Australian Securities and Investments Commission v Vizard

REASONS FOR JUDGMENT 1 The defendant, Stephen William Vizard, was appointed a non-executive director of Telstra Corporation Limited in September 1996. Telstra, then known as Australian and Overseas Telecommunications Corporation Ltd, was incorporated under the Corporations Law of the Australian Capital Territory. One of its principal functions was to control all domestic telephone services. In 1997 the Commonwealth enacted legislation to permit competition in the provision of telephone services. Telstra is one of the organisations that was granted a licence to provide those services. It is now one of Australia's largest companies, partly owned (as to 50.1%) by the Commonwealth with the balance of the shares, which are listed on the Australian Stock Exchange, in private hands. 2 The provision of telephone services is not Telstra's only activity. It also invests in companies listed on the ASX. Large sums of money are involved. Telstra's board of directors decides whether an investment should be bought or sold. For an informed decision to be made, the board is given information that explains the nature of the proposed transaction and analyses its strengths and weaknesses. The information is highly confidential. The directors know that they must keep the information secret. They also know that they must not make any use of the information for their own purposes. These rules derive from the fact that a director is a fiduciary. The rules were first given statutory force by s 107 of the Companies Act 1958 (Vic) which provided that a director must act honestly and not make use of any information acquired in that office to gain an improper advantage for himself or to cause detriment to the company. The provision was introduced following an investigation in Victoria into the affairs of Freighters Limited, whose directors had abused their position by (among other things) establishing companies that resold products formerly distributed by the company without notifying shareholders. Within four years s 107 (with some modification) was incorporated into the Companies Acts of all other States. At the time of the events with which this case is concerned, the relevant sections were, initially, s 232 and then s 183 of the Corporations Law. 3 The object of s 107 and its successors was to encourage good corporate governance by the provision of deterrents: Angas Law Services Pty Ltd (in liq) v Carabelas (2005) 53 ACSR 208, 225. The deterrents were the imposition of criminal and civil liability for a contravention. But deterrence is not always effective. It was not effective with the defendant. The facts show, and the defendant concedes, that during 2000 he contravened s 232(5) on one occasion and s 183(1) on two occasions. Penalties must be imposed. To determine the appropriate penalty is a matter for serious consideration. 4 It is convenient to begin with the facts. They are all to be found in a statement of agreed facts, a large bundle of documents tendered by the plaintiff, Australian Securities and Investments Commission, several affidavits filed by the defendant and in the submissions of counsel for the parties. I propose to mention only those that are central. 5 First, I will sketch the background. The defendant is a well-known figure. He commenced his working life as a lawyer, but gained his fame in another area, the entertainment industry. The defendant produced and appeared in many highly rated television programmes. His fame, and resultant fortune, took him in other directions. He established successful businesses, including an independent production house that produced many popular television programmes. He set up his own philanthropic organisation, the Vizard Foundation. He became heavily involved in the arts and community affairs. He was the President of the Council of Trustees for the National Gallery of Victoria, the Chairman of the Victorian Major Events Committee, the Chairman of the World Swimming Championships Corporation as well as a director of a number of charitable organisations including the Sony Foundation Australia, the Allanah and Madeline Foundation, Open Family Australia and the Addiction Research Foundation, to name just a few. 6 The list of the defendant's achievements is formidable. His contribution to the community was great. For all this he was well rewarded. He was appointed to the board of public companies, Telstra being one of them. He was made a Member of the Order of Australia in 1997 for services to the community and the arts. In 2003 he received a Centenary Medal for outstanding services to the arts, major events, philanthropy and the community. In the eyes of the public he was a pillar of the community. But this was not to last. 7 The events that proved to be the defendant's undoing occurred in 2000. I have mentioned that the defendant had been involved in various business activities. He also wanted to trade in listed shares. Share trading is a very public activity. Every listed company must maintain a share