Plaintiff v Defendant [2012] VSC 332 | Case summary

Supreme Court of Victoria|2012-08-09|Before: ROBSON J

CORPORATIONS - Director - Admitted contravention of s 180(1) of the Corporations Act 2001 - Agreed statement of facts - Agreed declarations of contraventions - Agreed proposed penalties - Factors to be considered in imposing penalties - Role of court where contraventions are admitted and proposed penalties agreed on - Importance of general deterrence in imposing penalties.

2 In late 2009, this Court commenced to hear the proceedings, but after several days of hearing the proceedings were adjourned to enable ASIC to amend its claim against Mr Lindberg. The hearing did not resume. The parties, however, engaged in lengthy negotiations and have now reached agreement to settle the proceedings. The settlement involves Mr Lindberg formally admitting to four contraventions of s 180(1) of the Act involving a failure by Mr Lindberg to exercise reasonable care and skill and the dismissal of the other allegations against him.

(a) a statement of the four agreed contraventions of the Act;

4 The parties submit that the appropriate penalties for the admitted contraventions are:

(a) an aggregate pecuniary penalty of $100,000; and

(b) a disqualification period expiring on 14 September 2014.

5 The statement of agreed facts gives the background to the contraventions, the facts that support the contraventions, and Mr Lindberg's circumstances that are relevant to penalty. The agreed facts are taken to be admissions of fact by Mr Lindberg only for the purposes of this proceeding. Under s 191 of the Evidence Act 2008 [3] an agreed fact means a fact that the parties to a proceeding have agreed is not, for the purposes of the proceeding, to be disputed, and in a proceeding evidence is not required to prove the existence of an agreed fact unless the court gives leave.

6 The parties have agreed that the conduct of Mr Lindberg involves four contraventions. Nevertheless, a declaration of contravention should not be made by consent of ASIC and the person against whom ASIC has proceeded unless the Court has a basis for being satisfied by the evidence (including agreed facts) that the statutory conditions for the making of the declarations have been fulfilled.[4] The burden of proof upon ASIC is the balance of probabilities that is to applied in the manner described by Dixon J in Briginshaw v Briginshaw.[5]

7 The same observations also apply as to whether the statutory conditions for imposing a pecuniary penalty have been fulfilled. In this case, the parties seek a pecuniary penalty on the basis that the contraventions are 'serious.' The Court must be satisfied on the evidence that the contraventions are 'serious' to enliven the power to order a pecuniary penalty.

8 In Dean-Willcocks v Commissioner of Taxation[6] Austin J held that there was no bar to the Court being 'satisfied' as required by a preference provision of the Corporations Act by an admission between the parties. On the other hand, he held that a Court is never bound by admissions made inter parties or in pleadings.[7] He said that a "Court may decline to act on admissions if, for example, they are made so as to attract a jurisdiction that is not naturally present. However, in most cases it is appropriate to allow and even encourage parties to simplify litigation by making admissions so as to achieve the just, quick and cheap resolution of their dispute..."[8]

9 In ASIC v Rich[9] White J of the Supreme Court of New South Wales said that as a general principle a Court does not make declarations on matters relating to public rights or rights analogous thereto by consent or on admissions but only if satisfied by evidence. He held that an application for a declaration of contravention was such a matter.[10]

10 ASIC and Mr Lindberg have agreed on the period of disqualification and the pecuniary penalty. That does not absolve the Court of its duty to consider the appropriateness of the penalty in the light of the agreed facts and the surrounding circumstances. However, where ASIC and a defendant have reached a negotiated settlement in relation to a contravention of the Act and the penalty proposed is, broadly speaking, within the 'permissible range' (having regard to all the circumstances), the Court should not depart from that agreed penalty.[11]

11 Thus, the task imposed on me by the Act is to decide whether or not I am satisfied on the evidence before me that Mr Lindberg has contravened section 180(1) of the Act as alleged.[12] If I am so satisfied, then I must make a 'declaration of contravention'.[13] The making of a declaration of contravention establishes the Court's jurisdiction:

(a) to make a 'pecuniary penalty order' under s 1317G;

(b) to make a 'disqualification order' under s 206(c).

12 As discussed below, I am satisfied that Mr Lindberg has contravened s 180(1) of the Act as admitted by him. The contraventions are all akin to an admission of negligence by him in performing his duties as a director and officer of AWB. None of the contraventions involve deliberate wrongful acts, dishonesty or any moral turpitude. Nevertheless, Mr Lindberg failed to perform his duties as a reasonable director or officer would in his situation. I find that the breaches of the Act were serious. I have concluded that the period of disqualification and the pecuniary penalties agreed on fall within the 'permissible range' although at the upper end of the range. I propose, in my discretion, to impose the disqualification and pecuniary penalties put forward by the parties: an aggregate pecuniary penalty of $100,000 and disqualification from managing a corporation until 14 September 2014.

The Contraventions and s 180

13 Each of the alleged contraventions in this case involves a breach of s 180(1) of the Act that provides:

Care and diligence - directors and other officers

Care and diligence - civil obligation only

(1) A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they:

(a) were a director or officer of a corporation in the corporation's circumstances; and

(b) occupied the office held by, and had the same responsibilities within the corporation as, the director or officer.

14 Section 180(1) forms part of Chapter 2D of the Act entitled 'Officers and Employees.' Part 2D.1, is headed 'Duties and Powers' and begins with s 179 that provides:

This Part sets out some of the most significant duties of directors, secretaries, other officers and employees of corporations. Other duties are imposed by other provisions of this Act and other laws (including the general law).

15 Division 1 of Part 2D.1, headed 'General Duties' begins with s 180 dealing with care and diligence. It is followed by s 181 dealing with good faith, s 182 use of position and s 183 use of information. Then follow criminal provisions dealing with good faith, use of position and use of information. There is no criminal provision dealing with care and diligence. Nevertheless, breach of s 180(1) may give rise to a civil penalty.

16 Iraq was a major market for the sale of AWB wheat. As a result of Iraq's invasion of Kuwait, in 1990 the United Nations imposed sanctions on Iraq. Those sanctions called on member states to prevent the sale to Iraq of commodities or products except supplies intended for strictly medical purposes and, in humanitarian circumstances, foodstuffs. The sanctions also sought to deny to the Iraq regime access to hard currencies. Under the sanctions, proceeds from the sale of Iraq petroleum was paid into a UN Escrow Account. Funds from that account were then released to pay for the importation into Iraq of medical supplies and foodstuffs (in humanitarian circumstances) such as wheat from AWB. The exchange of oil for food was known as the Oil For Food Program (OFFP).

