Plaintiff v Defendants

"206C(1) On application by ASIC, the Court may disqualify a person from managing corporations for a period that the Court considers appropriate if:

(a) a declaration is made under section 1317E (civil penalty provision) that the person has contravened a corporation/scheme civil penalty provision;[4] and

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

206E(1) On application by ASIC, the Court may disqualify a person from managing corporations for the period that the Court considers appropriate if:

(a) the person

(i) has at least twice been an officer of a body corporate that has contravened this Act while they were an officer of the body corporate and each time the person has failed to take reasonable steps to prevent the contravention; or

(ii) has at least twice contravened this Act while they were an officer of a body corporate; or

(iii) has been an officer of a body corporate and has done something that would have contravened subsection 180(1) or section 181 if the body corporate had been a corporation; and

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

14 Having found that the circumstances mentioned in ss. 206C(1)(a) and 206E(1)(a)(ii) of the Act have been established in respect of each of the personal defendants, the question remains as to whether I am satisfied that disqualification orders are justified, as required by ss. 206C(1)(b) and 206E(1)(b).

15 Notwithstanding that they were given ample notice of my reasons for decision in ASIC v PFS and of the fact that I intended to hold a disqualification hearing, neither Shaun White nor Nicole White appeared at the disqualification hearing. As with the contravention hearing, Mr Tolson appeared in person to represent his separate interests.

16 Further, notwithstanding that I made directions permitting the filing of evidence relevant to the disqualification hearing, no party filed any such evidence.

17 For the reasons appearing hereafter, I am satisfied that I am justified in making an order disqualifying each of the personal defendants from managing corporations. In the case of Shaun White and Nicole White, they should each be disqualified from managing corporations for life. In the case of Mr Tolson, he should be disqualified from managing corporations for a period of seven years.

APPLICABLE LAW

18 The principles to be applied in determining whether a disqualification order is justified and if so, the period of disqualification, have been considered in many cases. In Rich v Australian Securities and Investments Commission[5] McHugh J reviewed the authorities for the purpose of determining whether an application for a disqualification order exposed the defendant officer to a penalty. In deciding that the power to make disqualification orders was not merely protective, but also involved the imposition of a penalty, McHugh J identified, by reference to the decided cases, four general categories of important matters to which courts have regard when determining whether to order disqualification and, if so, for what period:

(1) the nature and seriousness of the contraventions;

(2) protection of the public;

(3) retribution and deterrence;

(4) mitigating factors.[6]

19 As to the nature and seriousness of the contraventions, McHugh J gave examples, by reference to the decided cases, of the kinds of contraventions which have been held to justify the making of disqualification orders:

"Many and varied are the contraventions of the Corporations Act that give rise to applications for the disqualification of a person from managing corporations. Those contraventions are the grounds for the exercise of the court's discretion to order disqualification. The nature and seriousness of the contraventions are important matters to which the courts have regard when determining whether to order disqualification. Contraventions under the Corporations Act and its predecessor legislation that have been found to enliven the court's discretion include breaches of directorial duties of honesty, good faith and due care and diligence, making improper use of the position of director to gain an advantage for that person or for others to the detriment of the company, making inappropriate use of company funds, engaging in misleading and deceptive conduct, permitting corporations to trade while insolvent, operating unregistered schemes unlawfully or carrying on a business such as a securities business or an investment advice business without a licence and failing to comply with administration obligations. In substance, the nature of these contraventions is little different from those which attract the sanctions of the criminal law."[7] **(**Citations omitted.) (Emphasis in original.)

20 In Rich v ASIC, McHugh J referred to Re HIH Insurance Ltd (in prov liq); Australian Securities and Investments Commission v Adler[8] as being the "leading authority on the reasons for a court exercising its powers under ss. 206C and 206E to order the disqualification of a person from managing corporations".[9]

21 In ASIC v Adler, Santow J formulated 15 propositions arising from the decided cases in which disqualification orders had been made.[10] It is convenient to set out the 15 propositions formulated by Santow J by quoting the manner in which they are set out in the judgment of McHugh J in Rich v ASIC:

"1. Disqualification orders are designed to protect the public from the harmful use of the corporate structure or from use that is contrary to proper commercial standards.