register and the register is available for public inspection. The defendant wanted to avoid publicity surrounding his trading activities. That was not too difficult to achieve. Many methods are available, and most are perfectly legitimate. To keep his share trading out of the public eye the defendant put in place the following arrangement. First he established a company, Creative Technology Investments Pty Ltd (CTI), which was to be the investment vehicle. Then he arranged for his accountant, Mr Lay, to be the sole director and shareholder of CTI. Thus there was no outward connection between the defendant and the company. The second step involved Brigham Pty Ltd, a trustee company, the shares in which were beneficially owned by the defendant, his wife and their children. They were also the beneficiaries of the trust. In December 1999, Brigham entered into a loan agreement with CTI. The idea was that Brigham would make loans to CTI from funds provided by the defendant or related entities. The loan funds were to be applied toward the purchase of a share portfolio. Instead of the usual obligation to repay the loan, the agreement provided that CTI would pay Brigham 90% of the proceeds derived from the sale of any shares, after the deduction of certain expenses. The balance was presumably to cover administration costs and provide a fee for services. 8 Share trading through CTI commenced shortly after the loan agreement was put into place. I know nothing of the details of that trading. Here we are only concerned with three trades effected in 2000. Each transaction was entered into because, as a director of Telstra, the defendant had obtained confidential information which indicated to him that the trades would be profitable. 9 The first trade involved shares in a technology company, Sausage Software Ltd. Telstra held a strategic stake in both Sausage and another technology company, Solution 6 Holdings Limited. In March 2000, there were confidential discussions between Telstra, Sausage and Solution 6 involving a possible merger of Sausage and Solution 6 (Project Cricket) and the acquisition by Telstra of a substantial interest in the merged entity. The directors of Telstra, including the defendant, were informed of the discussions in emails sent on 2 and 5 March 2000 by the Chief Executive Officer, Mr Switkowski. The first email advised that discussions were "well advanced … to merge [Sausage and Solution 6] into one organisation creating a substantial new age company and possibly attracting a rearating [sic] of their already high values." The second email gave further details of the proposal. An attachment to that email provided a "transactions overview". In substance the proposal was that Solution 6 would acquire the shares in Sausage and Telstra's eBusiness assets (which were then worth around $200 million). In exchange for its business, and an additional subscription of $50 million, Telstra was to receive approximately 40% of the shares in Solution 6. It was obvious to the defendant that when the proposed merger became public there would be an increase in the share price of the target company, Sausage. 10 The defendant decided to take advantage of this information. On 7 March 2000, he instructed Mr Lay to purchase on market $500,000 worth of shares in Sausage. In the result, on 10 March 2000 CTI purchased 86,000 shares at prices varying between $5.68 and $5.81. The total cost, net of brokerage and stamp duty, was $501,289.30. 11 The Telstra board met on 17 March 2000 to consider Project Cricket and resolved that it should go ahead. Although his indirect interest in the Sausage shares created a clear conflict of interest, the defendant did not disclose that interest before he cast his vote. 12 The merger was announced to the market on Monday 20 March 2000. The share price in Sausage shares rose from its previous closing price of $5.80 to close at $7.40. CTI, Brigham and, ultimately, the defendant and his family, made an immediate unrealised profit of approximately $140,000; a gain of almost 28% in just ten days. 13 The defendant was not to know that the price of Sausage shares would remain above his buying price only until 4 April. Nor was he to know that in late April the price would slump. About seven days after the announcement the defendant told Mr Lay to sell the shares. The instruction was to sell at no less than $7.00. Only 645 shares could be sold at that price, realising $4,433.10 net of brokerage and stamp duty. On 31 March, the defendant told Mr Lay to dispose of the balance of the shares at $5.93. Mr Lay was only able to dispose of 42,355 shares at that price, realising another $252,945.94. The balance of the Sausage shares were sold after the so-called "tech-wreck" in late April at prices between $2.15 to $2.19. CTI recovered only $93,190.30. The upshot was a net loss of $150,719.96 on the investment. 