Registrar of Aboriginal and Torres Strait Islander Corporations v Pini

REASONS FOR JUDGMENT 1 This is an application pursuant to s 386-1 of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth). The applicant seeks declaratory relief relating to conduct allegedly contrary to ss 265-1 and 265-10 of the Act. In addition to declaratory relief, the applicant seeks an order of disqualification against both respondents pursuant to s 279-15 of the Act. The declarations are now to be made by consent. I have, in the course of argument, expressed some doubt as to whether the conduct described in the material could constitute a relevant breach, but given that the respondents have consented to appropriate declarations, it is not necessary that I resolve those doubts. I propose to deal with the respondents upon the basis that they derived personal benefit from their conduct. However I do not intend to treat the alleged breaches of s 265-10 as being serious. 2 The parties have filed an agreed statement of facts and admissions upon which I propose to act. The Lagulalya Aboriginal Corporation (the "company") provided services to a small indigenous community in the Groote Eylandt and Bickerton Island area of the Northern Territory. Among other things, the company operated a store and associated service facilities. The first respondent was employed as general manager. The second respondent, who was his partner, was employed as the business manager. The business was a small one, but the terms of remuneration were not ungenerous. The first respondent was employed at a salary of $85,000 per annum plus superannuation, of which up to $16,500 could be salary sacrificed, with the use of a motor vehicle for employment and recreational use, a reasonably furnished house and two return flights each year for annual leave. The second respondent was employed upon the same terms, save that her salary was $75,000 per annum. 3 It is clear from the material that the respondents conducted the company's business in a completely incompetent way. I infer that as a result, the company suffered significant financial loss. It is not possible to calculate the full consequences of such conduct. It involved a failure to develop, install and observe any real system for the control of money, or for recording the affairs of the business. As a result, the auditors found it difficult to establish very much about the financial affairs of the company. Attempts by other persons to draw to the respondents' attention inadequacies in their management were met with refusals to accept any such criticisms. A lawyer who had advised them was dismissed because of the unacceptable nature of the advice which was given. The results of the investigation appear at para 25 of the statement of agreed facts and admissions. I need not set them out here. Further comments are made at para 31. The circumstances which led to the respondents' employment appear at paras 35 - 40. It seems that the directors of the company were indigenous persons who had no business experience at all, and were therefore unsuitable or unable to supervise the work of the respondents, or to identify inadequacies in their performance of such work. 4 Whatever the position may have been when the respondents started their employment, by the time they finished it, the company was unable to meet its debts and required external funding in the order of about $400,000. During their employment the respondents continued to enjoy their remuneration packages, whilst they were either unable or unwilling appropriately to perform their duties. 5 In summary, the respondents, whilst occupying important positions of leadership in a remote and isolated Aboriginal community, failed to discharge their responsibilities. Given the way in which the business was performing, and the respondents' attempts to conceal that fact, I infer that they acted in a manner which was inconsistent with the way in which an ordinary person of ordinary prudence would have been expected to act. In those circumstances, I make the declarations sought. 6 As I have said, the applicant also asks that the respondents be disqualified from managing a corporation. The question is the length of any period of disqualification. I have been provided with a helpful table of comparable decisions which show a range between 2 and 20 - 25 years. However the cases at the higher end seem to have involved deliberate actions, either fraudulent in nature or akin thereto. There is no suggestion of fraud in this case, although it is suggested, and I think demonstrated that the respondents ought to have been aware of their own shortcomings. 7 To my mind, the first case, Registrar of Aboriginal and Torres Strait Islander Corporation v Berto [2014] FCA 100 is reasonably comparable with the present case. Without authority, Mr Berto transferred funds from the relevant corporation to a commercial entity involved in a major construction project. The project was designed to deliver significant benefits to the local community. The total amount involved was $1.7 m. The money had been derived from a Commonwealth Government grant. It was used in such a way as to result in the money becoming refundable to the Commonwealth. Mr Berto understood that the money would, in any event have been repaid by the company and it was, in fact, repaid. Mr Berto was fully cooperative. The case is, I think, somewhat less serious than the present case. There was no actual loss, although there was a risk of loss. It appears to have been a "one-off" transaction. 8 In the case of Re Tasmanian Spastics Association; Australian Securities Commission v Nandan (1997) 23 ACSR 743, where a penalty of three years was imposed, the relevant director had applied funds to meet his own entitlements, and used the relevant association's sales tax exemption number to gain a personal tax exemption. There was a deliberate, systematic and unauthorised misuse, for personal or private purposes, of the funds, an abuse of trust and confidence and attempts to camouflage his conduct. He appears not to have co-operated or displayed any remorse. In the present case, the respondents have consented to the declaratory relief and have not resisted the imposition of periods of disqualification. These matters go in mitigation of the seriousness of their conduct. However the imposition of a period of disqualification should be seen as a method of protecting the public rather than as a penalty per se. 9 In the circumstances, it appears to me that a period of disqualification of between two and three years is justified. In the case of Mr Pini, I will impose a period of disqualification of three years. In the case of Ms Lucas, the period of disqualification will be two years. I order that the respondents pay the applicant's costs of the proceedings. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett.