in the matter of QLS Superannuation Pty Ltd (ACN 059 795 998) v Parker [2003] FCA 262 | Case summary

in the matter of QLS Superannuation Pty Ltd (ACN 059 795 998) v Parker [2003] FCA 262 | Case summary | Zoe

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1 The Australian Securities and Investments Commission's ("ASIC") case is now confined to seeking declarations that the first defendant, Mr Parker, contravened s 232(2), (4) and (6) the Corporations Law, an order prohibiting him from managing a corporation and an order that he pay a pecuniary penalty "in relation to each contravention by him of $200,000". 2 QLS Superannuation Pty Ltd ("QLSS") carries on business as the trustee of a superannuation fund, the Law Employees Superannuation Fund ("LES Fund"). It was established by the Queensland Law Society. It is a regulated fund under the Superannuation Industry (Supervision) Act 1993 (Cth). Membership of the Fund is confined to employees of solicitors' practices in Queensland. According to its Annual Reports, the Fund had assets at 30 June 1996 of a little over $13,000,000 and 5,042 members and, at 30 June 1997, assets of over $18,000,000 and 5,477 members. Under the Superannuation Guarantee Charge Act 1992 (Cth), employers are required to provide a prescribed minimum level of superannuation support in each financial year for each of their employees. The LES Fund thus provides a service to Queensland solicitors to assist them in meeting their statutory obligations under the Superannuation Guarantee Scheme. The contributions made to the Fund, in large part if not entirely, come from these employer solicitors: there is no evidence to suggest that contributions of any significant amount have been made by voluntary payments by employees. 3 The Board did not oversee the activities of the trustee of a family trust of which they themselves were beneficiaries or of the trustee of a private trust set up to benefit persons who were to be the object of the settlor's voluntary bounty. The Board had charge of trust funds generated from compulsory contributions made by employer solicitors in respect of their employees intended by Parliament to assist in providing, otherwise than at public expense, for the employees' retirement. The employers have no control over the moneys once they have contributed them to QLSS and, in all probability, would be content in any event to take no interest in QLSS' activities once they are relieved of their own statutory obligations. As Parker commented in his May 1997 paper on superannuation presented to McCullough Robertson, in which he urged that firm to use the LES Fund in order to discharge its obligation with respect to the compulsory superannuation of its employees, he said:

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4 Each employee intended to benefit from the Fund is "neither the legal nor the beneficial owner of the amount that stands to the credit of his [or her] account from time to time" with the Fund until the happening of a prescribed event, such as retirement or death, that will crystallise the member's "account" into an actual beneficial entitlement. See Re Coram; Ex parte Official Trustee in Bankruptcy v Inglis (1992) 109 ALR 353 at 357. At any given time, most members will thus have no interest in any of the Fund's assets and only very limited rights to information from the trustee. Moreover, like the employee members of the superannuation fund I dealt with in Australian Securities Commission v Corplan Nominees Pty Ltd (unreported, 29 April 1994 at 15 and 16), many of the employee members of the LES Fund are unlikely to be vigilant in monitoring the way the moneys in which they are prospectively interested are administered by the Fund trustee, firstly, because a considerable number of such members can be expected to be younger persons not able to obtain access for many years to the moneys that accumulate in the Fund for their benefit and, secondly, because employer contributions paid into the Fund on behalf of individual employees from time to time are likely to be relatively small and, for that reason too, not of great concern to the individual employees. The average account balance of the LES Fund as at 30 June 1996 was only about $2,600 and, as at 30 June 1997, about $3,200. Employer-contributors and Fund members as potential beneficiaries are thus especially dependent on the integrity and competence of their Fund's trustee and those persons who control the activities of the trustee. 5 It is in recognition of these characteristics common to many superannuation funds created with compulsory contributions from employers of the kind administered by QLSS that the Parliament has imposed heavy responsibilities on both the trustees of such funds and the directors of those trustees. Pursuant to s 52 the Superannuation Industry (Supervision) Act, the governing rules of QLSS as trustee of the Fund are taken to include covenants by the trustee, which include the following:

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6 Pursuant to s 52(8) of that Act, each of the statutory covenants binding QLSS as trustee also operates as a covenant by each of the four defendants, as its directors, "to exercise a reasonable degree of care and diligence for the purpose of ensuring that the trustee carries out" those covenants. Contravention of such a covenant by the trustee and by a director entitles a person who suffers loss or damage resulting therefrom to recover the amount of that loss or damage by action against the trustee and the director involved in the contravention: see s 55(3). 7 Because QLSS' business was acting as trustee of the LES Fund with the particular membership that it had and was subject to the statutory covenants, QLSS was bound in conducting its business to conform to the higher standard of care referred to in Wilkinson v Feldworth Financial Services Pty Ltd (1998) 29 ACSR 642 at 693 than that of an ordinary prudent business person which commonly applies to trustees. Each of its directors was in their turn bound to ensure that QLSS satisfied this higher standard of care to which it was subject. 8 In 1993, each of the four defendants, Dr Tarr, Mr Frankcombe, Ms Barrie and Mr Parker, became the four directors of QLSS, with Tarr as Chairman of the Board and Parker as Secretary. Tarr and Parker were the employers' representatives and Frankcombe and Barrie were the employees' representatives on the Board. That remained the position at all times of present relevance. 9 QLSS did not employ staff. Administrative tasks were undertaken for it prior to 30 June 1997 by Parker, in his capacity as an employee of Buck Consultants Pty Ltd and thereafter, in his capacity as an employee of his own company, Just Consulting Pty Ltd. 10 Until late 1996, QLSS invested the superannuation contributions it received from employer-solicitors in a range of funds managed by large professional investment managers. In October 1996, Parker prepared and distributed to the other three Board members his "Future Directions" paper. It is unlikely that it was all Parker's own idea. Parker says that he produced this paper for the Board's consideration after a discussion with Tarr in which they agreed that it was desirable for QLSS to seek better investment returns. 11 The "Future Directions" paper identified a major difficulty for the LES Fund as being that the fund administrator was a Suncorp organisation, which competed with the LES Fund for contributions. The sixteen points identified for discussion in the paper included dropping Suncorp as the fund administrator and establishing a specialist administration company owned by QLSS. Other discussion points were:

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14 It can be seen that the Board did not adopt Parker's recommendation in his "Future Directions - Stage 2" paper to invest $3,000,000 in listed shares through BNP, preferring a more "conservative approach to investments". But it did adopt his other proposals. On the evidence before me, the Board's decision to commit QLSS to a program of commercial lending was not a sound one. 15 From about 1985, Parker had worked in the insurance industry and, in the latter part of this period, had been involved in the sale of superannuation products and then the administration of companies involved in superannuation. He said his experience in managing an investment portfolio and in the making and administration of commercial loans was limited. I have reservations about whether it was as limited as he suggested. In his "Future Directions - Stage 2" paper, Parker claimed experience in the selection of investments for a number of trustee organisations. He had some experience in organising syndicated lending by superannuation fund trustees in his role as a director of EPAS Asset Management Pty Ltd. In March 1997, he gave detailed reasons to the Board why it should approve the first loan made by QLSS, ie, that to Santalucia, and urged the Board to enter into this transaction because: "It is, in my professional opinion, a good investment opportunity." The letter he wrote on 9 May 1997 to Perdriau suggests he may well have had rather more familiarity with the intricacies of commercial lending, including matters such as the assessment of credit risk and prudential steps to be taken by a lender before advancing moneys, than he sought to convey in his evidence. This letter sets out, eg, a number of quite sophisticated loan terms and conditions all of which found their way into the ultimate loan agreement approved by the QLSS Board; it also suggests, in the requirement that Parker informed Perdriau would apply so far as provision of a valuation of use to a mortgagee is concerned, a level of sophisticated knowledge of such matters on Parker's part. The letter also contains statements by Parker that he had a number of investor clients (one being QLSS) who, in effect, would act on his say-so in making loans of up to $2,500,000 available. 16 Parker said that he knew of nothing to suggest that any of Tarr, Frankcombe or Barrie had any experience in commercial lending. It is unclear what experience Tarr had in such matters. Tarr, a lawyer himself, was the Chief Executive Officer of the Queensland Law Society; in about March 1996, he moved to the position of Chief Executive Officer of the Society's newly-established insurer which it had set up to provide professional indemnity insurance that had become compulsory for solicitors. In its Annual Report to members for the 1998 year, the LES Fund recorded that Tarr was also a director and shareholder of another organisation which "arranges group insurance for the many superannuation funds on a co-operative premium sharing basis and offers a collective pricing system that would otherwise not be available to our Fund on its own". He appears to have had considerable commercial experience particularly in the insurance area. Parker said, in his affidavit, that decisions as to the investments QLSS should pursue was the subject of decision by the Board and "was a matter as to which Dr Tarr particularly had significant input". This is confirmed by Frankcombe. Tarr saw Parker's affidavit, but did not comment in his own statement on what Parker had to say here. 17 Frankcombe was a client services manager with a major law firm, McCullough Robertson; he has no professional qualifications and his duties largely involved collecting debts due to the firm. Ms Barrie was employed by the Law Society in its accounts department. So far as the evidence before me indicates, neither of Frankcombe or Barrie had any experience at all in commercial lending. 18 Despite what Parker says was his limited experience in commercial lending and despite the evidence suggesting little such experience on the part of the other three directors, they did not engage skilled assistance to advise them in relation to this new area of investment activity to which they determined to commit QLSS. In the agreed statement of facts, it is recorded that from early 1997 onwards:

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19 Everything with respect to the commercial loans business was done by the Board, with Parker being given by the Board's decision of 14 February 1997 responsibility for seeking out proposals for commercial loans which he thought suitable for consideration by the Board. 20 As I understand it, this statement of facts was agreed only as between Parker and ASIC. But I take it to record the facts which ASIC would, in all probability, have been able to prove if the action had proceeded against all four defendants, something supported not only by QLSS' documents, including Board minutes, but also by the evidence of Frankcombe. 21 Parker was, by early April 1997, much concerned about whether his continuing involvement with Buck Consultants and the fact that they were being retained by the administrator of the LES Fund might create problems for the Fund because Buck would be a "related party". In his "internal working paper" of 9 April 1997, which it appears he circulated to the directors and his note on the same topic to Tarr of 9 April 1997, Parker records his concerns. He invited the Board members' comments, noting: "[m]y preference is to resolve this conflict of interest by resigning from Buck Consultants and terminate all interests in Buck (eg share holdings) and seek separate appointment to QLS under a personal business structure". Parker was keen to develop a secure, long-term relationship with QLSS for himself. He succeeded in achieving this by mid 1997. By 30 June 1997, according to its Annual Report to members, QLSS had terminated the administration contract with Suncorp and established its own administration under Parker. 22 In early June 1997, Parker put a proposal before the Board for QLSS to lend $2,500,000 to Perdriau, who operated a child minding centre on the Gold Coast. It is agreed that by early 1997, Perdriau was in financial difficulties and was seeking to refinance loans owed to financiers totalling approximately $2,350,000. Parker declared a financial interest in this transaction and absented himself from the discussions on this proposal by the other three members and took no part in the decision made by those three to make this advance. The $2,500,000 was advanced to Perdriau on 4 July 1997. He made monthly repayments of interest as had been agreed, from August 1997 until May 1999 (save that he missed the January 1998 payment: Parker agreed to capitalise this instalment of interest and the Board of QLSS did not demur). He made no repayments of interest or capital after May 1999. QLSS ultimately realised its security over the child minding centre. 23 As a result of this loan, QLSS lost a lot of money, a loss ameliorated by ASIC's pursuit of the four defendants. It is agreed that interest unpaid by Perdriau to September 1999 amounted to a little over $100,000. Interest at the non-default rate from October 1999 to November 2001, when QLSS' securities over Perdriau's properties were realised, would have amounted to about a further $500,000. If all this interest is added to the principal of $2.5m and if the net proceeds of realisation of the security and the settlement proceeds received as a result of ASIC's action are brought into account, it appears that the decision of the Board to grant the loan to Perdriau has resulted in the QLSS Fund losing at least about $600,000. 24 In late 2001, ASIC commenced proceedings against Tarr, Frankcombe, Barrie and Parker. It alleged that all four infringed s 232(4) the Corporations Law by, among other things, making and implementing the decision on behalf of QLSS to advance moneys to Perdriau. It also alleged that Parker had further infringed ss 232(2) and (6) the Corporations Law. The proceedings for compensation brought by ASIC against all four Board members, based on s 232(4), was settled shortly before the trial commenced. It appears that they had insurance in respect of liabilities they might incur to the Trust. The insurer agreed to pay an amount equal to part of the damages ASIC had claimed on behalf of the Trust, which amount ASIC considered acceptable. None of the four defendants contributed any of their own moneys. ASIC discontinued its compensation proceedings against all four in so far as they were based on their contraventions of s 232(4). It was a term of this compromise that none of Tarr, Frankcombe, Barrie or Parker was required to make any admission that he or she had contravened that particular provision. 25 ASIC, however, continued its disqualification and penalty proceedings against Parker. It thus seeks declarations that Parker contravened s 232(2), (4) and (6) the Corporations Law, an order under s 1317EA(3)(a) that he be disqualified from acting as a director of any company and that he be ordered under s 1317EA(3)(b) to pay a pecuniary penalty in respect of his contraventions of ss 232(2), (4) and (6). The case against Parker is based on his conduct in bringing Perdriau's application before the Board for its consideration, on his conduct in failing to ensure that the loan conditions set by the Board on 16 June 1997 were complied with before the money was advanced to Perdriau on 4 July and on his being involved in the transaction in the ways mentioned when he and Perdriau had agreed that he was to have a success fee of $50,000 if QLSS approved the loan application. Understandably, in view of the settlement of its compensation claim against all four defendants, ASIC no longer alleges that Parker contravened s 232(4) by joining in the Board's decision to embark upon commercial lending: the case ASIC initially brought against all four defendants included an allegation that each had contravened s 232(4) by permitting QLSS to enter upon the business of making commercial loans without having suitably experienced advisers or risk assessment procedures. 26 Of the other three directors, only Frankcombe gave evidence. His recollection of relevant events is poor. The Court has not heard from the Chairman of the Board, Tarr. A facsimile statement from Tarr was put into evidence. It is quite brief and, in part, so illegible that senior counsel for ASIC had to offer his suggestion as to how the illegible passage should be read. It appears from this short statement (and from the extract from his examination by ASIC that Parker put in evidence) that, like Frankcombe, Tarr claims a limited recall only of relevant events. He is apparently now resident in the USA. But no attempt was made by ASIC to explain why Tarr neither attended Court as a witness nor was available for cross-examination by the kind of video-conferencing facility now commonly in use. ASIC did not rely on anything in Tarr's compulsory examination by ASIC, though Parker's counsel tendered an extract. Some basis was, however, laid by ASIC in its evidence for explaining why the remaining member of the Board, Barrie, was not available to give evidence. 27 In closing submissions, Parker's counsel acknowledged, no doubt on the basis of Parker's concessions in his affidavit and oral evidence, that his conduct in failing to ensure that the conditions of this loan set by the Board were satisfied in the period between the Board's decision of 16 June and drawn down of the loan on 4 July 1997 was such as to amount to a contravention of s 232(4). However, counsel submitted that the case was nevertheless one in which neither disqualification nor a pecuniary penalty order was warranted. Parker opposes the making of findings that his conduct upon which ASIC has focused involved contraventions of s 232(2) or (6). 28 I have said something about the experience of all four Board members in the area of commercial lending. The Perdriau loan was, in fact, only the third loan made by QLSS from its trust funds. QLSS had advanced $1,500,000 to Santalucia on 27 March 1997 and $1,000,000 to Clairview on 4 April 1997. Parker brought both these applications to the Board, just as he brought the Perdriau application before it on 16 June 1997 in the exercise of the responsibility to do that that had been delegated to him by the Board. With the advance to Perdriau, these three loans together represented about 27% of the entire assets of the LES Fund. 29 On 6 March 1997, Parker circulated information to Board members about the Santalucia investment proposal. He said it fell "directly within the October 96 resolution" and provided the opportunity for the fund to participate in a syndicated loan facility with two other superannuation funds. The proposal was for the fund to advance, on 14 March 1997, the sum of $1,500,000, ie, 50% of the syndicated facility sought by the borrower. Parker described the ratio of security to the valuations of the security properties "as very favourable … if in fact the valuations are 'reasonable' for mortgage purposes which I understand from the facility Agent is the basis upon which they have been made". This agent described as "Agent for the Syndicate" was EPAS Asset Management Pty Ltd, of which Parker was then a director. In the proposal Parker prepared for Board consideration, he identified the risks involved in proceeding with the proposal saying: "The level of risk of an individual direct loan is not able to be accurately assessed using market indicators or standardization techniques, but would typically take into account the individual strengths of the borrower (mortgagor) and the security. Notwithstanding the above, a strong loan to security valuation ratio goes a long way towards minimising investment risk". He included other advice directed to minimising risk by procuring valuations of the offered security on a number of specialised bases. He concluded by saying, among other things:

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32 Ellis sent Parker a short valuation dated 3 April 1997 stating: "The property was valued by my firm on 31 July 1996 at $1,500,000 … There has been little movement in the real estate market along this section of the coastline since the valuation was carried out and I confirm that this valuation is still applicable". 33 The arrangement was completed on 4 April 1997 with QLSS funds being advanced through McCullough Robertson on the instructions of Parker. At the QLSS Board meeting of 11 April 1997, Parker tabled these documents relating to the Clairview Island loan and "sought ratification of investment in" Clairview. Parker says that this "loan was dealt with more particularly by Dr Tarr and myself and the Board at some very early date thereafter ratified it". Parker's actions in rushing into this loan and disbursing $1,000,000 of QLSS moneys to the US developers without Board approval suggests he had a high degree of confidence that he would be able to get the Board's ex post facto approval of his action. His confidence was well placed. The Board resolved to ratify Parker's activities. The evidence before me does not otherwise reveal whether Parker discussed this transaction with any other Board members in the five days between when he received the initial approach and when he arranged for the $1,000,000 to be advanced. Parker told Perdriau in his letter of 9 May 1997 that: "I act for a number of clients [who included QLSS] who are direct and substantial investors … Upon my advice, they will place investments". After setting out the terms and conditions that he would require Perdriau to agree to, he said: "If the above is acceptable to you I will arrange for my clients to resolve to make available to you the sum of $2.5 million …". Once again, the confidence that Parker here expressed in his ability to persuade his investor clients to do his bidding was fully justified, at least so far as QLSS was concerned. 34 The Board acted on Parker's recommendation that QLSS make the Santalucia and Perdriau loans and the Board ratified his precipitate actions in disbursing $1,000,000 of QLSS' trust moneys to Clairview. There is no evidence that the Board rejected any lending proposal put up by Parker. The other Board members were not mere rubber stamps for Parker's decisions: they did not accept the BNP share market investment recommendation he made in his January 1997 paper and they imposed terms a little more onerous in some respects on Perdriau, as the price for his loan, than the conditions proposed by Parker to Perdriau and then to the Board. But I accept that Parker had considerable influence with the Board in so far as the other members would very likely act on loan recommendations that Parker saw fit to bring to their attention. They would hardly have delegated to him in February 1997 the responsibility for selecting loan proposals suitable for their consideration if that was not the position. 35 The Clairview loan was an extraordinary investment for a superannuation trustee company. The LES Fund provided two US entrepreneurs with $1,000,000 finance for a maximum of two months to enable them to settle a purchase in circumstances where they planned to repay the loan from speculative sales they hoped to make overseas of the five lots comprising the property. The loan was made on a cursory valuation of the island, the LES Fund's main security for repayment. The interest rate, annualised at nearly 80%, might be thought to reflect the very high level of risk: it is about six times the rate at which financiers were commonly lending on first mortgage security at about this time. In the letter he prepared on 14 May 1997 under cover of which he distributed the Board papers for the meeting of 16 May, Parker said of the Clairview Island investment: "I believe this project is under contract for sale. This will see our investment repaid as anticipated". His optimism was misplaced. By early June 1997, ie, two months after the transaction was entered into, Clairview defaulted. It appears from the limited information before me, including the agreed facts, that it remained in default until January 1998, when QLSS had the good fortune, after obtaining a Supreme Court judgment against Clairview, to recoup the moneys outstanding in respect of the transaction "in full", according to Parker, from a source of refinance that Clairview was eventually able to locate. The evidence does not reveal whether QLSS recouped not only the $1,000,000 principal, but also interest over the six months or so after this loan should have been repaid. 36 What happened at the 16 June 1997 Board meeting, when the Perdriau loan was approved, suggests a high degree of imprudence on the part of Tarr, Frankcombe and Barrie, as well as Parker, in continuing with the activity of commercial lending given their limited experience in that field and their failure to have skilled assistance and proper risk assessment procedures in place. Information put before the Board on that occasion by Parker showed that Clairview had just gone into default by failing to repay its $1,000,000 loan made to it by QLSS only two months before; the Board papers included a letter written by Parker on behalf of QLSS to Clairview's solicitors warning that, unless the outstanding payment was made immediately, QLSS as mortgagee would take such action as it considered appropriate. The Board's reaction to being told at the meeting of 16 June that one of the two loans they had made in this entirely new area of business for QLSS had gone bad was to move on, it would appear, without much if any discussion - none is recorded in the minutes and Parker says there was none - to making the decision to advance a further $2,500,000 of QLSS funds to another commercial borrower, who after a time also went bad. 37 ASIC does not contend that Parker knew prior to 16 June, when the Board approved the loan to Perdriau on his recommendation, or at any time between then and 4 July 1997, that Perdriau was in default under various of the loans which he was seeking to refinance with the $2,500,000 from QLSS. But ASIC submits that Parker was derelict in not making inquiries about the position of the existing loan facilities that Perdriau had. This submission is well founded. I would only add that it is surprising that none of the other three Board members showed any interest in knowing something about the state of these other loans either, before agreeing on 16 June to the loan proposal. 38 At the time the Board approved this loan on 16 June 1997, Perdriau was in serious financial difficulty. He had been in that position for some considerable time. He had a $1,000,000 loan from the Public Trustee of Queensland which he obtained in late 1993. It was for a three year term. On 1 July 1996, the Public Trustee's senior investments officer wrote to remind Perdriau that back in December 1995 the Public Trustee's Investment Board had given instructions "to reduce our Gold Coast property exposure, and that we do not undertake construction finance" (which Perdriau was also then seeking to obtain in connection with the development of his child care centre in addition to altering his existing loan arrangements with the Public Trustee). The senior investment officer also then said:

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40 It was very soon after that Perdriau approached Parker about a loan to refinance this and his other existing borrowings. 41 Between July 1996 and January 1997, Perdriau had raised a loan of $1,000,000 from another financier, MBA Mortgages Pty Ltd. It was due for repayment on 30 June 1997; MBA had informed him that it would not be prepared to rollover the loan and required repayment by 30 June. In July 1996, Perdriau had also raised loans of $200,000 from Derni Pty Ltd and, in October 1996, $200,000 from Sanwa Australia Finance Limited on lease finance. As at early June 1997, he had, for many months, been in default under the Public Trustee loan facility and the Derni facility and had had difficulty in paying a number of the lease instalments to Sanwa on time. By the end of that month, he also had to find $1,000,000 to repay MBA. The $2,500,000 was advanced by QLSS to Perdriau on 4 July 1997. 42 Parker says that Perdriau approached him in April 1997 with a proposal to borrow $2,500,000 to refinance his existing facilities. He reduced his proposal to Parker to writing. In his letter of 21 April 1997, Perdriau explained to Parker his desire to refinance as being driven by a desire to obtain better borrowing rates of about 8.5% then available than the 10% rate of his existing loan facilities. Parker says there was some discussion between the two about why the Public Trustee was not prepared to rollover Perdriau's existing loan. Parker says Perdriau told him that the Public Trustee's decision not to rollover his loan was governed by its change in its lending policies. He also said that the Public Trustee was happy, though the $1,000,000 loan had fallen due back in October 1996, to allow him further time to obtain alternative finance. Parker does not suggest, however, that Perdriau told him or that he asked anything about the state of the other loan facilities, one of which had been in default for a long time. Perdriau sent Parker a copy of a 1993 valuation for the first stage of the child centre he had obtained for the Public Trustee when he originally got his loan from that organisation. He sent it to Parker with a letter from a Public Trustee solicitor, Ms Kennedy, dated 9 April 1997 to Perdriau. Ms Kennedy, in this letter, said:

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44 This letter dealt with only one of the two issues Parker raised with Clarkson. As a response to Parker's queries, it told only half the truth. Ms Kennedy's letter of 12 June is inconsistent with Clarkson's letter to Perdriau of 11 March and her own letter of 9 April, which Parker had. The true position on 12 June was that the Public Trustee had granted Perdriau a number of ad hoc extensions to the 1 November 1996 date for repayment of the $1,000,000 loan while pressing him for repayment under threat of enforcement action. There is nothing in the evidence before me, including the evidence given by Clarkson, to suggest that there was any significant change by the Public Trustee in its attitude to Perdriau between 28 March and 11 June, only a series of requests by Perdriau for further and further extensions. Ms Kennedy's letter of 12 June carefully avoids giving any report of the kind Clarkson says Parker sought. Such a report would have informed QLSS, the potential refinancier, in writing of Perdriau's past and continuing defaults. It can be readily inferred that the Public Trustee was concerned about Perdriau's capacity to repay its $1,000,000 as more and more time passed after 1 November 1996 without Perdriau being able to produce the money. It can further be inferred that the Public Trustee saw Parker's emergence on the scene as an opportunity to extricate itself, without loss, from its relationship with Perdriau. 45 Parker thought it appropriate to seek confirmation from the Public Trustee of Perdriau's statements to him to the effect that he was not in default under the loan from that organisation. Parker had reason, in the form of the copy of Ms Kennedy's letter to Perdriau of 9 April 1997, to be concerned about his repayment history. Yet he accepted Ms Kenney's letter of 12 June, although it did not deal with that history and he did not insist on getting the information he had expressly asked Clarkson to give him on 11 June. Nor did Parker trouble himself with making any inquiries of his own of Perdriau's other three financiers or even with asking Perdriau anything about those other loans. When asked to explain his lack of interest in these matters, he gave this evidence:

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47 Neither in his 11 June Board paper, at the meeting of directors of QLSS on 16 June 1997, nor at any other time prior to the making of the advance to Perdriau did Parker inform the other directors of QLSS of the view that he had formed of Perdriau in March 1997. Parker says that he wrote this report to the EPAS Board of 17 March 1997 "reflecting my thoughts of Mr Perdriau in the strongest terms in order to completely destroy any prospect that the other directors of EPAS would agree with Mr Perdriau and Mr Commins' initial proposal and would authorise me to negotiate a satisfactory outcome on behalf of EPAS". The outcome was that the EPAS Board gave Parker the requisite authority and he says that "in or about March or April 1997" negotiations culminated in a satisfactory outcome with Commins, the other party who, with Perdriau, had sought to negotiate on behalf of Farnan, forming his own company which purchased Farnan's business and took an assignment of the EPAS loan made to Farnan. 48 I do not accept that what Parker had to say about Perdriau in his report to the EPAS Board reflected anything other than his actual assessment of Perdriau in mid March 1997. The gravity of Parker's failures to press the Public Trustee for the information he sought about Perdriau's repayment history and to make any inquiry about Perdriau's repayment history in respect of his other lenders is exacerbated by his having formed this adverse view of Perdriau only a couple of months before he saw fit to recommend Perdriau's application for refinance to the QLSS Board. Parker's failures in these respects suggest, if not an awareness that Perdriau was in trouble meeting his existing borrowing obligations, a conscious decision not to probe too deeply into Perdriau's financial affairs. 49 Parker submitted Perdriau's application for a loan in the sum of $2,500,000 to the QLSS Board by his Board paper of 11 June 1997. In this paper, Parker set out under the heading "Reasons for Re-Finance (verified)" details of his discussions with Clarkson about Perdriau and said:

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64 In January 1997 Taylor Byrne had prepared a valuation report of the child care centre as at 9 January 1997 for Perdriau. Parker got this from Perdriau prior to 16 June 1997. This was one of the only two valuations he had prior to the Board meeting of 16 June. This Taylor Byrne valuation, prepared for and addressed to Perdriau, was obtained by him to assist him in seeking refinance of his existing loan facilities. It covered only Stage 2 of the centre and the swimming centre. Taylor Byrne valued this part of Perdriau's operation at a total of $2,250,000. Parker said, of the only other valuation he had before the 16 June Board meeting, that he had received from Perdriau not only Ms Kennedy's letter to Perdriau of 9 April, but also the valuation referred to in her letter: that had been prepared by an internal Public Trustee valuer in May 1993; it relates only to Stage 1 of the centre. Parker said he discussed this 1993 valuation with Tarr, who told him it was too old to be of use. After referring at one point in his affidavit to this 1993 valuation and the Taylor Byrne January valuation of Stage 2, Parker returned, at a later stage of his affidavit, to the topic of valuations. He here says "at some stage I recall discussing the valuations [plural] with respect to the TSCEC which had been prepared by Taylor Byrne Valuers [only one had been prepared by that firm up to that time] with Mr Hamilton of that firm. The contact was made by me by telephone prior to the settlement of the loan with Mr Perdriau. I cannot now recall the precise date of the conversation. However, it would have been between 16 and 30 June 1997." Parker then sets out the substance of what he claims was his conversation with Hamilton, including his request that Hamilton update the latter's Stage 2 valuation of January 1997 and address it to QLSS. He makes no further reference to receiving such a valuation, although he goes on to say that: "the updated valuation of stage 1 of the TSCEC by Taylor Byrne dated 19 June 1997 was forwarded to me by McCullough Robertson on 30 June 1997". Between 25 June and 30 June 1997 Taylor Byrne prepared a valuation report of Stage 1 as at 19 June 1997, also addressed to Perdriau. Taylor Byrne were never asked for and never provided a valuation report addressed to the Board of QLSS in relation to the property offered by way of security. Hamilton says he was never contacted by anyone on behalf of QLSS about either his Stage 1 or Stage 2 valuation, his instructions to make his 19 June valuation of Stage 1 coming in a telephone call from Perdriau on 16 June 1997. He sent this June valuation to Perdriau's solicitors, who passed it on to McCullough Robertson on 30 June. It was from McCullough Robertson that Parker got this June valuation of Stage 1, not Hamilton. I accept the valuer, Mr Hamilton's, evidence in preference to Parker's. 65 The Taylor Byrne Stage 1 and Stage 2 valuations each stated:

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68 The loan to value ratio in respect of the proposed loan was therefore approximately 72%, close to the least favourable ratio the Board was prepared to accept as satisfying the valuation condition it fixed for the loan. Parker had repeatedly stressed in the various papers he presented to the Board in connection with QLSS' entry into and conduct of its commercial lending business, the need for reliable valuations confirming a substantial margin between the amount of the loan and the amount likely to be realised from the security property. It is to be noted that in his letter of 2 July 1997 to Tarr in which he referred, without further comment, to having by then obtained valuations for Stage 1 and Stage 2, he informed Tarr: "Based on the loan application of $2.5M this will give a 72% LVR which falls inside the Board's conditions". The loan to valuation ratio of 72% to which Parker drew Tarr's attention has particular significance in view of the qualifications set out by Taylor Byrne in their January 1997 valuation which Parker had prior to the Board meeting of 16 June and which I accept was made available to the other three members at that meeting. It provides yet another reason why the Board's decision to make the loan was imprudent. 69 Both valuations were addressed to Perdriau. Parker did not have the Taylor Byrne valuations assigned to QLSS, ie, he did not obtain a statement in writing from Taylor Byrne to the effect that QLSS was entitled to rely upon the valuations for the purpose of advancing $2,500,000 to Perdriau secured over Stage 1, Stage 2 and the swim centre. 70 The agreed facts state that if Parker did not know the valuations contained the qualifications in par 61(d) above, he ought to have known that. Though he had the January valuation for a time prior to the Board meeting of 16 June, Parker cannot have looked at it. If he had he could not have put it before the Board on 16 June without comment. That valuation was of Stage 2 only; it is of an amount of $2,250,000, well below the $2,500,000 that Perdriau was seeking and very greatly below the loan to valuation ratio which the Board expressly adopted, on Parker's recommendation, as one of the conditions upon which it was prepared to make the $2,500,000 advance to Perdriau when it made that decision on 16 June. Nor did he bother to read the 19 June valuation which he says that he received from McCullough Robertson on 30 June 1997. He said he looked only at the "bottom line", ie, the $1,220,000 figure, and did not consider any of the qualifications set out in the valuation. These qualifications appear at the end of the valuation under the heading "CONCLUSION"; they are the same as those mentioned in the valuation of Stage 2 of January 1997 already set out. 71 ASIC contends that Parker did not bring the January valuation of Stage 2 - all he then had - to the notice of the other three Board members on 16 June. It is, I think, clear enough from the absence of any copies of this valuation in the papers produced to ASIC in response to statutory notices by each of Tarr, Frankcombe and Barrie, that they did not have among their own papers such copies. Parker says that, while his practice was to copy to each board member all relevant papers for use at board meetings, if a document came to hand only after he had circulated the board papers for a forthcoming meeting, he would not necessarily photocopy that to all the members, but would table the original document at the meeting. He says he thinks he did this on 16 June. I accept that Parker did make the Taylor Byrne January 1997 valuation available to the other Board members at the 16 June meeting. 72 Only Frankcombe of the other three board members gave evidence. At his compulsory examination, he appears to have been quite certain that he saw a valuation of Perdriau's centre before the decision to make the advance was made by the Board. He said then: "I do remember seeing a valuation because we made a decision based on that valuation but I can't tell you exactly what the valuation was like." At the time he was being asked to identify whether a particular valuation document was the one to which he was referring. At trial he was still certain he saw a valuation; but he was less certain as to whether he saw it before, during or after the meeting of 16 June. 73 The information provided by Tarr is confined to a short facsimile statement partly illegible. He says of the Taylor Byrne January valuation:

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79 (They had only seen the June Stage 2 report.) Not even this provoked Parker into checking to see if the valuation conditions of the loan had been fully met. 80 The loan conditions required Perdriau to forward to Parker an independent valuation of the entire property prepared on three different bases from Taylor Byrne addressed to the Board. Parker did not follow that up. Nor does it appear he even bothered to read either of the two valuations. All that is extraordinary: in his various reports to the Board, Parker repeatedly emphasised the importance of reliable valuations as protection for QLSS against loss in respect of commercial loans. In his letter of 9 May to Perdriau, he expounded upon the importance of valuations of the centre on a number of different bases. He thought that important enough to recommend that it be a condition of the loan that just such differently based valuations be provided to QLSS. And it was only when McCullough Robertson drew his attention to the manifest deficiency in the one valuation it received from Perdriau's solicitor on 30 June that Parker, on 2 July, drew the attention of Tarr to the incomplete valuation material that was all the Board had available to it up to that date, the eve of settlement of the loan transaction. 81 It was another condition of the loan that a copy of Perdriau's profit and loss account for the eleven months to May 1997, which Parker had forwarded to McCullough Robertson, be verified by an appropriate accountant. Another condition of the loan required independent verification of a number of key business indicators. The indicator figures referred to in this condition were, in fact, provided by Perdriau to Parker in their early discussions about the possibility of Parker procuring the loan for Perdriau. In his letter of 9 May 1997, Parker told Perdriau that substantiation of these "key numbers provided by you" would be required before final settlement. McCullough Robertson made it clear in their letter of 20 June 1997 to Parker that they did not themselves intend attending to these matters unless Parker specifically told them to do so. He did not respond. Nor did he trouble himself with these two critical matters either, just as he had not troubled himself with checking that there was valuation material that satisfied the relevant loan condition. Yet, as will appear, his evidence is that, without any need to do so, he took it upon himself on 23 June to do something of no apparent importance at all to, viz, to write to the Gold Coast City Council about Perdriau's rates. 82 It is agreed that:

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86 Just Consulting received payment from Perdriau of a fee of $37,500 in consideration of Parker having arranged the loan. Though Parker had informed Perdriau in his letter of 9 May 1997 that Perdriau would be required to pay Parker a fee of $50,000 "on completion of the loan advance" which he assured Perdriau he could arrange, Parker agreed to take this reduced fee from Perdriau because the latter complained that Parker had offered the loan at 9% when QLSS only approved it at the higher rate of 9.5%. 87 The Board in October 1996 agreed to Parker's proposal in his "Future Directions" paper that he be remunerated in respect of new business that he brought into the LES Fund "on a success factor basis". Parker, at one point, emphasised that "there was no fee payable to me at all" in respect of either the Santalucia or Clairview loans. That is not accurate. He proposed by his letter of 6 March 1997 to Board members and was apparently paid through his then employer, Buck Consulting, for the loan he arranged for Santalucia on an hourly rate "for my time and effort in this matter" rather than on any basis that could be described as a "success factor basis". Parker also said that he believed Buck Consulting, for whom he was then working, would have charged the LES Fund on a similar basis for the time he spent arranging the loan by the Fund to Clairview. That he was not paid in respect of these transactions by QLSS itself on the agreed "success factor basis" is no doubt explained by the fact that he introduced these transactions to QLSS in his capacity as an employee of Buck Consulting. But he introduced the Perdriau transaction to QLSS on his own account through his company, Just Consulting. 88 Perdriau is the most important witness on the issue of Parker's knowledge of his financial position. However, the Court has not heard from him. I was not prepared to admit into evidence a written statement provided by Perdriau to ASIC under the Evidence Act 1995 (Cth): ASIC chose to rely only on a cursory note from a doctor at the hospital in which Perdriau was apparently a patient at the time of the trial. No attempt was made to explain why, even if Perdriau could not attend court, he could not be cross-examined in hospital. 89 It is difficult, however, to accept that Parker was not, prior to the board meeting of 16 June 1997, aware that Perdriau was facing financial difficulties and was dependent on the QLSS loan to escape from those difficulties or at least aware that Perdriau was very likely in that situation. At the very least, the evidence shows that, even if he did not know the extent of Perdriau's financial problems with his existing lenders, Parker deliberately chose not to inquire into that area. 90 I have referred to the communications between Parker and the Public Trustee in which the former sought both confirmation of the reason for the Public Trustee's decision not to refinance Perdriau and a report with respect to Perdriau's loan repayments and in which he received the carefully worded letter from Ms Kennedy that dealt only with the first issue. He had reason in the form of Ms Kennedy letter of 9 April to Perdriau to seek confirmation about both matters. It is difficult to accept that even a busy man, who had taken the necessary as well as obviously prudent step of seeking information from an existing large lender that included a report on the borrower's repayment history, would overlook that he had not been given that important information. If he had insisted on that information and got it or was refused it, it is unlikely that even the Board of QLSS would have approved the $2,500,000 loan. I have also referred to Parker's wholly unexplained failure, notwithstanding his justifiable distrust of what Perdriau told him about the state of his loan with the Public Trustee and the poor opinion he had but recently formed of Perdriau, to seek any information at all with respect to Perdriau's other loans. 91 Further, as at 23 June 1997, rates had been paid by Perdriau in respect of the child care centre only up to 31 December 1995. By the time the January notice fell due for payment, ie, by about February 1997, rates of at least $6,729 which had become payable over a period of eighteen months in respect of the child care centre were then overdue. Moreover, the rates on his residence on the Gold Coast were also then in arrears. I am satisfied that Perdriau had some discussions with Parker about these unpaid rates. 92 On 18 June 1997, a Council officer, Potter, wrote to Perdriau referring to their discussion the previous day, saying: "Please find attached schedule of rates which shall be overdue as at 30 June 1997". The schedule states the total accumulation of the rates, together with interest on those overdue rates that would be overdue as at 30 June 1997 for Perdriau's home, the child care centre and his other properties. The total amount of these rates was $15,985, with $9,765 being for the child care and swimming centre. Though the Council wrote to Perdriau about the state of the rates on both the child care centre, his home and his other properties on 18 June 1997 in neutral terms well capable of suggesting that the schedule attached to the Council's letter showed the amount of rates that would become due only on 30 June 1997, evidence from the Council's rate records, undisputed, shows that the true position then was that Perdriau had long been unable to pay accumulating rates on both the child care centre and his home. More than a year's rates would be overdue on the centre on 30 June. 93 Parker got this Council letter of 18 June from Perdriau. The Council's letter of 18 June 1997 does not call for any response. However, it was Parker who responded with his letter of 23 June 1997 to Mr Potter, the author of the Council's letter. In it he said:

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96 The clear inference is that Parker wrote his letter of 23 June 1997 at Perdriau's request to assure the Council that at least the bulk of the rates would be paid in the near future. In his written statement, Parker does not deal with this letter. His counsel only produced Parker's letter of 23 June 1997 during the course of the hearing, though he pointed out it had been listed in Parker's verified list of documents. Parker's oral explanation for this letter was that he wrote it to seek confirmation from the Council that the Council schedule given him by Perdriau accurately stated the rates that were payable on the property in respect of which Perdriau was seeking the loan. He did not, however, explain why he felt the need to seek such confirmation himself when McCullough Robertson had told him in their letter of 20 June and the enclosure that that was one of the matters they did intend to look after. He also said that when he wrote this letter, he thought at the time that no rates were outstanding, but that the schedule set out what would be the position on 30 June 1997 and that it did not occur to him that Perdriau needed the funding in order to pay some of his operating costs. That cannot be reconciled with what he wrote in his letter of 23 June 1997. The probabilities are that Perdriau, who must have been well aware of his indebtedness to Council, spoke to Parker about the latter sending a letter of comfort to the Council to say that the outstanding rates would be cleared out of the QLSS loan proceeds that would be available to Perdriau in a few days. 97 McCullough Robertson wrote to Parker on 3 July stating, among other things, that they had been provided by the borrower with current rates notices: "which show that there are no arrears of rates or Council charges for the properties". It appears that on that same day McCullough Robertson had received a facsimile from Perdriau's solicitors which states: "copy rates notices enclosed. Also copy printout from Council advising amounts due as at the 30th of June 1997". The notices are inconsistent with the true position as to a large amount of rates being overdue, according to Council's own records: the overdue rates were only paid out of the loan moneys on 4 July 1997. The printout enclosed is a copy of the schedule attached to the letter of 18 June 1997 from Potter to Perdriau, to which I have referred, edited to disclose only the position in respect of the child care centre. Whatever be the explanation for the inconsistency between what McCullough Robertson had to say and the position as recorded in Council's records, that does not detract from the fact that the evidence to which I have referred shows that in late June a substantial amount of rates were overdue by Perdriau in respect of the child care centre and his other properties over a long period prior to 30 June 1997 and that Perdriau and Parker knew that. 98 Parker consistently rejected suggestions that he brought the Perdriau loan application to the Board, that he did that on incomplete material and that he allowed the loan to proceed to settlement after Board approval without taking any action to ensure that the loan conditions had been satisfied all because he stood to earn the $50,000 success fee. But he was prepared to acknowledge that his performance in these various respects was grossly deficient. In cross-examination, he said of his failure to put necessary material before the Board on 16 June:

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101 When, in a forensic flourish, cross-examining counsel in this last question sought to emphasise the extent of Parker's dereliction by seeking confirmation that he was not purporting to rely on ill health or anything like that as an excuse, Parker took that suggestion up and referred, for the first time in the case, to personal difficulties that he said he was "quite sure" would have contributed to that dereliction. His evidence here smacks of opportunism. That was the first and last that was heard in the entire case of Parker being embroiled in personal difficulties in June/July 1997 that might be relevant to his extremely poor - unforgivably poor, to adopt his words - performance of his duties. In a lengthy passage in his witness statement, Parker sets out the disruption caused to his life as a result of his involvement with QLSS and the ASIC investigation into the matters the subject of this action. He deals too with his personal relationship with his wife over this period and, in setting out his limited assets, he refers the impact his recent diagnosis as a diabetic will have on his capacity to obtain disability insurance. He is at pains to set out here the various matters he considers important as relevant to both the disqualification and penalty applications by ASIC. Nowhere does he seek to suggest that in May/June/July 1997 he faced personal turmoil that might have had an impact on how he then failed to properly perform his duties. 102 The constitution of QLSS relieved a director from having to account to the company for a profit the director earned in connection with the company's business if the director made a proper disclosure at the meeting of directors at which the transaction was dealt with. Whether such a provision is consistent with the statutory covenants binding QLSS need not now be considered. It can be accepted that only a disclosure that is in "sufficient detail for the board as a whole to understand the scope of the benefit and potential profit to the director" will have this effect. See Camelot Resources Ltd v MacDonald (1994) 14 ACSR 437 at 443. Notwithstanding the Board's agreement to him being paid success fees, Parker as a director of QLSS was subject to heavy fiduciary obligations at the time the Perdriau loan was discussed by the Board because of the nature of QLSS' business as trustee of the superannuation fund and the newness of its activities in commercial lending. I accept that Parker could not avoid his fiduciary obligations as a QLSS director merely by declaring that he had an interest in the loan being approved and by absenting himself from the Board when it discussed the proposal: see Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187 at 240 - 241 and Centofanti v Eekimitor Pty Ltd (1995) 15 ACSR 629 at 631 - 632. 103 In developing its argument that Parker abandoned QLSS' interests in order to pursue his own financial interests, ASIC submitted that Parker's disclosure in his Board paper of 11 June 1997 set out above was inadequate and misleading. 104 It is agreed that in his 11 June paper and at the meeting of the directors of QLSS held on 16 June 1997, Parker informed the other directors of QLSS that:

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106 The disclosure suggested that the fees were payable to Parker in respect of services rendered and to be rendered in relation to Perdriau's businesses, which included assisting him to refinance his business and providing advice to him in respect of other projects. ASIC says that, in truth, Parker's relationship with Perdriau was confined to an entitlement to be paid the success fee if QLSS approved Perdriau's loan application; ASIC points to the agreed facts set out above. 107 Notwithstanding the agreed facts, Parker now says his disclosure was not inadequate or misleading. Parker says the reference in his letter of 11 June to providing other services to Perdriau was a reference to the discussions which he had had concerning the establishment of alternative finance for the child care industry and that he intended to disclose that his relationship with Perdriau would be ongoing and therefore more substantial than an involvement with him that was limited to this particular loan transaction and to it alone. In his affidavit Parker said that, in the course of dealing with Perdriau and Commins in relation to Farnan's dispute with EPAS, he had discussions with Perdriau about the establishment of a national scheme for providing finance to child care centres that did not involve banks with whom a number of child care centre operators were experiencing difficulties. He also said that a particular proposal discussed was that the Australian Child Care Centres Association might be able to obtain bulk finance from a financial institution and then re-distribute that finance by way of loans to various child care operator members of the Association, of which Perdriau was treasurer. In the letter of 7 July 1997 under cover of which Parker sent Perdriau the invoice for his $37,500 fee, he said "I look forward to working with you on the ACCA refinance pool proposal". Given this confirmation of what Parker says about anticipating an extended relationship with Perdriau, I think that his disclosure to the Board was not inadequate or misleading in so far as it asserted that he had a relationship with Perdriau which, in effect, was more extensive than the right to a success fee if the loan application was approved. 108 ASIC also attacks the adequacy of Parker's disclosure because he did not reveal the quantum of the fee he was to be paid if the Board approved Perdriau's application. Whether the Board would have demurred at the proposal to lend the $2,500,000 to Perdriau if Parker had disclosed that he was to be paid a success fee of 2% of that figure can be doubted. As already noted, the Board, at its 1 October 1996 meeting, resolved to adopt all of the proposals made by Parker in his "Future Directions" paper. These included recommendation no 9, by which he proposed that he would expand his role as Fund Secretary to include Marketing and Promotion and would be remunerated on a "success factor basis". The propriety of the Board of the trustee of a superannuation fund with membership like that of the LES Fund making such an arrangement with one of the directors does not need to be considered now. The QLSS Board minutes of 27 July 1999 record that each of Frankcombe and Barrie were asked by the new chairman, Mr Short, whether, if they had been aware of the amount of fees payable to Parker by Perdriau, they would still have agreed to the loan and both said they would have. The Board's willingness to accept Parker's proposals to loan money to Santalucia and Clairview supports this conclusion. The absence of evidence suggesting that a 2% fee was excessive or beyond the range of fees that brokers might charge for placing finance with borrowers does too. 109 I am not prepared to find that Parker made a disclosure of his interest in the Perdriau loan being approved which was, in all the circumstances, inadequate or misleading. 110 I have reservations about the extent to which Parker can be relied upon as a witness. But I am not prepared to find that he put the Perdriau loan proposal before the Board actually knowing that Perdriau was in financial difficulty, as it is now agreed he then was, because Parker's dominating interest was in earning the $50,000 success fee he had bargained for with Perdriau. There is reason to suspect that he may, by reason of his knowledge of the rates position, have been aware that the reasons Perdriau had given him for seeking refinance may not have been the true ones and that Perdriau may have been in some financial difficulty. He was concerned to obtain information about Perdriau's financial position from the Public Trustee. Yet he was content to be fobbed off with an inadequate response by the Public Trustee to his inquiry. This also suggests that he had reason to be wary of what he was told by Perdriau about his reasons for refinancing. His failure to make any inquiry at all of Perdriau's other lenders, for which failure he could offer no explanation at all, suggests that he had decided not to inquire any further than he was forced to into Perdriau's affairs. But Parker had just been successful in negotiating with the Board for him to become involved in what was anticipated to be a long term relationship from which Parker could expect to earn significant ongoing income. I doubt that he would have jeopardised that new relationship, practically at its outset, to earn the fee from Perdriau if he had known that he was proposing to the Board that they enter into a transaction very likely to result in substantial loss to the LES Fund. I think, however, he deliberately shut his eyes when he knew that vigilance was required in seeking out information as to Perdriau's financial position in order to properly perform his duties to QLSS. I have come to the conclusion that his conduct was not deliberately dishonest, in that he decided to keep back information from the Board that he knew would kill Perdriau's prospects of obtaining a loan in order to earn the success fee he had negotiated with Perdriau. I think his conduct up to 16 June can most accurately be characterised as conduct engaged in by him with a reckless disregard for the proper performance of his duties as a director with delegated responsibility for identifying for consideration by the Board commercial loan proposals that might be suitable investments for QLSS in carrying out its role as trustee of a superannuation fund. Though I am not prepared to find that he deliberately sold out QLSS in order to earn the success fee, the prospect of a substantial fee, if the proposal was approved by the Board, played a part in Parker adopting the attitude that he did. 111 Parker's conduct after 16 June in abandoning entirely his duty to ensure that the conditions upon which the Board approved the loan to Perdriau were satisfied before permitting disbursement of the $2,500,000 advance could readily be explained as the actions of a person who was prepared to permit the company of which he was a director to take the decisive step of paying over money which he knew was, in large part at least, at serious risk of being lost, in order to ensure that his own personal expectation of pecuniary advantage was realised. However, the difficulty I have in finding that he acted as he did between 16 June and 4 July 1997 because he wanted to advance his own financial interests, though knowing that that would very likely mean loss to QLSS, is that such a view of things is in conflict with the trouble Parker had taken to establish the recently consummated relationship with QLSS that I have no doubt Parker expected would be a remunerative one for him in the long term. His conduct between 16 June and 4 July 1997 must, however, be regarded as showing a high degree of reckless disregard for the proper performance of his duties as a director with the responsibility for overseeing and ensuring that the loan conditions fixed by the Board were satisfied before permitting the loan moneys to be advanced to Perdriau. I do not doubt that the prospect of receiving the success fee once the loan was finalised contributed to Parker's reckless conduct in the period between loan approval and draw down. 112 While I think Parker may have had rather more experience in evaluating commercial loan proposals and the risks of commercial lending than he was prepared to admit to, I do not think he was particularly skilled or experienced in that. But notwithstanding this, he appears to be a man with an abundance of confidence in his ability to oversee and manage complex commercial activities. He was confident, without having any real reason for being so, in proposing that the Board, which he believed had no experience in the area, should adopt a higher risk investment strategy than it had hitherto followed in reliance on Parker's ability to select suitable investment proposals. His precipitate conduct in committing the LES Fund to the manifestly risky Clairview proposal without prior Board approval and his confidence in informing Perdriau that he had clients who would act on his recommendation also suggest this. I am inclined very much to think that the reckless disregard for the interests of fund members that he displayed in putting up the Perdriau proposal to the Board and the blatantly reckless conduct he displayed in failing to ensure that the loan conditions set by the Board were satisfied before permitting Perdriau to get his hands on the money resulted from an unfounded, over-confident assessment by him of his own ability to properly manage other people's money. 113 Section 232(4) the Corporations Law provides:

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121 I have explained why I do not think Parker's disclosure of his interest in the Board approving the Perdriau application was inadequate or misleading. But, quite apart from that consideration, Parker was delegated by the Board and accepted responsibility for identifying borrowing proposals suitable for approval by the Board. He put up the Perdriau application in the circumstances I have described, which involved a reckless failure to check Perdriau's repayment history. He also had the responsibility for ensuring that the conditions upon which the Board approved the loan to Perdriau were satisfied before draw down. I have explained why I consider he acted in reckless disregard of that responsibility too. He was acting in both capacities as the director of a company which was the trustee of the superannuation fund with the membership characteristics I have described. In both areas of the Perdriau transaction, Parker, in my opinion, breached the standards of conduct to be expected of him having regard to all the circumstances and thus made improper use of his position. 122 By his letter of 9 May 1997, he required Perdriau to agree to pay him a fee of 2% of the amount advanced "on completion of the loan advance" before he would put Perdriau's application for finance before his clients. At trial, he said that if Perdriau had not agreed to pay this success fee: "I would most probably have terminated my services with him" ie he would not have taken the application to the Board of QLSS. One of his objects in putting the Perdriau application before the Board and in allowing it to proceed to settlement was thus to earn, ie, to gain, the success fee that Perdriau had promised. 123 Parker therefore contravened s 232(6). 124 The object of the disqualification power in s 1317EA(3)(a) is "not punitive". The section is "designed to protect the public and to prevent the corporate structure from being used to the financial detriment of investors, shareholders, creditors and persons dealing with the company": see Re Magna Alloys & Research Pty Ltd [1975] 1 ACLR 203 at 205. A detailed discussion of the considerations relevant to the determination of disqualification periods under the Corporations Law is contained in the judgment of Santow J in Australian Securities and Investments Commission v Adler [2002] NSWSC 483 at pars [55] and [56]. In par [56], his Honour says that the factors that led to the shortest disqualifications, "that is disqualifications for up to 3 years" included:

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125 Since the power of disqualification is protective of the public interest and not punitive, I do not think that, in determining upon the disqualification or whether it should be imposed on Parker, I am entitled to take into account the fact that ASIC has decided not to pursue disqualification proceedings against the other three directors of QLSS. 126 Parker's counsel submitted that the discretion to disqualify him from acting in the management of a company is not enlivened because there is no evidence that he is presently unfit to manage a corporation: by s 1317EA(4) the Court is not to make a prohibition order under s 1317EA(3)(a) if it "is" satisfied - ie at the time of decision - that, despite the contravention, the person is a fit and proper person to manage a corporation. I reject that submission. 127 The fact that he may not have been responsible for causing harm to the interests of persons involved in superannuation funds in particular since the events the subject of this action does not, of itself, serve to show that the discretion to disqualify is not enlivened. The quality of his conduct while a director of QLSS, particularly in the period from late 1996 to mid 1997, is such as to show that he remains unfit, despite his past experience in the insurance and superannuation area, to be in a position where he can influence the investment decisions of an organisation carrying on the business of managing superannuation fund moneys. Parker's conduct in June/July 1997 was detrimental to the interests of members of the LES Fund. It constitutes serious misconduct. In large part, he admits his conduct was unjustifiable. 128 Further, QLSS terminated the services of Just Consulting, and with it Parker's services, in May 1999. Thereafter, Parker continued to be involved in providing advisory services to three other superannuation funds. Parker says he made the decision sometime in 2000 to terminate Just Consulting's business in providing advisory services to these superannuation funds because of the cloud caused by the ASIC investigation into his own conduct. After a short time out of the superannuation industry, he took up in February 2001 what appears to be a senior position with a superannuation and group life insurance management company. This employment was terminated in July 2002, when the ASIC action against him became public knowledge. The sensitivity of those in the superannuation industry, at least in more recent times, to having people of perceived probity and competence in positions of influence in the industry is illustrated by the hostility Parker says he attracted from fellow workers in that industry, once knowledge of the ASIC investigation into his activities with QLSS became known and by the reasons he was given by his employer's managing director for terminating his employment in 2002. It is apparent that, though Parker may not have engaged in any conduct that might demonstrate unfitness to be the director of a company involved in managing or administering superannuation funds after July 1997, the nature of his conduct up to that time, which is the subject of the ASIC action against him, was considered by a range of people in the superannuation industry as rendering Parker unfit to be involved in that industry in 2002. It is understandable that Parker's conduct here in question should be seen, even some years later, as leaving him with a still-enduring stigma. I have referred to the statutory features of the superannuation industry regulating the activities of funds like the LES Fund and the practical considerations flowing from the nature of the particular Fund's membership and the compulsory element that puts the Fund in the position of being in control of the moneys of others. These considerations show why reasonably minded observers expect a high level of probity and competence on the part of those involved in the management of superannuation funds. If the Court were not to impose any disqualification on Parker now, that might well be represented as a degree of vindication of Parker. 129 I do not accept counsel's submission that Parker is entitled to recognition because he frankly acknowledged his poor performance and did not attempt to excuse actions which he accepts cannot be excused. The quality of his performance, particularly in failing to take any action to ensure that the loan conditions were satisfied before permitting the moneys to be advanced, is so gross that I do not see his so-called frank admissions as telling much in his favour: rather does Parker accept that any attempt to defend his conduct has no prospect of succeeding. It is, I think, more revealing of Parker's attitude that, though accepting that his conduct was indefensible, he still says that no disqualification or, at worst, a limited disqualification is all that is warranted. 130 These considerations, coupled with his conduct in June/July 1997 as I have described it, show, in my opinion, that he is not now a fit and proper person to manage a corporation that has any involvement in managing or administering others' funds. 131 It was submitted by Parker's counsel that, even if a disqualification order were to be made, it would be appropriate to limit the disqualification so as to permit him to manage his own company, Just Consulting. An undertaking was offered on behalf of Parker to that effect to avoid any disqualification being ordered. 132 I do not accept that it is appropriate to permit Parker to manage his own company. Its business included the provision of advisory services to three other superannuation funds into, it would appear, 1999 or 2000. It appears Parker is keen to get back into the superannuation industry in which he has spent a good deal of time between 1986 and July 2002 and can be expected to operate that company as he has in the past, as his vehicle for doing that. It is the management level of that particular area of business activity from which I think he should be excluded. 133 I do not consider it appropriate, given the quality of Parker's conduct, to impose a partial or limited disqualification. In my opinion, a substantial period of disqualification, four years, is appropriate. 134 In Australian Securities Commission v Donovan (1998) 28 ACSR 583, it was said, at 37 - 38, of the power conferred on the Court to impose pecuniary penalties:

[176]

136 A detailed discussion of the considerations relevant to the fixing of the appropriate pecuniary penalty under the Corporations Law provisions here in question appears in Adler at par [125] to [132]. 137 On the findings I have made as to the quality of Parker's relevant conduct, it would be appropriate to impose a not insubstantial amount by way of pecuniary penalty, either in the form of a single penalty or of a penalty in respect of Parker's conduct in putting Perdriau's application before the Board and his later conduct in failing to oversee compliance with the loan conditions. Having regard to the fact that he received a benefit of $37,500 and the character of his conduct constituting the contraventions of the three provisions here in question, a substantial penalty, discounted to a significant extent to reflect his personal circumstances and his good character, including the testimonials evidencing that, would be appropriate. 138 However, the loss inflicted on the LES Fund as a result of the Perdriau transaction was not caused only by the conduct of Parker. The other three directors, and particularly Dr Tarr appear to have, on the evidence before me, a significant share of responsibility for that. I recognise that because ASIC has elected not to pursue proceedings against these three directors and they are in consequence not represented in these proceedings, I am not in a position to form anything like a final view on the quality of their conduct. But the evidence before me, limited though it therefore is, suggests that these directors contributed significantly to the loss suffered by the LES Fund as a result of the Perdriau transaction by conduct well capable of constituting a contravention of s 232(4). They committed QLSS to commercial lending of LES Fund's moneys, when the Board lacked expertise in that area, without putting in place prudential controls; they approved the loan to Perdriau, though that meant that, with the earlier two loans, over a quarter of the Fund's entire assets had been lent out in this new area of business, without taking the trouble to look closely at the proposal and, in particular, they approved this loan at about the same time the second of the loans made by the Board on behalf of the LES Fund had gone into default. That all suggests conduct on their part pointing to each falling well short of conduct required of the Board of the trustee of a superannuation fund like LES Fund that was causative of the loss suffered from the Perdriau transaction. 139 Since the object of the penalty provision is punitive, I think I can take into account the fact that ASIC has chosen to pursue Parker alone of the four directors. Disparity between the sentences imposed on co-offenders can justify an otherwise appropriate sentence imposed on one of the offenders being reduced. In Lowe v The Queen (1984) 154 CLR 606, the High Court identified the reason for this sentencing principle in the fact that, in some circumstances, the disparity may be such as to give rise to a justifiable sense of grievance on the part of the particular offender and the appearance of injustice to the objective bystander looking on. See pp 610, 613 and 623. This principle is not directly applicable here by way of analogy because proceedings for a penalty have not been pursued against the other three directors. But that Parker should be singled out when he was but one of four directors responsible for the loss to the LES Fund that provoked ASIC to take action is, in my opinion, well capable of creating the appearance of injustice if I were to accede to ASIC's submission that a pecuniary penalty be imposed on him, and on him alone. 140 I have decided not to impose any pecuniary penalty on Parker because he is by no means solely responsible for the debacle resulting in 1997 from the Board of QLSS deciding to embark upon commercial lending and, in particular, deciding to make the loan to Perdriau. I am not, against this background, prepared to single out Parker for punishment by way of the imposition of a pecuniary penalty, though, but for that consideration, his conduct would justify a moderate penalty, something substantially less than that proposed by ASIC. 141 Moreover, I have not been prepared to find actual dishonesty on Parker's part, though I have found a high degree of recklessness. I also take into account here the likely impact that the disqualification will have on Parker. 142 I will accordingly make a declaration that Mr Parker, in the exercise of his powers and the discharge of his duties as an officer of QLS Superannuation Pty Ltd, contravened s 232(4) the Corporations Law by the following conduct:

in the matter of QLS Superannuation Pty Ltd (ACN 059 795 998) v Parker

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