Gillfillan v Australian Securities and Investments Commission

Costs of the CA Penalty Hearing 8The Australian Directors submit that ASIC should pay their costs of the remitted appeals in this Court (the "CA Penalty Hearing"). They do so on the basis that each was substantially successful in his or her appeal and that costs should follow the event. 9The written submissions filed on behalf of Ms Hellicar and Mr Brown advance the principal arguments in support of this contention. They say that they made good their contention that the primary Judge erred in his approach to imposing penalties for the contravention of s 180(1) of the Corporations Act. Upon this Court re-exercising the discretion as to penalties, the period of disqualification in each case was reduced from five years to two years and three months and the pecuniary penalty from $30,000 to $25,000. 10Ms Hellicar and Mr Brown acknowledge that at the first hearing of the appeals to this Court from the orders made by the primary Judge ("CA Liability Hearing"), they submitted that they should be relieved from liability for the breaches of the Corporations Act found against them by his Honour. However, they point out that they abandoned this contention in written submissions filed in this Court on 23 July 2012, some four months prior to the CA Penalty Hearing. Since the contention was abandoned well in advance of the CA Penalty Hearing, so they argue, they should not lose any portion of the costs to which they would otherwise be entitled. 11Ms Hellicar and Mr Brown further submit that their entitlement to costs should not be reduced merely because not all of their submissions in the appeal were successful. They contend that their success in setting aside the orders made by the primary Judge and in having the penalties reduced warrants a costs order in their favour. 12ASIC's answer to these submissions is that Ms Hellicar and Mr Brown did not in substance enjoy substantial success on the appeal. ASIC submits that Ms Hellicar and Mr Brown asked the Court, in the event that the primary Judge's orders were set aside, not to impose a period of disqualification exceeding the time already served (about 18 months) and not to impose a pecuniary penalty greater than $15,000 on each of them. 13In the result, this Court took the view (at [253]) that a period of disqualification of three years was appropriate. The precise period of disqualification imposed on Ms Hellicar and Mr Brown and the other Australian Directors took account of the fact that during the period from 17 December 2010 (the date of the CA Liability Judgment) until 3 May 2012 (the date of the High Court's decision), they were subject to practical constraints on their ability to act as directors notwithstanding that during this period no orders imposing penalties were in force. This was because ASIC's appeal to the High Court was pending and both the Australian Directors and the US Directors faced the prospect that the appeal would be allowed and the penalties imposed by the primary judge reinstated (as in fact occurred). 14ASIC submits that each party enjoyed partial success at the CA Penalty Hearing and, on that basis, it is appropriate that the Australian Directors and ASIC should bear his or her or its own costs of the proceedings. ASIC further submits that such an order is supported by the "relatively late" withdrawal by the Australian Directors of their contentions that they should have been relieved from liability under ss 1317S and 1318 of the Corporations Act. 15In my opinion, the costs order in relation to the CA Penalty Hearing should reflect the success enjoyed by Ms Hellicar and Mr Brown in setting aside the penalties imposed by the primary Judge and in having this Court substitute reduced penalties for their contraventions. On the other hand, Mr Hellicar and Mr Brown did not succeed in having the penalties reduced to the level they contended was appropriate. This is not a case in which their failure on some issues, such as their attempt to diminish the gravity of their contraventions, was immaterial to the result. On the contrary, their failure on some issues meant that the outcome of the appeal was significantly less favourable to them than if their arguments had been accepted. Nor was the time required to deal with these issues trivial. 16In these circumstances, Ms Hellicar and Mr Brown should have the majority but not the whole of their costs of the CA Penalty proceedings. I think an order that ASIC pay two thirds of the costs of Ms Hellicar and Mr Brown in the CA Penalty proceedings would be a fair reflection of the outcome of the appeal. 17I do not think that any of the other three Australian directors is in a substantially different position to that of Ms Hellicar and Mr Brown. Each succeeded in having the primary Judge's orders set aside, but did not succeed in persuading the Court to reduce the penalties to the level they submitted was appropriate. 18Contrary to my original impression, I do not think that there should be any reduction in the proportion of costs payable by ASIC to the Australian Directors by reason of what was described in the CA Penalty Judgement as the "relatively late" withdrawal of the appellants' submissions that they should be relieved from their contraventions of the Corporations Act. ASIC does not suggest that the timing of the withdrawal of those submissions led to it incurring any significant costs in relation to the CA Penalty Hearing.