17 From June 1999, Iraq required importers of wheat to pay to an agent of the Iraq government a fee purportedly for inland transport of the wheat within Iraq after the wheat had been delivered by the importer to Iraq. The fee payable to the Iraq agent was to be paid in hard currency. In fact, the fee was well in excess of the actual cost of inland transport of the wheat. The fee was merely a method used by Iraq to circumvent the UN sanctions to permit the Iraq regime to obtain hard currency. AWB agreed to pay the fee on its wheat shipments to Iraq.

18 Under a contract for the sale of wheat to Iraq, AWB would be paid for the wheat it provided from moneys released from the UN Escrow Account. AWB would present to the relevant UN authorities (the UN Office of the Iraq Program (OIP)) the contract for the sale of wheat to Iraq and the UN would release from the Escrow Account the sale price to AWB, if the OIP was satisfied all was in order. The moneys for the inland transportation fees were included in the sale price of the wheat. The consequence of these transactions was that the UN Escrow Account was being misused. Money was being obtained from the Escrow Account other than for medical supplies and foodstuffs (in humanitarian circumstances), and the Iraq regime was receiving hard currencies in breach of the UN sanctions.

19 The IGB owed BHP approximately US$8m for a shipment of wheat to Iraq. BHP had assigned that debt to a company called Tigris. AWB agreed with Tigris that it would assist Tigris recover the assigned debt from the IGB. AWB did so by increasing the price of wheat under two contracts. The UN office, the OIP, was not informed that the price of wheat under the contracts had been inflated to recover this debt when it approved the release of moneys to AWB from the Escrow account. Tigris and AWB entered into a written agreement relating to the payment to Tigris by AWB for Tigris and the payment by Tigris of a "success fee" to AWB.

20 In substance, contravention 1 alleges that between April 2003 and August 2004, Mr Lindberg failed to make enquiries as to whether the recovery of the Tigris Debt was in accordance with UN resolutions or took place with the knowledge and approval of the UN.[14]

[1] By April 2003, Mr Lindberg, had been informed that AWB proposed to recover a debt of approximately US$8 million from the Iraqi Grains Board (IGB) for Tigris Petroleum Corporation Ltd (Tigris) by increasing the price of the wheat to be sold by AWB to the IGB pursuant to OFFP Contracts A1670 and A1680.

[2] Despite having this knowledge, Mr Lindberg failed to make inquiries and ascertain whether:

(a) the recovery of the Tigris Debt from the UN Escrow Account was contrary to UN resolutions; and

(b) the recovery of the Tigris Debt was to occur with the knowledge and approval of the UN.

[3] Mr Lindberg thereby contravened s 180(1) of the Corporations Act 2001 in that between April 2003 and August 2004 he failed to exercise his powers and discharge his duties as Chief Executive and Managing Director of AWB, with the degree of care and diligence that a reasonable person would exercise if they:

(a) were a director or officer of a corporation in AWB's circumstances; and

(b) occupied the office held by, and had the same responsibilities within AWB as, Mr Lindberg.

The Evidence in support of the contravention 1

22 The relevant evidence is set out in paragraphs [40]-[59] and [162] of the agreed facts. The principal agreed facts relevant to the actual Contravention are in paragraphs [50] to [51] of the agreed facts.

23 The evidence establishes that Mr Lindberg was aware of the existence and nature of the Tigris Debt. The evidence also establishes that, on 7 April 2003, Mr Lindberg was informed that the price in outstanding contracts for the sale of wheat to Iraq included a component on account of the Tigris repayment of approximately $10 per tonne and Mr Lindberg did not enquire whether the Tigris component had been included with the knowledge and approval of the UN or whether its recovery was in accordance with UN resolutions. It is implicit in the admissions by Mr Lindberg that he knew of the UN resolutions and that the relevant contracts had been approved by the UN.

24 It is then alleged that Mr Lindberg thereby breached s 180(1) in that he failed to exercise his powers and discharge his duties as CEO and managing director of AWB with the degree of care and diligence that a reasonable person would exercise if they:

(a) were a director or officer of a corporation in AWB's circumstances; and

(b) occupied the office held by, and had the same responsibilities with AWB as Mr Lindberg.

25 No evidence has been tendered on whether a reasonable person in Mr Lindberg's position would have made the enquiries that Mr Lindberg failed to make. It is implicit in the agreement between ASIC and Mr Lindberg, however, that a such a person would have made such enquiries.

26 In my opinion, the allegations of fact in the alleged contravention have been made out by the evidence. Accordingly, I find that contravention 1 has been made out.

Mr Lindberg's observations on contravention 1.

27 The evidence discloses that a number of other AWB senior executives were aware that the relevant contracts included a component to recover the Tigris Debt. These senior executives included AWB's General Counsel, AWB's Risk Officer, the General Manager of AWBI and the Group General Manager of Trading. None of these executives raised any concerns with Mr Lindberg at this time as to whether including the Tigris component in the contract price was in accordance with UN resolutions or should have been disclosed to the UN.[15]

28 Secondly, the contravention is for the limited period from April 2003 to August 2004, as after that time Mr Lindberg did make enquiries, including seeking the advice of two highly respected senior counsel. In September 2004, Mr Lindberg was informed by Mr Cooper, who was the general counsel of AWB, that there appeared to be a breach of Resolution 661 because of the increase in the price of AWB wheat contracts to repay the Tigris Debt; that the processing of this high amount through the OFFP was never disclosed; and that the increase in price was not a payment for a humanitarian purpose.[16]

29 Mr Cooper nevertheless recommended that payment be made to Tigris after sign-off by International Sales and Marketing (IS&M) of a written summary of facts. Mr Lindberg directed Mr Cooper to further investigate these matters and to obtain advice from Richard Tracey QC and later Robert Richter QC before any payment was made.[17]

30 The contravention does not allege any specific harm flowed to AWB from Mr Lindberg's failure to make the inquiry alleged. Mr Lindberg does admit his failure to make enquiries in April 2003 in relation to the recovery of the Tigris Debt was a material omission which may have impacted upon the means by which AWB in fact recovered the debt. The breach was an omission not a commission and did not involve any deliberate wrongdoing.

Contravention 2 - Report on scope of Project Rose

31 Project Rose was the name given to the internal investigation undertaken by AWB after it learnt of complaints made by a US wheat industry lobby group that AWB had misused the OFFP by inflating the price of wheat contracts that allowed moneys to go Saddam Hussein's family.

32 Contravention 2 relates to Mr Lindberg's failure to inform the Board that Project Rose was limited as three former employees, who were likely to have relevant information to the allegation that AWB had misused the OFFP had not been interviewed.