2. 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.

3. Protection of the public also envisages protection of individuals who deal with companies, including consumers, creditors, shareholders and investors.

4. The banning order is protective against present and future misuse of the corporate structure.

5. The order has a motive of personal deterrence, though it is not punitive.

6. General deterrence is an object of the legislation.

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

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

9. In assessing an appropriate length of prohibition, consideration is given to the degree of seriousness of the contraventions, the propensity of the defendant to engage in similar conduct in the future and the likely harm that may be caused to the public.

10. 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 defendant's conduct.

11. A mitigating factor in considering a period of disqualification is the likelihood of the defendant reforming.

12. The eight criteria to govern the exercise of the court's powers of disqualification set out in Commissioner for Corporate Affairs (WA) v Ekamper have been influential. It was held that in making such an order it is necessary to assess:

(c) the structure of the company or companies and the nature of its or their business;

(d) the interests of shareholders, creditors and employees;

(e) the risks to others from the continuation of the defendant as a director;

(g) hardship to the defendant and to his or her personal and commercial interests; and

(h) the defendant's appreciation that future breaches could result in future proceedings.

13. Factors that have led to the imposition of the longest periods of disqualification (that is, disqualifications of twenty-five years or more) include:

(b) high propensity that the defendant may engage in similar activities or conduct;

(c) activities undertaken in fields in which there was potential to do great financial damage such as in management and financial consultancy;

(e) disregard for the law and compliance with corporate regulations;

(g) previous convictions and contraventions for similar activities.

14. In cases in which the period of disqualification ranged from seven years to twelve years, the factors that led to the conclusion that these cases were serious though not the "worst cases", included:

(c) the fact that the defendant had engaged in deliberate courses of conduct to enrich himself or herself at others' expense, but with lesser degrees of dishonesty;

(d) continued, knowing and wilful contraventions of the law and disregard for legal obligations; and

(e) lack of contrition or acceptance of responsibility, although that must be weighed against the prospect that the defendant may reform.

15. The factors leading to the shortest disqualifications (that is, disqualifications for up to three years) were:

(a) although the defendant had personally gained from the conduct, he or she had endeavoured to repay or partially repay the amounts misappropriated;

(b) the defendant had no immediate or discernible future intention to hold a position as manager of a company; and

(c) the defendant had expressed remorse and contrition, acted on advice of professionals and had not contested the proceedings against him or her." (Citations omitted.)[11]

22 The 15 propositions identified by Santow J are a helpful guide to the exercise of judicial discretion in determining whether to make a disqualification order, and if so, for what period. However, as Santow J pointed out, reference to earlier decisions does not "produce any neat arithmetic algorithm" or produce a guide which is "able to be used mechanically."[12]

23 In Re One.Tel Ltd (in liq); Australian Securities and Investment Commission v Rich[13] Bryson J warned that the guidance to be obtained from other decisions with respect to the reasons for ordering disqualification and the period of disqualification is limited, as each decision is closely related to its own facts. These statements were referred to by McHugh J in Rich v ASIC with apparent approval.[14]

24 In Elliot v Australian Securities and Investments Commission the Court of Appeal of this Court referred to the 15 propositions and factors listed by Santow J in ASIC v Adler as bearing a similarity to sentencing principles in the criminal law.[15] The Court of Appeal emphasised that "above all else protection of the public and deterrence, specific and general, must also be given appropriate consideration."[16] This statement was approved by McHugh J in Rich v ASIC.[17]

25 With the guidance which can be obtained from these authorities, I proceed to consider the position of each of the personal defendants.

SHAUN WHITE

26 ASIC seeks an order that Shaun White be disqualified from managing corporations for the rest of his life. On behalf of ASIC, it was submitted that this maximum period of disqualification was justified on a number of grounds. In summary, it was submitted that:

(1) The contraventions of the Act by Shaun White which I have found are of the most serious kind. This is especially so because the contraventions of the Act by Shaun White were, for the most part, directly related to investments in superannuation by persons seeking to provide for their retirement. The result of the contraventions has been loss of substantial amounts of superannuation savings, with little or no hope of recovery.

