CATCHWORDS TRADE PRACTICES - Prosecutions - Misleading representation concerning the effect of conditions - Conduct liable to mislead the public as to the characteristics of services - Sale by agent of investment contracts - Contracts providing for discount at rate of 4% per year upon settlement prior to expiration of full 25 year term - Agents trained to sell on basis of 10 year investment - Agents not informed of existence of discount - No information given to clients relating to discount - Pleas of guilty - Assessment of penalties. Trade Practices Act 1974 ss.53(g), 55A, 75B, 79. NSW G.116 and G.124 of 1986 RONALD EDWARD ADAMS v_ ANTHONY BRYANT & CO PTY LTD NSW G.135 of 1986 RONALD EDWARD ADAMS v VENN CHARLES WILLIAMS NSW G.146 of 1986 RONALD EDWARD ADAMS v_ BRIAN AHEARNE Wilcox J Sydney 14 April 1987 IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) NSW G.116 of 1986 ) ) GENERAL DIVISION CORAM: PLACE: DATE: BETWEEN: RONALD EDWARD ADAMS Prosecutor AND: ANTHONY BRYANT & CO PTY LTD Defendant WILCOX J SYDNEY 14 APRIL 1987 MINUTES OF ORDER THE COURT ORDERS THAT: - 2. Note: The defendant be convicted of a contravention of s.53(g) of the Trade Practices Act 1974 being the offence alleged in the information filed herein on 24 April 1986. The defendant pay a fine of forty thousand dollars ($40,000) to the Registrar of this Court within twenty~one (21) days of this day. Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. See also Order 37 rule 2(3). IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) NSW G.124 of 1986 ) ) GENERAL DIVISION CORAM: PLACE: DATE: BETWEEN: RONALD EDWARD ADAMS Prosecutor AND: ANTHONY BRYANT & CO PTY LTD Defendant WILCOX J SYDNEY 14 APRIL 1987 MINUTES OF ORDER THE COURT ORDERS THAT: 1. Note: The defendant be convicted of a contravention of s.55A of the Trade Practices Act 1974 being the offence alleged in the information filed herein on 24 April 1986. The defendant pay a fine of forty thousand dollars ($40,000) to the Registrar of this Court within twenty-one (21) days of this day. Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. See also Order 37 rule 2(3). IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) NSW G.135 of 1986 ) ) GENERAL DIVISION CORAM: PLACE: DATE: BETWEEN: RONALD EDWARD ADAMS Prosecutor AND: VENN CHARLES WILLIAMS Defendant WILCOX J SYDNEY 14 APRIL 1987 MINUTES OF ORDER THE COURT ORDERS THAT: Note: The defendant be convicted of a contravention of s.55A of the Trade Practices Act 1974 being the offence alleged in the information filed herein on 24 April 1986. The defendant pay a fine of eight thousand dollars ($8,000) to the Registrar of this Court within twenty-one (21) days of this day. Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. See also Order 37 rule 2(3). IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY )} NSW G.146 of 1986 ) ) GENERAL DIVISION BETWEEN: RONALD EDWARD ADAMS Prosecutor AND: BRIAN AHEARNE Defendant CORAM: WILCOX J PLACE: SYDNEY DATE: 14 APRIL 1986 MINUTES OF ORDER THE COURT ORDERS THAT: 1. The defendant be convicted of a contravention of s.55A of the Trade Practices Act 1974 being the offence alleged in the information filed herein on 24 April 1986. 2. The defendant pay a fine of eight thousand dollars ($8,000) to the Registrar of this Court within twenty-one (21) days of this day. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. See also Order 37 rule 2(3). IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) ) ) CORAM: PLACE: DATE: GENERAL DIVISION WILCOX J SYDNEY 14 APRIL BETWEEN : AND: BETWEEN: AND: BETWEEN: AND: NSW G.116 and 124 of RONALD EDWARD ADAMS Prosecutor ANTHONY BRYANT & CO PTY LTD Defendant NSW G.135 of 1986 RONALD EDWARD ADAMS Prosecutor VENN CHARLES WILLIAMS Defendant NSW G.146 of 1986 RONALD EDWARD ADAMS Prosecutor BRIAN AHEARNE Defendant REASONS FOR JUDGMENT There are before the Court four informations alleging offences under Part V of the Trade Practices Act 1974. These four cases are the remnants of 44 informations laid by Ronald Edward Adams, an officer of the Trade Practices Commission, against four defendants, Anthony Bryant & Co Pty Ltd, Venn Charles Williams, Craig Francis Williams and Brian Ahearne. In a judgment delivered on 6 August 1986 I dealt with certain interlocutory aspects of those proceedings: see 67 ALR 616. It had been agreed between the parties that all 44 matters should be heard together, in a hearing estimated to take some weeks. But when the cases were called for hearing counsel informed the Court that in four of the matters the respective defendants would enter guilty pleas and that, if this happened, the prosecutor would seek the dismissal of each of the other 40 informations. In the event guilty pleas were entered in two