[4] Mr Lindberg was aware of the following statements and information given to Board members of AWB and AWB International Ltd (AWBI), a subsidiary of AWB in a presentation to the Boards of AWB and AWBI on 25 May 2004:

(a) Project Rose was the code name for the AWB Group's internal investigation of AWB's wheat exports to Iraq and AWB's involvement in the OFFP in regard to which allegations of impropriety had been made in the public arena; and

(b) the Project Rose investigation commenced in June 2003 and had involved a comprehensive review of all contract arrangements for the export of wheat by AWB to Iraq from mid 1999 until 2002, including inland freight arrangements within Iraq.

[5] Mr Lindberg knew from September 2004 that the Project Rose investigation was limited to examination of documents in AWB's possession and interviews of existing AWB employees and the former Chairman, and that former employees likely to have information relevant to the allegations of impropriety, including Messrs Hogan, Watson and Emons, had not been interviewed.

[6] Mr Lindberg failed to inform the Board of AWB of these limitations of the Project Rose investigation and to qualify the statements and information given to the Boards on 25 May 2004.

[7] Mr Lindberg thereby contravened s 180(1) of the Corporations Act 2001 in that from September 2004 he failed to exercise his powers and discharge his duties as Chief Executive and Managing Director of AWB, with the degree of care and diligence that a reasonable person would exercise if they:

(a) were a director or officer of a corporation in AWB's circumstances; and

(b) occupied the office held by, and had the same responsibilities within AWB as Mr Lindberg.

34 The relevant evidence is set out in paragraphs [60]-[73] and [163] of the agreed facts. The principal agreed facts relevant to the contravention are in paragraphs [70]-[73].

35 The evidence discloses that by September 2004 Mr Lindberg knew that the Project Rose investigation did not include an interview with the three former employees Hogan, Watson and Emons. The evidence establishes that Mr Lindberg knew that these three were likely to have relevant information. Mr Lindberg also knew that the Boards of AWBI and AWB had been informed earlier of Project Rose and its purpose. The evidence discloses that the on 25 May 2004, the joint boards were informed of the investigation and that this included interviews of AWB personnel. Mr Lindberg agrees that he did not tell the board that the three former employees had not been interviewed or qualify the statements and information given to the board on 25 May 2004.

36 As with contravention 1, no evidence has been tendered on whether a reasonable person in Mr Lindberg's position would have informed the Board of AWB in Mr Lindberg's circumstances. It is implicit in Mr Lindberg's admission that a such a person would have done so.

37 Accordingly, on those facts I find contravention 2 has been made out.

Observations of Mr Lindberg on contravention 2

38 The evidence discloses that it is not possible to establish whether or not the AWB Board would have taken any particular action if it was made aware of the fact that the three former employees had not been interviewed. The evidence also discloses that it is not known whether those former employees would have co-operated if contacted and if they did co-operate what they would have said.[18]

39 On 25 May 2004, the joint Boards of AWB and AWBI were given a presentation by Mr Cooper and Mr Quennell in the presence of Mr Lindberg.[19] Information was provided to the Boards about the nature and scope of the investigation. That was done by the people who were in charge of implementing the investigation, the General Counsel Mr Cooper, and Mr Cornell, who was an external solicitor from Blake Dawson Waldron engaged to assist with the investigation. The Boards were told that:

(a) contracts with the IGB included payment of a 'trucking fee' payable to a Jordanian company, Alia, nominated by the IGB, which AWB continued to use at that time;

(b) the same trucking fee, which increased from time to time for no apparent reason, was payable regardless of the distance transported;

(d) the fee paid by AWB for inland transport varied from an initial cost of US$12 per tonne to a maximum of US$47.75 per tonne, then dropped immediately after the US-led invasion to US$25 per tonne and was currently US$35 per tonne.[20]

40 While having regard to the lack of qualification that should have been made clear by Mr Lindberg concerning the limitation on the investigation, it is said on Mr Lindberg's behalf his failure should be assessed in the context of what the Boards were told about the investigation and what it had revealed.

41 In fact, there is no evidence whether or not the board did not otherwise know about the failure to interview the three former employees.

Contravention 3 - Inaccuracies in the Tigris Agreement and the collection of the Tigris Debt

(a) not specifically informing the Board that the Tigris Debt had been recovered through the inflation of prices under contracts A1670 and A1680; and

(b) not informing the Board of the agreement with Tigris, or that the agreement misdescribed the payment to Tigris as a service fee rather than a debt and the commission retained by AWBI as a 'success fee'.[21]

[8] By December 2004, Mr Lindberg knew that AWB had been paid out of the UN Escrow Account for wheat sold by AWB to the IGB pursuant to Contracts A1670 and A1680, the price of which had been inflated to include the Tigris Debt.

[9] AWBI and Tigris executed an agreement in December 2004 (the Tigris Agreement) which did not state that AWB had assisted Tigris to recover the Tigris Debt from the UN Escrow Account and was to receive a fee of US$500,000.00 in return, but instead recorded that Tigris had been of significant assistance in procuring contracts for the sale of AWB wheat to Iraq and provided that AWB would pay US$7,087,202.24 described as a 'service fee' to Tigris, being the net amount payable to Tigris after deduction of the $500,000.00 which was referred to in the Tigris Agreement as a 'success fee'.

[10] Mr Lindberg was provided with the Tigris Agreement but either failed to read it or alternatively read it and failed to appreciate that it described the amount paid to Tigris as a service fee when it was in fact a debt owing to Tigris from the IGB which had been recovered from the UN Escrow Account, and that the commission of US$500,000.00 retained by AWBI was described in the Tigris agreement as a 'success fee'.

[11] At the Board meetings of AWBI of 14 December 2004 and AWB on 15 December 2004 the Boards were told by Mr Lindberg that Tigris had assisted AWB in recovering threatened wheat sales in Iraq in 2002, that in consideration for that assistance, AWB had assisted Tigris in recovering a debt owed to Tigris by the IGB, and that Tigris had paid a commission for the recovery of the debt and all of that commission was paid to AWBI and therefore to growers.

[12] The AWB Board was told that AWB had collected the Tigris Debt of approximately US$8 million. Further the Board was told that two QC's opinions had been obtained on whether the recovery of the Tigris debt contravened UN resolution 661 and whether it was lawful to make the payment to Tigris. Mr Lindberg expressly or impliedly informed the Board that the Tigris debt had been recovered through wheat contracts under the OFFP. Mr Lindberg did not specifically inform the Board of AWB that the Tigris debt had been recovered through the inflation of prices under contracts A1670 and A1680 from the UN Escrow Account.

[13] Mr Lindberg did not inform the boards of AWBI and AWB of the Tigris Agreement, nor that the Tigris Agreement misdescribed the payment to Tigris as a service fee, whereas it was in fact a debt owed to Tigris by the IGB which had been recovered from the UN Escrow Account, nor that it misdescribed the commission retained by AWBI as a 'success fee'.

