property in breach of trust. In the joint decision of the High Court in Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 484 ("Youyang"), the leading authority on equitable compensation for breach of trust, the Court said at [63] that "the loss of the trust funds occurred as soon as the trustee wrongly disbursed them". 196 As Edelman J noted in Agricultural Land Management Ltd v Jackson and Others (2014) 98 ACSR 615 at [357]-[359]: [357] The High Court [in Youyang] did not reject the "but for" test which had been applied by the New South Wales Court of Appeal. Instead, the High Court held that the trial judge had not made the causation finding asserted by Handley JA. The High Court instead approved the comments of Hodgson JA who dissented in the New South Wales Court of Appeal saying (at [60]): [60] … [I]f a trustee wishes to assert that a breach of trust caused no damage for the reason that the beneficiary would, if asked, have authorised the very action which constituted the breach of trust, then there is at least an evidentiary onus on the trustee to make good that proposition. [358] This appears to endorse the possibility of a "but for" causation test which, subject to an evidentiary onus on the defaulting party, requires a plaintiff to prove that the unauthorised action would, if requested, have been authorised. But these comments must be understood in the light that: (i) the case was not argued as a substitutive compensation case, (ii) the High Court did not need to decide this point, and (iii) there are other indicia in the judgment that such a causal requirement was not required, including the citation of many of the cases discussed above [by Edelman J] and the extrajudicial writing of Lord Millett. [359] In relation to (iii), in the following passage the High Court also rejected a "but for" causal test in the context of characterising the "loss" of the trust funds as merely being their disbursement: (passage omitted). 197 At [338] Edelman J considered the duty of a trustee to maintain a common account trust fund in an authorised manner and reviewed the relevant authorities. His Honour said, and I respectfully agree, that it is not a sufficient response to a wrongful disbursement of trust funds that the disbursement would have occurred even if the trustee had acted properly. At [344]-[345] his Honour said the "but for" question is irrelevant where the duty is to replenish a distribution of unauthorised trust funds. Edelman J also cited an extrajudicial paper in which Gummow J stated: …the true inquiry is whether the loss [ie dissipation of the asset] would have happened had there been no breach, not whether the loss was caused by or flowed from the breach. : Gummow W "Compensation for Breach of Fiduciary Duty" in TG Youdan (ed) Equity, Fiduciaries and Trusts, Carswell, Toronto, 1989, p 89. 198 Similarly, in Magnus v Queensland National Bank (1888) 37 Ch 466 ("Magnus") the Court of Appeal held that a custodial bank was liable to restore trust funds merely because it had dissipated trust funds in a manner which was not authorised: Magnus at 474 - 477 per Cotton LJ. At 472 Halsbury LC observed: …we are not at liberty to speculate whether the same result might not have followed whether the bank had been guilty of that default or not. The bank have in fact been guilty of default. As a matter of fact they concurred in the money being handed to a person who had no authority, in my view of the facts, to receive it. 199 However, I reiterate my remarks at [192] and note again that the quantum of the loss suffered by the Trust is not central to my decision. For the purpose of the applications before me a $33 million breach of trust is gravely serious in itself, regardless of whether loss can be proved to have been caused by that breach.
8. The contention that passage of the Lodgement Resolution was merely procedural or administrative 200 In the liability hearing the Directors contended that they were not required to consider APCHL's and Mr Lewski's conflicts of interest when considering the Lodgement Resolution because: (a) that resolution involved a merely procedural or operational question, namely whether APCHL was ready to lodge the Amendments as required by the Act; (b) that resolution was only to ensure that APCHL complied with its pre-existing legal obligation to lodge the Amendments as soon as practicable; and (c) in the absence of any changed circumstances, the Directors were not required at the 22 August 2006 Board meeting to revisit their 19 July 2006 decision to pass the Amendments, which they characterised as a counsel of perfection. 201 I do not agree. In fact in the liability hearing no Director even accepted that the Lodgement Resolution was before the 22 August 2006 Board meeting. If (as I found) the resolution was before the meeting: (a) Mr Lewski and Mr Jaques merely said that they would have abstained from voting; (b) Clarke said that he remained silent and in effect abstained from voting; (c) Dr Wooldridge and Mr Butler said nothing as to what they would have done had the resolution been before the meeting. 202 There is therefore no evidence from any Director as to how he, in fact, treated the Lodgement Resolution. The contention by any Director that he approached the resolution as a procedural or administrative matter is just speculation. But even if I accept any Director's contention that he treated the Lodgement Resolution as a procedural or administrative step and of less significance than his 19 July 2006 decision to pass the Amendments, I still consider his contraventions to be serious. 203 As I said in the liability judgment, the Lodgement Resolution authorised and directed lodgement of Amendments which brought into effect substantial additional fees, payable from trust funds, for the benefit of APCHL (and through it Mr Lewski). Until the Amendments were lodged with ASIC they had no effect, and the resolution provided, in terms, that it would make the Amendments effective. Putting to one side any need to revisit their 19 July 2006 decision to pass the Amendments, the Lodgement Resolution was important in itself and it required careful consideration. 204 On 19 July 2006 each Director (except Mr Clarke) gave scant if any consideration to the important matters set out at [138] above. On 22 August 2006 when passing the Lodgement Resolution each Director gave no consideration whatsoever to those matters. Nor on 22 August 2006 did any Director reflect on the scant, if any consideration he earlier gave to those matters (except for Mr Clarke who was not a Director earlier).
9. The contention that the Directors' honestly believed that the Amendments were valid when they made the Decisions to Pay the Listing Fee 205 The Directors contend, in effect, that their Decisions to Pay Contraventions are not serious because following lodgement they were never advised that the Listing Fee was not validly included in the Constitution. Each Director notes that: (a) he had received an email from Madgwicks which implied that the Amendments had been validly made; (b) he believed that the Amendments had been validly made; (c) he believed that there was an obligation in the Amended Constitution to pay the Listing Fee; (d) there was legal advice from Madgwicks and from Blake Dawson that the balance of the Listing Fee was payable; (e) legal advice from Blake Dawson indicated that the payment of the remainder of the Listing Fee was not adverse to the Members' interests; and (f) the finding that the Listing Fee was not validly provided for in the Constitution was only determined after complex legal debate including by reference to authority not available at the time of the breaches. 206 I accept each Director's unchallenged evidence that he genuinely believed the Amendments were valid and effective, and that he made the Decisions to Pay the Listing Fee based upon that genuine, albeit mistaken, view. This significantly reduces the seriousness of the Decisions to Pay Contraventions. 207 It is therefore unnecessary to deal with the matters to which the Directors point to show that they were not advised that the Listing Fee was not valid. I note in passing however that they over emphasised the significance of some of the matters. For example, there is no basis to their reliance on the fact that ASIC and the legal firm Blake Dawson did not alert them. I say this because there is no evidence that ASIC was aware of the contravening conduct and Blake Dawson's advice proceeded on the assumption that the Amendments were valid. 208 However Chapter 5C does not relate only to dishonest conduct. The Decisions to Pay Contraventions do not turn on, and each Director's obligation to act in the Members' best interests is not satisfied by, his subjective belief as to the validity of the Amendments. 209 Each Director's obligation to so act required him to give undivided loyalty to the Members' interests, including to eschew any conflict of interest and to give priority to the Members' interests. The test for each Director is objective and his holding a genuine belief as to the validity of the Listing Fee does not establish that he acted with competence and care solely in pursuit of the Members' interests: Hillsdown Holdings Plc v Pensions Ombudsman and Others [1997] 1 All ER 862. 210 As I said in the liability judgment (at [753]) at one level the Directors' contention that their belief in the validity of the Amendments meant that they were acting in the Members' interests is based in the suggestion that the passage of time since lodgement of the Amendments somehow operated to wash away their earlier failures to comply with their statutory duties. I do not accept this. Each Director's belief that the Constitution provided for the Listing Fee was the product of his failure when passing the Lodgement Resolution and (except for Mr Clarke) when earlier passing the Amendments to give any or any proper consideration to the important matters set out at [138] above. 211 Further, in making the Decisions to Pay each Director failed to give proper consideration to the matters set out at [155]. In my view when making those decisions each Director failed to act with competence, care and prudence solely in pursuit of the Members' interests. A reasonable director in the position of each of the Directors would have questioned whether the Decisions to Pay should be made and their contraventions are serious. 212 I reiterate however that the Decision to Pay Contraventions are significantly less serious than the Lodgement Resolution conduct.

10. The difference in Mr Lewski's conduct 213 Mr Lewski argues that each Director's contravening conduct should be seen as the same. I reject this contention and I see his conduct and the context in which it occurred as quite different to that of Dr Wooldridge, Mr Butler and Mr Jaques, and different again to that of Mr Clarke. 214 Mr Lewski notes that: (a) the Statement of Claim advanced the same case against him as it did against the other Directors; (b) the agreed Summary of Facts did not point to any significant difference in his contravening conduct compared to that of the other Directors; (c) the fact that he would receive the benefit of the Listing Fee was well known to the other Directors; (d) the procedure at Board meetings was under the control of Dr Wooldridge as Chairman; (e) the Amendments were passed by all Directors (except Mr Clarke); (f) the Amendments were brought into effect by all Directors' approval of the Lodgement Resolution; (g) all Directors made the Decisions to Pay; and (h) the declarations of contravention make no distinction between his contravening conduct and that of the other Directors; 215 I accept these matters. It is clear that Mr Lewski's conduct did not on its own constitute the conduct which caused the wrongful removal of $33 million from Prime Trust. All of the Directors, acting as the Board, approved the Lodgement Resolution and made the Decisions to Pay. 216 Even so, while the Lodgement Resolution was passed by all the Directors Mr Lewski's conduct and the context in which it occurred is quite different from that of the other Directors. He was the driving force behind APCHL and the main actor in its conduct. He was APCHL's owner, a Director, and its Chief Executive Officer for much of the relevant period, and through entities he controlled he was also involved in APCHL's operations. He indirectly employed two of the other four Directors (Mr Butler and Mr Jaques). He had greater influence than any other Director on the Board. 217 The differences in his conduct and its context include that: (a) he was central to both courses of conduct as he instigated and then orchestrated the breaches; (b) his conduct in taking advantage of his position of trust and in breaching his statutory fiduciary duties for personal gain is quite different to the other Directors who did not stand to directly benefit at the time of the Amendments; (c) he did not inform the 20 June 2006 Board meeting that the Amendments were necessary because of "anomalies" in the fees payable to APCHL under the Constitution; (d) he initiated the Amendments largely to give himself the substantial Listing Fee; (e) he actively sought that the Amendments be made without seeking the Members' approval, doing so out of a concern that they would not approve them or would not do so in the substantial quantum that he sought; (f) he sought advice from Madgwicks (the legal firm that his other entities also used) to the effect that the Amendments could be made without the Members' approval; (g) he moved with urgency to introduce the additional fees although there was no business case for urgency; (h) he sought a new Listing Fee payable from scheme property even though APCHL was already systematically moving towards listing; (i) he gave the misleading instruction to Madgwicks that the Amendments were necessary to "clarify anomalies" in the Constitution when the true position was that the Amendments amounted to a large increase in the consideration payable by the Members for APCHL's services and a significant impairment of Members' rights; (j) he played a role in the presentation and content of the Madgwicks Advice provided to the other Directors; (k) he had a greater understanding of the uncertainty as to the Board's power to introduce the Amendments than the other Directors as a result of his conferences with Madgwicks; (l) he moved, spoke in favour of and voted for the Amendments at the 19 July 2006 Board meeting even though he should not have participated in that issue because of his material conflict of interest; and (m) he approved the Lodgement Resolution at the 22 August 2006 Board meeting even though he should not have participated in that issue either. 218 The context in which the other Directors contravening conduct occurred was quite different. Amongst other things, the other Directors (except for Mr Clarke): (a) did not instigate the Amendments; (b) did not procure the Madgwicks Advice; (c) did not provide instructions in regard to the Madgwicks Advice or influence the content or presentation of that advice; (d) did not know that Mr Lewski had a role in the content or presentation of the Madgwicks Advice; (e) did not deliberately seek to avoid obtaining the Members' approval for the Amendments because of a concern that they would not approve them; (f) did not confer with Mr Goldberg or Ms Kovacs in relation to the Board's power to pass the Amendments and had less understanding of the uncertainty as to that power than Mr Lewski; and (g) had no material conflicts of interest and were entitled to participate in the resolution to pass the Amendments on 19 July 2006 and the Lodgement Resolution on 22 August 2006 (although at the time of the Decisions to Pay in April 2008 Mr Butler stood to gain if the balance of the Listing Fee was paid and he had a conflict of interest.) Mr Clarke's conduct had further differences again. 219 The fact that Mr Lewski was the beneficiary of the additional fees is an important difference. Mr Lewski received the benefit of the Lodgement Resolution and at that time the Listing Fee was thought to have a value of between about $11.25 million and $21.6 million. None of the other Directors stood to directly benefit from the Amendments. At the time of the Decisions to Pay in July 2007 the Listing Fee was known to be worth $33 million, and only Mr Lewski (and to a lesser extent Mr Butler) stood to benefit. 220 Mr Lewski's conduct must also be seen in the context that, notwithstanding his material conflicts of interest and duty, and although he was in breach of s 195(1) in even being present at the Board meetings when the Amendments or the Listing Fee were dealt with: (a) on 19 July 2006 he moved the resolution to pass the Amendments, he spoke in favour of the Amendments, and he voted in favour of the Amendments; (b) on 22 August 2006 he approved the Lodgement Resolution to bring the Amendments into effect; (c) on 26 June and 27 July 2007 he participated in the Decisions to Pay the Listing Fee in four tranches, including setting the amount for each tranche; and (d) he participated in the Decisions to Pay the balance of the Listing Fee at the 27 June 2008 Board meeting through the resolution to execute the Deed of Acknowledgment. 221 Nor was Mr Lewski blind to his conflict of interest when considering the Amendments. He recognised the conflict when he described the absence of a Listing Fee in the Constitution as an "inbuilt commercial disincentive" to APCHL and to him to proceed with listing. He sought to justify the Amendments on the basis that they removed the incentive for him to act against the interests of the Members, when he was already obligated to put their interests first. I infer that he informed the other Directors of his "commercial disincentive" as Dr Wooldridge and Mr Jaques referred to "skewed incentives" and the need for "a level playing field" in reference to his interests. Notwithstanding the other Directors' awareness of Mr Lewski's conflict of interest, and his stated concern as to an "inbuilt commercial disincentive", there is no evidence that he sought to reassure them that he would fulfil his statutory obligations. 222 However I cannot accept Mr Jaques' submissions, in effect, that Mr Lewski deliberately misled the other Directors. ASIC did not need to establish that Mr Lewski had acted dishonestly and this allegation was not pleaded or put to him by ASIC or the other Directors. While it is possible to see Mr Lewski's conduct in the way Mr Jaques submits, in the circumstances it would be wrong to make the grave finding that he deliberately misled the other Directors. 223 Nor do I find, as counsel for Dr Wooldridge contends, that Mr Lewski "worked closely with Madgwicks to put forward a piece of advice that went as far as Madgwicks were prepared to go in facilitating the presentation of the issues as not requiring unitholder approval." ASIC did not plead or put this to Mr Lewski, nor did Dr Wooldridge or any other Director. In fact the other Directors stood shoulder to shoulder with Mr Lewski in the liability trial. They denied any wrongdoing rather than seeking to explain their breaches on the basis that they were misled by Mr Lewski or Madgwicks. 224 While I consider Mr Lewski influenced the content and presentation of the Madgwicks Advice to an extent and it is possible to see his conduct in the way Dr Wooldridge contends, I do not make the serious finding that Dr Wooldridge seeks.

Conclusion regarding seriousness of contraventions 225 In my view the Lodgement Resolution Contraventions are serious in their nature and in their effect on the Members' interests. The seriousness of each Director's contraventions are demonstrated by the magnitude of the additional fees that were created by the wrongful conduct and the importance of the statutory fiduciary duties that each of them breached in order to generate those fees. The Decisions to Pay Contraventions are less serious because the Directors genuinely believed the Listing Fee was validly included in the Constitution, and because the conclusion that it was invalid was only reached after detailed legal argument, and by reference to later authorities. 226 I discuss the seriousness of the contraventions in relation to each Director when I deal with the exoneration applications and penalties.

F. THE APPLICATION FOR RELIEF 227 As I explained at [68], an application for relief from liability under the exoneration provisions involves three stages of inquiry, namely: (a) whether the applicant for relief has acted honestly; (b) whether having regard to all the circumstances the applicant ought fairly to be excused; and (c) whether the applicant should be relieved from liability wholly or in part, and if partly, to what extent. To be successful each Director must satisfy the Court at each stage of the inquiry. 228 A person acts honestly within the ordinary meaning of that term if that person's conduct was without moral turpitude: MacDonald (No 12) at [22]. As I said at [69] the test has three limbs, namely whether the director acted: (a) without deceit or conscious impropriety ("the first limb"); and (b) without intent to gain an improper benefit or advantage ("the second limb"); and (c) without carelessness or imprudence to such a degree that negates the performance of the duty in question ("the third limb").

Did any Director establish that he acted without deceit or conscience impropriety? 229 ASIC did not contend, under the first limb of the test, that the Directors acted deceitfully or with conscious impropriety.

Did any Director establish that he acted without intent to gain an improper benefit or advantage? 230 I consider the words "to gain an improper benefit or advantage" mean "in order to" do so, and therefore each Director must satisfy the Court that he or she did not have that intention: see Chew v The Queen (1992) 173 CLR 626 ("Chew") at 633-4, per Mason CJ, Brennan, Gaudron and McHugh JJ in relation to a similar phrase in s 229(4) of the Companies (Western Australia) Code. 231 The word "improper" involves "impropriety" in the benefit or advantage being sought but whether conduct is improper in the context of the "acted honestly" test is not confined to the subjective intention of the person concerned: see MacDonald (No 12) at [19]-[22]; Edwards (No 3) at [8]-[9]; RJ Elrington Nominees Pty Ltd v Corporate Affairs Commission (SA) (1989) 1 ACSR 93 at 110 per Bollen J; Corporate Affairs Commission v Papoulias (1990) 20 NSWLR 503 at 506 per Allen J; Forem-Freeway at [31]. 232 A company officer may intend to gain an improper benefit or advantage without acting in bad faith. For example, in Chew (at 634) (in the context of s 229(4)) the High Court held that a director's conduct may be improper even if he or she believed the conduct was in the interests of the company. In R v Byrnes (1995) 183 CLR 501 at 514 (again in the context of s 229(4)) the High Court, per Brennan, Deane, Toohey and Gaudron JJ, explained that "[i]mpropriety does not depend on an alleged offender's consciousness of impropriety." See also Robins and Others v Incentive Dynamics Pty Ltd (in liq) and Another (2003) 175 FLR 286 at 297 per Mason P. 233 I detailed Mr Lewski's conduct in dealing with the Directors' ten main contentions and set out its differences from the other Directors' conduct at [217]-[221] and I need not do so again. He avoided seeking the Members' approval for the Amendments in part out of a concern that they would not approve them. He participated in Board meetings regarding the Amendments and the Lodgement Resolution when it was improper for him to do so. He did so even though he knew he had a material conflict of interest and in my view he was aware that his participation in those meetings was wrong. He also participated in the Decisions to Pay when it was improper for him to do so. I found that he made improper use of his position as a director to provide an advantage to himself. 234 He knew and intended that the Listing Fee: (a) to which APCHL became entitled through lodgement of the Amendments; and (b) which was paid through APCHL to him in 2007 and 2008 through the Decisions to Pay; was for his own benefit and was at the expense of the Members. No reasonable director in his position could have thought that it was in the best interests of the Members that he receive the substantial additional fees provided in the Amendments. 235 In my view, despite his material conflict of interest and conflict of interest and duty he was determined to ensure that by bringing the Amendments into effect he would receive substantial monies through payment of the Listing Fee. He did not establish that he acted without intent to gain an improper benefit or advantage when he approved the Lodgement Resolution and participated in the Decisions to Pay. 236 The question as to whether any of Dr Wooldridge, Mr Butler and Mr Jaques established that he acted without intent to gain an improper benefit or advantage is more difficult. The circumstances surrounding their passage of the Amendments and the Lodgement Resolution shows that each of them knew and intended that the fees provided for in the Amendments were for the benefit of APCHL and Mr Lewski, at the expense of the Members. Although they understood that Mr Lewski had a material conflict of interest they succumbed to the interests of Mr Lewski. Importantly, I found that each of them made improper use of his position to provide an advantage to APCHL and an indirect advantage to Mr Lewski. 237 In making the Decisions to Pay, and in their ancillary involvement in paying the Listing Fee, each of them again knew and intended that the fees provided for in the Amendments were for the benefit of APCHL and Mr Lewski, at the expense of the Members. 238 Although none of them had an intent to gain an improper advantage or benefit for themselves, this does not, in my view, mean that they satisfied the second limb of the test. It will usually be the case that a director that improperly uses his or her position to provide a substantial advantage to another director (as I have found) will have shown moral turpitude. I note also the impropriety of their acquiescence in Mr Lewski's breaches of s 195(1) by making no complaint while he participated in Board resolutions through various meetings regarding the Amendments (except for Mr Clarke), the Lodgement Resolution and the Decisions to Pay. 239 There is though some force to the Directors' contentions. Without descending to the detail, their contentions surround the questions of intent to gain an improper benefit, which they argue requires an enquiry into the subjective state of mind of each Director as to the impropriety of the gain in question. They argue that there is no suggestion in the evidence that Dr Wooldridge, Mr Butler and Mr Jaques had an intent to gain an improper benefit or advantage for APCHL and Mr Lewski, there is no finding of dishonesty, and the evidence shows they acted in the belief (although found to be erroneous) that the Amendments were in the best interests of the Members. 240 Mr Clarke's position is stronger again than Dr Wooldridge, Mr Butler and Mr Jaques. He was not a Director on 19 July 2006 when the Amendments were passed. On 22 August 2006 when he passed the Lodgement Resolution he did not read and understand the Lodgement Resolution or the Amendments and he therefore did not have any intention that the fees provided for in the Amendments were for the benefit of APCHL and Mr Lewski. It is likely that he gave the resolution no thought and just waved through lodgement of the Amendments. 241 At the time he participated in the Decisions to Pay he did however know and intend that the Listing Fee was for the benefit of APCHL and Mr Lewski, but at that time he genuinely believed the Listing Fee was validly included in the Constitution. 242 In the finish it is unnecessary to decide this issue because nothing turns on whether Dr Wooldridge, Mr Butler, Mr Jaques and Mr Clarke established that they satisfy the second limb of the "acted honestly" test. This is so because no Director satisfied me under the third limb.

Did any Director establish that he acted without carelessness or imprudence that negated the performance of the duties in question? 243 In my view no Director established that he acted without such carelessness or imprudence that it negated the performance of the duties in question. 244 This limb of the test was discussed in Poolman at [325] by Palmer J where his Honour explained: … the court should be concerned only with the question whether the person has acted honestly in the ordinary meaning of that term, that is, whether the person has acted without deceit or conscious impropriety, without intent to gain improper benefit or advantage for himself, herself or for another, and without carelessness or imprudence to such a degree as to demonstrate that no genuine attempt at all has been to carry out the duties and obligations of his or her office imposed by the Corporations Act or the general law. A failure to consider the interests of the company as a whole, or more particularly the interests of creditors, may be of such a high degree as to demonstrate failure to act honestly in this sense. However, if failure to consider the interests of the company as a whole, including the interests of its creditors, does not rise to such a high degree but is the result of error of judgment, no finding of failure to act honestly should be made …(Emphasis added.) 245 In Gillfillan at [295] and [303] Sackville AJA (Beazley and Barrett JJA agreeing) approved the primary judge's findings with respect to the third limb of the test in the following terms: [295] The primary judge did not find affirmatively that either of the US directors had acted deceitfully or with conscious impropriety. His conclusion that they had not satisfied him that they had acted "honestly" within the meaning of s 1317S(2)(b)(i) rested on a finding (penalty judgment at [63]) that it was not just mere inadvertence, imprudence or carelessness on the part of the US directors not to have asked for a copy of the draft ASX announcement. … His Honour was prepared to accept (at [65]) that the non-executive directors, including the US directors, may have believed that they were acting in the best interests of the James Hardie group … But, in his Honour's view (at [66]), a director's belief that he or she is acting in the best interests of the company does not compel the court to be satisfied that the person has acted honestly in the relevant sense. … [303] It is true that the contraventions by the US directors were, as his Honour found, isolated events. None the less, his Honour was entitled to not be satisfied that they had acted honestly in the sense explained by his Honour (and accepted by them as the correct construction of s 1317S(2)). (Emphasis added.) 246 The parallels between the position of the Directors in the present case and the directors in Gillfillan are clear. In Gillfillan the directors contended that they thought that they were acting in the best interests of the company and in the present case the Directors contend they acted in the best interests of the members. In both cases the directors contend that their contraventions involved a lack of care and that they had made a genuine attempt to carry out their duties. But in Gillfillan the US directors were unsuccessful in their attempt to satisfy the third limb of the test, as in my view the Directors in the present case must be. 247 I respectfully agree with the approach of Jessup J in Links Golf Tasmania Pty Ltd v Sattler and Another (2012) 292 ALR 382 at [661], where his Honour explained: [The defendant] most probably, did not realise that there was anything wrong in what he was doing. He did not intend to gain an improper advantage because he assumed, mistakenly as I would hold, that he had every right to obtain funding for the wellness centre in his own name, and to build it wherever he chose, even if not to the benefit of LGT. Notwithstanding the absence of deceit or conscious impropriety, however, I take the view that Sattler's conduct involved a degree of imprudence that negated the performance of his fiduciary duty to LGT. In that sense, I would hold that he did not act honestly within the meaning of s 1318. (Emphasis added.) 248 I will now briefly deal with each Director's position.

Mr Lewski 249 Mr Lewski concedes that his Lodgement Resolution conduct (as found) amounts to serious incompetence. In my opinion his carelessness and imprudence was so pronounced that there can be no question that it negated the performance of the duties in question. At the 19 July 2006 Board meeting he gave no proper consideration, and at the 22 August 2006 Board meeting he gave no consideration whatsoever, to the matters I set out at [138] above. In making the Decisions to Pay he gave no proper consideration to the matters I set out at [155] above. 250 He had statutory fiduciary obligations including a duty to act in the best interests of the Members and to give priority to the Members' interests in the event of a conflict of interest. Despite his material personal conflicts of interest and duty he acted as I have set out at [217]-[221]. He orchestrated the Amendments at every stage and misused his position of influence by participating in Board meetings relating to the Amendments, the Lodgement Resolution and the Decisions to Pay when doing so was a breach of s 195(1). He put his own interests ahead of the Members at every step and his conduct represents the height of carelessness and imprudence.

Dr Wooldridge, Mr Butler and Mr Jaques 251 Although not put in exactly the same way, in essence Dr Wooldridge, Mr Butler and Mr Jaques contend that they made a genuine attempt to carry out the duties and obligations imposed by the Act, including that each of them: (a) having decided to vote in favour of the Amendments at the Board meeting on 19 July 2006, and believing that the Constitution had been amended at that time, his considerations for voting in favour of the Amendments remained operative when voting in favour of the Lodgement Resolution; (b) considered the Madgwicks advice and the desirability and availability of the Amendments (in Dr Wooldridge's case on a number of occasions); (c) believed that there was a genuine reason to make the Amendments and that the Board had considered and understood the Amendments; (d) believed that the Madgwicks Advice advised the Board that, having regard to the Act and the Constitution, it had the power to pass the Amendments without the approval of the unit holders; (e) was satisfied that the Amendments did not affect the rights of the unit holders and was satisfied that the Amendments were in the unit holders' best interests; and (f) considered how the conflict between the interests of the unit holders and the interests of APCHL could be resolved in favour of the unit holders. 252 I do not accept these contentions. First, I note that some of them are a re-run of arguments already rejected in the liability judgment. For example Dr Wooldridge submits that: (a) he honestly believed that the Constitution had been validly amended at the time of the Lodgement Resolution. However, I found (at [561]-[562]) that the Directors had not intended the Amendments to take effect until they were lodged; (b) he considered the Amendments to be in the best interests and in favour of the Members. While his evidence was to that effect in relation to the 19 July 2006 Board meeting, I found (at [616]) that no Director gave consideration to the best interests of the Members when considering the Lodgement Resolution on 22 August 2006; (c) he was satisfied that there was a legitimate reason to make the Amendments. While his evidence was to that effect in relation to the 19 July 2006 meeting, I found (at [592]) that no Director was satisfied there was a legitimate reason for the Amendments on 22 August 2006; (d) he believed that the Board had considered legal advice to the effect that it could make the Amendments without the Members' approval. While his evidence was to that effect in relation to the 19 July 2006 meeting (and putting to one side the obvious deficiencies in that advice) I found (at [594]) that on 22 August 2006 no Director gave any consideration to the Board's power to make the Amendments or the need for proper legal advice. 253 Second, in my view the Directors seek a literal application of the relevant passages in Poolman at [318]-[327] which is an incorrect approach to principles stated in judges' reasons: Stewart in his capacity as liquidator of Newtronics Pty Ltd (in liq) and Another v Atco Controls Pty Ltd (in liq) (2014) 307 ALR 562 at [32] per Crennan, Kiefel, Bell, Gageler and Keane JJ. The gravamen of the third limb of the "acted honestly" test is little more than this: if the evidence demonstrates that no real effort was made to carry out the statutory duty, the person charged with the acquittal of that duty will fail to establish that he or she acted honestly. 254 Although Dr Wooldridge took a little more care than the others, each of Dr Wooldridge, Mr Butler and Mr Jaques gave scant, if any, consideration at the 19 July 2006 Board meeting, and gave no consideration whatsoever at the 22 August 2006 Board meeting, to the important matters set out at [138]. In my view they made no real effort to carry out their duties to exercise reasonable care and diligence, to act in the best interests of the members and to prefer the Members' interests given the conflict of interests, to take all reasonable steps to ensure compliance with the Constitution and not to make improper use of their position to the benefit of Mr Lewski and the detriment of the Members. 255 This can be seen in the fact that although Mr Lewski's conflict of interest was obvious, Dr Wooldridge, Mr Butler and Mr Jaques failed to properly deal with it and instead of putting the Members' interests first they capitulated to Mr Lewski's interests. In fact Dr Wooldridge and Mr Jaques testified that they sought to somehow balance Mr Lewski's interests with the Members' interests, thereby conceding that they proceeded down the wrong path. I found that each of them provided Mr Lewski with the Listing Fee largely so as to incentivise him to pursue listing rather than proceed to vesting. They acted as they did notwithstanding that the Five Principal Factors indicated the need for a high level of care, diligence and caution 256 Their conduct involved such a degree of carelessness and imprudence that it negated the performance of the duties in question.