14 The second transaction concerned shares in Computershare Limited. In January 2000 CTI had on the defendant's instruction purchased 14,000 Computershare shares at an average price of $7.18 per share. There was nothing untoward about this purchase. It was simply the product of an investment decision made by the defendant and communicated to Mr Lay. The problem, however, was that Telstra also had an investment in Computershare shares, holding about 15% of the stock on issue. It was this holding that led to the defendant's next wrongdoing. It will be recalled that part of Project Cricket required Telstra to subscribe $50 million for shares in Solution 6. It needed to raise the funds. On 16 March 2000, Mr Switkowski informed the directors that the funds would be raised by the sale of the Computershare shares. The email advised that "this [proposal] is all very market sensitive information". The sale of Telstra's Computershare shareholding was also discussed at the board meeting on 17 March 2000 where Project Cricket was given the go-ahead. 15 It seems that the defendant was concerned that the sale of such a large parcel of Computershare shares could bring down the price. So in late March he instructed Mr Lay to sell CTI's holding. The shares were sold for prices between $7.40 and $7.58. This returned a profit of $2,591.68. 16 On 13 July 2000, Telstra announced that it had disposed of its shares in Computershare. The market price fell $0.60, but picked up a few days later. In the result, CTI (and hence the defendant and his family) obtained no real benefit from this misuse of Telstra's information. 17 This brings me to the third and final transaction. On 28 June 2000, Mr Switkowski reported to a board meeting at which the defendant was present a proposal (Project Galaxy) that Telstra acquire an interest in Keycorp Limited, an e-commerce and information technology company. On 4 July 2000 the board was informed that the Keycorp acquisition was "looming" and would soon require a meeting where approval would be sought. A few days later Mr Switkowski provided the directors with detailed information about the proposed acquisition. The information disclosed that Telstra hoped to acquire a 51% interest in Keycorp. The consideration for the acquisition would be the sale to Keycorp of Telstra's EFTPOS business which was then valued at $464 million. Board papers were forwarded to the directors on 12 July 2000. The papers indicated that if Project Galaxy were to be approved by the board at its meeting on 13 July, a public announcement to that effect would be made on about 20 July. The board gave its approval to Project Galaxy on 13 July by a circular resolution. 18 In all likelihood the price of Keycorp shares would rise when the proposed acquisition was announced. For this reason, on about 14 July 2000, the defendant instructed Mr Lay to acquire approximately $250,000 worth of Keycorp shares at a price no more than $13.40 each, the then prevailing price. CTI purchased 18,650 shares for a total cost of $252,347.76 (net brokerage and stamp duty). 19 Telstra's proposed acquisition was announced on 21 July. The price of Keycorp shares immediately rose to a high of $15.79, a significant increase from the closing price on the previous day of $12.56. The price remained above $12.50 until at least 21 August when it closed at $12.79. At $15.79 per share, CTI's unrealised profit was $39,265.52. If it had sold the shares at any time before 11 August, it would have recovered its outlay and returned a profit. 20 The defendant did attempt to realise a profit. On 26 or 27 July 2000 he told Mr Lay to sell 12,000 Keycorp shares, but at a price not less than $14.28. Only 2,713 shares could be sold. The amount recovered was $38,363.82 net brokerage and stamp duty. The profit on the sale of this parcel was $1,654.82. For reasons that have not been explained the defendant decided to retain the balance of the holding. They are still owned by CTI. Yesterday's closing price was $2.04. 21 The use by the defendant of confidential information to purchase the Sausage and Keycorp shares and to sell the Computershare shares was illegal. When the Sausage shares were purchased, s 232(5) of the Corporations Law relevantly provided that: "An officer or employee of a corporation, or a former officer or employee of a corporation, must not, in relevant circumstances, make improper use of information acquired by virtue of his or her position as such an officer or employee to gain, directly or indirectly, an advantage for himself or herself or for any other person or to cause detriment to the corporation." Section 183(1) (which repealed and replaced s 232(5)) was in force when the Computershare and Keycorp transactions took place. It relevantly provided: "A person who obtains information because they are, or have been, a director or other officer or employee of a corporation must not improperly use the information to: (a) gain an advantage for themselves or someone else; or (b) cause detriment to the corporation." 