CATCHWORDS Corporations - Officer and employee - Improper use of position to gain an advantage or to cause detriment to the corporation - Executive officer using corporation's funds and facilities for personal or private purposes - Whether Board of Directors authorised the personal or private use of the corporation's funds - Whether the conduct of the officer contravened s.232(6). Corporations - Contravention of a civil penalty provision - Civil penalty orders under s.1317EA - Consideration of principles applicable to a prohibition from managing a corporation under s.1317EA(3)(a) - Consideration of principles applicable to an imposition of a pecuniary penalty under s.1317EA(3)(b) - Whether a prohibition order should be made - Whether a pecuniary penalty should also be imposed. ss.232(6), 1317DA, 1317EA and 1317JA of the Corporations Law Cases R. v. Byrnes (1995) 183 CLR 501 Neat Holdings Pty Ltd v. Karajan Holdings Pty Ltd (1992) 67 ALJR 170 Commissioner for Corporate Affairs v. Bracht 1989 VR 821 Friend v. Corporate Affairs Commission (1989) 7 ACLC 106 Nicholas v. Commissioner for Corporate Affairs (1987) 5 ACLC 258 TG 3013\1996 - AUSTRALIAN SECURITIES COMMISSION V. SATYA NANDAN MERKEL J MELBOURNE (HEARD IN HOBART) 10 APRIL 1997 IN THE FEDERAL COURT OF AUSTRALIA TASMANIA DISTRICT REGISTRY GENERAL DIVISION TG No. 3013 of 1996 IN THE MATTER OF: TASMANIAN SPASTICS ASSOCIATION AUSTRALIAN COMPANY NUMBER: 009 485 670 AUSTRALIAN SECURITIES COMMISSION Applicant and SATYA NANDAN Respondent COURT: MERKEL J PLACE: MELBOURNE (HEARD IN HOBART) DATE: 10 APRIL 1997 ORDERS 1. The Court declares, pursuant to s.1317EA(2) of the Corporations Law, that the respondent has, by the specified acts set out in the schedule to the Application dated 5 August 1996 as amended, contravened s.232(6) of the Corporations Law in relation to the corporation previously named the Tasmanian Spastics Association and now named the Cerebral Palsy Association of Tasmania. 2. The Court orders, pursuant to s.1317EA(3) of the Corporations Law, that the respondent be prohibited for 3 years from managing a corporation. 3. The Court orders pursuant to s.1317EA(3) of the Corporations Law that the respondent pay to the Commonwealth a pecuniary penalty of $20,000. 4. The respondent is to pay the applicant's taxed costs of and incidental to the Application. 5. Liberty is reserved to the respondent to apply for time for the payment of the penalty. 6. Liberty is reserved to the applicant to apply for reimbursement of any further sums the subject of the said contraventions in the event that the parties are unable to reach agreement on the issue of reimbursement. NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA TASMANIA DISTRICT REGISTRY GENERAL DIVISION TG No. 3013 of 1996 IN THE MATTER OF: TASMANIAN SPASTICS ASSOCIATION AUSTRALIAN COMPANY NUMBER: 009 485 670 AUSTRALIAN SECURITIES COMMISSION Applicant and SATYA NANDAN Respondent COURT: MERKEL J PLACE: MELBOURNE (HEARD IN HOBART) DATE: 10 APRIL 1997 REASONS FOR JUDGMENT Introduction The Australian Securities Commission ("the ASC") has made application under s.1317EA(2) of the Corporations Law ("the CL") for the grant of the following relief against the respondent ("Nandan"): 1. A declaration pursuant to Section 1317EA(2) of the Corporations Law that the Respondent has by the specified acts set out in the schedule attached hereto and marked with the letter "A" contravened Section 232(6) of the Corporations Law in relation to the Tasmanian Spastics Association. 2. An order pursuant to Section 1317EA(3) of the Corporations Law prohibiting the Respondent for such period as the Court may think fit, from managing a Corporation. 3. An order pursuant to Section 1317EA(3) of the Corporations Law that the Respondent pay to the Commonwealth a pecuniary penalty of an amount that the Court may think fit but not exceeding $200,000.00. 4. That the Respondent pay the Applicant's costs of and incidental to this application. The schedule attached to the Application, as amended, specifies 58 transactions. The ASC alleges that: • Nandan engaged in the transactions in his capacity as principal executive officer and secretary of the Tasmanian Spastics Association ("the Association") between January 1993 and July 1994; • in engaging in the transactions Nandan made improper use of his position as an officer and employee of the Association to gain, directly or indirectly, an advantage for himself and for other persons and to cause detriment to the Association in contravention of s.232(6) of the CL. The Association was incorporated in Tasmania on 16 October 1963 as the Spastic Children Treatment Fund Committee. On 29 October 1970 it changed its name to the Tasmanian Spastics Association. Recently it changed its name to the Cerebral Palsy Association of Tasmania. Its principal activity has been fundraising as a charitable institution. The facts Nandan was the principal executive officer and secretary of the Association between 1 August 1988 and 25 July 1994. Nandan was employed as "General Manager/Public Officer and the Company Secretary of the Association". Under his contract of employment he was entitled to: (a) 4 weeks annual leave, 10 days sick leave and all statutory public holidays. (b) take his leave when convenient to both