matters against Anthony Bryant & Co Pty Ltd and in one matter against each of Mr V C Williams and Mr Ahearne. The other informations were then dismissed. The four surviving matters are all closely connected. Mr V C Williams and Mr Ahearne were at all material times directors of Anthony Bryant, a company incorporated in 1980. In May 1983 Scottish Amicable Life Assurance Society appointed Anthony Bryant as its agent for the purpose of offering to members of the public the opportunity to enter into investment insurance contracts known as "Managed Investment Plans". The terms of the agency agreement included a payment to Anthony Bryant of a commission equal to 125% of the sum contributed by each introduced investor in the first year of the Plan. The terms and conditions governing the rights of investors in Managed Investment Plans are set out ina booklet, apparently prepared by Anthony Bryant in conjunction with Scottish Amicable, which, when supplemented by a schedule setting out details concerning the particular client, acts as the Policy document. The booklet is fairly lengthy. I need note only those provisions which are relevant to the present matters. The document refers to a fund, known as "The Scottish Amicable Management Investment Fund", which consists of a separately identifiable portfolio of assets held by the society. Income from those assets is added to, and all expenses in respect of those assets is deducted from, the Fund. The Fund is divided into units, the scheme being that the share of each investor in the Fund is commensurate with the proportion which his or her number of units bears to the total number of units on issue. Provision is to be made each month for valuation of the Fund for the purpose of obtaining a unit value which is to be publicly announced. The conditions make clear that not all the contributions made by investors will go towards the purchase of units. In the first place, the purchase price of units is to be increased by 3% to allow for establishment costs; that is investors purchasing units pay a premium of 3% over current value. Secondly, and more significantly, the conditions permit the society to direct significant proportions of the contributions made in early years to other purposes: presumably mainly the payment of commission. Thus the proportions of contributions guaranteed to be applied to the Fund are: Year 1 - 60%; Year 2 - 65%; Year 3 - 75%; subsequent years - 95%. The conditions dealing with the position upon disposal of units are presently important. They are as follow: "7 Sell Back Price The sale price of the Units (called the Sell Back Price) is the Unit Value as determined in Note 4, reduced by 3% to cover termination costs. 10 Cash In Value After the Policy has been in force for two years and the equivalent of two full years contributions have been paid, the Managed Investment Plan acquires a 'Cash in Value' based on the sell back price of the Units. If the Policy is cashed in after the end of the term, the Cash In Value is the full sell back price of the Units held. If it is cashed in earlier, the full sell back price of Table 1 Units may be discounted by up to 4% (four percent) for each year, or part of year, remaining between the cashing in date and the date at the end of the selected term. That discount applies only to Table 1 Units. Table 2 Units are not discounted on cashing in." Table 1 Units are those purchased out of contributions which accord with the stipulated initial investment contribution; Table 2 units out of contributions in excess of that. The booklet provides for payment of the sell back value of units held upon the death of the investor. Otherwise repayment is to be made at the expiration of the term specified in the schedule; usually 25 years. If the investor wishes to cash in his or her units before the expiration of the term, condition 10 applies. It follows, of course, from the combination of condition 10 and a term of 25 years that encashment after a period of 10-15 years might involve a large loss to the investor. An investor who cashed his or her holding after 10 years might be faced with a deduction of 60% (15 years at 4% per year) of the value of the units. After 15 years the deduction might be 40%. Following the making of the agency agreement Anthony Bryant established a training course for its sales representatives. A two volume training manual was prepared and issued to trainees. The trainees were instructed to absorb the sales technique included in the manual to the point of learning word for word the actual language which it recommended for use. The technique suggested in the manual can only be described as high pressure salesmanship. Moreover, and this is the presently relevant point, the