The CA Liability Hearing 19The CA Penalty Judgment resolved the costs of the CA Liability Hearing insofar as they related to the issue of approval of the Draft ASX Announcement (the subject of the appeal to the High Court). The costs of the CA Liability Hearing relating to the issues of exoneration and penalty have not yet been resolved. 20At the CA Liability Hearing, the Australian Directors submitted that the primary Judge should have made orders pursuant to ss 1317S and 1318 of the Corporations Act relieving them from liability for their contraventions of s 180(1). They also submitted that their contraventions were not "serious" for the purposes of s 1317G(1)(b)(iii) of the Corporations Act and thus no pecuniary penalties should have been imposed on them. The US Directors made similar submissions. All of these submissions were ultimately rejected or abandoned. 21ASIC submits that the failure on exoneration and lack of seriousness outweighs the Directors' limited success in having the periods of disqualification and the quantum of pecuniary penalties reduced in consequence of the CA Penalty Judgment. ASIC contends that it was put to the expense and trouble of answering the submissions that were subsequently rejected or abandoned. ASIC says that the appellants' unsuccessful submissions on those issues were largely discrete from other issues, although ASIC accepts that there was some overlap with the submissions on penalties. ASIC submits that the appellants should be ordered to pay ASIC's costs of the CA Liability Hearing insofar as they related to the issues of exoneration and lack of seriousness of the contraventions. 22The appellants resist this submission on the ground that they enjoyed equal success on these issues at the CA Liability Hearing. They accept that they lost on the issues of exoneration and lack of seriousness, but they point out that they succeeded in this Court in having their penalties reduced. The appellants contend that the arguments advanced on the issues of exoneration and lack of seriousness at the CA Liability Hearing would have been presented in any event, since they went to the appropriateness of the penalties imposed by the primary Judge. 23It is not easy to determine the merits of the competing submissions without a close analysis of the extent to which submissions and oral argument at the CA Liability Hearing were devoted to exoneration and lack of seriousness, on the hand, and to the appropriate level of penalties, on the other. No party suggests that such an analysis should now be undertaken or even that it is reasonably feasible to do so. 24In the absence of more detailed submissions by the parties (for which I do not criticise them), the resolution of this costs question is very much a matter of impression. In the end, the appellants and ASIC each had some success on the issues. ASIC succeeded on exoneration and lack of seriousness, but the appellants succeeded on penalties, at least to the extent that the primary judge's orders were set aside and lesser penalties substituted. To be consistent with the order that ASIC pay two thirds of the Australian Directors' costs of the CA Penalty Hearing, ASIC should pay two thirds of the appellants' costs of dealing with the question of severity of penalty at the CA Liability Hearing. On the other hand, the appellants should pay ASIC's costs incurred by it in relation to exoneration and lack of seriousness. 25There is no sound basis at this stage of the proceedings for this Court to quantify the costs incurred in relation to each set of issues in the CA Liability Hearing. Neither ASIC nor the appellants have invited the Court to make separate costs orders in relation to each set of issues. In these circumstances, I think that the appropriate course is that ASIC and the appellants should bear their own costs of the CA Liability Hearing incurred in relation to the issues of exoneration, lack of seriousness and severity of the penalties.

Repayment of Interest on Pecuniary Penalties 26Following the CA Liability Judgment, which set aside the primary Judge's orders, ASIC repaid to each of the appellants the penalty that he or she had paid in conformity with the orders made by the primary judge. In addition, ASIC paid interest to each appellant. The precise amounts of interest varied but were in the order of $3700 to each appellant. 27ASIC submits that the appellants should now repay all of the interest paid to them after the CA Liability Judgment. It says that the effect of the High Court judgment was to restore the penalties imposed by the primary Judge from the date of his Honour's orders. ASIC also says that the orders made by this Court on 12 November 2012 reducing the pecuniary penalties took effect only from that date: Uniform Civil Procedure Rules ("UCPR"), r 36.4(1)(b). 28The appellants, other than Mr Willcox, accept that they must repay a proportion of the interest they received. However, they submit that they should only repay the proportion of interest that corresponds to the proportion of the original penalties upheld by this Court. In the case of Ms Hellicar, for example, since the penalty ultimately imposed was 5/6 of the original penalty, she should repay 5/6 of the interest she received, not the full amount. 29As Woolworths Ltd v Strong (No 2) [2011] NSWCA 72; 80 NSWLR 445 shows, the relevant provisions bearing on this question are s 75A(10) of the Supreme Court Act 1970 and UCPR, rr 51.54 and 51.59. No issue has been raised as to whether the appellants claimed the appropriate relief in their notices of appeal as required by r 51.59. 30The basic principle is that every successful appellant has the right to restitutio in integrum: Commonwealth v McCormack [1984] HCA 57; 155 CLR 273 at 276. The appellants should be placed in the position they would have been in had the pecuniary penalties ultimately imposed by this Court been imposed by the primary Judge. It follows that the appellants' submissions are correct. 31I should add that were it necessary to do so, the Court could make an order that the substituted penalties apply from the date the primary Judge made the original orders: r 36.4(3). However, I do not think that it is necessary to take this step to achieve the appropriate result. 32I reject Mr Willcox's submission that he should not be ordered to repay any of the interest he received.