(2) The contraventions were not brought about by mere negligence or oversight. They were the result of gross incompetence, misleading and deceptive conduct including lies told by Shaun White and, in particular, the misappropriation of superannuation moneys by Shaun White and the use of those moneys for his own purposes.

(3) The contraventions by Shaun White must be viewed in light of the fact that he ought not, during the relevant period, to have been acting as a director of any corporation. By reason of his conviction for obtaining property by deception in contravention of s. 81 of the Crimes Act 1958 (Vic) he was disqualified from managing corporations under s. 206B(2) of the Act for the period 17 May 2000 to 17 May 2005. In merely acting as a director of the corporate defendants during this period, Shaun White was committing an offence under s. 206A of the Act.

(4) Shaun White has shown no remorse for his actions and has failed to provide any assistance to ASIC or the liquidator of the corporate defendants. Nor did he participate in the trial and seek to explain his actions.

27 I accept these submissions on the part of ASIC. The conduct of Shaun White which I have found to contravene the Act and the ASIC Act was of a most serious kind. As set out in my reasons for judgment in ASIC v PFS, Shaun White's contraventions included:

(1) Misappropriation of SMSF trust moneys.[18]

(2) Misappropriation of moneys invested in joint ventures.[19]

(3) Carrying on a financial services business without an AFS licence.[20]

(4) Engaging in false and misleading conduct, including telling deliberate lies.[21]

(5) As the person in effective control of all of the companies in the PFS Group, permitting those companies to trade whilst insolvent, with the effect that employees and creditors were not paid.[22]

(6) As the person in effective control of the PFS Group, failing to ensure that PFS Group companies kept proper books and records of all transactions engaged in by them.[23]

(7) As the person in effective control of the PFS Group, failing to ensure that the corporate defendants complied with their taxation obligations.[24]

(8) As the person in effective control of the PFS Group, causing or permitting the general mismanagement of the corporate defendants.[25]

28 The seriousness of the contraventions of the Act by Shaun White is magnified by the fact that many of the contraventions involved deliberate disregard for compliance with the law and corporate regulations, dishonesty and fraud. As a result of his conviction for obtaining property by deception, Shaun White should not have been acting as a director at all.

29 In my view, in the circumstances of this case, Shaun White should be disqualified from managing corporations for life. In reaching this conclusion, I have taken into account earlier decisions where very serious contraventions of this Act have resulted in periods of disqualification between 25 and 30 years.

30 In Australian Securities and Investment Commission v Parkes[26] Austin J disqualified a director found guilty of serious contraventions for a period of 25 years. This was the period of disqualification sought by ASIC. The circumstances giving rise to the contraventions involved the defendant using company funds to pay the debts of other companies for his own personal obligations. The amount involved was approximately $250,000. Austin J gave the following reasons for acceding to ASIC's request for a 25 year disqualification:

"In reaching this conclusion, I take into account the following factors:

• the contraventions that I have found include some very serious contraventions;

• those contraventions have led to loss and damage on the part of companies and investors, contrary to the protective purpose of the relevant provisions of the Corporations Law;

• the defendant's field of activity, management and financial consultancy, is an area where the potential to do damage is especially high, compared, say, with a defendant whose expertise is in making cement;

• the defendant's contraventions have been recurrent, arising in the context of three different sets of companies;

• until the end, the defendant asserted explanations for what he had done which I have found to be implausible, and this suggests to me that he has no contrition;

• all of these facts lead me to believe that there is a high propensity that the defendant will engage in similar conduct if only a short period of the prohibition is imposed;

• I am conscious of the fact that a prohibition for 25 years will effectively prevent the defendant from managing a corporation for the rest of his life, but it will not prevent him from earning income as an employee, using his undoubted financial skills under proper supervision."[27]

31 In my view, each of the factors mentioned by Austin J are relevant and applicable to the contraventions by Shaun White. Further, in my view, the contraventions in ASIC v Parkes were nowhere near as serious as the contraventions by Shaun White. Nevertheless, they were considered sufficiently serious to justify a prohibition for 25 years in circumstances where, presumably having regard to the age of Parkes, Austin J described this period of disqualification as being "effectively ... for the rest of his life".