parties and within 6 months from when it fell due. (c) a salary package which consisted of: (i) Gross Salary of $35,000.00 per annum paid on a regular fortnightly schedule but without C.P.I. increases; and (ii) use of an Association vehicle. (d) a company car with appropriate signage for to and from work and all work related journeys. (e) claim via the standard expense form any incidental expenses, but not those considered to be of a personal and private nature, incurred on behalf of the Association. From time to time Nandan requested a salary increase. The matter was raised at meetings of the board of directors of the Association ("the Board") but his salary remained unchanged. Finally, at a meeting of the Board held on 28 March 1994, Mr. Nandan advised that he had not had a pay rise for five years and sought the Board's approval to take "a salary sacrifice" of up to 30% of his salary to be paid as superannuation, health care cover and interest on a home loan. Nandan said that it would not cost the Association any money but would save him tax. The Board approved Nandan's request but the scheme suggested by him had not been implemented prior to the cessation of Nandan's employment. Accordingly, the terms of Nandan's employment remained unchanged. Nandan, who was an experienced bookkeeper, was one of five authorised signatories to cheques drawn on the Association's cheque account and was given considerable autonomy and latitude in managing the Association's business. Nandan was responsible for: • keeping and maintaining the Association's financial and accounting records including the computerised general ledger system; • supervising staff in posting cheques, invoices and receipts to various accounts on the ledger system; • signing purchase order forms for the supply of goods and services to the Association. Nandan's autonomy was such that he was able to use his position to purchase goods, to quote the Association's sales tax exemption number and, with another signatory, to sign the Association's cheques. Nandan was not expressly authorised to engage in any transaction or dealing of a personal or private nature using the Association's funds or facilities without the authority of the Board to do so. The problems which gave rise to the present Application appear to have arisen, in part, as a result of Nandan's sense of grievance that he had not received a salary increase since the commencement of his employment. As a consequence, he regarded himself as entitled to use the Association's funds for "extended credit and what amounted to interest free loans". Nandan's "entitlement" was not based on any express authorisation from the Board but was derived from his belief that it was compensation for his "salary sacrifice"; a euphemism used by Nandan for not receiving the salary increase to which he considered he was entitled. The 58 transactions, totalling $25,919.25, involved use by Nandan of the Association's funds or facilities (which included its sales tax exemption number). They fell into a number of categories: • 6 advances to Nandan totalling $9,940 which he alleged were drawn against his leave entitlement; • 8 Ansett Australia airfares totalling $5,416; • 1 transaction involving the acquisition of electrical goods acquired for $2,607 by the Association from a company, Loughrans. Nandan alleges he "took over" the goods to assist his niece as a Miss Australia entrant. Nandan refunded the purchase price to the Association but enjoyed the benefit of the sales tax exemption to which he was not entitled; • 17 withdrawals from the Association's account, totalling $2,550, as Nandan's superannuation contributions to the AMP Society which was administering Nandan's personal superannuation fund; • 14 payments, totalling $2,060, to "Caltex" for Nandan's private vehicle expenses; • 1 transaction using $2,000 for an entrance fee for Nandan's niece in the Miss Australia awards; • 1 transaction involving payment of $430.60 to Goodyear Tyre and Rubber for Nandan's private vehicle expenses. Nandan used the Association's sales tax exemption number to gain sales tax exemption; • 1 transaction involving payment of $318.70 to Jackson's Oil for Nandan's private vehicle expenses; • 7 payments, totalling $309.61, to Telstra for private telephone calls; • 1 transaction involving payment of $164 to K-Mart for electrical goods. Nandan used the Association's sales tax exemption number to gain sales tax exemption; • 1 transaction involving payment of $139 to Sports Power for the acquisition of personal sports goods. Nandan used the Association's sales tax exemption number to gain sales tax exemption. Although the precise facts and circumstances surrounding the various categories of transactions differ, I am satisfied that: • each transaction was engaged in by Nandan without any express authority of the Board; • Nandan was aware at the time of each transaction that it was not expressly authorised by the Board; • Nandan used his position as the principal executive officer and secretary of the Association, and as a signatory to the Association's cheque account, to engage in the transactions; • the transactions were of a personal or private nature for the benefit of Nandan or members of his family. In February 1994 the auditor of the Association