22 Each of s 232(5) and s 183(1) was a civil penalty provision: s 232(6B) of the Corporations Law prior to 13 March 2000; s 1317E(1) of the Corporations Law after 13 March 2000. Part 9.4B of the Corporations Law made provision for the civil and criminal consequences of contravening a civil penalty provision. The consequences in a civil proceeding were that there could be a declaration of contravention if the court was satisfied that a person had contravened the provision (s 1317EA(2); s 1317E(1)(2)), a pecuniary penalty not exceeding 2,000 penalty units ($200,000) could be imposed (s 1317EA(3)(b); s 1317G(1)), and an order could be made prohibiting the offender from managing a corporation for such period as was specified (s 1317EA(3)(a); s 206C). An order under s 1317EA(3)(a) of the Corporations Law could not be made if the court was satisfied that the person was "fit and proper person to manage a corporation" (s 1317EA(4)). Further, a pecuniary penalty could not be imposed under s 1317EA(3)(b) unless the court was satisfied that the contravention was "serious" (s 1317EA(5)). Following the amendments that came into force on 13 March 2000, a pecuniary penalty could only be imposed where a contravention materially prejudiced the interests of the company or its members or its ability to pay its creditors, or where the contravention was "serious" (s 1317G(b)), and a disqualification order could only be made if the court was satisfied that it was "justified" (s 206C(1)(b)). 23 The Corporations Law has been repealed. By virtue of the transitional provisions, s 1400 and s 1401 of the Corporations Act 2001 (Cth), proceedings may still be commenced for a contravention of s 232(5) and s 183(1). 24 Contraventions of the sections have been established. The necessary elements of each contravention are that: (i) The defendant was a director of Telstra; (ii) The defendant obtained confidential information by virtue of his position as a director; (iii) The defendant made improper use of that information by basing his decision to purchase or sell shares (as the case may be) on that information; and (iv) The improper use was made to obtain an advantage for CTI and through it for Brigham and the defendant and his family. 25 Penalties must be imposed for the contraventions were in the words of the statute "serious". To determine what those penalties should be, it is necessary, first, to say something about the character of the offences created by s 232 and s 183. Offences of this type are often referred to, inexactly but usefully, as "white collar" crimes. In 1995, Gleeson CJ, then Chief Justice of New South Wales, drew attention to comments often made about the apparent leniency shown to "white collar" offenders (he did not use that description) in contrast with sentences imposed in respect of violent crime: R v Hassen Mohammed El-Rashid (unreported, Supreme Court of New South Wales Court of Criminal Appeal, Gleeson CJ, Mahoney and Sperling JJ, 7 April 1995). Gleeson CJ did not deny that there was differential treatment. He explained that the difference was the result of two factors, first, that Parliament has provided lower penalties for "white collar" offences and, second, that violent crimes, such as armed robbery for example, are usually far more serious. The reason some people believe that white collar crimes are not serious is not only because of the absence of violence but, I suspect, because of the invisibility of the losses caused, which are usually spread among consumers and shareholders rather than concentrated on a few victims. The reality is, however, that the cost of white collar crime is often extremely high, causing many people to suffer greatly. Just ask the creditors and shareholders of the Pyramid Group and Estate Mortgage in Victoria, of the Bond and Connell Groups in Western Australia, of the State Bank of South Australia in South Australia, of Quintex in Queensland, and of HIH and One.Tel in New South Wales. The list is not exhaustive. 26 There is another distinction that may also be important. It is the distinction between "true crimes" and offences "which … are not criminal in any real sense, but are acts which in the public interest are prohibited under a penalty": Sherras v De Rutzen [1895] 1 QB 918, 922. These latter offences are commonly referred to as regulatory offences. They are enacted "for the regulation of individual conduct in the interests of health, convenience, safety and the general welfare of the public": R v Pierce Fisheries Limited [1971] SCR 5, 13. Commonly, regulatory offences are not concerned with values but with results. Their object is to induce compliance with rules that benefit society as a whole. It is commonly said that a conviction for a regulatory offence, much like a conviction for a white collar crime, carries with it less culpability than a conviction for a "true crime". See the discussion in R v Wholesale Travel Group Inc [1991] 3 SCR 154, 219. 