recommended sales language placed particular emphasis upon the desirability of the Plan as a 10 year investment. Thus the opening gambit, to be learned by rote, included the following: "Let's have a look at your working career. Here you are today at age 30 and then you'll be 40, etc." The sales person was then to draw a line showing numbers at 10 year intervals until age 70 and thereafter to proceed: ""A lot of things are going to happen over the next forty (40) years for which you are going to need capital. When do you want capital most of all? At your retirement age here or earlier ~ say 10 years here? (Mark Lifeline at 10 years and retirement.) (If 10 years)" At a later stage of the interview the sales person was to suggest to the prospect an appropriate list of investment requirements. The list, along with security, profit and freedom from tax included "a flexible 10 year fund". In the second volume of the training manual there was a section setting out the recommended discussion with prospects regarding their need for money. Again the emphasis was on a 10 year time span. "'Capital isn't built up over night, it takes time doesn't it?' 'If I could write a cheque for everything you wanted right now, what would you put on the list?' 'Now in 10 years time that list may be different but I'm sure you could still write a list, couldn't you?' 'I£ you had a savings plan 10 years ago, would you be better off now?' 'How much money will you have earned in the next 10 years?' 'Where do you really see yourself in 10 years time? - Let's look in the mirror.' eee Do you have any idea of how you will achieve enough capital for the things you want here (10 years). Well shall we make it my job ..." In the next section, designed "for the client who is hazy about his future or to consolidate a need section" four separate references to a 10 year period were prescribed. Sales representatives of Anthony Bryant were not issued with copies of the Policy document. So they had no means of learning about the discount provided for in condition 10. But not only were they kept in ignorance; what they were given was positively misleading. Sales staff were issued with copies of a booklet published by Anthony Bryant entitled "Member's Guide to the Managed Investment Plan". This document was designed for presentation to the prospect. Instruction documents provided to the sales representatives required them to take the prospect through the Member's Guide. The document emphasised the flexibility of the Plan, stating that it "is one of the most flexible plans available in Australia to-day", the investor being able, among other options, to "cash-in the plan after two years or more". Reference is made to the "buy-in" and "sell-back" prices; the latter being said to be unit value less 3%. In the middle of the brochure is a double page graph introduced with the following explanation: "Examples of Investment Benefits The Managed Investment Plan is an open-ended investment which enables you to withdraw at a time to suit your needs. It can be earlier or later than the 25 year period. Naturally, the later you withdraw, the better the return on your investment as shown in the example alongside. Let's compare figures for an initial monthly investment level of $100 into an investment term of 25 years and its performance over 10, 15, 20 and 25 years assuming an inflation rate of 8%, and a Unit growth at 2% faster than the inflation figure. Initial Monthly Investment Investment Term Contribution 25 years $100 NOTES: All amounts have been rounded to the nearest $1,000. An inflation rate of 8% per annum is assumed throughout. Units are assumed to grow at the inflation figure of 8% + 2% per annum. Illustrations are based on contributions to the Plan increasing each year in line with the Consumer Price Index assumed at 8% per annum. We consider the examples to be conservative in relation to what the Plan can actually achieve. A projected return of over 250% of total contribution input after 25 years, illustrates the benefits of longer term investment as against Cashing-In earlier." There followed four double columns, headed respectively, "10 years", "15 years", "20 years" and "25 years". One of the double columns, in each case, showed a figure payable "on cashing in", the other "on death". In the case of 10 years the respective figures were $18,000 and $23,000. According to a computation made at my request $18,000 broadly corresponds with the pay out due to an investor who had acted in accordance with the assumptions in the explanation to the graph, subject to a discount under condition 10 of the Policy of 2% (not 4% as permitted by that condition) per year. Upon the following page, under the heading "At a "4, Your Plan is