Mr Clarke 257 Mr Clarke's position is materially different to the other Directors. He had no knowledge of what had transpired at the 19 July 2006 Board meeting and knew nothing of the flawed decision on that date. 258 He argues that, notwithstanding my finding that a reasonable director in his position would have seen that the decision made on 19 July 2006 was "clearly wrong", the fact that he failed to notice this was not a flagrant failure and was a mistake that many directors in an identical position may have made. He argues that any brand new director at the 22 August 2006 Board meeting would be likely to be reticent to question the 19 July 2006 decision to pass the Amendments, or to abstain on the Lodgement Resolution. 259 He notes, and I accept, that the duty to resolve conflicts of interest in favour of the Members did not of itself dictate that no amendment could ever properly be made to introduce new fees. He argues that the question of whether the Amendments were proper was not as obvious as to go without saying, and an incoming director could not have known as a matter of certainty that the decision was plainly wrong without knowing the manner (if any) in which the Board had resolved the conflict issues. I accept this as far as it goes. 260 Although he was only a passive participant in the 22 August 2006 Board meeting Mr Clarke contends that it does not follow that he made no genuine attempt at all to carry out the duties of his office. He had attended a number of Board meetings as a consultant but he was only appointed a Director the day before that meeting and he says that he: (a) had not found sufficient time to read and digest all of the material which was sent to him the day before the meeting; (b) had read Mr Goldberg's 18 August 2006 email (although not its attachments) which was sent to him on 21 August 2006 in which Mr Goldberg described: (i) the Listing Fee and the Removal Fee as having been "implemented by the recent amendment to the Constitution see below"; and (ii) the Deed of Variation amending the Constitution as having been "approved at the last Board meeting and executed", going on to "propose that the deed be dated 22 August and lodged with ASIC on that date…". He says that any reasonable director in his position would have taken considerable comfort from Mr Goldberg's email, and from the fact that Madgwicks had prepared the deed amending the Constitution. He argues that this is especially so when he had not seen the deficient Madgwicks Advice and could not reasonably have been expected to ask for it; (c) attended the meeting on 22 August 2006 and thereby began to inform himself of the affairs of the company and the conduct of its Board; (d) believed (albeit mistakenly) that he was a passive participant at the meeting and that he was thereby abstaining from voting on any matter before the Board that day; and (e) had no experience as a director of any entity comparable to APCHL as his background was in small business, local government and community-based organisations. 261 In all the circumstances, and even if he had been able to devote several hours to reading the materials provided to him before the meeting, he submits it would have been a highly astute and forthright director in his position who would have adopted a markedly different position to that which he adopted. If he fell short of the required standard he argues that it could not be far short and that his failings do not involve moral turpitude. 262 There is some force to Mr Clarke's contentions. As I have said, I accept that his position is different to the other Directors as he was not present at the 19 July 2006 Board meeting, he was a new Director on 22 August 2006, he had not read the Board papers for that meeting, and he did not see the Madgwicks Advice. 263 However I do not accept the thrust of his contentions. I say this because at the 22 August 2006 Board meeting he had just been appointed a Director of a large responsible entity with gross assets of $568 million. In accepting the appointment he assumed important statutory fiduciary duties. Despite these obligations at his first meeting he approved the Lodgement Resolution to bring substantial additional fees into effect, payable from trust property to Mr Lewski, when: (a) he had not read the Board papers; (b) he had not considered and understood the Lodgement Resolution; (c) he had not read or understood the Amendments which the Lodgement Resolution brought into effect; and (d) he did not ask the other Directors for any explanation of the Amendments or the Lodgement Resolution. 264 It appears that he sat passively in his first Board meeting and merely waved through a resolution which allowed a $33 million breach of trust. He failed to give any attention whatsoever to the resolution or the facts underpinning it. Such conduct goes beyond mere inadvertence or carelessness and it negated the proper performance of the duties in question. 265 In his evidence in the penalty hearing he accepts that he was not sufficiently prepared for the 22 August 2006 Board meeting and that he did not appreciate the significance of the Lodgement Resolution. He states: I accordingly failed to realise that the effect of one of our decisions was to confer a substantial benefit on Mr Lewski which, although it had been the subject of agreement before I joined the Board, still required the Board to resolve in favour of taking one final step (lodgement at ASIC) to make it valid. 266 His position is similar to that of the United States directors in Gillfillan. In that case, in relation to the trial judge's conclusion that he was not satisfied that those directors had acted honestly, Sackville AJA (Beazley and Barrett JJA agreeing) said at [298]-[299] and [302]: [298] The contravention by the US Directors did not consist of a failure to request a copy of the Draft ASX Announcement or to abstain from voting on the motion to approve the Announcement when they knew what the Announcement was likely to say. Their contravention consisted of their failure to request a copy of the Announcement or to abstain from voting when they knew (contrary to their evidence) that the meeting was being asked to approve the Draft ASX Announcement. Although they did not know the terms of the Draft ASX Announcement, they knew or should have known that it was a matter of great importance to JHIL and to investors. Yet they did nothing to ascertain its contents or to dissociate themselves from the vote to approve its release to the ASX (and to the wider community). [299] The US Directors attended the Meeting by telephone and did not have the Draft ASX Announcement before them..…In any event, neither Mr Gillfillan nor Mr Koffel had before him the text of the Draft ASX Announcement at the time the Board approved its release. … [302] Essentially, the US Directors abdicated their responsibility at the Meeting by not asking for a copy of a critical document which the Board was asked to approve for release to the ASX, or at least abstaining from voting on the resolution (thereby dissociating themselves from the Board's decision to approve release). The US Directors' position at trial was that the Meeting had not been asked to approve the Draft ASX Announcement. That evidence was not accepted. They provided no explanation of what led them to acquiesce in the vote on such an important matter without discharging their responsibilities as directors of JHIL. 267 Central to each Director's contentions in relation to the Decisions to Pay Contraventions is that he genuinely believed that the Listing Fee was provided in the Amended Constitution. I accept this. 268 I have already dealt with this contention at [205]-[211]. As I have said, on 19 July 2006 each Director's belief (except for Mr Clarke's), and on 22 August 2006 each Director's belief (including Mr Clarke's) was the product of his failure to give any or any adequate consideration to the important matters set out at [138] and [155]. While they believed the Amended Constitution provided for the Listing Fee, each Director (except for Mr Clarke) knew how the Amendments were passed on 19 July 2006, and each Director (including Mr Clarke) knew how the Amendments were brought into effect on 22 August 2006. Each of them knew (or should have known) that he had given no proper consideration to, amongst other things, the conflicts of interest, the prohibition on Amendments in favour of APCHL, and (except for Mr Clarke) the unusual and uncertain Madgwicks Advice. 269 A reasonable director in each Director's position would have been alive to APCHL's and Mr Lewski's conflicts of interest and before making the Decisions to Pay would have sought clear legal advice or a judicial direction that the Amendments had been effective. None did so and Blake Dawson's advice was given on the assumption that the Listing Fee was valid. When making the decisions to pay $33 million from trust funds to APCHL and to Mr Lewski no Director even considered whether there were any conflicts of interest nor even raised a concern about Mr Lewski's participation in those decisions. 270 In my view each Director's conduct reveals a level of carelessness and imprudence that negated the performance of the duties in question.

Whether any Director ought fairly to be excused and whether to exercise the discretion to relieve any Director from liability 271 In my view no Director established that he acted honestly (within the meaning of the exoneration provisions), but if (contrary to my view) any Director was able to do so: (a) I do not consider that he ought fairly to be excused from liability either wholly or partly; and (b) I would decline to exercise my discretion to grant him relief from liability, either wholly or partly. 272 I say this, first, because the nature and seriousness of the contraventions indicate that no Director ought fairly be excused from liability either wholly or in part. See Vines at [52]; Morley at [50]-[52]. The seriousness of each Director's contraventions is demonstrated by the magnitude of the additional fees that were generated by the wrongful conduct and the importance of the statutory fiduciary duties that he breached in order to generate those fees. The contraventions had a serious effect because they resulted in the diversion of $33 million from trust property, being about 6.7% of net scheme property. See Healey (No 2) at [89]. In a general sense it is likely that the conduct caused a substantial loss to the Trust. 273 Second, in my view it cannot be said any Director acted honourably, fairly and in a common-sense manner as judged by the standards of other directors. 274 Mr Lewski's conduct involved the impropriety to which I refer at [233]-[235] and I do not consider his conduct to be honourable or fair. He completely failed to act in a common-sense manner as judged by the standards of other directors as he put his own interests ahead of the Members at every step. As I have said, in my view his approach represents the height of carelessness and imprudence. 275 In relation to whether Dr Wooldridge, Mr Butler and Mr Jaques acted in a common sense manner as judged by the standard of other directors I reiterate my remarks at [252]-[255]. In my view it is plain that they did not. The same can be said of Mr Clarke's conduct, and I reiterate my remarks at [263]-[266]. See Edwards (No 3) at [10]; Maelor Jones at 295. 276 I take the same view of the Decisions to Pay Contraventions. Each Director (except for Mr Clarke) knew that when passing the Amendments he gave no adequate consideration to the important issues I set out at [138], and each Director (including Mr Clarke) knew that when passing the Lodgement Resolution he gave those matters no consideration at all. No Director gave any consideration to the matters listed at [155] and each Director failed to act in a common sense manner judged by the standards of other directors. 277 Third, it must be kept in mind that the Directors breached statutory fiduciary duties and a stricter approach to such breaches is appropriate: Vines at [58]; Manpac Industries at [75]. 278 Fourth, the requirement to adhere to the Constitution of a managed investment scheme is aimed at the important purpose of investor protection. The prohibition on amendments in favour of APCHL in cl 24.1 of the Constitution was significant for the Members' investments and it required strict adherence by the Directors. Vines at [54]; Friedrich at 199. 279 Fifth, insofar as the Directors (other than Mr Clarke) seek to rely on the Madgwicks Advice to diminish the seriousness of the conduct, while I accept that their conduct must be assessed in light of its deficiencies, it was not legal advice that a reasonable director in each Director's position would have followed. 280 Sixth, no Director except for Mr Clarke showed appropriate contrition. Mr Lewski showed none at all and the expressions of contrition by the other Directors (except for Mr Clarke) were qualified and/or based on the Court's findings rather than upon an acknowledgement and acceptance of his wrongdoing. See Vines at [51]; Whitlam (No 2) at [15]. 281 Seventh, in Mr Lewski's case he made a $33 million gain from the contraventions, and he has not repaid those monies. See Lasscock's Nurseries Ltd at 264; Permakraft at 510. 282 Eighth, in Mr Butler's case he stood to receive a $750,000 performance bonus payable if APCHL was paid the balance of the Listing Fee which meant he participated in the Decisions to Pay in April 2008 even though he had a conflict of interest. 283 For similar reasons I would refuse to exercise my discretion to relieve any Director from liability, either wholly or partly. 284 Further to the matters I have set out above, the circumstances of the case indicate a powerful requirement to deter other directors from similar conduct. This is another potent reason to refuse to exercise my discretion to excuse any Director. 285 I note again that APCHL was a large managed investment scheme with $568 million in funds under management at the relevant time, and it was significant in the sector. The existence of conflicts of interest between responsible entities and the members of managed investment schemes (particularly in relation to fees) have long been recognised, yet no Director properly dealt with APCHL's and Mr Lewski's obvious conflicts of interest and no Director put the Members' interests first as required. In my view it would send completely the wrong message to the commercial community, particularly the managed investment scheme sector, if in the circumstances of the present case any Director was wholly or partially relieved from liability. 286 I also consider that relieving any Director from liability would tend to diminish public confidence in the maintenance of appropriate standards of corporate behaviour, which also supports refusal to exercise my discretion. 287 I accept that to different degrees each Director has paid a heavy price in terms of loss of reputation and financial loss, but this does not outweigh the public interest in deterrence or the need to preserve public confidence in the maintenance of appropriate standards of behaviour. I would not excuse any Director on this basis. 288 Mr Clarke's conduct was the least culpable of the Directors and he came closest to satisfying me that he should be relieved but, in the finish, I am not persuaded. 289 As I have said, Mr Clarke's position is analogous to that of the US directors in Gillfillan. Like them he took no steps to consider and understand the question before the Board, and he approved the relevant resolution without troubling himself to consider what effect it had. I respectfully agree with the approach taken by Sackville AJA in Gillfillan at [311], when discussing whether the s 1317S discretion should have been exercised in that case. His Honour said: Mr Bennett also sought to characterise the US Directors' contravention as a mere failure to observe a "ritual", that is to indicate formally that they abstained from the vote to approve a document that they had not seen. It is not entirely clear why the reference to abstention was included in the declaration of contravention, as the primary Judge found (at [125]) that the silence of the US Directors was, in effect, a vote approving the release of the Draft ASX Announcement. Be that as it may, the significance of the failure to abstain was that the US Directors, despite being alerted to the importance of the Draft ASX Announcement, took no steps to ascertain its contents and, in effect, approved its release without troubling to consider what representations were being conveyed to the ASX and to the financial and wider communities. Their contravention was not a mere failure to observe a "ritual". (Emphasis added.) 290 As I explain when dealing with general deterrence in relation to the penalty to be imposed on Mr Clarke, I do not accept his contention that, because of the particular circumstances of his case, deterrence would not be undermined if I excuse him from liability. 291 Mr Clarke also contends that he should be exonerated because, if he is not, he will continue to be exposed to liability in the Supreme Court proceedings which he argues would be wholly disproportionate to the wrongs he has been found to have committed. I do not accept this. The Supreme Court proceedings predate the declarations of contravention and the declarations themselves do not do not create the liability (if any) that Mr Clarke has in those proceedings. His liability arises from his conduct. Nor is it straightforward that a grant of relief would mean that Mr Clarke escaped those proceedings.

G. THE PENALTIES TO BE IMPOSED 292 As I have said I approach the issue of penalties on the basis that the Lodgement Resolution conduct and the Decisions to Pay conduct are sufficiently distinct in nature, time, and effect that it is appropriate to treat them as two separate courses of conduct.

The overlap between the Lodgement Resolution conduct and the Decisions to Pay 293 In the alternative some Directors contend that the Decisions to Pay are at least in part the same conduct, or that they flow from and are so closely interrelated with the approval of the Lodgement Resolution, so that any penalties imposed for the Decisions to Pay Contraventions should be imposed concurrently (and not cumulatively) with the penalties for the Lodgement Resolution Contraventions. They argue that if this is not done they will be punished twice for the same conduct. 294 I accept this contention in part. When they approved the Amendments and later the Lodgement Resolution the Directors (except for Mr Clarke) must be taken to have intended that the Listing Fee would be payable when listing later occurred. At the time each Director (including Mr Clarke) made the Decisions to Pay he genuinely believed that the Amended Constitution provided for payment of the Listing Fee. In that sense the Decisions to Pay flow out of the earlier approval of the Lodgement Resolution and there is some overlap in the two courses of conduct. 295 In my opinion the overlap between the two courses of conduct justifies 50% of the penalties imposed for the Decisions to Pay Contraventions being served concurrently with the penalties for the Lodgement Resolution Contraventions. 296 I will now deal with each Director's individual position, although it should be kept in mind that I have already dealt with their ten main contentions.