27 Sections 283 and 183 can on one level be regarded as prohibiting conduct which is not regarded as serious. The maximum penalty that can be imposed in a civil proceeding for the contravention of these and other civil penalty provisions is $200,000. This is despite the fact that a contravention holds great potential for profit and may cause much harm. In a criminal prosecution (and after 13 March 2000 there could be both a civil and criminal prosecution for the same conduct - see s 1317P of the Corporations Law), the maximum penalty was more severe, namely imprisonment for a period not exceeding five years plus a fine not exceeding $200,000. 28 The sections also bear the stamp of "regulatory offences". On a daily basis, a director of a large public company will come across information that is not available to the public or even to the company's shareholders. According to the common law a director is denied the ability to use such information for his or her own purposes. It does not matter that the director's action causes no harm to the company or does not rob it of an opportunity which it might have exercised for its own advantage: Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134. This rule admits of few exceptions. Parliament realised that the common law was too often ignored. The temptation to make an improper profit was too great. So Parliament decided to act. The Companies Acts were amended to create an offence if a director misused information obtained by reason of his fiduciary position. It is in this sense that the sections are regulatory in character, directed to avoiding the potential harmful consequences of a particular type of conduct. 29 But s 232 and s 183 have another equally important purpose. They seek to establish a norm of behaviour that is necessary for the proper conduct of commercial life and so that people will have confidence that the running of the marketplace is in safe hands. For this reason a contravention of s 232 or s 183 carries with it a significant degree of moral blameworthiness. There is moral blameworthiness because a contravention involves a serious breach of trust. 30 It is appropriate now to make mention of the principles that underlie sentencing, being principles that also guide the determination of civil penalties. This is not the occasion upon which to discuss in any detail the four concepts that inform sentencing: general deterrence and personal deterrence (where punishment is imposed to avert future harm), and rehabilitation and retribution (where punishment is imposed simply because the offender deserves it). It is important, however, to make this point. For most offences (and contraventions of s 232(5) and s 183(1) are no exception) the punishment imposed by the court is the means by which society expresses its moral condemnation of the offender. It also affirms that the particular law is worthy of obedience. If the punishment is unduly lenient there is the risk that the court will be perceived as endorsing the offender's conduct. 31 In the present case, punishment need not take into account personal deterrence or rehabilitation. The defendant admitted his wrongdoing prior to the institution of this proceeding and, through his counsel, has made a statement in open court expressing his unreserved contrition for his wrongdoing. He apologised to his family, his colleagues, his friends and the community as a whole. His brother, himself a man of high repute, has said that the defendant is deeply remorseful for his wrongdoing, has faced up to the fact that what he did was utterly wrong and intends to make it up to the community he has so badly let down. Professor Vizard said that in his opinion the defendant will not make the same mistake again. ASIC accepts this to be a correct assessment of the situation and so do I. 32 Nevertheless, as I have been at pains to point out, an offender such as the defendant deserves punishment for his moral culpability. The contraventions in question involved a breach of trust. I have already said that in each case the breach was serious. Shares in Sausage and Keycorp were purchased in hopes of recovering a sizeable profit. The trades were profitable. The fact that no profit was realised is beside the point. That was due to the wholly fortuitous decline in the share market. 33 While retribution is important as a stamp of society's disapproval of particular conduct, the governing principle of "sentencing" in cases of the kind with which we are concerned is general deterrence. The sentence must be exemplary and sufficient so that members of the business community are put on notice that if they break the trust which has been reposed in them they will receive a proper punishment. It is vital not only in the interests of the business community but in the interests of society that leaders of that community will act honestly in all their dealings. Any slip from the high standards demanded of directors can put at risk the fortunes of their company and also the fortunes (large or small) of those who invest in them. In extreme cases the misconduct can affect the economy as a whole. 34 It could hardly be denied that, as a rule, directors of publicly listed companies are sensitive to risk. The few that may be tempted to gain prestige, wealth and security by illegal means can be dissuaded from that course if the risk of detection and serious punishment is too great. Although the civil penalties are not substantial when compared with the possible gains from corporate crime, other penalties may act as a better deterrent. 