[14] Mr Lindberg thereby contravened s180(1) of the Corporations Act 2001 in that he failed to exercise his powers and discharge his duties as Chief Executive and Managing Director of AWB, with the degree of care and diligence that a reasonable person would exercise if they:

(a) were a director or officer of a corporation in AWB's circumstances; and

(b) occupied the office held by, and had the same responsibilities within AWB as Mr Lindberg.

44 The evidence relating to contravention 3 is in paragraphs [74] to [94], [98], [104] and [164] to [166] of the Agreed Facts. The principal Agreed Facts relevant to the actual contravention are in paragraphs [90] to [94] of the Agreed Facts.

45 Paragraph [88] of the evidence establishes that Mr Lindberg was provided with the Tigris Agreement but either failed to read it, or alternatively read it and failed to appreciate that it described the amount paid to Tigris as a service fee.

46 The evidence establishes that Mr Lindberg did not inform the board of AWB that the Tigris Debt had been recovered through the inflation of prices under contracts A1670 and A1680 from the UN Escrow Account, and that he did not inform the inform the boards of AWBI and AWB of the Tigris Agreement, nor that the Tigris Agreement misdescribed the payment to Tigris as a service fee, whereas it was in fact a debt owed to Tigris by the IGB which had been recovered from the UN Escrow Account, nor that it misdescribed the commission retained by AWBI as a 'success fee'.

47 As with contraventions 1 and 2, it is implicit in the admissions that a reasonable person in Mr Lindberg's position would have read the Tigris agreement and thus informed the Board as to the true state of affairs.

48 On the basis of the tendered evidence I am satisfied that contravention 3 has been made out.

Mr Lindberg's observations on contravention 3

49 The substance of contravention 3 is that Mr Lindberg was provided with the Tigris Agreement but either failed to read it or alternatively, if he did read it, to appreciate that it described the amount paid to Tigris as a service fee when it was in fact a debt owing to Tigris from the IGB which had been recovered from the UN Escrow Account, and that the commission was described as a 'success fee'.[22]

50 Mr Lindberg's failure to inform the Boards is the consequence of him failing to read or alternatively, if he did read, failing to appreciate what was in the Tigris Agreement, rather than any knowing withholding of information.

51 The failure to inform the Board also should be assessed in the context of what had been disclosed to the Board. The AWB Board was told that AWB had collected the Tigris Debt of approximately $8 million. Mr Lindberg had also expressly or impliedly informed the Board that the Tigris Debt had been recovered through wheat contracts under the OFFP.[23] The Board was informed that there was concern about the recovery of the Tigris Debt.[24] The Board was told that two QCs' opinions had been obtained on whether the recovery of the Tigris Debt contravened UN Resolution 661 and whether it was lawful to make the payment to Tigris.

52 Mr Lindberg, however, failed to specifically inform the Board that the Tigris Debt had been recovered through the inflation of prices under Contracts 1670 and A1680 from the UN Escrow Account.[25]

53 Subsequent to the concerns raised by the US lobby group about AWB's misuse of the OFFP, in late 2004, and after the fall of the Iraq regime, the UN established an inquiry into the OFFP known as the IIC. Mr Lindberg met with investigators from the IIC and was advised of evidence that the investigators had received that AWB funds improperly made their way to the Iraq regime.

54 Contravention 4 relates to Mr Lindberg's failure to inform the Board that the UN Independent Inquiry Committee into the OFFP (IIC) had received evidence from former Iraqi government officials and others alleging a number of matters, the substance of which was that Alia had been used to channel funds to Iraq, and that all suppliers had paid kickbacks including AWB who always made payments through Alia.[26]

[15] In June 2003, Mr Lindberg established Project Rose to investigate allegations made by the US Wheat Associates of impropriety in relation to AWB's wheat export to Iraq and AWB's involvement in the OFFP.

[16] The Project Rose investigation revealed, and Mr Lindberg was aware from May 2004, that the trucking fees paid to Alia varied from between USD$12 per tonne to USD$47.75 per tonne in relation to contracts from July 1999 to December 2002.

[17] On 20 February 2005 Mr Lindberg attended by telephone a Project Rose meeting with AWB's internal and external lawyers at which there was reference to an allegation that AWB had paid a 10 percent mark-up which had been paid to the IGB via Alia.

[18] On 24 February 2005 Mr Lindberg attended a Project Rose meeting with AWB's internal and external lawyers at which:

(a) one meeting attendee referred to a 10 percent increase in relation to AWB wheat contracts with Iraq which was not satisfactorily explained; and

(b) a conversation with Mark Pieth of the IIC was referred to, as well as an allegation that special commissions were paid as transport fees which were disproportionately high, and that payments of 10 percent were not paid directly by the United Nations, but were paid by AWB.

[19] On 28 February 2005 Mr Lindberg was interviewed by investigators from the IIC. In the course of that interview, Mr Lindberg was informed that:

(a) Officials of the Hussein regime had informed the IIC that Alia was used to channel funds to the government of Iraq;

(b) the Iraqi Director General of Planning and Follow-up had informed the IIC that no company was exempt from paying a 10 percent kickback to the Government of Iraq;

(c) the Iraqi Minister of Trade had informed the IIC that all suppliers under the OFFP had paid kickbacks to the Government of Iraq; that AWB had always made its payments through Alia; that AWB was the biggest supplier and always paid 10 percent 'after sales service';

(d) the Coalition Provisional Authority and government officials had informed the IIC that the price of wheat under AWB's contracts with the IGB had been reduced because a 10 percent kickback had been identified in the contract price.

[20] In fact, in November 2000, a fee of 10 percent of the contract price for payment of wheat had been added to the total contract price and included in the trucking fee paid by AWB to Alia, and had been referred to in a February 2001 document as a 'service fee'.

[21] From February 2005 until September 2005, Mr Lindberg failed to inform the Board of the matters that had been put to him by the IIC and set out in paragraphs (a) to (d) above.

[22] Mr Lindberg thereby contravened section 180(1) of the Corporations Act 2001 in that from February 2005 until September 2005 he failed to exercise his powers and discharge his duties as Chief Executive and Managing Director of AWB with the degree of care and diligence that a reasonable person would exercise if they:

(a) were a director of officer of corporation in AWB's circumstances; and

(b) occupied the office held by, and had the same responsibilities within AWB as Mr Lindberg.

56 The facts relating to contravention 4 are in paragraphs [95] to [112] and [167] to [170] of the Agreed Facts. The principal agreed facts relevant to the actual contravention are in paragraphs [100] to [103] of the Agreed Facts.