Factors relevant to Disqualification Order 297 Mr Lewski submits that his Lodgement Resolution Contraventions should be treated as "serious but not worst-case" contraventions (as characterised by Santow J in Adler) and he contends that his Decisions to Pay are part of the same course of conduct. He accepts that the Court's findings justify characterising his Lodgement Resolution conduct as "serious incompetence". However he argues that in circumstances where no dishonesty or conscious impropriety has been found, and where it cannot be proved that his actions alone caused the $33 million breach of trust, the longest periods of disqualification described by Santow J (25 years or more) cannot be justified. 298 ASIC contends that the "longest periods of disqualification" (as described by Santow J) are appropriate in the present case because of, amongst other things, the nature and seriousness of Mr Lewski's contraventions including that his acts were central in the diversion of $33 million from trust funds, he took advantage of a position of influence and breached statutory fiduciary responsibilities in order to enrich himself, and that he has demonstrated no contrition or even shown an understanding of the seriousness of his wrongdoing. 299 I accept ASIC's contentions as to Mr Lewski's conduct, but I do not accept that a 25 year disqualification is appropriate. While accepting the difficulties in transposing the result in one case to another, the common thread running through the cases where the longest periods of disqualification have been imposed is dishonesty or knowledge of the wrongdoing: see Adler - where Mr Adler was disqualified for 20 years; Australian Securities and Investments Commission v Loiterton and Others (2004) 50 ACSR 693 - where Mr Loiterton was disqualified for 17 years; Australian Securities and Investments Commission v White and Others (2006) 58 ACSR 261 - where Mr White was disqualified for life; Matcham (No 2) - where Mr Matcham was disqualified for 15 years; MacDonald (No 12) - where Mr MacDonald was disqualified for 15 years; Re Idylic Solutions Pty Ltd; Australian Securities and Investments Commission v Hobbs and Others (2012) 93 ACSR 421 - where Mr Hobbs was disqualified for life and Mr Collard was disqualified for 20 years; Australian Securities and Investments Commission v Sydney Investments House Equities Pty Ltd and Others (2009) 253 ALR 616 - where Mr Goulding was disqualified for 25 years. 300 ASIC did not need to establish dishonesty to make out its case, and it did not plead or put to Mr Lewski that he was dishonest. I made no finding that Mr Lewski's conduct was dishonest and in my opinion any disqualification order cannot be for the "longest periods" as described. Having said this, the relevant considerations indicate that a lengthy disqualification is appropriate.

Seriousness of the contraventions 301 I have already set out my views as to the nature and seriousness of Mr Lewski's contraventions, and I detailed his central role at [217]-[221]. It suffices to note that he instigated and orchestrated courses of conduct that breached important statutory fiduciary duties, he improperly used his office for his own advantage, he was the primary actor in the diversion of $33 million from trust funds, he received the benefit of the diversion and he has not repaid the monies. For the purposes of this application I consider that his conduct was central in Prime Trust's suffering a substantial loss.

Protection of the public including through personal deterrence 302 The principal purpose of a disqualification order is protection of the public. I consider Mr Lewski's conduct shows that he is unsuitable to manage corporations, particularly responsible entities, which points to a need to disqualify him from managing corporations. 303 As I have said, he was the principal actor in both courses of conduct. He used his position of influence to instigate and orchestrate the introduction of substantial additional fees payable from Trust property to him. In pursuit of the Listing Fee for his own gain he ignored his statutory fiduciary duties and he failed to give priority to the Members' interests. Instead he put his own interests first at every step. Amongst other things, although he recognised that it was inappropriate for him to vote on resolutions in which he had a material personal interest he moved, spoke in favour of and voted to pass the Amendments, he approved the Lodgement Resolution, and he participated in the Decisions to Pay in 2007 and 2008. I found that he improperly used his position to gain an advantage for himself and in my opinion his conduct was generally improper. 304 It was also the height of carelessness and imprudence for him to act as he did given his conflict of interest and conflict of interest and duty. In fact he concedes that his Lodgement Resolution conduct (as found) is properly characterised as serious incompetence. 305 Nor has Mr Lewski demonstrated any contrition or even any recognition or understanding that he committed the serious wrongdoing I found. I conclude that he continues to believe that he was entitled to act as he did, which is the thrust of the evidence he gave in the liability hearing. 306 His failure to act in the best interests of the Members including his failure to prefer the Members' interests over his own interests given his conflict of interest, his failure to adhere to the Constitution, his improper use of his office, his impropriety in participating in meetings in breach of s 195(1), his serious carelessness and imprudence, coupled with his lack of contrition and his failure to recognise or understand his own wrongdoing indicate there is a real risk that he will reoffend if he is allowed to continue to manage corporations. 307 In my view there are compelling reasons to disqualify him from managing corporations for a lengthy period so as to protect the public, including by deterring him from future breaches.

General deterrence 308 Without again setting out Mr Lewski's conduct I note that he was the central actor in the contravening conduct and in pursuit of personal gain he subordinated the Members' interests to his own. It is of central importance that other directors of responsible entities are deterred from conduct of this kind. 309 The requirement to impose a disqualification order which will deter other directors from similar conduct must be considered in the context that APCHL occupied a significant position in the managed investment scheme sector, and that sector is an important part of the Australian investment market. Given the legislative purpose of investor protection, and the members' vulnerability to the conflicts of interest of responsible entities and their controllers (particularly in relation to fees), it is fundamental that other directors of responsible entities understand the need to be punctilious in their commitment to the members' best interests and in the event of a conflict of interest to put the members' interests first, rather than pursuing their own interests as Mr Lewski did. A strong message must be sent to deter other directors from similar self-enriching conduct.

Understanding of the proper role of a director 310 I have previously set out how Mr Lewski's conduct fell well short of the required standard and it is unnecessary to do so again. His conduct shows that at the time of the contraventions he did not understand the proper role of a director, particularly a director of a responsible entity. His evidence in the liability trial confirmed his lack of understanding of his duty to act in the Members' best interests and to give them his undivided loyalty. He put on no evidence to satisfy me that his understanding had improved since then. His lack of understanding can also be seen in his failure to recognise the seriousness of his own wrongdoing, and his complete lack of contrition.

Evidence of character 311 Mr Lewski adduced no evidence of character and therefore the mitigating effect on penalties that positive character evidence may have provided is not available to him. I note also that in the liability hearing he gave contrived, implausible and self-serving evidence which in my view reflected badly on his character.

Contrition 312 Mr Lewski has displayed no contrition. He cannot have the benefit of any concession that it might have brought him. 313 However he argues that his lack of contrition must be seen in the context that he intends to appeal. I accept this and note (as Gzell J said in Whitlam (No 2) at [16]) that there is a tension that exists when a matter is likely to be the subject of appeal and there is perceived to be some significance in a resolute continuance of a denial of events found by the primary judge. 314 In Whitlam (No 2) Gzell J found that the defendant lacked contrition and this in part supported his Honour's conclusion that there was a likelihood that the defendant would repeat similar conduct. In my view, even where a defendant intends to appeal, I consider the absence of contrition is relevant to determining whether there is a need to protect the public including through personal deterrence. 315 However, the fact that Mr Lewski intends to appeal, together with the fact that damages proceedings against him are on foot in the Supreme Court, means that I do not give his absence of contrition much weight in itself.

The need to balance personal hardship against the public interest 316 Mr Lewski adduced no evidence which enabled me to balance his personal hardship against the public interest. The mitigating effect that personal hardship may have had in relation to disqualification is not available to him.

Factors relevant to Pecuniary Penalty 317 Mr Lewski accepts that a pecuniary penalty is appropriate for his Lodgement Resolution Contraventions (although not his Decisions to Pay Contraventions) but argues against imposition of penalties ranging towards the maximum.

Punishment 318 Punishment of the contravener is a central objective behind the imposition of a pecuniary penalty, but it is hard to see how the available pecuniary penalties can have any real punitive effect on Mr Lewski. 319 Mr Lewski has had the wrongful benefit of $33 million. The maximum pecuniary penalty for a single contravention or single course of conduct is $200,000, which means that the maximum penalty that could be imposed upon him for the two courses of conduct is $400,000. 320 It must also be kept in mind that the maximum penalty is reserved for the worst possible cases: Markarian at [31]; Australian Ophthalmic Supplies Pty Ltd v McLary-Smith (2008) 246 ALR 35 at [108] per Buchanan J. In the absence of a finding of dishonesty Mr Lewski's contraventions are not the worst possible case. 321 While keeping in mind that the maximum penalty is reserved for the worst cases, in my opinion the fact that Mr Lewski has had the wrongful benefit of $33 million operates to increase the pecuniary penalty to be imposed, so that it has whatever punitive effect that is available in the circumstances.

Personal Deterrence 322 In Matcham (No 2) at [270] Jacobson J held that: …the requirements of deterrence are such that an appropriate penalty should be at least equal to, if not greater than, the amount of the unauthorised payment. His Honour went on to say that "a penalty of at least the amount taken seems to me to be an appropriate starting point, although it is subject to the other guiding factors". I respectfully agree. The facts in Matcham (No 2) are different to the present case as it involved dishonest misappropriation of monies but I do not consider this relevantly distinguishes it from the present case. In my view his Honour's remarks are applicable to breaches which lead to a wrongful gain by a contravener, and not just to breaches involving dishonesty. 323 In any event Mr Lewski's contraventions involved the diversion of trust funds in breach of statutory fiduciary duties for personal gain, he improperly used his position to gain an advantage for himself and his conduct went beyond mere departures from the duty of care and diligence. As he has not repaid the monies he wrongfully received in my view the amount he wrongfully received is an appropriate (albeit unachievable) starting point for the pecuniary penalty to be imposed. 324 While the requirement to deter Mr Lewski from repeating similar conduct will be met, firstly, by the disqualification order there remains scope for a pecuniary penalty to provide further personal deterrence. First, personal deterrence will be served by requiring Mr Lewski to pay a pecuniary penalty. There can be no question given his conduct that he is highly motivated by money. 325 Second, I note that Mr Lewski's companies feature controlling shareholdings by him and his family members. Although he is to be disqualified from managing corporations it is likely that he will continue to play some role in them either directly or through his family. A pecuniary penalty is appropriate to deter him from any involvement in similar conduct in the companies in which he will play a continuing role. 326 While any pecuniary penalty cannot approach the $33 million he wrongfully received it must go as far as possible to attempt to put a price on contravention that is sufficiently high to deter him: CSR at 52,152. In my view a high pecuniary penalty is required.

General Deterrence 327 I have already set out my views on the importance of general deterrence in relation to Mr Lewski's conduct. While general deterrence will be served by his disqualification there remains room for further general deterrence through imposition of a pecuniary penalty. 328 I note that some directors who make wrongful financial gains may consider disqualification an acceptable price to pay if they can retain the benefit of the monies received. Pecuniary penalties need to be set so that other directors, particularly directors of responsible entities, are deterred from similar self-enriching conduct. The nature and seriousness of his contraventions indicates that a high penalty is appropriate.

Hardship/Incapacity to pay 329 Mr Lewski adduced no evidence as to any incapacity to pay, or evidence as to hardship. In fact it is hard to see how he could adduce such evidence when he received $33 million as a result of his wrongful conduct.

Contrition 330 I reiterate my observations at [312]-[315] regarding Mr Lewski's lack of contrition.

Mr Lewski's penalties 331 Having regard to these considerations I have decided to disqualify Mr Lewski from managing corporations as follows: (a) 14 years for the Lodgement Resolution Contraventions; and (b) 2 years for the Decisions to Pay Contraventions. 332 Having regard to the extent to which the two courses of conduct are interrelated and in order to avoid punishing Mr Lewski twice for the same conduct, I consider that half of the disqualification for the Decisions to Pay Contraventions should be served concurrently with the disqualification for his Lodgement Resolution conduct. This reduces the effective disqualification period to 15 years. 333 I have already detailed Mr Lewski's conduct and I need not set it out again. The requirement to protect the public is fundamental to my decision, and it is central that Mr Lewski is prevented from similar conduct in the future. It is also important that other directors, particularly directors of responsible entities, are strongly dissuaded from putting their personal interests above the members' interests and enriching themselves at the expense of the members. 334 A fourteen year disqualification for Mr Lewski's Lodgement Resolution Contraventions is above Santow J's category for "serious though not worst case" contraventions (disqualifications from 7 to 12 years). But Santow J's list is only a guide and is not to be followed in an unquestioning way. In my view Mr Lewski's Lodgement Resolution conduct justifies a longer disqualification. Although Mr Lewski's Lodgement Resolution conduct did not involve dishonesty or intent to defraud it satisfies many of the other criteria in Santow J's category for the "longest periods of disqualification" (25 years or more) including that: (a) his conduct caused a substantial loss; (b) he is likely to engage in similar activities or conduct in the future; (c) the conduct occurred in a field in which there was potential to do great financial damage; and (d) he has shown no contrition or remorse. 335 I closely considered imposing disqualification for about 20 years but I did not do so because I have made no finding of dishonesty. I note too that he is 58 years old. His age together with the effective 15 year disqualification means that he is unlikely to manage corporations again. I also keep in mind that his disqualification must be in due proportion to the other Directors, and I have disqualified Dr Wooldridge, Mr Butler and Mr Jaques for much shorter periods. 336 A two year disqualification for his Decisions to Pay Contraventions reflects my view that these contraventions are much less serious than his Lodgement Resolution conduct. His Decisions to Pay conduct was though more culpable than the other Directors because, amongst other things, he orchestrated the conduct, he knew more than they did about the uncertainty of the Board's power to pass the Amendments, the conflict of interest and conflict of interest and duty were his, he participated in the Decisions to Pay despite his conflict of interest (as Mr Butler did), the decisions were directly for his benefit, and he has retained the benefit of the $33 million that he wrongfully received. 337 While I have taken into account the 15 year disqualification order I consider that Mr Lewski's contraventions also require pecuniary penalties as follows: (a) $170,000 for his Lodgement Resolution Contraventions; and (b) $120,000 for his Decisions to Pay Contraventions. 338 Again, having regard to the extent to which the two courses of conduct are interrelated and in order to avoid punishing Mr Lewski twice for the same conduct, half of the pecuniary penalty for the Decisions to Pay Contraventions is to be paid concurrently with the pecuniary penalty for the Lodgement Resolution conduct. This reduces the effective pecuniary penalty to $230,000. 339 In my view such a pecuniary penalty, in combination with the 15 year disqualification, is necessary to send an effective message to Mr Lewski and to other directors, particularly directors of responsible entities, that such self-enriching conduct at the expense of the members will not be countenanced. 340 The penalty for Mr Lewski's Lodgement Resolution conduct represents a small discount on the maximum pecuniary penalty available. The penalties for his Decisions to Pay are substantially lower reflecting the lesser seriousness of those contraventions. However, both penalties are inflated to an extent by the fact that Mr Lewski has received $33 million in breach of trust and he has not repaid those monies. In my view a penalty of at least the amount taken is an appropriate starting point, although as I have said this cannot be achieved in the present case: Matcham (No 2) at [270]. 341 I have derived little assistance from the range of pecuniary penalties set out by Santow J in Adler. They are not a rigid catalogue and I must have regard to the particular circumstances of this case: Matcham (No 2) at [233]; Beekink at [117]-[120]. I have set penalties in an endeavour, amongst other things, to reflect the nature and seriousness of Mr Lewski's contraventions, the size of his wrongful gain, the punitive purpose, the requirement for personal and general deterrence, the community expectation of higher civil penalties for self-enriching contraventions of this kind and to take into account of the maximum penalties allowed.

Totality 342 I have conducted a final check on the aggregate penalties imposed on Mr Lewski. Although they are high I consider the penalties for each course of conduct and for his contravening conduct overall to be just and proportionate in all the circumstances.