Interest on costs 33ASIC submits that an order should be made for payment of interest on costs in its favour. Section 101(4) of the Civil Procedure Act 2005 provides that the Court may order that interest be paid on any amount payable under the order for payment of costs. The appellants accept that an order for interest on costs does not require special circumstances to be demonstrated: Lahoud v Lahoud [2006] NSWSC 126 at [82], per Campbell J and cases cited there. The purpose of such an order is to compensate a party having the benefit of a costs order for being out of pocket in respect of the relevant costs it has paid: Drummond and Rosen Pty Ltd v Easey (No 2) [2009] NSWCA 331 at [4], per Macfarlan JA. 34The appellants submit that ASIC should not have the benefit of an order for interest on costs because it is not a commercial organisation but a regulatory agency. However, since the purpose of such an order is compensatory, there is no basis for the distinction urged by the appellants. 35It is appropriate that ASIC should have the benefit of an order for interest on the costs orders made against the appellants in respect of the CA Liability Hearing. The costs orders are those made in the CA Penalty Judgment on 12 November 2012. 36The parties are agreed that if an order for interest on costs is made it should be in the form of the orders made in Leda Pty Ltd v Weerden (No 2) [2007] NSWCA 283 at [9], per curiam. However, they have not explained precisely how the orders made in Leda Pty Ltd v Weerden (No 2) should be adapted to the circumstances of this case.

Orders 37The appellants' written submissions, other than those of Mr Willcox and Mr O'Brien, attach the form of orders they consider to be appropriate. ASIC's submissions do not attach draft orders. 38The appellants' draft orders used proceeding numbers for the CA Liability Hearing that do not match the numbers used either in the CA Liability Judgment or in the orders made on 12 November 2012. I use the identification numbers in the CA Liability Judgment at [1156]. If that is an error, the parties have liberty to send up agreed orders within seven days correcting the error. 39I have redrafted the orders made in Leda Pty Ltd v Weerden (No 2) in the manner I think is correct. If the adaptation is inapt, the parties also have leave to send up agreed orders within seven days correcting the error. 40The following orders should be made: Ms Hellicar's Appeal (CA 2012/194856)

1. The respondents ("ASIC") pay two thirds of Ms Hellicar's costs of this appeal (being CA 2012/194856).
2. There be no order as to costs in CA 2009/298427 in relation to the issues of exoneration and penalty.
3. Ms Hellicar repay to the Commonwealth of Australia the sum of $2,965.31, being five sixths (5/6) of the interest paid to her by ASIC in December 2010.
4. Ms Hellicar pay interest to ASIC on the costs the subject of Order 4 made on 12 November 2012 on the following basis: In this Order: X equals the total amount of costs and disbursements paid or liable to be paid to ASIC's legal advisers in connection with CA 2009/298427. Y equals the total amount of costs and disbursements allowed on assessment to ASIC in accordance with Order 4 made on 12 November 2012. The Allowed Percentage equals ((Y/X) x 100)%. Ms Hellicar to pay to ASIC interest on costs and disbursements, at the rates set out in Schedule 5 to the UCPR, on the Allowed Percentage of each amount for or on account of costs and disbursements actually paid to ASIC's legal advisers by or on behalf of ASIC from the date of payment of each such amount until the first to occur of (a) such time as Ms Hellicar has paid the costs due to ASIC under Order 4 made on 12 November 2012, or (b) any further order relating to interest on costs in proceedings CA 2009/298427. Reserve liberty to apply on seven days' notice for any further order in relation to paragraph (b).
5. Grant certificate to Ms Hellicar, if otherwise qualified, under the Suitors' Fund Act 1951 in respect of the appeal to the High Court (S176/2011). Mr Brown's Appeal (CA 2012/194824)
6. The respondents ("ASIC") pay two thirds of Mr Brown's costs of this appeal (being CA 2012/194824).
7. There be no order as to costs in CA 2009/298428 in relation to the issues of exoneration and penalty.
8. Mr Brown repay to the Commonwealth of Australia the sum of $3116.82, being five sixths (5/6) of the interest paid to him by ASIC in January 2011.