32 In Australian Securities and Investments Commission v Hutchings[28] Windeyer J imposed a life disqualification, with a right to apply on three months' notice after five years for a variation of the period of disqualification. The case involved two individuals carrying on business as partners in an enterprise which involved borrowing money from members of the public on the promise of high rates of interest. Approximately $14M was obtained from the public in this manner. No proper accounting information was kept and, apart from approximately $480,000, all of the funds which had been borrowed appeared to have been lost. Each of the defendants was found to have contravened the Corporations Law more than twice. Accordingly, the discretion to make disqualification orders was enlivened.

33 Windeyer J gave the following reasons for ordering that the defendants be disqualified from managing corporations for life:

"The deficiency is of such magnitude that it is desirable for the protection of the community that these men not be in charge of corporations when there is a risk that they may use the corporate veil to engage in activities bringing harm to members of the public. There is no logical reason to think a disqualification period of say 5 or 10 years would be appropriate. I consider the appropriate course is to make a disqualification order for life with the right to apply on 3 months' notice after 5 years for variation of such order."[29]

34 The amount of money involved in this case is substantially less than in ASIC v Hutchings. However, due to the loss or destruction of records, and the failure of Shaun White to co-operate with ASIC or the liquidators in any meaningful way, the extent of the losses suffered by persons dealing with the PFS Group is unable to be quantified. For example, ASIC's investigations concerning moneys misappropriated from SMSFs do not relate to all SMSFs established by the PFS Group. Notwithstanding this, misappropriations of hundreds of thousands of dollars have been identified. Further, losses by investors in PFS Group property developments also involve hundreds of thousands of dollars. In addition, there are unpaid salaries owing to PFS Group employees of approximately $40,000 and the Australian Taxation Office is owed hundreds of thousands of dollars.

35 In Australian Securities and Investments Commission v Pegasus Leveraged Options Group Pty Ltd[30] Davies AJ imposed a 30 year period of disqualification. This case involved raising money from the public without complying with the applicable provisions of the Act. In this respect, the facts are similar to those considered in ASIC v Hutchings. In addition, the company and the director had been involved in the dissemination of a fraudulent document. The amount involved exceeded $2M. The director, McKim, had been convicted of a criminal offence and ought not to have been acting as a director, because he was disqualified under s. 206B of the Act. In this respect, his position is similar to that of Shaun White.

36 In ordering a 30 year period of disqualification, Davies AJ referred with approval to ASIC v Parkes and ASIC v Hutchings and concluded that a disqualification period of "slightly more" than that ordered in ASIC v Parkes was appropriate.[31]

37 In Platcher v Joseph[32] Stone J ordered a disqualification period of 25 years. In that case, Platcher had contravened the Act by being involved in the management of a corporation at a time that he was disqualified from doing so because he was an undischarged bankrupt. He did so on two occasions, thus enlivening the jurisdiction under s. 206E(1)(a)(ii) of the Act to impose a disqualification order.

38 In giving his reasons for imposing a 25 year period of disqualification, Stone J took the following matters into account:

(1) Although Platcher had not acted dishonestly, he had shown indifference to the interests of those affected by his conduct.[33]

(2) Platcher showed "no regret or even consciousness as to the effects of his conduct".[34]

(3) Although a 25 year period of disqualification would effectively prevent Platcher from managing a corporation for life, he would still be able to work in the financial area as an employee under the supervision of someone who was permitted to manage a corporation.[35]

(4) The offences were very serious and recurrent. There was no discernable appreciation of the implications of his conduct or any contrition.[36]

(5) Having regard to Platcher's field of expertise in the financial area, there was potential for him to repeat his conduct and cause significant loss to members of the public. His failure to offer any explanation for his conduct suggested that there was a high likelihood that he would offend again if a substantial period of disqualification was not imposed.[37]

(6) In all the circumstances, Platcher was not a competent person to be managing corporations, as a result of which there was a serious risk that he would cause serious losses to members of the public if allowed to manage corporations in the future.[38]

39 In Australian Securities and Investments Commission v Australian Investors Forum Pty Ltd (No 3)[39] Palmer J imposed a disqualification period of 25 years in respect of Mr Anthony, a man aged 56 years. The effect of this disqualification was that Anthony could not manage corporations again until he was 81 years old. This was effectively a life disqualification, and it is clear that Palmer J intended it to be so. Palmer J stated:

"In my opinion, Mr Anthony should never be permitted to occupy a position of responsibility or trust in advising others in financial matters or in managing their financial affairs. He should never be allowed to use corporate structures or to participate in the management of corporations: the risk to the public is too great."[40] (Emphasis added.)