57 The evidence discloses that Mr Lindberg did fail to inform the board of the matters alleged. Similarly to contraventions 1-3, it is implicit in the admission of the parties that a reasonable person in Mr Lindberg's position would have done so.

58 On the basis of the tendered evidence I am satisfied contravention 4 has been made out.

Mr Lindberg's observations on contravention 4

59 Mr Lindberg says that it is relevant to look at what was disclosed to the Board and the circumstances in which he failed to do what he ought to have done.

60 Contravention 4 says that on 24 February 2005, Mr Lindberg was interviewed by investigators from the IIC and in that interview he was informed, amongst other things, that the Coalition Provisional Authority and government officials had informed the IIC that the price of wheat under AWB's contracts with the IGB had been reduced because a 10 percent kickback had been identified in the contract price.[27] Mr Lindberg failed to appreciate the significance of the matters that he was told at the meeting. While Mr Lindberg was aware that there had been a significant increase in inland transport fees, he did not understand at that time that there had been a 10 percent increase on the whole of the contract price which had been included in the inland transportation fee.[28]

61 On 10 March 2005, Mr Lindberg briefed the Boards of AWB and AWBI regarding the IIC interview. He did so in the presence of Mr Cooper, the AWB general counsel, who had also been present at the interview with the IIC investigators. Mr Lindberg informed the Boards that the focus of the IIC investigation was on Alia, whether it had channelled funds to the government of Iraq, and what AWB knew and when they knew it. Mr Lindberg informed the Boards that there had potentially been a breach of Resolution 661, which he described as 'procedural', and the possibility of a finding by the IIC that AWB had unknowingly or unwittingly breached Resolution 661. Mr Lindberg informed the Boards that he had asked the IIC investigators if they had any evidence of corruption by AWB and that the IIC investigators had responded that they had no such evidence.[29]

62 The Boards asked a number of questions about Alia following Mr Lindberg's briefing.[30] Some five weeks later, on 5 April, Mr Lindberg also provided further information to the AWB Board on Project Rose, and again on 27 April Mr Lindberg briefed the joint Boards in relation to Project Rose. [31]

63 On 27 September 2005, Mr Lindberg received a letter from the IIC in which the IIC's proposed findings in respect of AWB were contained, which included that the inland transportation fees paid by AWB were in actuality kickback payments for the benefit of the Government of Iraq and that there was evidence that AWB knew or should have known that its payments to Alia were payments to the Government of Iraq. The letter thus contained the matters that Mr Lindberg was told by the IIC investigators earlier but had failed to tell the Board of AWB. At a joint meeting of the Boards on 28 September 2005 the Boards were informed of the proposed findings of the IIC.

64 It is in that context that Mr Lindberg admits that he failed to inform the Board from February 2005 to September 2005, that officials of the Hussein regime had informed the IIC that Alia was used to channel funds to the government of Iraq and that the Coalition Provisional Authority and government officials had informed the IIC that the price of wheat under AWB's contracts with the IGB had been reduced because a 10 percent kickback had been identified in the contract price.

65 The delay in Mr Lindberg informing the board, as he admits, raises the issue of whether the AWB Board would have handled things differently had they been informed some few months earlier. As discussed below, no causal connection between his contravention and actual harm suffered by AWB is alleged. The Agreed Facts do not deal with whether or not the Board or any of its members knew or did not know of the relevant IIC allegations earlier than 28 September 2005.

Was there any harm to AWB as a result of the contraventions?

66 The contraventions are not based on Mr Lindberg having actual or constructive knowledge of AWB facilitating the payment of hard currency by AWB to the Government of Iraq between mid 1999 and March 2003 in breach of UN resolutions. This is relevant to the assessment of the harm caused by the contraventions. Both parties accept that it was the revelation of AWB's involvement in such payments that caused significant harm to AWB and its members.[32]

67 The parties agree that it is not possible to establish a causal link between the harm suffered by AWB as a result of AWB's misuse of the OFFP and the contraventions admitted by Mr Lindberg.[33] The parties agree that the contraventions did affect the information the AWB Board had when deciding how to respond to risks faced by it, however, the parties agreed that it is not possible to say that the AWB Board would have responded differently but for the contraventions.[34]

68 The provision Mr Lindberg contravened is of considerable significance in corporate law. The corporate structure in a market economy relies on the investment of the shareholders in a company being managed by the directors and officers of the corporation. The obligation imposed by s 180(1) demands a standard of care and diligence in directors and other officers of the corporation in managing the affairs of that corporation. That standard is one well known to the law and particularly in the law of negligence where the expected standard of conduct is that of the reasonable person. It is an objective standard where the conduct of the defendant is measured or assessed as against that of a reasonable person.

69 In the case of directors and officers of a corporation, the objective standard of conduct expected of a director or other officer of the corporation is that a reasonable person would exercise if they were a director or officer in the corporations' circumstances and occupied the office held by, and had the same responsibilities within the corporation as the director or officer. (my emphasis)

70 The obligation is important in ensuring that proper standards of care and diligence are maintained in our corporations. The consequences of a failure to observe those standards can and have often rendered great hardship on shareholders, creditors of the corporation, suppliers and contractors of the corporation, the employees and the public at large. As discussed below, the importance of the provision is reflected in the significance that general deterrence is given in determining an appropriate penalty for breach.

71 The punishment determined by the Court may appear harsh in light of a career of honest and loyal conduct particularly where the personal and family hardship experienced by the defendant is taken into account. Nevertheless, there is a significant public importance in appropriate standards being expected of directors and other officers of corporations. These standards of conduct are not unduly high. Under s 180(1) the standard is that expected of a reasonable person in the circumstances prescribed by the subsection.

72 Section 180(1) does not seek to punish the mere making of mistakes or errors of judgment. Making mistakes does not by itself demonstrate lack of due care and diligence.[35] The business judgment rule in s 180(2) also recognises that business judgments made in good faith and on a proper basis do not fall within s 180(1). Directors and officers of corporations are expected to take calculated commercial risks. A company run on basis that no risks were ever taken would be unlikely to be successful. The proper taking of risk in making business decisions is entirely consistent with exercising care and diligence. The proper assessment of the risks and potential rewards is a matter that demands the exercise of care and diligence. The two concepts complement each other in the management of corporations.

73 The admitted contraventions of Mr Lindberg did not involve the taking of an uncalculated risk or error of judgment. The conduct involved a lack of care and diligence in the performance of his duties that a reasonable director or other person would exercise in his position.

74 It is convenient to set out the relevant provisions of the Act.

Corporations Act Provisions - Part 9.4B

1317DA Definitions

In this Act:

corporation/scheme civil penalty provision means a provision referred to in subsection 1317E(1), other than in paragraphs 1317E(1)(ja) to (jg).

financial services civil penalty provision means a provision referred to in any of paragraphs 1317E(1)(ja) and (jaa) to (jg).