9. Mr Brown pay interest to ASIC on the costs the subject of Order 4 made on 12 November 2012 on the following basis: In this Order: X equals the total amount of costs and disbursements paid or liable to be paid to ASIC's legal advisers in connection with CA 2009/298428. Y equals the total amount of costs and disbursements allowed on assessment to ASIC in accordance with Order 4 made on 12 November 2012. The Allowed Percentage equals ((Y/X) x 100)%. Mr Brown to pay to ASIC interest on costs and disbursements, at the rates set out in Schedule 5 to the UCPR, on the Allowed Percentage of each amount for or on account of costs and disbursements actually paid to ASIC's legal advisers by or on behalf of ASIC from the date of payment of each such amount until the first to occur of (a) such time as Mr Brown has paid the costs due to ASIC under Order 4 made on 12 November 2012, or (b) any further order relating to interest on costs in proceedings CA 2009/298428. Reserve liberty to apply on seven days' notice for any further order in relation to paragraph (b).
10. Grant certificate to Mr Brown, if otherwise qualified, under the Suitors' Fund Act 1951 in respect of the appeal to the High Court (S177/2011). Mr Terry's Appeal (CA 2012/194902)
11. The respondents ("ASIC") pay two thirds of Mr Terry's costs of this appeal (being CA 2012/194902).
12. There be no order as to costs in CA 2009/298425 in relation to the issues of exoneration and penalty.
13. Mr Terry repay to the Commonwealth of Australia the sum of $3,072.62, being five sixths (5/6) of the interest paid to him by ASIC on 5 January 2011.
14. Mr Terry pay interest to ASIC on the costs the subject of Order 4 made on 12 November 2012 on the following basis: In this Order: X equals the total amount of costs and disbursements paid or liable to be paid to ASIC's legal advisers in connection with CA 2009/298425. Y equals the total amount of costs and disbursements allowed on assessment to ASIC in accordance with Order 4 made on 12 November 2012. The Allowed Percentage equals ((Y/X) x 100)%. Mr Terry to pay to ASIC interest on costs and disbursements, at the rates set out in Schedule 5 to the UCPR, on the Allowed Percentage of each amount for or on account of costs and disbursements actually paid to ASIC's legal advisers by or on behalf of ASIC from the date of payment of each such amount until the first to occur of (a) such time as Mr Terry has paid the costs due to ASIC under Order 4 made on 12 November 2012, or (b) any further order relating to interest on costs in proceedings CA 2009/298425. Reserve liberty to apply on seven days' notice for any further order in relation to paragraph (b).
15. Grant certificate to Mr Terry, if otherwise qualified, under the Suitors' Fund Act 1951 in respect of the appeal to the High Court (S175/2011). Mr Willcox's Appeal (CA 2012/195065)
16. The respondents ("ASIC") pay two thirds of Mr Willcox's costs of this appeal (being CA 2012/195065).
17. There be no order as to costs in CA 2009/298524 in relation to the issues of exoneration and penalty.
18. Mr Willcox repay to the Commonwealth of Australia five sixths (5/6) of the interest paid to him by ASIC in or about December 2010 or January 2011.
19. Mr Willcox pay interest to ASIC on the costs the subject of Order 4 made on 12 November 2012 on the following basis: In this Order: X equals the total amount of costs and disbursements paid or liable to be paid to ASIC's legal advisers in connection with CA 2009/298524. Y equals the total amount of costs and disbursements allowed on assessment to ASIC in accordance with Order 4 made on 12 November 2012. The Allowed Percentage equals ((Y/X) x 100)%. Mr Willcox to pay to ASIC interest on costs and disbursements, at the rates set out in Schedule 5 to the UCPR, on the Allowed Percentage of each amount for or on account of costs and disbursements actually paid to ASIC's legal advisers by or on behalf of ASIC from the date of payment of each such amount until the first to occur of (a) such time as Mr Willcox has paid the costs due to ASIC under Order 4 made on 12 November 2012, or (b) any further order relating to interest on costs in proceedings CA 2009/298524. Reserve liberty to apply on seven days' notice for any further order in relation to paragraph (b).