40 Notwithstanding these decisions imposing fixed periods of disqualification, in relation to contraventions of a most serious kind, I am of the firm view that this is a case where an actual, as opposed to effective, disqualification for life is appropriate. In my opinion, there are particular circumstances of this case which justify that result.

41 First and foremost, the contraventions by Shaun White of the Act were principally concerned with the superannuation investments of persons seeking to provide for their retirement. These people were misled by Shaun White and those acting under his direction and control to move their superannuation moneys from the safety of established and reputable superannuation managers into SMSFs under the effective control of Shaun White as signatory to the SMSF bank accounts. In many cases, these superannuation moneys were either misappropriated and used for Shaun White's personal purposes or were placed in risky property developments being undertaken by the PFS Group. The fact that Shaun White targeted the superannuation moneys of people in this way, mostly low or middle income earners, was so deplorable as to attract the maximum penalty which the law allows. In my view, principles of protection of the public, retribution and deterrence demand this result.

42 Secondly, there is the complete lack of contrition on the part of Shaun White. He has refused to cooperate with ASIC and the liquidators in any way. In conjunction with his wife, Nicole White, he has been a party to the concealment and/or destruction of material documents and computer data. At every turn, his actions and inactions have made the investigations by ASIC and the liquidators more difficult, more time consuming and more costly. Shaun White did not appear at trial, despite numerous opportunities to do so, and has never offered any explanation for his conduct. In these circumstances, I am of the firm view that he is a person who is likely to abuse any position which he may hereafter hold relating to the management of corporations. He should be prohibited from ever doing so.

43 In so ordering, I note that the possibility of Shaun White making an application under s. 206G of the Act for leave to manage corporations or a particular corporation is not excluded. Such an application must be made on notice to ASIC and supported by appropriate material. It is not, in my view, appropriate for me to fix any conditions as to a period before which Shaun White should be prohibited from making an application under s. 206G, as was done by Windeyer J in ASIC v Hutchings. It is in my view neither necessary nor desirable that such conditions be attached. In ASIC v Adler, Santow J doubted whether there was power to attach such conditions.[41] Whether or not such a power exists, I am of the firm view that it is not appropriate to exercise it by imposing a condition of the kind imposed by Windeyer J in ASIC v Hutchings. Any discretion under s. 206G should be exercised if and when it is invoked, having regard to the evidence then before the Court.

NICOLE WHITE

44 It is first necessary to note that, like Shaun White, Nicole White was convicted of obtaining property by deception in contravention of s. 81 of the Crimes Act 1958 (Vic). As a result, she was disqualified from managing corporations under s. 206B(2) of the Act for the period 17 May 2000 to 17 May 2005. Further, from March 2005, Nicole White was a bankrupt. Accordingly, she was disqualified from managing corporations under s. 206B(3) of the Act. In merely acting as a director of those corporate defendants of which she was a director, and in participating in the management of other corporate defendants, Nicole White was committing an offence under s. 206A of the Act.

45 The contraventions of the Act by Nicole White are not as widespread or serious as those of her husband. However, they are extremely serious. As set out in my reasons for judgment in ASIC v PFS, Nicole White's contraventions included:

(1) Being knowingly involved in or a party to the misappropriation of SMSF trust moneys by Shaun White.[42]

(2) Carrying on a financial services business without an AFS licence.[43]

(3) Engaging in false and misleading conduct, including telling deliberate lies.[44]

(4) Breaching her duties as a director or officer of a number of the corporate defendants, by failing to exercise reasonable care and diligence and acting so as to gain an improper advantage for herself, her husband or various of the corporate defendants.[45]

(5) As the administrator of SMSFs under the control of the PFS Group, failing to ensure that PFS Group companies kept proper books and records of all transactions engaged in by or on behalf of those SMSFs.[46]

46 In respect of Nicole White, ASIC also seeks an order that she be disqualified from managing corporations for the rest of her life. For reasons which are substantially the same as those which I have given in respect of Shaun White, I accept this submission.