Dr Wooldridge 343 Dr Wooldridge argues that if he is not excused from liability in relation to his breaches he should only be subject to the making of declarations. He submits that he is an honest, intelligent, experienced, and (ordinarily) conscientious director, that his breaches (as found) were honest, and that he has already suffered severe reputational damage and financial loss through the negative publicity resulting from the proceeding and the findings in the liability judgment. He argues that no disqualification order should be made and that pecuniary penalties are inappropriate. He submits that if a pecuniary penalty is imposed it should be modest. 344 ASIC did not contend that Dr Wooldridge did not honestly carry out his responsibilities as a director, nor did it contend that he understood that he was acting in breach of his duties. I accept that he is an honest man. He has an impressive record of public service and respected members of the community attest to his conscientiousness, character and integrity. 345 However his contraventions were serious in nature and effect. The seriousness of his conduct is demonstrated by the magnitude of the additional fees that were created by the wrongful conduct and the importance of the statutory fiduciary duties that were breached in order to generate those fees. In my view penalties must be imposed for his contraventions. 346 He was a Director (and Chairman) of a large corporate trustee with gross assets of $568 million at the time of the Lodgement Resolution. He had statutory fiduciary duties including to act in the best interests of the Members and to give priority to the Members' interests in the event of a conflict of interest, to exercise the care and diligence that a reasonable person in his position would exercise, not to improperly use his position to advantage others, and to adhere to the scheme Constitution. 347 That APCHL and Mr Lewski had material conflicts of interest and conflicts of interest and duty was obvious and the Five Principal Factors indicated that Dr Wooldridge should have exercised a high level of care and diligence and been cautious in dealing with those conflicts at the Board meetings on 19 July and 22 August 2006. 348 Unfortunately he did not comply with his statutory duties and at the 19 July 2006 Board meeting he gave scant if any consideration, and at the 22 August 2006 Board meeting he gave no consideration at all, to the important matters set out at [138]. Nor did he act to ensure that the other Directors, acting as the Board, gave proper attention to those matters. Although he said that he recognised Mr Lewski's conflict of interest he did not properly deal with it. Rather than give his undivided loyalty to the Members he proceeded down the wrong path and sought to somehow balance Mr Lewski's interests against the interests of the Members. Objectively viewed, when faced with the conflict of interests he surrendered to the interests of Mr Lewski by making the Amendments and then bringing them into effect. 349 His Lodgement Resolution conduct occurred in circumstances where, amongst other things: (a) he understood that Mr Lewski suffered a material conflict of interest in relation to the additional fees; (b) the additional fees were not in the Members' interests because they were gratuitous in the sense that they provided no or no equivalent benefit to the Members; (c) the nature of the additional fees indicated they were not in the Members' interests including that the Listing Fee imposed a fee when the Members were entitled to expect listing to occur without a fee; and the Removal Fee imposed a fee for the exercise of the right to remove APCHL when the Members had the right to do so without a fee; (d) he agreed to the Amendments so as to incentivise Mr Lewski to support the listing of APCHL, even though Mr Lewski was already obligated to do so; (e) the additional fees were contrary to an express prohibition in the Constitution against amendments to the benefit of APCHL; (f) the unusual and uncertain nature of the Madgwicks Advice as to the Board's power to make the Amendments meant that a reasonable director in his position would not have been satisfied by it, and indicated that the Board should obtain supplementary legal advice or a judicial direction; (g) he gave no proper consideration to whether the Board should impose the additional fees on the Members, as distinct from whether the Board had power to do so; (h) as a Director he took no action to stop Mr Lewski from fully participating in the Board meetings on 19 July 2006 and 22 August 2006 even though it was improper for Mr Lewski to do so; and (i) he did not act in the best interests of the Members, his conduct fell well short of the standard of care and diligence that a reasonable director in his position would have exercised, he failed to adhere to the terms of the Constitution, and he made improper use of his position to give an advantage to APCHL and Mr Lewski. His conduct, in combination with the other Directors, provided for about 6.7% of net scheme property to be wrongfully paid from trust funds to Mr Lewski. 350 I consider that his Decisions to Pay conduct was much less culpable for the reasons I have given.

The adverse media reports 351 Dr Wooldridge suffered a storm of negative media reports through the proceedings and following the Court's findings. There can be no doubt that he has suffered severe reputational damage as a result, and I accept that the diminution of his good reputation, garnered over many years, has been very painful for him and his family. Nor is there any question that his career has suffered as he has been required to resign from some positions and has not been offered others. He does though continue to serve on the boards of two public companies. 352 In Healey (No 2) at [177], Middleton J held that the widespread media reports of the breaches of duty by the directors in that case, and the associated embarrassment and reputational damage they suffered, made the need to impose disqualification orders or pecuniary penalties for reasons of general deterrence "much less than it would otherwise be". His Honour made declarations of contravention and declined to impose any penalties. I note though that the decision did not turn on publicity and reputational damage alone and many other factors were considered. 353 Sackville AJA took a somewhat different approach in Gillfillan at [242]. His Honour noted that Middleton J did not suggest that widespread publicity given to contraventions necessarily meant that there was no requirement for penalties in the interests of general deterrence. At [243] his Honour explained: The publicity accorded to this case and the severe reputational damage suffered by the Australian Directors are factors to be taken into account in determining whether a disqualification order or other penalty is justified. I do not accept, however, that these matters eliminate the need for penalties to reflect the objective of general deterrence. To accept that submission would be to give too much weight to the vagaries of media reporting or public commentary on particular cases. Moreover, in the absence of major financial reverses or reports of corporate wrongdoing, very few directors of large public corporations do not enjoy high standing and a reputation for integrity and competence. The potential for a diminution of reputation is no doubt a powerful deterrent to carelessness and an incentive to discharge responsibilities diligently. But it should not be assumed that the prospect of disqualification, with the attendant financial consequences and public obloquy attributable to the fact of disqualification, cannot have a powerful additional deterrent effect. In addition, the publicity accorded to particular contraventions does not necessarily diminish the importance of the law maintaining appropriate standards of corporate conduct by imposing disqualification orders on contravenors. (Emphasis added.) 354 I respectfully agree. I take into account the intense negative publicity and the reputational damage suffered by Dr Wooldridge which I see as a significant mitigating factor. However I do not accept that it means that penalties should not be imposed. While the risk of adverse media coverage is a powerful incentive for directors to pay close attention to their obligations, in my view court-ordered disqualification and pecuniary penalties together with the further loss of reputation they entail, will usually have a further strong deterrent effect. The need for general deterrence is fundamental to my decision in relation to Dr Wooldridge (and in relation to each of the Directors). 355 In my view the deterrent effect of court-ordered penalties will often be more than the deterrent effect of negative publicity alone. A director who has committed serious breaches of the Act may be able to minimise the reputational damage he or she suffers through adverse media reports by arguing (within his or her own circle and/or publicly) that the media reports are unfair or inaccurate. The director may be able to continue to hold his or her head high because of the natural scepticism of the public in regard to media reports. 356 But it is another thing for a director to plausibly argue that he or she has done no wrong when a Court, after careful consideration of the evidence, finds that penalties are appropriate. Imposition of a penalty is also likely to itself be the subject of negative media reports. 357 Second, as Sackville AJA observed, many directors of large corporations enjoy a reputation for competence and integrity and have high standing in the business community. Their high standing means, almost inevitably, that allegations or a finding of breach will bring media coverage and loss of reputation. Yet the legislature has set penalties for such breaches having regard to the need to protect the public through personal and general deterrence. This indicates that negative publicity does not necessarily mean that penalties should not be imposed.

Seriousness of the contraventions 358 I have already set out my view that Dr Wooldridge's contraventions are serious in nature and effect and I will not reiterate those remarks.

Protection of the public including through personal deterrence 359 ASIC contends that Dr Wooldridge has demonstrated little understanding of the nature and seriousness of his contraventions and is not a suitable person to manage corporations. It argues that the fundamental objective of protecting the public, including by deterring Dr Wooldridge from future offences means that he must be disqualified. 360 In particular, ASIC contends that: (a) Dr Wooldridge agreed to the Listing Fee largely to incentivise Mr Lewski to pursue listing rather than proceed to vesting. In doing so he was confronted by a conflict between Mr Lewski's interests and the Members' interests but he did not properly recognise the conflict and he yielded to Mr Lewski's interests rather than giving priority to the interests of the Members; (b) while Dr Wooldridge did not have an expectation of direct personal gain from the Listing Fee he had an interest in listing occurring and he saw the absence of a Listing Fee as something that might cause Mr Lewski to try to frustrate the proposed listing. His role on the Board included facilitation of the listing and, if the alternative to listing was termination of the trust, this would have meant an end to his position as Chairman which was prestigious for him. In that sense listing was to his advantage; (c) the Takeover Fee and Removal Fee also involved conflicts of interest which Dr Wooldridge failed to properly recognise and consider. They operated to entrench APCHL as the responsible entity whether or not the Members wanted that, and to discourage any takeover of Prime Trust unless it had the approval of APCHL; (d) the Amendments were self-evidently not in the best interests of the Members; (e) the process by which the Amendments were passed and then brought into effect exhibited a significant failure by Dr Wooldridge in the care and diligence that he was required to exercise; and (f) Dr Wooldridge's expressions of remorse and contrition are qualified. 361 While I accept these matters I nevertheless consider there is no real need to protect the public against the risk of Dr Wooldridge committing similar breaches in the future, or to impose a disqualification so as to deter him from future breaches. 362 I say this, first, because I accept Dr Wooldridge's submission that (while it is likely he will appeal my decision) the findings have had a profound impact on him and have substantially influenced the way in which he now carries out his responsibilities as a director. He deposes that: …in any future directorships I will need to be even more diligent in scrutinising advice and where a decision is contentious or possibly contentious, that I will need to give greater consideration to inviting the persons providing the advice to present orally and answer questions for the Board and to obtaining a second specialised opinion. 363 While I accept that Dr Wooldridge is likely to take greater care in the future I do not agree that doing so will mean that he is being "even more diligent" as he deposes. His evidence in this regard speaks to his lack of understanding of the seriousness of his Lodgement Resolution Contraventions as there is no question that his scrutiny of the Madgwicks Advice was far from diligent. 364 Second, his evidence, his record in public life and on boards, and the impressive character evidence, have led me to conclude that he is a man of honesty and integrity. This fact, together with the expense and stress of the proceedings, the intense adverse media reports he has suffered, the declarations of contravention I have made, and the damage he has suffered to his reputation and standing through the breaches, means he is unlikely to make the same mistakes again.

General deterrence 365 However, a number of factors indicate a powerful need to disqualify him from managing corporations in order to deter other directors, particularly directors of responsible entities, from similar conduct. The need for general deterrence can be readily seen in the nature and seriousness of his contraventions (including the important nature of the duties breached and the magnitude of the breach of trust that the contraventions allowed), the importance of the managed investment scheme sector in the Australian investment market, and the legislative objective to protect scheme members from the conflicts of interest of responsible entities and their officers. 366 Dr Wooldridge's conduct was not self-serving like Mr Lewski's but it is vital that other directors of responsible entities are strongly encouraged to be scrupulous in their commitment to the members' best interests and to be careful to identify conflicts of interest, to exercise a high degree of care, caution and prudence when a conflict of interest exists, and not to rationalise it away. 367 I note also that the reasons for appointing Dr Wooldridge to the Board included his reputation as a former Minister which was used by APCHL to attract investors. It is far from uncommon for high profile people of good repute to be recruited to senior board positions to buttress a company's reputation (often in the lead up to a capital raising or public listing) and it is important that those people who lend their good reputations to a company understand that their obligations do not end there. He or she must also be careful to discharge the solemn duties of a director. I do not suggest that Dr Wooldridge merely lent his reputation to APCHL but his conduct indicates that he did not understand the scope and significance of his duties to act in the best interests of the Members. 368 It is imperative that other directors appointed for such reasons understand the need to be careful to comply with their duties and that they fully apprehend the serious risks associated with failure to do so. 369 It is unfortunate indeed that Dr Wooldridge must suffer disqualification when he is an honest and ordinarily conscientious and diligent man. However I consider that it would send entirely the wrong message to the business community, particularly the managed investment scheme sector, if his serious breaches as a director of a substantial responsible entity like APCHL did not result in disqualification. 370 Nor do I accept Dr Wooldridge's contention that disqualification will mean that he is being sacrificed on the altar of the public interest. I do not disqualify him to make him a scapegoat or so that he bears the blame for others but because his conduct requires it. While I do not underestimate the loss that Dr Wooldridge will suffer as a result, I consider disqualification to be necessary in all the circumstances.

Evidence of character and contribution to society 371 Dr Wooldridge was a member of Federal Parliament from 1987 until 2001. He was the Federal Minister for Health and Family Services between 1996 and 1998 and the Federal Minister for Health and Aged Care between 1998 and 2001. He is the Chairman of the Co-operative Research Centre for Mental Health, an Adjunct Associate Professor in the Faculty of Medicine at the University of Melbourne and an Adjunct Professor in the Faculty of Medicine at Monash University. For 12 months he was the Global Chairman of the United Nations Agency for HIV/AIDS. 372 He has spent most of his working life in areas related to health and medical research, rural health and public health, and he has given particular attention to issues related to HIV/AIDS, indigenous health and childhood immunisation. He points to an impressive array of achievements in the area of public health which he says were conceived, developed, financed and implemented directly as a result of the positions he occupied at the time. 373 He has also given substantial pro bono time in a variety of areas including on the board of the Centre for Eye Research Australia, the board of Research Australia (a body that promotes health and medical research), assisting the work of Professor Hugh Taylor who is working to eradicate trachoma in Australia's indigenous population, assisting in establishing the Institute of Tropical Health and Medicine, assisting in the work to establish and win funding for the Co-operative Research Centre for Mental Health, and working towards the establishment of the Co-operative Research Centre for Oral Health. Between 2004 and 2008 he chaired the Federal Government's peak advisory body on HIV/AIDS, hepatitis C and sexually transmitted diseases under both Liberal and Labor governments. 374 The following witnesses adduced evidence as to Dr Wooldridge's character and contribution to society, as well as his conscientiousness and diligence at board meetings: (a) Professor Edward Byrne AC, Principal of King's College London and formerly Vice Chancellor of Monash University, says that from 2002 he was a member of the board of Neurosciences Australia chaired by Dr Wooldridge. From 2003 to 2007 he also sat with Dr Wooldridge on the Medicine Faculty Advisory Board. He describes Dr Wooldridge as a superb Chair of Neurosciences Australia who was fair, open, meticulous, across the detail and always very well prepared for board meetings, and that Dr Wooldridge was very active and made a significant contribution on the Advisory Board. He says that Dr Wooldridge has made great contributions to Australian society in the field of health and medical research and particularly neuroscience, as well as giving great pro bono support to Monash University. He describes Dr Wooldridge as a fine, public minded person of great integrity who has spent much of his career working for the public good. (b) Professor Kerry Arabena is the Chair for Indigenous Health and Professor and Director of Onemda VicHealth Koori Health Unit at the University of Melbourne. She deposes to regular interactions with Dr Wooldridge in a professional capacity since 1994 and since 2013 she has been a member of the pro bono Indigenous Health Unit Advisory Board at the University of Melbourne together with Dr Wooldridge. She says that Dr Wooldridge is always well prepared for board meetings. She describes Dr Wooldridge as a "conservative visionary" and a champion for Aboriginal people and Aboriginal health who presided over major health systems enhancements for indigenous people. She says that Dr Wooldridge has made a great contribution in the areas in which she operates, and that he is a person she respects and admires. (c) Ian Wronski is Deputy Vice Chancellor of the Division of Tropical Health and Medicine at James Cook University and holds a number of senior positions on important national and state based health councils, boards and advisory committees. He says he had regular dealings with Dr Wooldridge from 1996 or 1997 when he was Federal Minister for Health and since 2013 he has been a member of the board of the Australian Institute of Tropical Health and Medicine chaired by Dr Wooldridge. He says that Dr Wooldridge has good attention to detail, diligently applies himself to the task at hand and is always well prepared for board meetings. He describes Dr Wooldridge as a person of integrity who has made a great contribution to the development of the health workforce and health research infrastructure in northern Australia. (d) Shane Tanner is the Chair of Vision Eye Institute Ltd ("Vision Eye"), Australia's largest provider of ophthalmic care. Since July 2012 Dr Wooldridge has been a non-executive director of Vision Eye and a member of its Nomination and Governance Committee. Mr Tanner describes Dr Wooldridge as highly intelligent, highly regarded, a person of honesty and integrity, and as always very well prepared for the board and committee meetings. 375 The character evidence indicates that Dr Wooldridge is a man of honesty and integrity which points away from a need for a disqualification order. His work as a Minister, and the role he has taken on important advisory boards and committees, tends to show that he is conscientious, competent and hard-working. I expect that he would conduct himself in the same way when acting as a company director. 376 Each of the character witnesses considers that Dr Wooldridge made a great contribution in their respective areas, and that he would likely continue to do so. This also points away from disqualification. 377 Dr Wooldridge is a person who has given significant service to the community and this is relevant to penalties: see Whitlam (No 2) at [17], [24]-[25]. In my view he should be allowed to draw from the well to which he has substantially contributed. 378 These matters mitigate the disqualification to be imposed but, in the circumstances of the case, do not outweigh the public interest in general deterrence.