was requested to investigate the transactions. At that time about $13,000 of the amounts utilised by Nandan had not been repaid by him. By June 1994 the auditors had discovered Nandan's purchases of goods using the Association's sales tax exemption number and his use of the Association's funds for private or personal purposes. An ASC investigation under s.13 of the Australian Securities Commission Act 1989 (Cth) ("the ASC Act") was commenced on 5 August 1994. By that time Nandan had repaid all of the amounts, except for $1,360, and had recouped sales tax, of $978, to the Commonwealth. A final report was given under s.17 of the ASC Act on 17 July 1996. Nandan's opposition to the ASC's application was curious. In substance he did not dispute the ASC's evidence against him. However, Nandan gave evidence to the effect that he believed that the transactions, or many of them, fell within his general authority to manage the day to day business of the Association. The manner in which Nandan recorded the payments and repayments is a matter which is relevant to: (a) authority and improper use of position; (b) penalty. Nandan recorded the payments made from the Association's funds for his personal purposes by debits, usually in a suspense account but on some occasions in the general debtors account. Both accounts were used for miscellaneous items. He did not keep a separate ledger or personal account for the payments. The amounts taken were not identified in the accounts as being related to Nandan. Moreover their entry in the suspense or debtor accounts systematically camouflaged Nandan's use of the Association's moneys for his private or personal purposes. I am satisfied that Nandan intended to repay the moneys used. When repayments were made they were usually recorded as credits in the suspense account with an entry identifying Nandan. However, the items were not identified as repayments by Nandan to the Association. Nandan was asked about some of the payments in cross-examination: But the simple point is you were not keeping a separate ledger or personal account to which you posted these payments which are the subject of this application, did you?--- No it is true it wasn't a separate account. And you posted variously these payments to either 994, general administration suspense account, or 130, which was the general debtors account, did you not?--- It was the general debtors account 130, yes. ......... So when it was paid back by you you would put in a credit to the suspense account?--- Yes. (T17-19) Nandan admitted to not identifying the reason for the repayment in the books: And that is all, no reference to the particular matter? So you would just make a payment so it showed received from S Nandan but without explanation; that is right, is it not?--- Yes highly possible. (T19) In summary, there was no personal or other account or ledger identifying the debits and credits as being related to the actual transactions engaged in by Nandan or the repayment of the amounts used by him. Nandan's misuse of the Association's funds was systematically camouflaged, not only by the use of the suspense and debtors accounts, but by allocating the payments to a ledger without any proper or adequate identification. In my view Nandan deliberately adopted his particular bookkeeping strategy hoping that his use of small amounts, when spread out, would be less likely to attract attention or an audit. As a result of the methods employed by Nandan an audit was required to discover the nature and extent of his misuse of the Association's funds. I accept that Nandan did not deliberately falsify the accounts or deliberately omit entries in respect of the funds or facilities used. However, he did systematically camouflage that use over a prolonged period, making it very difficult to discover. These conclusions do not support Nandan's case on the issues of authority or proper use of his position. In my view Nandan's bookkeeping suggests a consciousness of impropriety in relation to the transactions recorded by him. No satisfactory explanation was given by Nandan for the manner in which he recorded his use of the Association's funds. He was an experienced bookkeeper. If his use was honest, albeit misconceived, it would have been a simple matter for him to have opened a personal account or ledger under his own name and to properly record payments for his personal benefit as debits and his repayments as credits. He did not do so. On the issue of authority Nandan gave evidence, inter alia, that: • the procedures he followed were established by the previous Manager; • the superannuation payments were authorised by Mr. Beattie, a Director of the Association who was also the insurance agent for the AMP Society; • he took payments in lieu of leave entitlements; • he relied on his general authority to manage the day to day affairs of the Association. In his Affidavit Nandan gave the following evidence: 15. The only benefits I obtained from these procedures were extended credit and what amounted to interest fee (sic) loans. 16. I do not think there was anything wrong with operating a personal account with the association as it was done by the previous general manager. I believed it was authorised or would be authorised because the Chairman himself purchased airline tickets for his wife and tyres for his vehicle and subsequently repaid the association. In his evidence Nandan appeared to be suggesting that he had some kind of implied authority to use the Association's funds and facilities for his personal or private purposes. Nandan's evidence under cross-examination was evasive and his explanations were unconvincing. Overall I found his evidence to be unreliable. He claimed to have maintained a "personal account". Ultimately, he reluctantly conceded he did not have a "personal account". Ultimately, he also reluctantly conceded lack of authority to draw "pay" in lieu of leave: No. You did not have the authority of the board of directors to take money against what you saw to be your leave entitlements, did you?---Well, maybe I didn't have the authority, but that's the day-to-day management of the affairs. That is part --- Well, the answer to the question is no, you did not have the authority of the board?---No. No. (T27) Similarly, he reluctantly conceded his lack of authority in respect of the AMP Society superannuation payments: Sorry?---That was my personal super. So they were your contributions?---Yes. So you were getting the company to pay your contributions?---Yes, but the understanding was that I was going to get a pay rise and that was going to take part of the salary sacrifice package. But you said that they never agreed to a pay rise?---Well, they discussed several times. They kept on deferring it; that's what I'm saying. And I think your own counsel asked you at the very end, did they ever agree to a pay rise; "They never did" was your answer, from memory?--No, no, I didn't say that. I said it was just deferred. It was discussed in the next meeting. So this was you taking your pay rise, in any event?---Well, I would say, no, because it was then debited to my personal account and then repaid so I didn't get any pay rise. So these payments went to the suspense account, did they?---Yes. Or the debtors account?---Yes. (T29) I am satisfied that in so far as Beattie, a Director of the Association and an agent for the AMP Society, was aware of or agreed to superannuation payments being made out of the Association's funds he was not authorised to do so on behalf of the Association. Further, I am satisfied that Nandan did not believe Beattie was authorised to do so on behalf of the Association. I do not accept the explanations Nandan gave for the conduct specified in the amended Application. I find that Nandan knew that that conduct was not authorised by the Association. In so far as he contended that some kind of implied authority existed I find that the evidence does not support the existence of any such authority. I do not accept Nandan's evidence in support of the facts he relied upon to establish any such authority. Further, the suggested authority is not consistent with the express terms of Nandan's contract of employment. Section 232(6) Section 232(6) of the CL provides: An officer or employee of a corporation must not, in relevant circumstances, make improper use of his or her position as such an officer or employee, to gain, directly or indirectly, an advantage for himself or herself or for any other person or to cause detriment to the corporation. An officer is defined in s.232(1) as meaning, inter alia, a "secretary or executive officer" of a corporation. The statutory predecessor of the section (s.229(4) of the Companies Code) was considered in R. v. Byrnes (1995) 183 CLR 501. In concluding that "improper use" involved an objective, rather than a subjective, test of impropriety Brennan, Deane, Toohey and Gaudron JJ said at 514-515: Impropriety does not depend on an alleged offender's consciousness of impropriety. Impropriety consists in a breach of the standards of conduct that would be expected of a person in a position of the alleged offender by reasonable persons with knowledge of the duties, powers and authority of the position and the circumstances of the case. When impropriety is said to consist in an abuse of power, the state of mind of the alleged offender is important: the alleged offender's knowledge or means of knowledge of the circumstances in which the power is exercised and his purpose or intention in exercising the power are important factors in determining the question whether the power has been abused. But impropriety is not restricted to abuse of power. It may consist in the doing of an act which a director or officer knows or ought to know that he has no authority to do. In my view, on the facts I have found, in engaging in each of the transactions specified in the Application as amended Nandan, acting as an "officer" of the corporation as defined in s.232(1), made improper use of his position in contravention of s.232(6). Clearly, he breached the standards of conduct that would be expected of a person in Nandan's position by reasonable persons with the knowledge of the duties, powers and authority of the position and the circumstances of the case. He also gained an advantage for himself and his family. His use of the Association's funds caused detriment to the Association. The present proceeding is civil litigation for a penalty and is not a criminal prosecution. Accordingly, the findings I have made are on the balance of probabilities. However, I have not arrived at my findings in this matter lightly. I have borne in mind the statement of Mason CJ, Brennan, Deane and Gaudron JJ in Neat Holdings Pty Ltd v. Karajan Holdings Pty Ltd (1992) 67 ALJR 170 at 170-171: The ordinary standard of proof required of a party who bears the onus in civil litigation in this country is proof on the balance of probabilities. That remains so even where the matter to be proved involves criminal conduct or fraud. On the other hand, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what it is sought to prove. Thus, authoritative statements have often been made to the effect that clear or cogent or strict proof is necessary "where so serious a matter as fraud is to be found". Statements to that effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach that a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct. Relief Sections 1317DA, 1317EA(1) and 1317EB(1) of the CL provide that the ASC may apply for "civil penalty" orders under s.1317EA if, inter alia, the Court is satisfied that a person has contravened s.232(6). For the purposes of s.1317EA, s.232(6) is a civil penalty provision. Section 1317EA provides: (1) This section applies if the Court is satisfied that a person has contravened a civil penalty provision, whether or not the contravention also constitutes an offence because of section 1317FA. (2) The Court is to declare that the person has, by a specified act or omission, contravened that provision in relation to a specified corporation, but need not so declare if such a declaration is already in force under Division 4. (3) The Court may also make against the person either or both of the following orders in relation to the contravention: (a) an order prohibiting the person, for such period as is specified in the order, from managing a corporation; (b) an order that the person pay to the Commonwealth a pecuniary penalty of an amount so specified that does not exceed 2,000 penalty units. (4) The Court is not to make an order under paragraph (3)(a) if it is satisfied that, despite the contravention, the person is a fit and proper person to manage a corporation. (5) The Court is not to make an order under paragraph (3)(b) unless it is satisfied that the contravention is a serious one. Under s.1317JA(1) and (2), in a proceeding for a contravention of a civil penalty provision, the Court may relieve a person, either wholly or partly, from a liability to which the person would otherwise be subject if - • the person has acted honestly; and • having regard to all the circumstances of the case the person ought fairly to be excused for the contravention alleged. For the reasons I have set out Nandan was aware of his lack of authority to engage in the transactions yet engaged in those transactions in the manner described in these reasons over a prolonged period. Further, his use of the suspense and debtors accounts and ledgers camouflaged the transactions in a manner which, in a practical sense, concealed them from easy discovery. I am not satisfied that Nandan has acted honestly or that he ought fairly to be excused for the contraventions. As already stated, I am satisfied that Nandan has, by the specified acts set out in the Application as amended, contravened s.232(6) in relation to the Association. Accordingly, the declaration provided for under s.1317EA(2), and set out in paragraph 1 of the Application, is to be made. Section 1317EA(3) provides for both a prohibition from managing a corporation and a pecuniary penalty not exceeding $200,000. Section 91A defines "managing" as, inter alia, being in any way, directly or indirectly, concerned in or taking part in the management of a corporation. Traditionally such a prohibition has been viewed by the courts as being primarily protective of the public rather than penal or punitive: see Commissioner for Corporate Affairs v. Bracht [1989] VR 821 at 827; Friend v. Corporate Affairs Commission (1989) 7 ACLC 106 at 115 and Nicholas v. Commissioner for Corporate Affairs (1987) 5 ACLC 258 at 265-6. The object of s.1317EA(3)(a) is to protect the public by preventing a corporate structure from being able to be misused to the detriment of the company, its shareholders, creditors, investors and others dealing with the company. That objective is confirmed by s.1317EA(4) which provides that a Court is not to make a prohibition order under s.1317EA(3)(a) if it is satisfied that despite the contravention, the person is a fit and proper person to manage a corporation. The objective is achieved by the Court being conferred with power to prohibit persons who have contravened a civil penalty provision from managing a corporation for a specified period unless the Court is satisfied that the person is a fit and proper person to manage a corporation. In my view it is appropriate to make an order under s.1317EA(3)(a) prohibiting Nandan from managing a corporation. A number of factors have led me to that conclusion: • the contraventions involved a deliberate, systematic and unauthorised misuse, for personal or private purposes, of the funds and facilities of the Association, a charitable institution, on a regular and ongoing basis; • in engaging in the conduct constituting the contraventions Nandan abused the trust and confidence placed in him by his employer; • the contraventions were camouflaged from discovery in a manner which gives rise to serious concern as to the honesty and integrity of Nandan in managing a corporation; • notwithstanding the foregoing matters Nandan, in giving evidence, continued to deny his culpability and attempted to justify his conduct; • Nandan failed to display any remorse or contrition in respect of the contraventions of s.232(6) which I have found to have occurred. Accordingly, I am not satisfied that Nandan is a fit and proper person to manage a corporation. In my view it is appropriate to prohibit Nandan from managing a corporation for 3 years. Finally, I turn to consider the question of penalty. Although a prohibition from management is protective of the public in many cases it can have serious, deleterious and punitive financial and other consequences for the individual concerned. Accordingly, the consequences of a prohibition for the individual concerned can be a relevant factor to consider in relation to an appropriate pecuniary penalty, if any. If the consequences of a prohibition are significant then that may operate as a factor in favour of a lesser penalty. On the other hand, if the prohibition may not have significant consequences for the individual concerned then it is likely to be only marginally relevant in relation to penalty. The present case is an example of the latter situation. Nandan is not presently engaged in managing a corporation and the evidence does not suggest that it is likely that he will manage a corporation in the immediate future. It follows from my discussion of the nature and extent of the contraventions and the reasons for a prohibition order in the present case that I am satisfied that: (a) the contraventions are "serious" (see s.1317EA(5)); and (b) it is appropriate to impose a pecuniary penalty, under s.1317EA(3)(b), in addition to a prohibition on management of a corporation. Contraventions of s.232(6), of the kind which has occurred in the present case, undermine and erode the trust and confidence a corporate employer and the public are entitled to place in persons entrusted with the management of the business of a corporation. Section 232(6) is directed at protecting that trust and confidence by maintaining standards of conduct by officers and employees of corporations which would in the circumstances be reasonably expected of them by the public and their corporate employer. Section 1317EA provides statutory support for s.232(6) by ensuring, inter alia, that an appropriate pecuniary penalty is imposed for serious breaches of the section. In considering penalty in the present case, it is appropriate to have regard to: • general deterrence; • personal deterrence to Nandan; • the nature and extent of the conduct constituting the contraventions; • any contrition or remorse on the part of Nandan; • any other relevant circumstances. Having regard to the nature and extent of the contraventions it is my view that general deterrence to "those of a like mind" is called for: see Jeffree v. NCSC (1989) 15 ACLR 217 at 223. The lack of contrition and remorse displayed by Nandan also makes the issue of personal deterrence a matter of significance in relation to penalty. I have already concluded that Nandan's conduct constitutes a "serious" contravention of s.232(6). Ultimately, by his own admission, Nandan systematically used the Association's funds and facilities for his personal and private purposes and in a manner which camouflaged that use. I am satisfied that Nandan was fully aware of the impropriety of his actions. I would add that the fact that there was no intention to permanently deprive the Association of the funds used does not in any way negate the impropriety in Nandan's use of his position as an officer of the Association to gain an advantage. I also regard it as relevant that, to the knowledge of Nandan, the funds used were in substance public funds raised by a charitable institution primarily to assist persons suffering from cerebral palsy. The misuse of such funds adds to the seriousness of the conduct in question. However, some factors operate in mitigation on the issue of penalty: • Nandan has no prior offences; • the amounts in question were not large and it was Nandan's intention to repay the Association's funds used by him; • there was no deliberate falsification of the accounts or records of the Association in order to conceal the transactions; • Nandan appears to have repaid the amounts the subject of the contraventions; however about half of the amounts were repaid after the Association's auditors were requested to investigate; • the Association does not appear to have suffered a net financial loss as a result of the transactions. In all the circumstances a pecuniary penalty of $20,000 is appropriate. I also order that Nandan pay the ASC's costs of the Application. I certify that this and the preceding 20 pages are a true copy of the Reasons for Judgment of the Honourable Justice Merkel. Associate: Date: Heard: 29 November 1996 Place: Melbourne (heard in Hobart) Judgment: 10 April 1997 Appearances: Mr. D. Porter Q.C. with Ms S. Jackson instructed by the Australian Government Solicitor for the applicant. Mr. S. Chopping for the respondent.