47 In my view, Nicole White should, like her husband, be disqualified for life from managing corporations. This is because she was intimately involved, as the "Senior Fund Administrator", in the SMSF business of the PFS Group. In this role Nicole White was, at the very least, aware of the misappropriations by her husband of very substantial amounts of SMSF moneys. With this knowledge, she lied to cover up her husband's fraudulent conduct. Further, she knowingly took the benefit of moneys stolen by her husband from SMSFs. It is sufficient to refer to the use which was made of the moneys misappropriated from the Makaze SMSF, as described in ASIC v PFS.[47] Further, as with her husband, Nicole White has shown no contrition whatsoever. Like her husband, she has refused to cooperate with ASIC and the liquidators in any way. She has been a party to the concealment and/or destruction of material documents and computer data. I am of the firm view that she is a person who is likely to abuse any position which she may hereafter hold relating to the management of corporations. Principles of protection of the public, retribution and deterrence demand that she be prohibited from ever doing so.

48 As with her husband, Nicole White has the right, upon notice to ASIC and supported by appropriate material, to apply under s. 206G of the Act for leave to manage corporations or a particular corporation. I refer to my comments above in that regard.

DAMIEN TOLSON

49 The position of Tolson stands in stark contrast to that of Shaun and Nicole White. In the first place, there was no prohibition upon him acting as a director when he did so. None of the circumstances mentioned in s. 206B of the Act applies to him. In particular, he has no prior criminal history, either involving offences for dishonesty or at all.

50 Secondly, I found in ASIC v PFS that Tolson did not act dishonestly. There is no evidence that Tolson knew, or had any reason to suspect, that Shaun White was misappropriating SMSF moneys.[48]

51 However, the fact remains that Tolson contravened the Act in material respects. Although I am satisfied that he acted at all times in good faith, his conduct was such as to amount to gross negligence. In particular, I have found that Tolson naively did Shaun White's bidding without considering his duties as a director or the contractual duties of companies of which he was a director.[49]

52 In my view, Tolson had no real appreciation of his duties as a director at the relevant times. However, having observed him during the course of the trial of the contravention hearing and the disqualification hearing, I am well satisfied that he now has a good appreciation of the duties of a director.

53 The third significant distinguishing feature between Tolson on the one hand and Shaun and Nicole White on the other is Tolson's expressions of real contrition for his actions. Tolson demonstrated this by his conduct during the contravention hearing and the disqualification hearing, including express statements of contrition and the making of admissions against his interest in circumstances where the admitted matters were not established by the evidence.

54 I am satisfied that disqualification of Tolson from managing corporations is not required in order to protect the public. However, the seriousness of his contraventions are such that principles of retribution and deterrence remain relevant. In particular, this is so with respect to the following contraventions by Tolson:

(1) Tolson was a director of companies which failed to pay employees their wages in a timely manner or at all. These companies also continued to trade while insolvent and failed to comply with taxation obligations.[50]

(2) Tolson's conduct in relation to the "inter-company loans" and other payments from the PFS Ashridge Lane A account to PFS Business, as discussed in ASIC v PFS[51], constituted contraventions of ss. 180(1) and 182(1) of the Act of a serious kind causing substantial losses to investors. Although I accept that, at the time, Tolson had been recently appointed to his first position as a company director, and that he acted at the direction of Shaun White, this cannot be allowed to stand as a complete excuse for his conduct. In my view, in imposing a period of disqualification, I should consider the public interest in deterring people from acting as company directors in circumstances where they have no real appreciation of their duties as a director or in respect of the field of commerce in which the relevant company operates.