35 This is where the possibility of disqualification from office can play an important function. It may be accepted that the principal object to be achieved by a disqualification order is protective: protection of the company and its shareholders against the likelihood of repetition of the offending conduct. The mistake is to treat this as the sole purpose of a disqualification order. That error has now been exposed. In Rich v Australian Securities and Investments Commission (2004) 50 ACSR 242 the High Court made it clear that a disqualification order can be imposed not only to protect the company's shareholders against further abuse, but also by way of punishment and, importantly, for general deterrence. I am confident the fear of losing both their position from business life, as well as their good reputation, will be an effective deterrent in the case of many a director who is contemplating a dishonest course for gain. Few corporate crimes are spontaneous. There is always time to consider the consequences. The risk of a long period of disqualification, for example so long that it will keep the director forever out of public corporate life, may well tip the scales. 36 There is another aspect of punishment that requires particular attention in this case. I mentioned earlier that we are here dealing with "white collar" crime. This expression can be traced back to E Sutherland, White Collar Crime (1949). Sutherland defined white collar crime as a "crime committed by a person of respectability and high social status in the course of his occupation": ibid 9. It now has wider scope. Black's Law Dictionary (8th ed, 2004) defines "white collar" crime as "[a] non-violent crime [usually] involving cheating or dishonesty in commercial matters. Examples include fraud, embezzlement, bribery, and insider trading." I have also referred to the widely held view that "white collar" offenders are treated lightly. The reason seems to be this. Traditional sentencing holds that factors such as an unblemished past life, a reputation for honesty, an involvement in and a contribution towards community affairs, and so on (generally referred to by the umbrella expression "good character") are important factors in mitigation of sentence. I do not wish to deny the relevance of those factors, but in some cases they may result in the imposition of a very lenient sentence. At any rate there must be a limit to how far good character can be taken into account when dealing with a "white collar" offender, especially where the contravention concerns dishonesty or the abuse of a position of trust. Those convicted of such offences rarely have a criminal record. It is their good character that has enabled them to occupy the position of trust which they have ultimately breached. Indeed, it is their good character that is often used to facilitate the offence. 37 So while good character cannot be ignored it should only play a minor role in sentencing for most white collar corporate crime. At a general level, corporate crimes committed by prominent business people have a tendency to erode the moral base of the law and provide an opportunity for other offenders to justify their misconduct. At a more immediate level corporate crime is diffuse in its impact, is easily concealed with seemingly legitimate business transactions and is difficult to detect, control and punish. Corporate crimes are usually committed to accumulate wealth and power and are almost always the result of deliberate and calculated conduct. I have said in another context that, for this kind of offence, it is the nature of the offence rather than the character of the offender that should be the principal consideration for the punishment to be imposed: Australian Competition and Consumer Commission v ABB Transmission and Distribution Ltd (No 2 - Distribution Transformers) (2002) ATPR ¶41-872. I continue to hold that view. 38 Now I propose to consider the factors to which regard may be had in mitigation. There is a school of thought (not one to which I fully subscribe) that the most effective form of punishment for "white collar" offenders is shaming. One of the leading proponents of this school is Professor Kahan. He and Professor Posner have defined shaming as a "process by which citizens publicly and self-consciously draw attention to the bad dispositions or actions of an offender, as a way of punishing him for having those dispositions or engaging in those activities": D M Kahan and E A Posner, "Shaming White Collar Criminals: A Proposal for Reform of the Federal Sentencing Guidelines" (1999) 42 Journal of Law and Economics 365, 368. It is their thesis that shaming is a direct expression of moral condemnation, the equivalent of imprisonment as a symbol of disapprobation. They are of the view that shaming penalties will deter white collar crime. This is because if the offence is publicised in a manner that excites revulsion people will not deal with the offender. They will not hire them or socialise with them. Professors Kahan and Posner hold that shaming creates strong economic and psychological disincentives against future illegal conduct. 