5.4.1 Introduction, power and principles
217 The Registrar sought an order under s 279-15(1) of the CATSI Act, disqualifying:
(1) Ms Murray from managing, or being a director of, any corporation for a period of between 5 and 7.5 years; and
(2) Mr Brown, Ms Dickson and Ms Nichols from managing, or being a director of, any corporation for a period of 3 years.
218 The Court's power to make orders disqualifying the respondents from managing Aboriginal and Torres Strait Islander corporations is addressed in [26]-[27] above.
219 The principles developed in relation to ss 206C and 206E of the Corporations Act (often referred to as the 'Santow principles') have been held to be apt to guide the exercise of the disqualification power contained in the CATSI Act: Matcham No 2 at [164]. However, as Jacobson J said in Matcham No 2, the Santow principles should not be treated as a rigid catalogue of matters that must be considered in every case, but instead may be applied, as appropriate in each case, so as to inform the exercise of the discretion: at [173].
220 What then are the Santow principles? They were distilled in ASIC v Adler at [56] to include:
(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) Disqualification orders are 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 that deal with companies, including consumers, creditors, shareholders and investors.
(4) A disqualification 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) The objects of general deterrence are also sought to be achieved.
(7) 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.
(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 the appropriate length of prohibition, consideration has been given to the degree of seriousness of the contraventions, the propensity that the defendant may 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 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 (1987) 12 ACLR 519 are influential. The criteria were character of the offenders, nature of the breaches, structure of the companies and the nature of their business, 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 and offenders' appreciation that future breaches could result in future proceedings.
(13) Factors which lead to the imposition of the longest periods of disqualification (of 25 years or more), were large financial losses, high propensity that defendants may engage in similar activities or conduct, activities undertaken in fields in which there was potential to do great financial damage, lack of contrition or remorse, disregard for law and compliance with corporate regulations, dishonesty and intent to defraud and previous convictions and contraventions for similar activities.
(14) In cases in which the period of disqualification ranged from 7 to 12 years, the factors included serious incompetence and irresponsibility, substantial loss, defendants had engaged in deliberate courses of conduct to enrich themselves at others' expense, but with lesser degrees of dishonesty, continued, knowing and wilful contraventions of the law and disregard for legal obligations and lack of contrition or acceptance of responsibility, but as against that, the prospect that the individual may reform.
(15) The factors leading to the shortest disqualifications, that is disqualification for up to three years, were although the defendants had personally gained from the conduct, they had endeavoured to repay or partially repay the amounts misappropriated, the defendants had no immediate or discernible future intention to hold a position as manager of a company and the defendant had expressed remorse and contrition, acted on the advice of professionals and had not contested the proceedings.