(3) Tolson's conduct in respect of his dealings with Mr Kendon, as described in ASIC v PFS[52], resulted in Kendon losing approximately $24,000. On Tolson's own admissions, although not established by evidence, another four investors in the relevant property have also lost similar amounts. These are large losses for unsophisticated investors like the Kendons. Tolson's conduct in this regard was seriously flawed, although I accept that it was not dishonest in any way.

55 Further, Tolson's conduct when faced with notices from ASIC requiring him to produce documents relating to companies of which he was a director fell short of the standards to be expected of a responsible company director. Tolson produced no documents. His explanation for doing so is that the documents were all in the control of Shaun and Nicole White. Further, his inability to access these documents made it impossible for him to prepare a Report As To Affairs in respect of the companies of which he was a director, as requested by the liquidator. I accept that what Tolson says in this regard is true. However, the appropriate response in these circumstances is not to do nothing. Tolson ought to have responded to the ASIC notices by stating that he believed all of the relevant documents were with Shaun and Nicole White. In response to the liquidator's request for a report as to affairs, Tolson should have stated that he could not prepare such a document because he did not have access the relevant documents.

56 In all the circumstances, an order disqualifying Tolson from managing corporations for a period of seven years is, in my view, justified. In submissions, Tolson referred to the possibility that imposing a period of disqualification upon him would affect his ability to become a registered builder and, perhaps, to obtain insurance if he could become registered. There was no evidentiary basis for this submission. In my view, the appropriate response to it is to refer to the provisions of s. 206G of the Act. If the disqualification order which I will make has the effect of preventing Tolson from continuing his chosen career in the building industry, it will be open to him to make an application under s. 206G of the Act for leave to manage a particular corporation. If such an application is made, the Court hearing it can consider whether it should be granted in light of all of the circumstances then appearing, including any conditions which it may be appropriate to impose upon the grant of any such leave.

CONCLUSION AND ORDERS

57 I will make disqualification orders in accordance with the above reasons.

58 As to costs, I have already heard submissions as part of the disqualification hearing. It was submitted on behalf of ASIC that I should order that the corporate defendants, Shaun White and Nicole White should be jointly and severally liable for all of ASIC's costs, and that Tolson should be severally liable for one-third of ASIC's costs. In respect of the costs orders sought against the corporate defendants, ASIC did not seek priority for all of its costs, but only part of them. In my view, this submission was appropriate and I will accede to it.

59 The issue remains as to whether it is just that Tolson be responsible for one-third of ASIC's costs. In my view, it is not. Although Tolson was one of three officers of the corporate defendants who was proceeded against by ASIC, he was by no means one-third responsible for the conduct examined at trial or the losses which have been suffered. Tolson's conduct as a self-represented litigant was helpful and appropriate throughout, and he did not unnecessarily prolong any aspect of the trial.

60 In my view, it is appropriate to determine Tolson's liability for costs by reference to the period of disqualification imposed upon him, as compared with the combined periods of disqualification imposed upon Shaun and Nicole White. The evidence establishes that Shaun and Nicole White are aged 34 and 36 respectively. Taking into account normal life expectancy and periods of engagement in commercial activity, their life disqualifications equate to at least 30 years each, a total of 60 years. As against this, Tolson has been disqualified for a period of seven years. In these circumstances, I consider that Tolson should be responsible for 10 per cent of ASIC's costs of the proceeding. In arriving at this conclusion I have also taken into account the fact that time was lost at trial due to the need for ASIC to file supplementary evidence concerning matters which were the subject of hearsay evidence, the time taken to argue the possible application of the re-enactment rule[53] and the delay caused by the correspondence from Shaun and Nicole White during the trial.[54] None of these delays were caused by Tolson and he should not be responsible for them.

[1] [2004] NSWCA 448; (2004) 52 ACSR 1.

[2] [2004] NSWCA 448; (2004) 52 ACSR 1 at [410]- [427].

[3] [2006] VSC 192.

[4] In this proceeding, the only relevant civil penalty provisions are ss. 180-183 of the Act.

[5] [2004] HCA 42; (2004) 220 CLR 129.

[6] Rich v ASIC [2004] HCA 42; (2004) 220 CLR 129 at [47] to [58].

[7] Rich v ASIC [2004] HCA 42; (2004) 220 CLR 129 at [47].