Understanding of the proper role of a director 379 ASIC argues that Dr Wooldridge's evidence as to penalty and exoneration does not acknowledge the importance or impropriety of the Board's failure to identify and properly resolve the self-evident conflicts of interest. 380 I accept this. In my view his evidence in the penalty hearing did not squarely address all of his contraventions. Nor did he retract his insistence in evidence that the decision to approve the Amendments meant that the conflict that existed was resolved. As I have said, his expression of contrition was qualified. 381 His contraventions reveal a plain lack of understanding of his duty to act in the best interests of the Members including to prioritise the Members' interests in the event of a conflict of interest. This is readily apparent in his attempt to address Mr Lewski's conflict of interests by balancing the interests of Mr Lewski with the interests of the Members, when he was required to give his undivided loyalty to the Members and to put their interests first. 382 This lack of understanding is also apparent in his submission in the penalty hearing that his approach to the Amendments and the conflict of interests was appropriate. He submits that: …where disputes in the commercial and legal field arise, parties often forego what they are strictly entitled to, what is strictly in their best interests, and instead accept a "commercial solution"…in order to avoid the problems, costs and uncertainties that may arise if the tension between two parties with competing interests remain unresolved. 383 I do not accept that a "commercial solution" was appropriate but in any event the solution to which Dr Wooldridge points was just a capitulation to Mr Lewski's interests. While the listing process was a fluid and intensive process there were many steps that Dr Wooldridge could and should have taken to deal with Mr Lewski's conflict of interest rather than merely surrendering to the will and interests of Mr Lewski. 384 Against this, the subject contraventions are the only blemish on Dr Wooldridge's career as a company director which began in 2002, and the thrust of the character evidence is that Dr Wooldridge performs the role of a board member well and his acumen, integrity and general character is highly regarded. 385 The evidence of Dr Wooldridge's performance as a company director in a commercial setting is limited to Mr Tanner's evidence of his time on the board of Vision Eye which started in 2012. The balance of the evidence relates to his work on academic and advisory boards which is less relevant to establishing that he understands the obligations of a director. Even so, the substance of the evidence is that Dr Wooldridge is well prepared for meetings, across the detail, conscientious and meticulous and it is likely that he conducts himself in this way when acting as a director. 386 However I find it difficult to reconcile Dr Wooldridge's lack of care, diligence and caution at the 19 July and 22 August 2006 Board meetings with his successful Ministerial career, his success on various important advisory boards and committees, his success on the board of Vision Eye, and the evidence as to his conscientious approach. 387 I have concluded that Dr Wooldridge understands his role on advisory boards and committees and understands the role of a company director in a general commercial setting but I am not satisfied that he properly understands the role of a director of a responsible entity. This is different to the ordinary role of a director because it includes a fiduciary duty to act in the best interests of the members and to put their interests first in the event of a conflict of interests. His conduct at the time and his continued insistence that a "commercial solution" was appropriate to resolve the competing interests of Mr Lewski and the Members is redolent of his lack of understanding. 388 This points to a need to disqualify him from managing corporations, but it does not carry much weight overall because I am satisfied that he is unlikely to reoffend.

Contrition 389 Through counsel, Dr Wooldridge apologised to unitholders and creditors of APCHL who suffered loss as a result of his contravening conduct, and he deposes that it is deeply distressing to him that the Court has found that he did not live up to the standards required of directors. He submits, and I accept, that he has learned lessons from the Court's findings which will continue to inform his approach into the future. 390 Initially Dr Wooldridge's display of contrition was a qualified one as it was made on the basis of the Court's findings rather than because he accepted his wrongdoing. However, under pressure from the Court on this question, counsel obtained further instructions from him and he acknowledged that he erred in his conduct on 19 July and (on the assumption that the Lodgement resolution was passed) on 22 August 2006. Dr Wooldridge's general statement went some way towards addressing my concerns but it is not an expression of unqualified contrition. 391 In the finish I am not satisfied that Dr Wooldridge properly understands and appreciates the seriousness of his contraventions, and I do not give him the benefit of the concession that a proper display of contrition might have brought. I note though that the qualification of his contrition appears to arise from his continued resolute denial of the Court's findings. Given his intention to appeal and the fact that damages proceedings are on foot in the Supreme Court I have given this factor little weight in my decision.

The need to balance personal hardship against the public interest 392 The proceeding, the liability judgment, and the adverse media reports have had a significant effect on Dr Wooldridge's reputation, have caused distress to him and his family, and have caused him financial loss. 393 Dr Wooldridge has not sought or accepted any offer of work at a State or Federal Government level since commencement of the proceeding, and he was required to step aside as the Chairman of the Co-operative Research Centre for Oral Health which he had worked on for more than a decade. 394 Most of his income is obtained by providing strategic government and regulatory advice to companies in the health and medical technology sectors, usually through a Sydney-based advisory firm. He has been advised by that firm that the findings in the liability judgment have been raised by its clients on a number of occasions, and he has not received any new clients since the judgment. 395 He receives a parliamentary pension of approximately $130,000 per annum and the balance of his income is made up as follows: (a) $92,000 per annum as a director of Australian Pharmaceutical Industries Ltd ("Australian Pharmaceutical"); (b) $72,000 per annum as a director of Vision Eye; (c) $50,000 per annum as the Chairman of Co-operative Research Centre for Mental Health; and (d) $120,000 net per annum from consulting clients through Michael Wooldridge & Associates Pty Ltd. He has two fully dependent children aged 18 and 23. 396 If Dr Wooldridge is disqualified from managing corporations he will lose a substantial amount of income as he will be unable to continue as a director of Australian Pharmaceutical and Vision Eye for the period of disqualification, and he may not regain his board positions when the disqualification ends. He will though continue to have an income of about $300,000 per year from his parliamentary pension and his remaining work as a consultant. 397 Dr Wooldridge's personal hardship from disqualification must be balanced against the public interest but it is less important than the protection of the public through personal and general deterrence: Matcham (No 2) at [165]. In my view the hardship to him from disqualification operates to reduce the length of the disqualification but it does not mean he should not be disqualified.

Factors relevant to Pecuniary Penalty 398 It is uncontentious that the question of whether to impose a pecuniary penalty, and if so the quantum of the penalty, must be approached against the background of any disqualification imposed. 399 Dr Wooldridge contends that the making of declarations is sufficient and he again relies on Healey (No 2). In that case Middleton J considered a pecuniary penalty was unnecessary because the directors had acted conscientiously and honestly in otherwise carrying out their responsibilities, it was unlikely that they would offend again, the contraventions were isolated and the directors had learned a lesson. 400 In the alternative Dr Wooldridge submits that, if the Court sees a choice between imposing a disqualification order and imposing a pecuniary penalty, given his desire to continue as a company director the Court should impose a modest pecuniary penalty in lieu of a disqualification order. 401 As I explain, while I take into account the disqualification imposed, I consider that a pecuniary penalty is also necessary for Dr Wooldridge's contraventions.

Punishment 402 A pecuniary penalty must be framed to provide a measure of punishment to Dr Wooldridge in light of the nature and seriousness of his contraventions. It must to an extent reflect this punitive character although it should not go beyond the level necessary to deter others from using companies in a manner contrary to commercial standards: Adler at 126. Taking into account the disqualification order and that Dr Wooldridge will suffer significant financial loss as a result, the pecuniary penalty need not in my view be severe.

Personal Deterrence 403 As I have said, I consider Dr Wooldridge is quite unlikely to reoffend and it is unnecessary to impose a pecuniary penalty in order to deter him from similar conduct.

General Deterrence 404 I have already set out my views on the importance of general deterrence in relation to Dr Wooldridge's conduct. The disqualification order will operate to deter other directors from similar conduct but I consider a court-ordered pecuniary penalty is appropriate to send a further message of deterrence. In my view some directors are likely to be more effectively deterred by a pecuniary penalty rather than disqualification, and for others a combination of penalties renders it an effective deterrent. General deterrence is central to my decision.

Hardship/incapacity to pay 405 Dr Wooldridge put on no evidence as to incapacity to pay a pecuniary penalty. He submits that, if penalties are to be imposed, a modest pecuniary penalty should be preferred to disqualification because of his desire to continue as a company director. 406 As I have said I consider his contraventions require disqualification for a period. Taking into account that his income from company directorships will cease during his disqualification he can afford to pay a moderate pecuniary penalty as he will continue to earn about $300,000 per annum.

Contrition 407 I reiterate my remarks at [389]-[391]. I give this factor little weight.

Dr Wooldridge's penalties 408 Having regard to the considerations above I have disqualified Dr Wooldridge from managing corporations as follows: (a) two years for the Lodgement Resolution Contraventions; and (b) 6 months for the Decisions to Pay Contraventions. 409 Again, having regard to the extent to which the two courses of conduct are interrelated and in order to avoid punishing Dr Wooldridge twice for the same conduct, I consider that half of the disqualification for the Decisions to Pay Contraventions should be served concurrently with the disqualification for his Lodgement Resolution conduct. This reduces the effective disqualification period to 2 years and three months. 410 Dr Wooldridge argues strenuously against any disqualification and there is force to his submissions. However the need to send an appropriately powerful message to other directors, particularly directors of responsible entities, is critical. In my view it is essential to ensure that other directors are strongly discouraged from similar conduct. 411 In my view a two year disqualification represents a significant reduction on the penalty otherwise applicable for contraventions of such serious nature and effect. A two year disqualification for Dr Wooldridge's Lodgement Resolution conduct falls within Santow J's "shortest disqualifications" category of up to three years, when his conduct and its context is more serious than that. Contrary to the criteria in that category he intends to continue to manage corporations, his expression of contrition is qualified, he strenuously contested the proceeding and a reasonable director in his position would not have relied on the Madgwicks Advice. 412 In fact, his conduct meets some of the criteria in Santow J's categories for "serious but not worst case" contraventions (7-12 years) and "longest disqualifications" (25 years or more), including serious incompetence and irresponsibility, substantial loss, qualified contrition and little acceptance of responsibility, and that the conduct was undertaken in a field in which there was potential to do great financial damage. 413 While there are cogent arguments for a longer disqualification I have not made such an order because Dr Wooldridge is an honest man who is ordinarily conscientious, he was not motivated by personal gain in committing to contraventions, he made no personal gain from the contraventions, there is no requirement to deter him from future breaches as there is no real risk that he will reoffend, he has made a significant contribution to society over many years, he and his family have already suffered significantly through intense adverse media reports, and the two year disqualification will cause loss of income of $328,000 (and perhaps more if when the disqualification ends he is not reappointed or cannot replace his directorships). In all the circumstances a longer period would be excessive. 414 I have imposed only a short disqualification for his Decisions to Pay Contraventions because they are significantly less serious for the reasons I have given. As half of the disqualification is to be served concurrently with the disqualification for the Lodgement Resolution conduct it adds only three months to the total. 415 While I take into account his disqualification I consider that a pecuniary penalty is also appropriate as follows: (a) $17,500 for his Lodgement Resolution Contraventions; and (b) $5000 for his Decisions to Pay Contraventions. 416 For the same reasons as I set out in relation to disqualification, half of the pecuniary penalty for the Decisions to Pay Contraventions is to be paid concurrently with the pecuniary penalty for the Lodgement Resolution conduct. This reduces the effective pecuniary penalty to $20,000. 417 In my view a pecuniary penalty, in combination with the disqualification order, is necessary to strongly encourage other directors of responsible entities to act in the best interests of the members, to be scrupulous in giving priority to the members' interests when there is a conflict of interests and to exercise a high degree of care, caution and prudence when a conflict of interest exist. Dr Wooldridge did not argue that he was unable to pay a penalty of $20,000.

Totality 418 I have conducted a final check on the aggregate penalties imposed on Dr Wooldridge 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 Butler 419 Mr Butler makes essentially the same contentions as Dr Wooldridge. He argues that he should only be subject to the making of declarations, and he relies on Healey (No 2). 420 Although different mitigating circumstances apply, Mr Butler's conduct and its context is broadly similar to that of Dr Wooldridge and Mr Jaques and my remarks regarding Dr Wooldridge's conduct are generally applicable to Mr Butler too. 421 I do not accept Mr Butler's submissions for essentially the same reasons as I did not accept Dr Wooldridge's contentions. In fact Mr Butler's submissions are somewhat weaker than Dr Wooldridge's contentions as Mr Butler had a conflict of interest when making the 2008 Decisions to Pay, and because the negative media reports were more intense and widespread in relation to Dr Wooldridge and he likely suffered greater reputational damage. 422 Mr Butler acknowledges that he was mistaken in his belief that APCHL was always entitled to payment of the Listing Fee, but he rejects ASIC's contention that he simply failed to take the precaution of understanding what he was voting for. He says that he thought the Listing Fee was necessary to fix an anomaly in the Constitution, and that he thought the Trust would either list or vest and that listing was the preferable outcome for the Members. He also says that he would have sought confirmation of the correctness of the Madgwicks Advice if he had cause to doubt it. 423 Mr Butler accepts that his conflict of interest means that his participation in the approval of the Heads of Agreement in April 2008 shows a lack of prudence and care, but he denies that his approval was actuated by the prospect of the bonus. I accept, as he contends, that the case was not put against him that he was motivated by an intent to receive the bonus and I accept that he did not understand at the time that he was acting in breach of his duties. 424 Even so, his contraventions are serious in nature and effect for the same reasons as in relation to Dr Wooldridge. In my view penalties must be imposed.