20. Grant certificate to Mr Willcox, if otherwise qualified, under the Suitors' Fund Act 1951 in respect of the appeal to the High Court (S181/2011). Mr O'Brien's Appeal (CA 2012/194958)
21. The respondents ("ASIC") pay two thirds of Mr O'Brien's costs of this appeal (being CA 2012/194958).
22. There be no order as to costs in CA 2009/298442 in relation to the issues of exoneration and penalty.
23. Mr O'Brien repay to the Commonwealth of Australia five sixths (5/6) of the interest paid to him by ASIC in or about December 2010 or January 2011.
24. Mr O'Brien pay interest to ASIC on the costs the subject of Order 4 made on 12 November 2012 on the following basis: In this Order: X equals the total amount of costs and disbursements paid or liable to be paid to ASIC's legal advisers in connection with CA 2009/298442. Y equals the total amount of costs and disbursements allowed on assessment to ASIC in accordance with Order 4 made on 12 November 2012. The Allowed Percentage equals ((Y/X) x 100)%. Mr O'Brien to pay to ASIC interest on costs and disbursements, at the rates set out in Schedule 5 to the UCPR, on the Allowed Percentage of each amount for or on account of costs and disbursements actually paid to ASIC's legal advisers by or on behalf of ASIC from the date of payment of each such amount until the first to occur of (a) such time as Mr O'Brien has paid the costs due to ASIC under Order 4 made on 12 November 2012, or (b) any further order relating to interest on costs in proceedings CA 2009/298442. Reserve liberty to apply on seven days' notice for any further order in relation to paragraph (b).
25. Grant certificate to Mr O'Brien, if otherwise qualified, under the Suitors' Fund Act 1951 in respect of the appeal to the High Court (S180/2011). Mr Gillfillan's Appeal (CA 2012/194766)
26. Each party pay his or its costs of this appeal (being CA 2012/194766).
27. There be no order as to costs in CA 2009/298440 in relation to the issues of exoneration and penalty.
28. Mr Gillfillan repay to the Commonwealth of Australia the sum of $2,479.61, being two thirds (2/3) of the interest paid to him by ASIC in January 2011.
29. Mr Gillfillan pay interest to ASIC on the costs the subject of Order 4 made on 12 November 2012 on the following basis: In this Order: X equals the total amount of costs and disbursements paid or liable to be paid to ASIC's legal advisers in connection with CA 2009/298440. Y equals the total amount of costs and disbursements allowed on assessment to ASIC in accordance with Order 4 made on 12 November 2012. The Allowed Percentage equals ((Y/X) x 100)%. Mr Gillfillan to pay to ASIC interest on costs and disbursements, at the rates set out in Schedule 5 to the UCPR, on the Allowed Percentage of each amount for or on account of costs and disbursements actually paid to ASIC's legal advisers by or on behalf of ASIC from the date of payment of each such amount until the first to occur of (a) such time as Mr Gillfillan has paid the costs due to ASIC under Order 4 made on 12 November 2012, or (b) any further order relating to interest on costs in proceedings CA 2009/298440. Reserve liberty to apply on seven days' notice for any further order in relation to paragraph (b).
30. Grant certificate to Mr Gillfillan, if otherwise qualified, under the Suitors' Fund Act 1951 in respect of the appeal to the High Court (S178/2011). Mr Koffel's Appeal (CA 2012/195054)
31. Each party pay his or its costs of this appeal (being CA 2012/195054).
32. There be no order as to costs in CA 2009/298441 in relation to the issues of exoneration and penalty.
33. Mr Koffel repay to the Commonwealth of Australia the sum of $2,494.41, being two thirds (2/3) of the interest paid to him by ASIC in January 2011.
34. Mr Koffel pay interest to ASIC on the costs the subject of Order 4 made on 12 November 2012 on the following basis: In this Order: X equals the total amount of costs and disbursements paid or liable to be paid to ASIC's legal advisers in connection with CA 2009/298441. Y equals the total amount of costs and disbursements allowed on assessment to ASIC in accordance with Order 4 made on 12 November 2012. The Allowed Percentage equals ((Y/X) x 100)%. Mr Koffel to pay to ASIC interest on costs and disbursements, at the rates set out in Schedule 5 to the UCPR, on the Allowed Percentage of each amount for or on account of costs and disbursements actually paid to ASIC's legal advisers by or on behalf of ASIC from the date of payment of each such amount until the first to occur of (a) such time as Mr Koffel has paid the costs due to ASIC under Order 4 made on 12 November 2012, or (b) any further order relating to interest on costs in proceedings CA 2009/298441. Reserve liberty to apply on seven days' notice for any further order in relation to paragraph (b).
35. Grant certificate to Mr Koffel, if otherwise qualified, under the Suitors' Fund Act 1951 in respect of the appeal to the High Court (S179/2011).

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