designed for the medium to long term (that's where the BIG profits are) and will probably perform best over ten years or more. As the Pian builds no cash value within the first two years, if you are thinking of collecting money next year or the year after, you should consider an alternative form of investment. However, after the policy has been in force for two years and the equivalent of two years contributions paid, there is nothing to stop you cashing-in your Units in an emergency. glance ... your special advantages" the following appears: Cashing~In In fact, you are not committed to a definite period. As your circumstances change you can decide to cash-in and take your investment, plus profits. Although, if you definitely wish to keep in front of inflation and retain the long-term value of your money, then remember that Scottish Amicable's Managed Investment Plan is confidently expected to out-perform most other forms of investment." The offences to which the various defendants have pleaded guilty arise under s.53(g) and s.55A of the Trade Practices Act 1974. Section 53(g) provides: "S53. A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services-- (g) make a false or misleading statement concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy." 10. It is alleged against the company, Anthony Bryant, in matter G.116 of 1986 that, on or about 1 May 1985, it, "being a corporation, in trade or commerce, in connexion with the promotion by negotiations of the supply of services, namely an investment insurance contract (did) make a misleading statement concerning the effect of conditions of that contract". The particulars included in the information identify a statement to a particular person by a particular agent of the company. The representation is said to be "that the said contract could, after ten years either be cashed in or permitted to continue and grow". This is said to be misleading in that "the fact was that while the said contract could be cashed in after ten years, that could only be done at a penalty of 4% of the value of the policy for each year it had to run before 25 years elapsed". The making of that representation is admitted by Anthony Bryant. The remaining three informations all depend upon s.55A. That section provides: "55A. A corporation shail not, in trade or commerce, engage in conduct that is liable to mislead the public as to the nature, the characteristics, the suitability for their purpose or the quantity of any services." As against the company it is alleged in matter G.124 of 1986 that in the period 24 April 1985 to 23 May 1985, at Melbourne and at Sydney, it "being a corporation, in trade or commerce (did) engage in conduct that was liable to mislead the public as to the characteristics of services, namely, investment insurance contracts". By the particulars the 11. services were identified as Managed Investment Plans issued by Scottish Amicable. Further, it was alleged that, from April 1982 onwards, the company trained sales representatives to sell the contracts to members of the public by stressing financial gains in ten years. It was said that the trainees were told, and told to tell potential customers, that the policies were 10 year policies which could be extended to 25 years, whereas they were in fact 25 year policies which could be cashed after two years but at a penalty of 4% for the value of the policy for each year it had to run before 25 years. It was said that the company refrained from taking steps to prevent the sales representatives trained by it from telling potential customers that the policies were 10 year policies. There is evidence of all of the matters particularized save the allegation that trainees were told to tell potential customers that the policies were 10 year policies extendable to 25 years. Both the individual defendants, Mr V C Williams and Mr Ahearne were charged, in matters G.135 and G.146 of 1986 respectively, with being knowingly concerned by omission in the commission of the offence by the company; it being said against each director that, knowing the facts alleged against the company, he omitted to take steps to procure it to prevent sales representatives telling potential customers that the policies were 10 year policies: see s.75B and s.79 of the Trade Practices Act. 12. It is admitted in connection with the s.55A charges thats: (a) Mr Williams and Mr Ahearne were aware of the terms and conditions of the Management Investment Plans and of the training material; (b) Anthony Bryant refrained from taking steps to prevent trainees from making representations to the effect of the training material to prospective investors; and (c) Mr Williams and Mr Ahearne omitted to take steps to procure Anthony