39 Well, the defendant has received his fair share of shaming. As his counsel, Mr Judd QC, has said, the damage to his (the defendant's) reputation (which for so long had been one of his principal assets) has been public and complete, and the impact on his family has been profound. The point Mr Judd makes, and rightly makes, is that to this point his client has already received a large measure of punishment for his wrongdoing. 40 While shaming is a form of punishment, it is not a substitute for the formal expression by society through its courts that the offender has committed a wrong. Formal retribution is a necessary element in imposing a proper punishment because it ensures that punishment is just and appropriate to the circumstances. Formal retribution takes into account the moral culpability of the offender, having regard to his motive for wrongdoing, his intentional risk-taking, the harm (if any) that has been caused by the offence, and the standard of the offender's behaviour. In this fashion, punishment involves, as it should, both normative and utilitarian considerations. 41 Because the degree of punishment is partly based on utilitarian considerations, an offender's early acknowledgment of wrongdoing, his degree of cooperation and his agreement not to contest the correctness of the elements of the offence with which he has been charged (in the language of the criminal lawyer, a guilty plea) not only justifies, but ordinarily requires, a "discount" from what would otherwise be the appropriate penalty. In R v Howard (2003) 48 ACSR 438, in relation to a prosecution arising out of the HIH collapse, the defendant had pleaded guilty to several counts of dishonestly obtaining a financial advantage. Justice Kirby explained (at 446-447) that the guilty plea justified a discount because: "The law takes a pragmatic approach to pleas of guilty. They save the court time. They also save the expense of a trial. The offender is entitled to a discount for the utilitarian value of that plea. He thereby assists the administration of justice. The discount for pleading guilty does not take account of the strength of the Crown case. The earlier the plea, the greater the saving to the court system. The longer and more complex the likely trial, the greater the utilitarian value." Similar considerations demand a separate "discount" when the offender has cooperated with the enforcing agency's investigations. The agency's time is saved, its costs are kept down and its funds can usefully be employed elsewhere. 42 It might be said that the desire to secure the practical ends of enforcement is inconsistent with the attainment of justice in a particular case. The price is in the inconsistency of punishment. It is a commonly held view that such inconsistency is calculated to lead to an erosion in public confidence in the integrity of the justice system: Lowe v The Queen (1984) 154 CLR 606, 610-611. The alternative position is that the public interest is best served by bringing offenders to account as quickly and as cheaply as possible. As things presently stand, the discount is available. Perhaps this is as it should be, although sometimes the rule comes at a high price. For a general criticism see J E Willis, "The Sentencing Discount for Guilty Pleas" (1985) 18 Australian and New Zealand Journal of Criminology 136. But compare Australian Law Reform Commission Report No 44, Sentencing (1998) 92-94. 43 How should these principles be applied in this case? Little more need be said about the contraventions, although a few points are worth restating. The defendant was a director of Telstra, one of Australia's largest companies. He owed his position to the belief that he was honest and capable. Highly confidential information came his way in his capacity as a director. He used that information for the purposes of benefiting himself and his family. This was both dishonest and a gross breach of trust. Not only that, the defendant well knew that what he was doing was wrong. His breach of trust was carefully concealed and was only discovered by chance. Everything was done for personal gain. There was no element of need on the defendant's part. By all accounts the defendant is a very wealthy man. Perhaps from his perspective the amounts the defendant stood to gain were not enormous, but most members of the community will think otherwise. It was only because of the vagaries of the marketplace that the defendant did not realise his gain. 44 When all is said and done, but for the fact that Telstra did not suffer any loss, the defendant's actions would have been within the category of a worst case for an offence of this type. Nonetheless it would be inappropriate to impose something close to the maximum available pecuniary penalty ($200,000) for each contravention. (As to the circumstances in which a maximum penalty can be imposed see R v Mallinder (1986) 23 A Crim R 179.) First, to impose the maximum penalty would be to ignore those factors that the law says should be taken into account in sentencing. Here the significant factors are the public disgrace which has been suffered by the defendant and his family, the genuine and unreserved contrition expressed by the defendant and the admissions made by him, which in this case certainly saved the time and expense of what might otherwise have been a rather lengthy trial. 