Seriousness of the contraventions 425 Mr Butler accepts that his contraventions (as found) are serious. The seriousness of his Lodgement Resolution conduct is underlined by the fact that, despite the Five Principal Factors, he did not make the effort to read and understand the effect of the Amendments before passing them. 426 Nor in my view did Mr Butler make the effort to read and understand the Constitution before approving amendments to introduce substantial additional fees. He says that he read the Constitution but in my view he either did not do so or he did not read it carefully having regard to the proposed Amendments. This may be inferred from his mistaken belief that the Constitution always provided for the Listing Fee. 427 Contrary to his duty to act to prioritise the Members' interests in the event of a conflict of interest, he understood that the Listing Fee was passed largely to incentivise Mr Lewski to pursue listing rather than vesting and he failed to properly deal with Mr Lewski's conflict of interest. 428 While his Decisions to Pay Contraventions are significantly less serious, the fact that he failed to recognise his own conflict of interest when approving the Heads of Agreement in April 2008 makes his conduct somewhat more culpable than that of Dr Wooldridge, Mr Jaques and Mr Clarke.

Protection of the public including through personal deterrence 429 For most of Mr Butler's working life he has worked as a real estate agent rather than as a company director. Even when appointed a Director of APCHL it appears that his major focus was on his role as a contractor marketing and selling independent living units and serviced apartments. From about 2006 he managed sales of units over 64 separate retirement villages. 430 Following termination of his contract with APCHL Mr Butler had difficulty finding employment in Melbourne and he moved to Perth. From about May 2009 he worked to set up a Perth based property fund named Otan Property Funds Management Ltd ("Otan"). He became the founding Managing Director of Otan, a director of various special-purpose companies related to it and the responsible officer pursuant to its Australian Financial Services Licence. His role also involved managing and marketing Otan's projects which consisted of off the plan residential and commercial subdivisions. 431 Upon delivery of the liability judgment he was required to resign his position with Otan and he no longer holds any paying company directorships. 432 ASIC contends that Mr Butler is not a suitable person to manage corporations and that he must be disqualified. Amongst other things, it relies on the fact that: (a) he did not make an effort to read and understand the Constitution or to read and understand the effect of the Amendments before passing the Amendments; (b) he understood that the Listing Fee was largely to incentivise Mr Lewski to pursue listing rather than proceed to vesting and he yielded to Mr Lewski's interests rather than giving priority to the interests of the Members; (c) the process by which the Amendments were passed and then brought into effect exhibited a significant failure to exercise the required standard of care and diligence; (d) he had an expectation of direct personal gain and a material conflict of interest when he was considering approving the Heads of Agreement in April 2008 as he stood to receive a bonus of $750,000 upon payment of the Listing Fee to APCHL. His failure to recognise his own conflict of interest made his failure to recognise and act to avoid Mr Lewski's conflict of interest at that stage more serious than Dr Wooldridge, Mr Jaques and Mr Clarke; and (e) his expression of contrition was partial and lacked insight into the inappropriateness of his behaviour. 433 I accept these matters but I doubt there is a real need to protect the public against the risk of Mr Butler repeating his conduct, or so as to deter him from similar conduct. I say this because, amongst other things: (a) I accept that his breaches were honest, albeit serious, mistakes; (b) he had no intention to make a personal gain or benefit from the Amendments or to deprive the Members of anything they were entitled to receive; (c) he committed no other breaches in the seven-year period that he was a non-executive director of APCHL; (d) John Nicholas, Chairman of Otan, says that when Mr Butler was a director of Otan he always acted in an honest and transparent manner, sought advice when required and acted to ensure that the Board was kept fully informed of matters as they arose; (e) John Welborn, director of Otan, says there were no material compliance breaches for the approximately 3 ½ year period that Mr Butler was the responsible officer under Otan's AFSL. During that time it became the second largest developer of apartment complexes in Perth; (f) Michael Randall, OAM, a partner of the stockbroking firm Randall King Daish, says that he has known Mr Butler for 30 years and that Mr Butler is a good man of unquestionable character and honesty; (g) he has suffered serious damage to his reputation and a serious reversal in his fortunes as a result of the proceedings, the findings in the liability judgment and the adverse media reports; and (h) he has expressed qualified contrition. 434 Although I hold my view with less confidence than the similar view I expressed in relation to Dr Wooldridge, in my opinion it is unlikely that Mr Butler will reoffend.

General deterrence 435 There are though a number of factors which strongly indicate a requirement to disqualify Mr Butler in order to deter other directors, particularly directors of responsible entities, from similar breaches. I set out these considerations in relation to Dr Wooldridge and the same matters are applicable to Mr Butler. 436 I note also that Mr Butler was appointed to the Board on the strength of his skill and experience in marketing and selling real estate and that he confesses to being inexperienced in corporate governance. This also points to a need for disqualification. It is critical that other persons appointed as directors because of their technical or commercial acumen are made to understand that their obligations do not end there, and that they must also be careful to exercise the independence and diligence that the law requires of directors: Adler at 56. 437 For the same reasons as I expressed in relation to Dr Wooldridge, it would send completely the wrong message to the commercial community, particularly the managed investment scheme sector, if Mr Butler was not disqualified. This is not to sacrifice him on the altar of public interest but because his conduct warrants it.

Evidence of character 438 I briefly summarised above the character evidence adduced on behalf of Mr Butler. I accept that his conduct was not dishonest and I have no reason to believe that he is likely to act dishonestly in the future.

Understanding of the proper role of a director 439 Mr Butler's conduct reveals that he does not properly understand the duty of a director of a responsible entity to act in the best interests of the Members and to prioritise the Members' interests in the event of a conflict of interests. In my view he completely failed in his obligation to deal with APCHL's and Mr Lewski's conflicts of interest and he failed to prioritise the Members' interests. He also failed to recognise his own conflict of interest when participating in the approval of the Heads of Agreement in 2008. 440 On the other hand the subject contraventions are the only blemish on his record and it is likely that he has learned a valuable lesson. 441 In the finish I consider that Mr Butler's skill is in real estate rather than as a director, and he concedes that at the time of the contraventions he was not skilled in corporate governance. There is insufficient evidence to satisfy me that his skill in this regard has improved. While he may understand the role of a director in a general commercial setting, I am not satisfied that he properly understands the duties of a director of a responsible entity. This was clear enough in his submission that he thought what was good for Mr Lewski was good for the Trust and its Members. 442 This points to a need to disqualify Mr Butler from managing corporations, although I do not give this factor much weight given my view that he is unlikely to reoffend.

Contrition 443 Mr Butler says that he deeply regrets his role in the decisions of the Board which led to the proceeding and that it is a source of distress and embarrassment to him and his family. He accepts that his mistaken belief that the Constitution always provided for the Listing Fee was not a proper basis to approve the fee. 444 However his contrition is qualified because he made it clear that his statement of contrition is made on the basis of the contraventions found, and should not be seen as an acceptance that his conduct was wrongful. I am not satisfied that he sufficiently understands and appreciates the seriousness of his wrongdoing and he cannot have the benefit of the concession that a proper display of contrition might have brought him. 445 Even so, I give this factor little weight in my decision as his qualified contrition reflects the likelihood of an appeal against my findings and the fact that damages proceedings against him are on foot in the Supreme Court.

The need to balance personal hardship against the public interest 446 Mr Butler hold no paid directorships and he advanced no evidence or submission that he will suffer personal hardship if he is disqualified.

Factors relevant to Pecuniary Penalty 447 Mr Butler contends, again, that the making of declarations is sufficient. However, insofar as the decision on penalties involves a choice between a disqualification order and pecuniary penalties, Mr Butler would prefer to be disqualified rather than suffer a pecuniary penalty.

Punishment 448 My remarks regarding punishment in relation to Dr Wooldridge are also applicable to Mr Butler. Although I take his disqualification into account, it has no great effect on him because he does not presently hold a paid directorship and it is possible that he will never do so again. In those circumstances the disqualification order may have no real consequence for him and the pecuniary penalty assumes greater significance in meeting the punitive purpose: Adler at 126.

Personal Deterrence 449 As I have said I consider it unlikely that Mr Butler will reoffend and there is no real need to impose a pecuniary penalty in order to deter him from similar conduct in the future.

General Deterrence 450 I reiterate the views I expressed as to the importance of general deterrence in relation to Dr Wooldridge's conduct, which are equally applicable to Mr Butler's conduct. While the disqualification imposed will have a deterrent effect, a court-ordered pecuniary penalty will send an appropriately strong further message to deter other directors from similar conduct. As I have said, some directors are likely to be more effectively deterred by a pecuniary penalty rather than disqualification, and for others a combination of penalties renders it an effective deterrent.

Hardship/incapacity to pay 451 Mr Butler's financial position is poor. He owns no real property and he has no other significant assets. He has debts of about $293,000 on credit cards and for legal fees, and his debts are only slightly less than his wife's equity in the family home. 452 Mr Butler earns income through a consulting company which has negligible net assets and at the time of the hearing his only source of income was a three-month consultancy agreement with a property development firm paying $20,000 per month. He was not confident of securing a long term extension to the consultancy. It is a condition of his consultancy agreement that he continues to hold a real estate agents licence which he will lose if he becomes bankrupt. His wife is employed doing sessional work as a teacher's assistant. 453 ASIC did not cross examine Mr Butler on his financial position and the thrust of his evidence is that he cannot afford to pay any pecuniary penalty, and there is no evidence of any related person or entity that might be able to satisfy a penalty. 454 Although a penalty may have a harsh effect the authorities make it clear that the personal hardship caused to an offender is less important than the need to protect the public through personal and general deterrence: Matcham (No 2) at [165]. While it is impossible to be precise in balancing the need for deterrence against the personal hardship to the offender through imposition of a pecuniary penalty, I have reached the view that a moderate pecuniary penalty is appropriate.

Contrition 455 I reiterate my remarks at [443]-[445]. I give this factor little weight.

Mr Butler's penalties 456 Having regard to the considerations above I have disqualified Mr Butler from managing corporations as follows: (a) three years and nine months for the Lodgement Resolution Contraventions; and (b) six months for the Decisions to Pay Contraventions. 457 Having regard to the extent to which the two courses of conduct are interrelated and in order to avoid punishing Mr Butler twice for the same conduct, half of the disqualification for the Decisions to Pay Contraventions is to be served concurrently with the disqualification for his Lodgement Resolution conduct. This reduces the effective disqualification period to four years. 458 Mr Butler's Lodgement Resolution conduct and its context is similar to that of Dr Wooldridge and, as I said in relation to Dr Wooldridge, his conduct is more serious than the criteria in Santow J's "shortest disqualifications" category of up to three years. In fact he meets some of the criteria for a longer period of disqualification. 459 I have ordered disqualification for 3 years and nine months for his Lodgement resolution conduct. I did not impose a greater disqualification because I consider Mr Butler's failures were honest mistakes, he was not motivated by personal gain in committing the contraventions, he made no personal gain from them, there is no other blemish on his record, and it is unlikely that he will reoffend. In my view the disqualification is sufficient to serve the purpose of general deterrence, and I reiterate that there is no need for personal deterrence. I ordered a longer disqualification for him than Dr Wooldridge for the reasons I explain when dealing with parity. 460 I have imposed only a short disqualification for Mr Butler's Decisions to Pay Contraventions because they are significantly less serious. As he had a material conflict of interest when he participated in the Decisions to Pay in April 2008 his conduct is somewhat more culpable than Dr Wooldridge, Mr Jaques and Mr Clarke, but the difference is not significant. It was not put against him that he was motivated by an intent to receive the bonus when he participated in those decisions, and his unchallenged evidence is that he genuinely believed that the Listing Fee was valid. 461 Taking into account the disqualification order, I consider that pecuniary penalties are also appropriate as follows: (a) $17,500 for his Lodgement Resolution Contraventions; and (b) $5000 for his Decisions to Pay Contraventions. 462 For the same reasons as I set out in relation to disqualification I consider that half of the pecuniary penalty for the Decisions to Pay Contraventions should be paid concurrently with the pecuniary penalty for the Lodgement Resolution conduct. This reduces the effective pecuniary penalty to $20,000. 463 I take into account the disqualification imposed on Mr Butler but a pecuniary penalty is necessary to provide a further measure of general deterrence for the same reasons I gave in relation to Dr Wooldridge. It is also necessary to serve the punitive purpose as Mr Butler's disqualification may have little real effect on him. 464 In fact, the nature and effect of his contraventions and the fact that disqualification may not have any real effect on him, meant that I gave serious consideration to imposing a higher pecuniary penalty. 465 In large part I did not do so because he will have real difficulty paying the penalty I have fixed and he is likely to be unable to pay a higher penalty. If Mr Butler becomes bankrupt he will lose his real estate agents licence. He has worked in real estate his entire life and without a licence it will be very difficult for him to find employment in Western Australia or elsewhere. He has two school-age children to support and a wife who does not earn a significant income. 466 Of course, bankruptcy or its risk does not necessarily justify a lighter penalty and the centrality of general deterrence means that there will be cases where a penalty imposed may be higher, even substantially higher, than the penalty to be imposed having regard only to the particular circumstances of the offender: High Adventure at [11]. But I must have regard to Mr Butler's capacity to pay and the hardship caused by the requirement for payment: Adler at 126; Forem-Freeway at 351. 467 Weighing all the relevant factors in the balance, in combination with the disqualification order, the pecuniary penalty is appropriate to meet the objectives of punishment and general deterrence, while also taking account of his incapacity to pay. I will allow liberty to apply so that Mr Butler may seek time to pay should that be necessary.

Totality 468 I have conducted a final check on the aggregate penalties imposed on Mr Butler 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.

Seriousness of the contraventions 469 As I have said, Mr Jaques' conduct and its context is broadly similar to that of Dr Wooldridge and Mr Butler and my remarks regarding Dr Wooldridge's conduct are generally applicable to Mr Jaques' conduct. Mr Jaques accepts in submissions that his contraventions (as found) are serious. In any event the seriousness of his conduct can be readily seen in the magnitude of the fees generated by his wrongful conduct and the importance of the statutory fiduciary duties that were breached in order to generate those fees. 470 Although he did not have an intention to personally benefit from the Listing Fee he was well aware that Mr Lewski (in whose hands his ongoing employment lay and who controlled the payment of his bonuses) would benefit from it. His reasons for supporting the Amendments were largely aligned with his view of Mr Lewski's interests and wishes rather than the Members as he allowed the Listing Fee in order to "level the playing field" and to incentivise Mr Lewski to stay with the Trust. 471 Rather than give his undivided loyalty to the Members he proceeded down the wrong path and he sought to somehow balance Mr Lewski's interests against the interests of the Members. There were many steps he could and should have taken to ensure that APCHL (and Mr Lewski) complied with their duties under the Act. Instead, viewed objectively, he conceded to the conflict of interests in favour of Mr Lewski. 472 Mr Jaques seeks to minimise the seriousness of his contraventions by pointing to the deficiencies in the Madgwicks Advice. I have already dealt with this contention at [162]-[169] and I will not reiterate my remarks. I note too that Mr Jaques accepts in submissions that no attack can be or is made on the finding that a reasonable director would have read the Amendments and the Madgwicks Advice carefully, and appreciated the deficiencies of the advice. 473 Mr Jaques also contends that the consequences of the contraventions are difficult to assess. He argues that there is insufficient evidence to support a finding that there is a causal relationship between each Director's conduct and an overall reduction of the assets in the Trust. I rejected this contention at [184]-[199] and I will not reiterate my views. 474 His Decisions to Pay Contraventions are significantly less serious for the reasons I have already canvassed.