1317E Declarations of contravention

(1) If a Court is satisfied that a person has contravened 1 of the following provisions, it must make a declaration of contravention:

(a) subsections 180(1) and 181(1) and (2), 182(1) and (2), 183(1) and (2) (officers' duties);

...

(d) subsection 344(1) (requirements for financial reports);

...

(g) subsection 601FD(3) (duties of officers of responsible entity)

...

These provisions are the civil penalty provisions.

Note: Once a declaration has been made ASIC can then seek a pecuniary penalty order (section 1317G) or (in the case of a corporation/scheme civil penalty provision) a disqualification order (section 206C).

(2) A declaration of contravention must specify the following:

(a) the Court that made the declaration;

(b) the civil penalty provision that was contravened;

(c) the person who contravened the provision;

(d) the conduct that constituted the contravention;

(e) if the contravention is of a corporation/scheme civil penalty provision - the corporation or registered scheme to which the conduct related.

1317F Declaration of contravention is conclusive evidence

A declaration of contravention is conclusive evidence of the matters referred to in subsection 1317E(2).

1317G Pecuniary penalty orders

Corporation/scheme civil penalty provisions

(1) A Court may order a person to pay the Commonwealth a pecuniary penalty of up to $200,000 if:

(a) declaration of contravention by the person has been made under section 1317E; and

(aa) the contravention is of a corporation/scheme civil penalty provision; and

(b) the contravention:

(i) materially prejudices the interests of the corporation or scheme, or its members; or

(ii) materially prejudices the corporation's ability to pay its creditors; or

(iii) is serious.

Penalty a civil debt etc

(2) The penalty is a civil debt payable to ASIC on the Commonwealth's behalf. ASIC or the Commonwealth may enforce the order as if it were an order made in civil proceedings against the person to recover a debt due by the person. The debt arising from the order is taken to be a judgment debt.

206C Court power of disqualification - contravention of civil penalty provision

(1) On application by ASIC, the Court may disqualify a person from managing corporations for a period that the Court considers appropriate if:

(a) declaration is made under:

(i) s 1317E (civil penalty provision) that the person has contravened a corporation/scheme civil penalty provision; or

(ii) [Not relevant]

(b) the Court is satisfied that the disqualification is justified.

Matters to which the Court may have regard

(2) In determining whether the disqualification is justified, the Court may have regard to:

(a) the person's conduct in relation to the management, business or property of any corporation; and

(b) any other matters that the Court considers appropriate.

75 Accordingly, Part 9.4B of the Act permits the court to make a 'declaration of contravention.'[36] The Court must do so where it is satisfied that a person has contravened one of the listed provisions. The listed provisions include s 180 (1), which is a 'corporations/scheme civil penalty provision.'[37] The making of a declaration establishes the jurisdiction:

(a) to make a 'pecuniary penalty order' under s 1317G;

(b) to make a 'disqualification order' under s 206C.

76 A declaration of contravention must specify the court that made the declaration, the civil penalty provision that was contravened, the person who contravened it, the conduct that constituted the contravention, and the corporation or registered scheme to which the conduct related.[38]

77 It is the practice in cases where an application is made for the imposition of a pecuniary penalty and a disqualification from managing a corporation, consequent upon a finding of a contravention of the Act, for the court to consider first the issue of disqualification before considering whether a pecuniary penalty should be imposed.[39]

78 In Australian Securities and Investments Commission v Adler (No 5)[40] (Adler), Santow J outlined the propositions that may be derived from the authorities on disqualification.[41] These were summarised and applied by the Court of Appeal in Elliott v ASIC[42] as follows:

(i) Disqualification orders are designed to protect the public.

(ii) The banning order is designed to protect the public by seeking to safeguard the public interest in the transparency and accountability of companies and in the suitability of directors to hold office.

(iii) Protection of the public includes protection of individuals that deal with companies, including consumers, creditors, shareholders and investors.

(iv) The banning order is protective against present and future misuse of the corporate structure.

(v) The order has a motive of personal deterrence, though it is not punitive.

(vi) The objects of general deterrence are also sought to be achieved.

(vii) In assessing the fitness of an individual to manage a company, it is necessary that they have an understanding of the proper role of the company director and the duty of due diligence that is owed to the company.

(viii) Longer periods of disqualification are reserved for cases where contraventions have been of a serious nature such as those involving dishonesty.

(ix) In assessing an appropriate length of prohibition, consideration has been given to the degree of seriousness of the contraventions, the propensity that the defendant may indulge in similar conduct in the future and the likely harm that may be caused to the public.

(x) It is necessary to balance the personal hardship to the defendant against the public interest and the need for protection of the public from any repeat of the conduct.

(xi) A mitigating factor in considering a period of disqualification is the likelihood of the defendant reforming.

Character of the offender;
Nature of the breaches;
Structure of the companies and the nature of their businesses;
Interests of shareholders, creditors and employees;
Risks to others from the continuation of offenders as company directors;
Honesty and competence of offenders;
Hardship to offenders and their personal and commercial interests;
Offenders appreciation that future and breaches could result in future proceedings.

(xiii) Factors which lead to the imposition of the longest periods of disqualification (25 years or more) include:

large financial losses;
high propensity to contravene again;
lack of contrition or remorse;
disregard for the law;
dishonesty and intent to defraud; and
previous convictions and contraventions for similar activities.

(xiv) In cases in which the period of disqualification ranged from seven to twelve years, the factors evident included:

serious incompetence and irresponsibility;
substantial loss;
engaging in deliberate courses of conduct to enrich the defendants;
wilful contraventions of the law and disregard for legal obligations;
lack of contrition or acceptance of responsibility.

(xv) In cases in which the period of disqualifications ranged up to three years, the factors evident include:

the defendants had endeavoured to repay the amounts owed;
the defendants had no future intention to hold a position as manager of a corporation; and
the defendant had expressed remorse and contrition, acted on advice of professionals and had not contested the proceedings.

79 The Court of Appeal in Elliott went onto say:[43]

Many of the propositions and factors listed by Santow, J bear a similarity to sentencing principles. Matters going to aggravation and mitigation in relation to contraventions of s 588G need to be considered and accorded proper weight. But above all else protection of the public and deterrence, specific and general, must also be given appropriate consideration.