45 Second, there is the submission by ASIC, supported as it is by the defendant, that the appropriate penalty for each contravention is $130,000. The cases, including decisions of the Federal Court in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 and Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd (2002) ATPR ¶41-880, hold that I should not depart from the penalty recommended by the parties unless it is clearly out of bounds. The proposed penalty is certainly low. Left uninstructed I would have imposed a higher penalty, but not substantially different from that suggested. If this penalty is insufficient, Parliament should increase the maximum. The current amount has been in place for more than 13 years and may require review. 46 This brings me to the issue of disqualification. There is no doubting that it is necessary to impose some period of disqualification. The statutory criteria have been established for each contravention, most emphatically in the case of the latter two. The question is how long should the disqualification be? ASIC submits that five years is appropriate. Mr Young QC explained that, having regard to the gravity of the offence, disqualification for around ten years would have been proper, but that period should be reduced because of the "discounts" to which the defendant is entitled. The defendant acknowledged that there must be some disqualification and supported the period nominated by ASIC. 47 For reasons which I am about to explain, it is my view that a disqualification for five years is not sufficient. I appreciate that I need not be too concerned with specific deterrence. The defendant's very public disgrace suggests that it is unlikely that he will be given the opportunity of again becoming a director of a sizeable publicly listed company. In any event, it is common ground that he is unlikely to offend again. My real concerns here are with punishment for retributive purposes and general deterrence, but principally the latter. 48 Indeed general deterrence is of primary importance in cases of this kind. A message must be sent to the business community that for white collar crime "the game is not worth the candle", to use the language of a Canadian judge, McDermid JA,in R v Jaasma (1976) 1 AR 553, 555. It is permissible to impose punishment with a general deterrent content even if the case does not call for specific deterrence. In R v Thompson (1975) 11 SASR 217, 222 Bray CJ said, in a somewhat different context: "I realise to the full that the appellant is a man of good character and worthy of respect, that he is not, in the ordinary sense of the word, a criminal, that he had no intention of harming anyone, and that imprisonment will be to him a great hardship and a great indignity. He does not stand in need of reformation or rehabilitation. But … there are offences where the deterrent principle must take priority and where sentences of imprisonment may properly be imposed, even on first offenders of good character, to mark the disapproval by the law of the conduct in question and in the hope that other people will be deterred from like behaviour." See also R v Tait (1979) 46 FLR 386, 399. 49 In assessing the appropriate period of disqualification I must be mindful not to impose a period which is out of all proportion to the gravity of the offence. Provided the period is proportional, it can be fixed to reflect the need to protect society from the kind of unlawful conduct engaged in by the defendant. In my view the appropriate period of disqualification is ten years. But for the factors requiring a "discount", a much longer period would have been in order. 50 If the imposition of a ten year ban causes some hardship an order may be made giving the defendant leave to be involved in the management of a particular corporation (for example, a private family trustee or the Vizard Foundation) or a particular class of corporations. The power to make orders of this kind is now located in s 206G of the Corporations Act. 51 For the foregoing reasons there will be declarations that the Corporations Law has been contravened, the imposition of pecuniary penalties totalling $390,000 for those contraventions and orders requiring the defendant to pay ASIC's costs of this application and of its investigation into the affair. ASIC should bring in short minutes of orders within 14 days. I certify that the preceding fifty-one (51) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.