[8] [2002] NSWSC 483; (2002) 42 ACSR 80.

[9] Rich v ASIC [2004] HCA 42; (2004) 220 CLR 129 at [48].

[10] ASIC v Adler [2002] NSWSC 483; (2002) 42 ACSR 80 at [56].

[11] [2004] HCA 42; (2004) 220 CLR 129 at [49].

[12] ASIC v Adler [2002] NSWSC 483; (2002) 42 ACSR 80 at [70], referring with approval to the statement by Hill J in Australian Competition and Consumer Commission v Universal Music Australia Pty Ltd (No 2) [2002] FCA 192 at [34].

[13] [2003] NSWSC 186; (2003) 44 ACSR 682 at [26]- [30].

[14] Rich v ASIC [2004] HCA 42; (2004) 220 CLR 129 at [53].

[15] [2004] VSCA 54; (2004) 10 VR 369 at [137].

[16] Elliot v ASIC [2004] VSCA 54; (2004) 10 VR 369 at [137]. See also ASIC v Vizard [2005] FCA 1037 at [40].

[17] [2004] HCA 42; (2004) 220 CLR 129 at [51].

[18] ASIC v PFS [2006] VSC 192 at [144]- [150], [162]-[210].

[19] ASIC v PFS [2006] VSC 192 at [211]- [251].

[20] ASIC v PFS [2006] VSC 192 at [338]- [360].

[21] ASIC v PFS [2006] VSC 192 at [361]- [365], [367]-[370].

[22] ASIC v PFS [2006] VSC 192 at [293]- [311], [316]-[317].

[23] ASIC v PFS [2006] VSC 192 at [228], [235], [259], [318]-[329], [333], [379].

[24] ASIC v PFS [2006] VSC 192 at [330]- [332], [379].

[25] ASIC v PFS [2006] VSC 192 at [330]- [332].

[26] [2001] NSWSC 377; (2001) 38 ACSR 355.

[27] ASIC v Parkes [2001] NSWSC 377; (2001) 38 ACSR 355 at [181].

[28] (2001) 38 ACSR 387.

[29] ASIC v Hutchings (2001) 38 ACSR 387 at [20].

[30] [2002] NSWSC 310; (2002) 41 ACSR 561.

[31] [2002] NSWSC 310; (2002) 41 ACSR 561 at [105].

[32] [2003] FCA 9; (2003) 44 ACSR 277.

[33] [2003] FCA 9; (2003) 44 ACSR 277 at [68].

[34] [2003] FCA 9; (2003) 44 ACSR 277 at [68].

[35] [2003] FCA 9; (2003) 44 ACSR 277 at [70].

[36] [2003] FCA 9; (2003) 44 ACSR 277 at [71].

[37] [2003] FCA 9; (2003) 44 ACSR 277 at [72].

[38] [2003] FCA 9; (2003) 44 ACSR 277 at [73].

[39] [2005] NSWSC 1198; (2005) 56 ACSR 204.

[40] [2005] NSWSC 1198; (2005) 56 ACSR 204 at [42].

[41] ASIC v Adler [2002] NSWSC 483; (2002) 42 ACSR 80 at [82].

[42] ASIC v PFS [2006] VSC 192 at [392]

[43] ASIC v PFS [2006] VSC 192 at [338]- [360], [374].

[44] ASIC v PFS [2006] VSC 192 at [361]- [365].

[45] ASIC v PFS [2006] VSC 192 at [384]

[46] ASIC v PFS [2006] VSC 192 at [318]- [329], [333], [379].

[47] ASIC v PFS [2006] VSC 192 at [184].

[48] ASIC v PFS [2006] VSC 192 at [193].

[49] ASIC v PFS [2006] VSC 192 at [125].

[50] ASIC v PFS [2006] VSC 192 at [379].

[51] ASIC v PFS [2006] VSC 192 at [243]- [251], [383(3)], [387].

[52] ASIC v PFS [2006] VSC 192 at [288]- [292].

[53] ASIC v PFS [2006] VSC 192 at [77]- [92].

[54] ASIC v PFS [2006] VSC 192 at [56]- [58].