Protection of the public including through personal deterrence 475 ASIC seeks to disqualify Mr Jaques for essentially the same reasons as it advances in relation to Dr Wooldridge and Mr Butler. 476 There is force to their contentions but for essentially the same reasons as with Dr Wooldridge and Mr Butler I am not satisfied that there is a real need to disqualify him in order to protect the public, or so as to deter him from similar conduct in the future. 477 I say this because, amongst other things: (a) I accept that his breaches were honest, albeit serious, mistakes; (b) he had no intention to make a personal gain or benefit from the Amendments or to deprive the Members of anything they were entitled to receive; (c) he committed no other breaches in the lengthy period that he was a non-executive director of APCHL; (d) he has suffered serious damage to his reputation and his financial position as a result of the proceedings, the findings in the liability judgment and the adverse media reports; (e) he recognises that he is poorly equipped to serve as a director on boards like APCHL; (f) he has expressed qualified contrition; and (g) he is now 67 years old and he no longer has an ambition or desire to work as a director. In my view he is likely to have learned his lesson.

General deterrence 478 Mr Jaques accepts that, if he is not exonerated, a modest disqualification order is appropriate to meet the need for general deterrence. 479 In my view the same matters that strongly indicate a need to disqualify Dr Wooldridge and Mr Butler to satisfy the requirement for general deterrence are also applicable to Mr Jaques. To avoid repetition I will not set those matters out again. 480 Another matter pointing to a requirement for general deterrence is Mr Jaques' admission that his breaches of duty arose from his inexperience and limited background in corporate governance. He says that because of his inexperience in such matters it was not his practice to interrogate or challenge views expressed either by external advisers or by more experienced board members when it came to questions of corporate governance. He deposes: In retrospect, I can see that I was not well equipped to perform the functions of a director of APCH. To have the experience to evaluate the sorts of decisions that I was being asked to make as a director of APCH required a more sophisticated understanding of corporate governance and regulatory issues than I had. (Emphasis added). He also admits that he understood at the time that he did not have as good a grasp of corporate governance issues as he would have wished, and considered from time to time whether it was appropriate for him to remain on the Board. He decided to remain because of his skill and acumen in the real estate industry. 481 In my view it is vital that other directors be made to understand the importance of a reasonable understanding of the principles of corporate governance, including an ability to recognise and deal with conflicts of interest, and a capacity to explore and challenge the views of other directors where necessary. It is important too that other directors be made to fully apprehend the risks they face if they make decisions on matters before them when, as with Mr Jaques, they are aware that their understanding is limited yet remain as a director and continue to participate in board decisions. 482 Mr Jaques' conduct is such that disqualification must be ordered so as to send a compelling message to other directors, particularly directors of responsible entities.

Understanding of the proper role of a director 483 As with Dr Wooldridge and Mr Butler, Mr Jaques' contraventions display his lack of understanding of the duties owed by directors of responsible entities to act in the best interests of the members including to prioritise the members' interests in the event of a conflict of interests. His submission that his assessment of the Listing Fee in "commercial terms" was an appropriate approach is redolent of his lack of understanding. 484 His lack of understanding of his duties to the Members is also apparent in his admission that he knew that his lack of experience in corporate governance meant that he was ill-equipped to act as a director of APCHL, and that he remained on the Board because of his real estate expertise. Given his limitations he should not have remained on the Board, or at least he should have abstained from considering questions involving corporate governance issues. Instead at the Board meetings on 19 July and 22 August 2006 he failed to properly deal with Mr Lewski's conflict of interest and a $33 million breach of trust occurred. 485 He does not suggest that his understanding has improved since then.

Evidence of character 486 Mr Jaques adduced no character evidence and his evidence in the liability hearing did not reflect well on him. However, I accept that his conduct was not dishonest and I have no reason to believe that he is likely to act dishonestly in the future.

Contrition 487 Mr Jaques acknowledges the findings that he breached his duties and regrets that his conduct fell below the appropriate standard. I have no doubt about his regret but as it is based on the Court's findings rather than on his own acceptance of wrongdoing his contrition is qualified. 488 He was more candid in his belated acceptance that he was ill-equipped to deal with corporate governance issues at the time of the contraventions, but he displayed no such self-awareness in the liability hearing. Before me he strenuously denied that there was any deficiency in his understanding or approach to the issues before the Board on 19 July and 22 August 2006. 489 I am not persuaded that Mr Jaques properly understands and accepts the seriousness of his wrongdoing. In my view he cannot have the benefit of any concession that a proper display of contrition might have brought him.

The need to balance personal hardship against the public interest 490 I accept that the proceeding and the findings in the liability judgment have had a serious effect on Mr Jaques, and that he has suffered severe reputational damage through the adverse media reports. While I take this into account, his personal hardship is less important than public protection and deterrence when determining whether to impose disqualification, and if so, for what duration: Matcham (No 2) at [165]. 491 In my view Mr Jaques will suffer little personal hardship through disqualification as he has no intention of returning to work as a director.

Punishment 492 My remarks regarding punishment in relation to Dr Wooldridge are also applicable to Mr Jaques. He is 67 years old and I accept that he has no intention to return to the role of director. The disqualification order will have no great consequence for him and a pecuniary penalty assumes a greater significance in achieving the punitive purpose: Adler at 126.

Personal Deterrence 493 There is no requirement to impose a pecuniary penalty on Mr Jaques in order to deter him from similar conduct. He has no intention of returning to that role, and in any event he is unlikely to reoffend.

General Deterrence 494 I reiterate the views I expressed as to the importance of general deterrence in relation to Dr Wooldridge's conduct, which are equally applicable to Mr Jaques. While the disqualification imposed will have a deterrent effect, a court-ordered pecuniary penalty will send an appropriately strong further message to deter other directors from similar conduct. 495 A pecuniary penalty is also necessary because of the matters I set out at [481] above. It is essential that other directors be discouraged from a similarly careless approach to a director's obligations.

Hardship/incapacity to pay 496 Mr Jaques' financial position is poor. He is 67 years old and he has very limited prospects of again obtaining employment. He lost the bulk of his life savings when Prime Trust collapsed and he has negligible savings other than a joint self-managed superannuation fund with his wife to the value of about $300,000. The family home has been in his wife's name for many years, but some of the joint superannuation funds were recently spent on renovations and a change of home. His wife works as a nurse earning in the order of $75,000 per annum. 497 Mr Jaques will have difficulty in paying a pecuniary penalty but, as I have said, personal hardship is less important than public protection and deterrence when determining a penalty.

Contrition 498 I reiterate my remarks at [487]-[489].

Mr Jaques' penalties 499 Having regard to the considerations above I have disqualified Mr Jaques from managing corporations as follows: (a) three years and nine months for the Lodgement Resolution Contraventions; and (b) six months for the Decisions to Pay Contraventions. 500 For the reasons given in relation to the other Directors I consider that half of the disqualification for the Decisions to Pay Contraventions should be served concurrently with the disqualification for his Lodgement Resolution conduct. This reduces the effective disqualification period to four years. 501 Mr Jaques' Lodgement Resolution conduct and its context is similar to that of Dr Wooldridge and, as I said in relation to Dr Wooldridge, his conduct is more serious than the criteria in Santow J's "shortest disqualifications" category of up to three years. In fact he meets some of the criteria for a longer period of disqualification. 502 I did not though disqualify him for a longer period because he was not motivated by personal gain in committing the contraventions, he made no personal gain, these are his first contraventions, he is now 67 years old, he has no desire to again be a director, and given the effect of the proceedings on him it is unlikely that he will reoffend. In my view the disqualification is sufficient to serve the purpose of general deterrence. 503 I have imposed only a short disqualification for his Decisions to Pay Contraventions for the same reason as with Dr Wooldridge. 504 Taking into account the disqualification order, his age, his limited employment prospects and his poor financial position I consider that pecuniary penalties are also appropriate as follows: (c) $17,500 for his Lodgement Resolution Contraventions; and (d) $5000 for his Decisions to Pay Contraventions. 505 For the same reasons as I set out in relation to disqualification half of the pecuniary penalty for the Decisions to Pay Contraventions should be paid concurrently with the pecuniary penalty for the Lodgement Resolution conduct. This reduces the effective pecuniary penalty to $20,000. 506 Weighing all the relevant factors in the balance, in combination with the disqualification order, I consider the pecuniary penalty is sufficient to serve the punitive purpose and deter other directors from similar conduct, while also taking account of Mr Jaques' financial difficulties. Although his personal hardship is less important than the need to protect the public I do not impose a higher pecuniary penalty because of the difficulty he faces in paying such a penalty. It is impossible to be precise in balancing the need for deterrence against his personal hardship but I concluded that a moderate pecuniary penalty was appropriate. 507 I will allow liberty to apply so that Mr Jaques may seek time to pay should that be necessary.

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.

H. Parity 570 Equal justice requires that where other things are equal, persons involved in the same contravention should receive the same sentence. Where other things are not equal, the differences in sentence must be rational and fair, so that no justifiable sense of grievance may arise. That is, there must be due proportion between the sentences imposed on co-offenders. 571 Mr Lewski contends that his contravening conduct and its context is the same as the other Directors. He argues that the fact that he sought payment of the Listing Fee does not make his contraventions more serious than those who, like him, failed to discharge their duties as directors by approving the Lodgement Resolution and making the Decisions to Pay. 572 Although Mr Lewski seems to accept the obvious differences in Mr Clarke's conduct and its context he contends that, subject to the personal mitigating factors applying to the other Directors, any pecuniary penalty and disqualification order imposed on the Directors should be the same. 573 I reject the contention that Mr Lewski's conduct and its context is the same as that of the other Directors. His submissions on parity are misconceived and his much greater culpability requires that he suffer substantially greater penalties. 574 I have given the requirement for due proportion between the penalties imposed on Mr Lewski and the other Directors careful, indeed anxious, consideration. I set Mr Lewski's penalties significantly higher because, amongst other things: (a) he was central to both courses of conduct as he instigated and then orchestrated the breaches, and no other Director played a similar role; (b) he took advantage of his position of influence and breached his statutory fiduciary duties for personal gain, and no other Director's Lodgement Resolution conduct was motivated by personal gain; (c) penalties aimed at deterring other directors from self-enrichment at the expense of the Members are necessary for his conduct, and not for any other Director's conduct; (d) penalties aimed at deterring him from similar conduct are necessary for him, whereas the other Directors are unlikely to reoffend; (e) he has shown no contrition or even any understanding or acceptance of his serious wrongdoing, whereas Mr Clarke showed real contrition and remorse and the other Directors showed qualified contrition; (f) he put on no evidence or submissions that he is unable to pay or that personal hardship must mitigate the penalty, whereas Mr Butler, Mr Jaques and Mr Clarke did; (g) he adduced no evidence of character, whereas Dr Wooldridge, Mr Butler and Mr Clarke did; (h) he has retained the benefit of $33 million wrongfully received, whereas the other Directors received no financial benefit from the contraventions (except for Mr Butler who received $30,000); and (i) Mr Clarke was not present and was not a Director when the Madgwicks Advice was considered and the Amendments passed at the 19 July 2006 meeting, and had no knowledge of the inadequacy of Mr Lewski's (and the other Directors') consideration of the relevant matters. 575 I consider his significantly higher penalties are in just proportion with the penalties imposed on the other Directors. 576 The conduct of Dr Wooldridge, Mr Butler and Mr Jaques and its context are broadly similar. While there are some differences they are not important in my view. 577 The differences include that, as Chairman, Dr Wooldridge was in control of the process of the meetings and had a responsibility to see that Mr Lewski did not participate in Board meetings when he had a conflict of interest, and that the Board gave proper consideration to the relevant issues: see AWA Ltd v Daniels trading as Deloitte Haskins & Sells and Others (1992) 7 ACSR 759 at 867 per Rogers CJ. In Australian Securities and Investments Commission v Rich and Others (2003) 44 ACSR 341 at [61] Austin J sought to confine Rogers CJ's remarks to the chairmen of publicly listed companies, but I respectfully disagree with his Honour's approach. I can see no reason in principle why a chairman of a responsible entity of a registered managed investment scheme, particularly a large responsible entity such as APCHL, should not have similar responsibilities to a chairman of a listed company. 578 However, ASIC pleaded and ran its case on the basis that the non-executive directors all had the same care and responsibility and the parts played by Dr Wooldridge, Mr Butler and Mr Jaques in the contraventions were essentially the same. It did not suggest that the particular responsibilities of Dr Wooldridge as Chairman were specifically relevant to the contraventions. In Healey (No 2) at [193]-[194] confronted with similar circumstances Middleton J declined to apply a differential treatment to the Chairman. I do not consider it appropriate to differentiate Dr Wooldridge's culpability by reference to his responsibilities as Chairman. 579 Dr Wooldridge seeks (lightly) to differentiate his conduct from Mr Butler and Mr Jaques on the basis that he took more care at the 19 July 2006 Board meeting. I accept that he did so but I give it little significance when his consideration of the relevant issues was quite inadequate. 580 Another difference is that Mr Butler had a material conflict of interest at the time he participated in the Decisions to Pay in April 2008 which makes his conduct more culpable than Dr Wooldridge and Mr Jaques. However, it makes little difference in differentiating the penalties because, first, ASIC did not suggest that Mr Butler's Decisions to Pay in 2008 were motivated by a desire to obtain his bonus and I accept that he genuinely believed the Listing Fee was validly included in the Constitution at that time. Second, the penalties imposed for the Decisions to Pay Contraventions are relatively small. 581 It is the different personal and mitigating circumstances of Dr Wooldridge, Mr Butler and Mr Jaques which largely underpin the differences in their penalties. 582 For example, Dr Wooldridge, Mr Butler and Mr Jaques have suffered disqualifications for different periods even though their conduct was similar. 583 I disqualified Mr Butler and Mr Jaques for four years because that period was appropriate for their conduct, and provided no reduction because they will suffer little damage to their business career and little financial loss through disqualification. Neither currently holds a directorship. Mr Jaques no longer seeks to be a company director and it will be difficult for Mr Butler to return to that role. 584 I disqualified Dr Wooldridge for only two years for similar conduct because he will suffer damage to his business career and loss of income of more than $328,000 through loss of his existing directorships. He intends to continue his career as a company director and it may be some time after his disqualification ceases before he can regain his existing directorships or replace them with others. I also took into account his exemplary character and his significant contribution to the community in imposing a shorter disqualification. 585 Another different circumstance is that Mr Butler and Mr Jaques are in a parlous financial state and their financial difficulties are likely to continue. I imposed moderate pecuniary penalties upon them because of, amongst other things, their incapacity to pay. Dr Wooldridge received the same penalty as Mr Butler and Mr Jaques even though his financial position is strong. Notwithstanding his stronger financial circumstances I consider a moderate pecuniary penalty is also appropriate for Dr Wooldridge because of the substantial financial loss he will suffer through disqualification compared to Mr Butler and Mr Jaques. 586 In my view the penalties for Dr Wooldridge, Mr Butler and Mr Jaques are in due proportion. 587 I have also given careful consideration to the requirement for due proportion between the penalties imposed on Mr Clarke and the other Directors. As I have said, his conduct is materially different and less blameworthy than the other Directors. In his particular circumstances there is no requirement for disqualification, and the pecuniary penalty imposed will suffice to serve the need for punishment and general deterrence. In not imposing disqualification I also took into account Mr Clarke's honesty and service to the community.

I. COSTS 588 I am aware of no reason why costs should not follow the event and accordingly I have ordered that the Defendants pay the plaintiff's costs. I am though unaware as to whether there is any requirement to divide the costs between each Defendant or whether a particular form of costs order is preferable to the parties. I have granted liberty to apply in relation to the form of the orders and generally. I certify that the preceding five hundred and eighty-eight (588) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Murphy.