Bryant to prevent its sales representatives from making representations to the effect of the training material to prospective customers. The shortness of the period referred to in the informations under s.55A is explained by the circumstances that the relevant informations were laid on 24 April 1986 -- s.2l1 of the Crimes Act 1914 then applying a twelve month limitation period -- and that the practice complained of ceased late in May 1985, apparently as a result of publicity in a television program and an investigation by the Victorian Department of Consumer Affairs. Thereafter Scottish Amicable published a newspaper advertisement stating that policy = eee 13. holders introduced by Anthony Bryant would not be disadvantaged in any way "by the events that have forced the termination of this intermediary's" (that is, Anthony Bryant's) "association with Scottish Amicable". At the same time Scottish Amicable sent letters to policy holders introduced by Anthony Bryant inviting them, if they felt misled when investing in the Plan, to contact the society. They were assured that the society "will do everything necessary to ensure that you are not disadvantaged". However, the onus was put upon the investors to contact the society. The society did not take the obvious step, if it wished to ensure against disadvantage, of notifying all investors introduced by Anthony Bryant that it waived condition 10. The evidence indicates that 63 sales of Managed Investment Plans were made by representatives of Anthony Bryant in the period 24 April 1985 to 23 May 1985, involving about $140,000 in initial contributions by investors and commissions to Anthony Bryant of over $173,000. However, 45 of those policies were either cancelled ab initio or lapsed due to non-payment of contributions. In 12 cases condition 10 was removed from the policy by Scottish Amicable on application to it by the policy holder. Only in a handful of cases, therefore, did purchasers within this period continue with policies containing the entitlement of Scottish Amicable to reduce the payment by 4% per year for each year during which the term fell short of 25 years. 14, Two other items of evidence are relevant. First, it appears that on 31 July 1984 an executive of Scottish Amicable, whose precise status is not disclosed, notified the State managers of that society of a new practice concerning the cashing in of benefits. In the case of policies in force between 12 months and 23 months at date of encashment the discount would be 4% of the sell-back price for each year or part of a year remaining between the date of cashing in and the end of the selected term. Where the policy was cashed between 24 months and 35 months a discount of 3% per year or part of a year would apply. The rate of 2% would apply in the case of policies held for 36 months or more. I assume in favour of the defendants that this new practice became known to them before the dates of the relevant offences. Secondly, counsel for the defendants tendered in evidence two editions of a booklet published by Scottish Amicable, also described as "Member's Guide to the Managed Investment Plan" which were very similar in content to that published by Anthony Bryant and already mentioned. Indeed, the evidence suggests that the Anthony Bryant booklet was a reproduction, with only minor variations, of the Scottish Amicable document. The Scottish Amicable booklets contain some of the vices of the Anthony Bryant booklet. In particular both editions of the Scottish Amicable booklet make the statement that units "are sold at the Sell-Back price (which is the Unit value reduced by 3%)". This is a most misleading statement in the absence of any reference to the discount for early encashment; a matter not mentioned in the 15. booklets. The only clue to the existence of such a discount would be that, if a reader had both the necessary curiosity and mathematical aptitude, he or she could calculate from the graph in the middle pages -- containing the same figures as the Anthony Bryant graph -- that a discount of 2% per year had been applied to the estimated "cashing-in" figures. The mathematics necessary to arrive at that conclusion are quite complicated; so much so that counsel had to call for expert assistance in carrying out the exercise I requested of them. Very few, if any, prospective clients would divine from the graphs that a discount would be charged. However, one difference between the Scottish Amicable booklets and that published by Anthony Bryant is that, under the heading "Cashing-In", the former refer to "periods of fifteen years or more" whereas the Anthony Bryant booklet, as already mentioned, speaks of a period of "ten years or more". A second difference is that the Scottish Amicable booklets refer to an investment term "ranging from a minimum of 10 years up to 25 years"; a reference missing from the Anthony Bryant document. In their submissions on penalty counsel for the defendants placed emphasis upon the fact that the Anthony Bryant version of the "Member's Guide to the Managed Investment Plan" closely followed that of Scottish Amicable. As they said, Scottish Amicable is an old-established insurance company of high reputation; a circumstance which makes it the more surprising that it should have published 16. such a misleading document. To my mind it was grossly unfair for Scottish Amicable to state in its document that the sell-back price was Unit value less 3% without mentioning the potentially much more significant discount under condition 10. It is true that the graph assumes a discount of 2% per year but this also is misleading. The deduction of 2%, rather than the 4% per year to which the society was entitled under condition 10, depended entirely upon current practice. Nobody could say what the position might be 10 years on, when investors might wish to cash their policies. It is quite unacceptable to present, as a serious estimate of benefits under the Plan, a figure which depends upon whim rather than entitlement. If the society wished to get the sales benefit of a calculation based on a 2% per year discount, honesty required it to limit itself in law to that rate. If it wished to retain the right to levy a discount of 4% per year, it should have made that clear. But, however unacceptable the Scottish Amicable booklets, their contents afford little assistance to the present defendants. The defendants were aware of the true nature of the policies they were selling. Not only did they adopt the misleading elements in the Scottish Amicable booklets. They went further in their version by emphasising the ten year term. And they then instructed their sales representatives to relate their sales line to this term; thereby maximising the possibility that the misleading contents of the documents would occasion loss or frustration to their clients. 17. The emphasis in the training documents upon reference to a 10 year term can only be interpreted as an indication that the defendants believed that there was a significant market for 10 year investment policies and that they sought, in an organized way, to exploit that market with the Scottish Amicable Plan. Their failure to mention condition 10 even to the sales staff, still less to potential investors, is consistent only with a determination not to allow the facts to get in the way of a good sales pitch. The course adopted by the defendants was one of deliberate dishonesty for financial gain. By pleading guilty to these four informations the defendants have obviated the need for a lengthy trial. Due allowance must be made, in their favour, for that circumstance. I take into account that there is no evidence that any client of Anthony Bryant has yet suffered loss as a result of the conduct of the defendants. It is possible that there will be no loss, although in the absence of some general waiver by Scottish Amicable this seems unlikely. I also bear in mind that, by the mere convictions, the defendants will suffer damage to their reputations and that they have incurred legal costs -- which I assume to be not inconsiderable -- in connection with the prosecutions. But when all these matters are taken into account, there remains a need to inflict substantial penalties. Notwithstanding that the s.53(g) charge relates to a single 18. statement and the s.55A charges to a period of only one month, the offences must be seen in their context of being part of a systematic scheme of marketing Scottish Amicable Management Plans in a misleading way. There was no element of accident or inadvertence. The defendants were aware that the usual term of the Plans was 25 years and that any surrender before that date might attract a significant penalty. Even at 2% per year, the deduction for surrender after 10 years would be 308. Yet, without any mention of the discount, the policies were actively promoted as being suitable 10 year investments. In an early prosecution under the Trade Practices Act, Hartnell v Sharp Corporation of Australia (1975) 5 ALR 493, Smithers J, with whom Evatt J agreed, listed six matters relevant to the determination of penalties in respect of breaches of s.53(a) of the Act: the importance of the untrue statements and the extent of the departure from standards; the degree of wilfulness or carelessness involved in the relevant conduct; the degree that the statement departs from the truth; the degree of dissemination; what efforts have been made to correct the situation; and the