80 The factors referred to by Santow J and the observations of the Court of Appeal in Elliott were cited with approval by McHugh J in Rich where his Honour said that Adler was 'the leading authority on the reasons for a court exercising its powers under ss 206C and 206E to order disqualification of a person from managing corporations.'[44]

81 In Healey No 2 Middleton J said that Santow J's propositions from his decision in Adler needed to be considered in the light of the decision of the High Court in Rich. In Rich, McHugh J said that 'retribution is as much a factor as protection of the public' in setting the period of disqualification.[45] McHugh J also said that:[46]

Both Santow J's list of propositions and the comments of the Victorian Court of Appeal [in Elliott] indicate that the factors taken into account in the criminal jurisdiction - retribution, deterrence, reformation, contrition and protection of the public - are also central to determining whether an order of disqualification should be made under the Corporations Act and, if so, the appropriate period of disqualification. Those factors also support the conclusion that the jurisdiction exercised under this part of the Corporations Act cannot be characterised as purely protective.

82 In Rich the High Court held that an application for disqualification or a pecuniary penalty for contravention of a civil penalty under the Act was to seek a penalty or forfeiture and hence the person in question was entitled to rely on the privilege against exposure to penalties and forfeiture to avoid discovery.[47]

83 The purpose of a disqualification order is not only protective it is also punitive. It may be imposed by way of punishment and for general deterrence.[48]

84 The principles of general deterrence are relevant to the imposition of penalties for contraventions characterised by negligence. In Australian Securities and Investments Commission v Beekink, the Full Court of the Federal Court said:[49]

We reject the submission ... that deterrence is of less importance in cases of neglect or carelessness than in cases of misfeasance. That submission is contrary to the remarks of Cooper J in Donovan[50]. His Honour considered that general deterrence was applicable to those who might be minded to adopt a passive role.

85 In Beekink the Full Court allowed an appeal where it said that the trial judge 'gave too much weight to the personal considerations affecting Mr Beekink without considering that part of the protective nature of the order which is concerned with providing a deterrent to other persons involved in the management of corporations.'[51]

86 In Healey (No 2) Middleton J accepted that 'courts have emphasised the importance of general deterrence, and the need to ensure that the detriment suffered by a defendant does not undermine the need to impose penalties that will achieve general deterrence'.[52]

87 In ASIC v High Adventure Pty Ltd the Full Court of the Federal Court emphasised the importance of general deterrence:[53]

[B]y focusing on the detriment to the respondents the judge ignored both the seriousness of the contravention as well as the need to fix upon an appropriate penalty by reference to the need to deter future contraventions. As the cases to which the judge was referred show, the principal, if not the sole, purpose for the imposition of penalties for a contravention of the antitrust provisions in Part IV is deterrence, both specific and general. This rule is so well entrenched that citation of authority is unnecessary. Moreover, as deterrence (especially general deterrence) is the primary purpose lying behind the penalty regime, there inevitably will be cases where the penalty that must be imposed will be higher, perhaps even considerably higher, than the penalty that would otherwise be imposed on a particular offender if one were to have regard only to the circumstances of that offender. In some cases the penalty may be so high that the offender will become insolvent. That possibility must not prevent the Court from doing its duty for otherwise the important object of general deterrence will be undermined.

88 In Healey (No 2) Middleton J addressed why 'there are various reasons a contravention of the Act should not go unpunished and the imposition of what might be otherwise be regarded as a harsh penalty should be imposed.'[54] He cited with approval what Finkelstein J said in Australian Competition and Consumer Commission v ABB Transmission and Distribution Ltd (No 2) in the context of anti-trust violations: [55]

It is generally accepted that protection of society is the ultimate end of punishment. Traditionally this end is sought to be achieved by the imposition of punishment that serves four functions: deterrence, retribution, reformation and incapacitation. By deterrence I mean both specific deterrence, where the punishment imposed is sufficiently unpleasant to deter the person from committing further breaches of the law, and general deterrence where the punishment is set to deter potential offenders from committing that offence. The object of general deterrence is to prevent future harmful conduct and should be seen as a fundamental goal of sentencing. For that reason general deterrence justifies the imposition of what might otherwise be regarded as a harsh penalty (that is a penalty that takes into account not only the offender's conduct, but the criminal propensity of others) for the individual concerned, to bring about a greater benefit for society as a whole.

89 Courts have recognised that only limited guidance may be obtained about the appropriate period for disqualification from previous cases as each case turns on its own facts and the circumstances particular to the individual concerned: propositions in the previous authorities do not 'produce any neat arithmetical algorithm' or a guide which is 'able to be used mechanically'.[56]

90 I turn now to consider the principles applicable to applying a pecuniary penalty.

91 Section 1317G sets out the preconditions for the imposition of a pecuniary penalty. In addition to making a declaration of contravention the court must be satisfied that;

(a) the contravention is of a corporation/scheme civil penalty provision; and

(b) the contravention:

materially prejudices the interests of the corporation or scheme, or its members; or

materially prejudices the corporation's ability to pay its creditors; or

is serious.

92 In this case, ASIC relies on the contraventions being 'serious' to enliven the power of the Court to impose a pecuniary penalty. I shall have more to say about this below.

93 As with disqualification, a pecuniary penalty has both punitive and deterrent objectives. As Cooper J noted in Donovan:[57]

Its purpose in an appropriate case is to punish, but principally imposition of a pecuniary penalty is to act as a personal deterrent and a deterrent to the general public against a repetition of like conduct. The legislative deterrent effect is aimed at preventing a corporate structure being used by an individual in a manner which is contrary to proper commercial standards to the detriment of the company, its shareholders, creditors, investors and others dealing with it. If compliance with the appropriate standards of commercial conduct in the management of corporations by deterrence is the object, then any penalty should be no greater than is necessary to achieve this objective. Otherwise, severity beyond that figure would be oppressive.

94 In Adler, Santow J summarised the principles relevant in that case to the assessment of pecuniary penalties. His Honour noted the following factors, which he supported by reference to previous cases (citations omitted):[58]

(i) the pecuniary penalty has a punitive character, but it is principally a personal and general deterrent to prevent the corporate structure from being used in a manner contrary to commercial standards. The penalty should be no greater than is necessary to achieve this object;

(ii) to determine whether compensation is to be paid and in what amount it is necessary to consider the prospect of the respondent paying such compensation and the hardship to the defendant from such payment. Compensation has been ordered for an amount less than that lost even though there was little prospect of any of it being recovered;

(iii) the capacity of the defendant to pay is a relevant consideration in determining a pecuniary penalty;

(iv) in assessing a pecuniary penalty it is important to consider the consequences of an associated disqualification order for the defendant. If the making of such an order has significant consequences, they may operate as a factor in favour of a lesser penalty. Where the disqualification order does not have significant consequences for the defendant, the prohibition order is likely to be only marginally relevant;

(v) it is important to assess whether the order will prejudice the rehabilitation of the defendant;

(vi) the size of the penalty is a question of discretion. The circumstances of one case should not dictate the size of the penalty on another case;

....

(ix) Factors leading to the order of a penalty in the range of $20,000-$40,000 [for a single contravention] included:

defendant was aware of impropriety of actions;
no intention to deprive company permanently of funds;
amounts in question not large;
no deliberate falsification of accounts;
cases classed as being serious misconduct, but not worst cases.

(x) Relevant factors leading to the court to order the lower range penalties in the range of $4000-$5000 [for a single contravention] included:

remorse and contrition shown;
efforts to rpay misappropriated funds;
acted upon the advice of professionals;
did not contest the proceedings, or sought to save costs in proceedings;
tended to not involve dishonesty, but negligence or carelessness;
previous unblemished character;
further contraventions unlikely.

95 The Full Court of the Federal Court in Beekink observed that comments made by Bryson J in ASIC v Rich[59] regarding the limited degree of guidance from past decisions that may be obtained about the appropriate period for disqualification apply with equal, if not greater, force to the assessment of pecuniary penalties.[60] In the Court's view the reasons for this were the following: [61]

There are three difficulties in attempting to classify the amounts of pecuniary penalties by reference to common factors in other cases. First, the breaches tend to take a wide variety of forms. Second, the value of money erodes over time. The third reason is that in recent years the courts have been more concerned with the need for the imposition of higher civil penalties to reflect community expectations of the standards to be imposed on company directors; see for example Finkelstein J in Vizard at [33].

This is particularly so at a time when the commercial community demands ever greater financial rewards from the benefit of public office. The expectation of such rewards must be accompanied by an expectation of higher penalties when those in office slip from the standards imposed upon them under the law.

97 Principles analogous to the criminal sentencing considerations of cumulation, concurrence and totality (the totality principle) have been recognised by Courts as applicable when imposing civil penalties for contraventions. [63]

98 The totality principle (as it applies to civil penalties) was described by Middleton J in ACCC v Telstra as follows: [64]

Application of the totality principle requires the Court to review the entirety of the conduct and to determine whether the proposed penalty is appropriate 'as a whole'. The purpose of the exercise is to ascertain whether the proposed penalty is just and appropriate for the entirety of the contravening conduct, looking at the degree of misconduct involved.

The rationale underlying the totality principle is to ensure that the proposed penalty is not out of proportion with the conduct giving rise to the contraventions when viewed collectively, and to ensure the penalty is accordingly just and appropriate from the perspective of that collective assessment.

The Court's approach where there is agreement between parties as to penalty

99 The correct approach for the Court to take where there is an agreed statement by the parties as to penalties has been considered in a number of decisions. In Minister for Industry, Tourism & Resources v Mobil Oil Australia Pty Ltd[65] (Mobil Oil) the Full Court of the Federal Court[66] considered the correctness of the Court's approach in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission[67] (NW Frozen Foods) and concluded that the following propositions emerged from that decision: [68]

(a) It is the responsibility of the Court to determine the appropriate penalty to be imposed under s 76 of the TP Act in respect of a contravention of the TP Act.

(b) Determining the quantum of a penalty is not an exact science. Within a permissible range, the courts have acknowledged that a particular figure cannot necessarily be said to be more appropriate than another.

(c) There is a public interest in promoting settlement of litigation, particularly where it is likely to be lengthy. Accordingly, when the regulator and contravenor have reached agreement, they may present to the Court a statement of facts and opinions as to the effect of those facts, together with joint submissions as to the appropriate penalty to be imposed.

(d) The view of the regulator, as a specialist body, is a relevant, but not determinative consideration on the question of penalty. In particular, the views of the regulator on matters within its expertise (such as the ACCC's views as to the deterrent effect of a proposed penalty in a given market) will usually be given greater weight than its views on more "subjective" matters.

(e) In determining whether the proposed penalty is appropriate, the Court examines all the circumstances of the case. Where the parties have put forward an agreed statement of facts, the Court may act on that statement if it is appropriate to do so.

(f) Where the parties have jointly proposed a penalty, it will not be useful to investigate whether the Court would have arrived at that precise figure in the absence of agreement. The question is whether that figure is, in the Court's view, appropriate in the circumstances of the case. In answering that question, the Court will not reject the agreed figure simply because it would have been disposed to select some other figure. It will be appropriate if within the permissible range.

100 The above propositions were cited with approval by Barrett J in ASIC v Elm Financial Services.[69] Nevertheless, Barrett J went onto say that "[i]t is clear that the Court is in no way constrained by the parties' agreement and that, having made the declaration of contravention, it must exercise its discretion as to penalty."[70]

Submissions of Mr Lindberg on the contraventions

101 The contraventions are absent any dishonest behaviour by Mr Lindberg or deliberate withholding of information from the Board of AWB and AWBI.

102 Mr Lindberg relies on the contraventions not involving: any moral turpitude; deliberately seeking limited advice; deliberate decisions to misinform the board; leading the company into a breach of its duty; or misinforming the market.[71]

103 Mr Collins SC on behalf of Mr Lindberg said in regard to the accusations that were levelled against him:[72]

It's important, Your Honour, that with respect, the reasons and if there be any reporting of these proceedings, the reporting of them accurately reflects the fact that the disposition of the proceeding is consistent with the effect of the references that have been tendered without objection and that is that Mr Lindberg is and has consistently conducted himself as a hard working honest person of integrity. Your Honour, those submissions are not made in any way to challenge what the agreed position is and that is that the contraventions that have been agreed are serious contraventions and that the penalties that have been proposed jointly by the parties are appropriate.

But it should be made clear and we endeavour to make it clear that in accepting that position in no way detracts from Mr Lindberg's character and reputation as an honest, hard working person of integrity. Your Honour, that does not in any way diminish from the fact that it is accepted and the admissions that are made establish that he did not satisfy the objective standard of care required by s 180 of the Act.

104 Mr Lindberg sought to draw to the attention of the Court several issues relevant to the penalties to be imposed. These include:

(a) the nature of the contraventions, including the absence of any dishonest behaviour by Mr Lindberg or deliberate withholding of information from the Board of AWB and AWBI;

(b) the inability to ascertain any particular harm as a result of the contraventions;

(c) the effect of the allegations made against Mr Lindberg in the Cole Inquiry and in this proceeding, and the consequences of delay in their resolution, on Mr Lindberg and his family;

(d) the otherwise exemplary record of Mr Lindberg over his professional career, including as a director of the AWB companies and statutory authorities; and

(e) the contrition of Mr Lindberg for the contraventions and more generally for AWB's dealings with Iraq while he was the CEO/Managing Director of AWB.

Plaintiff v Defendant

At a glance

Court

Decision date

Before

Source

Judgment (526 paragraphs)

Parties

Legislation Cited (8)

Cases Cited (12)