deterrent effect of any penalty to be imposed. With minor variations to reflect the nature of particular charges, these criteria have been adopted in subsequent cases: see, for example, Quinn v Given (1980) 41 FLR 416 at pp.421-422 and Dawson v World Travel Headquarters Pty Ltd (1981) 53 FLR 455 at p.477. The application of those criteria necessarily leads to a conclusion that the present offences should be regarded as requiring the imposition of heavy penalties. The conduct of 19, the company was wilful. It involved the deliberate suppression of the truth for monetary gain. The degree of departure from the truth, and from standards accepted in the insurance industry, was high. The misleading statements were disseminated in an organized manner to a wide audience. When the matter came to public notice Anthony Bryant did circularise clients advising them to apply to Scottish Amicable for a deletion of condition 10; but the effective correction of the situation has been left by Anthony Bryant to Scottish Amicable. Finally, the deterrent effect is important. There must be many people in the community who 'N fail to read ~~ or who do not understand -~ the legal documents with which they are issued. They rely upon what they are told by their advisers. It is important that those who sell insurance and investment policies be deterred from taking advantage of that trust by having advisers, in this case the sales representatives, misrepresent the terms of those policies. As was said by Smithers J in Eva v Mazda Motors (Sales) Pty Limited (1977) 1 ATPR 40-020 at p.17,308: "The terms of the Act and the size of the maximum monetary penalties provided by Parliament indicate that Parliament intended the commercial standards specified by it to be observed and enforced. At the same time it no doubt expected the Court to exercise care in particular cases that penalties be not oppressive. The area of activity in which offences of significance may be committed is such that penalties which may be oppressive in relation to some defendants would be seen to be trivial in relation to others. The penalty in any particular case must be sufficient to reflect the gravity of the offence, and to reflect Parliament's unequivocal intention that its will is to be obeyed." See also Trade Practices Commission v Stihl Chainsaws Pty Ltd (1978) 2 ATPR 40-091 at p.17,896. 20. At the time of the offences the maximum applicable penalties were, in the case of a corporation, $50,000 and, in the case of an individual, $10,000. I bear in mind the principle that the maximum penalty should be reserved for the worst type of case falling within the relevant prohibition: see Queen v Tait (1979) 24 ALR 473 at p.484. However, the circumstances revealed by the evidence put these cases high in the scale of culpability. The company deliberately engaged in misleading conduct for its financial advantage. As the figures for April-May 1985 demonstrate, the sales operation was conducted on a large scale. I think that only the existence of the mitigating factors already mentioned reduce these offences from being of "worst case" category. The appropriate penalties must be near to the respective maxima. In relation to each of the informations against the company the appropriate penalty is, in my view, a fine of $40,000. There is a dearth of material as to the roles of the two individual defendants. All that is known is that each was a director, that each was aware of the true facts and that neither took any steps to prevent the company proceeding as it did. There is no basis for distinguishing between them in terms of culpability, the degree of which must be regarded as high. Each of these two defendants stood by whilst, to his knowledge, the representatives of the company deceived prospective investors. Once again the appropriate penalties must be near the maximum permissible. In each case I impose a penalty of $8,000. ——- = 21. By reason of an agreement made between the parties, costs were not sought on behalf of the prosecutor. Consequently, I make no order for costs. I certify this and the twenty (20) preceding pages to be a true copy of the Reasons for Judgment of his Honour Mr Justice Wilcox. associates; "5 mk eres Date: 14 April 1987 Counsel for the Applicants: Solicitors for the Applicants: Counsel for the Respondents: Solicitors for the Respondents: Counsel for Scottish Amicable Life Assurance Society (intervening by leave): Solicitors for Scottish Amicable Life Assurance Society (intervening by leave): Dates of hearing: Mr D Grieve OC with Mr L Katz Director of Public Prosecutions Mr R V Gyles QC with Mr J A Timbs Phillips Fox Mr R J Bainton QC with Mr G A Palmer QC and Mr A J L Bannon Minter Ellison 10, 12, 18 and 23 March