Reported Decision : 42 ACSR 80 (2002) 20 ACLC 1146 New South Wales Supreme Court CITATION : ASIC v Adler & 4 Ors [2002] NSWSC 483 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 2753/01 HEARING DATE(S) : 06/05/02, 07/05/02 JUDGMENT DATE : 30 May 2002 In the matter of HIH Insurance Limited (in provisional liquidation) ACN 008 636 575 and HIH Casualty and General Insurance Limited (in provisional liquidation) ACN 008 482 291 Australian Securities & Investments Commission Plaintiff Rodney Stephen Adler First Defendant Raymond Reginald Williams PARTIES : Second Defendant Dominic Fodera Third Defendant Adler Corporation Pty Ltd (ACN 054 924 373) Fourth Defendant Lynda Sharon Adler Fifth Defendant JUDGMENT OF : Santow J R B S Macfarlan QC/ P Durack/ A Abadee (Plaintiff) B W Walker, SC (First and Fourth Defendants) COUNSEL : P Crutchfield (Second Defendant) J E Sexton, SC (Third Defendant) Jan Redfern, Solicitor for ASIC (Plaintiff) Gilbert & Tobin (First and Fourth Defendant) SOLICITORS : Arnold Bloch Leibler (agent: Sparke Helmore) (Second Defendant) Dibbs Crowther & Osborne (Third Defendant) Speed and Stracey (Fifth Defendant) CATCHWORDS : CORPORATIONS - Disqualification order from managing a corporation - Relevant principles and factors - Contrition - Impossibility of order limited to public companies - disqualified person can later apply for permission on a restricted or conditional basis - Compensation order - Relevant principles - Difficulty of differentiation between Defendants - Pecuniary penalty order - Relevant principles and factors - Totality principle - Relevance of multiple contraventions - Exoneration - Appearance of honesty - Relationship between civil and criminal prosecution. LEGISLATION CITED : Corporations Act 2001; s180 to s183; s206E; s206G; s208; s209; s260; s260A; s260C; s260D; s1317G; s1317H; s1317P; s1317Q; s1317S; s1318 Evidence Act 1995 (NSW) s128 Australian Competition and Consumer Commission v ABB Transmission and Distribution Limited (No. 2) ([2002] FCA 559 ,3 May 2002, unreported) Australian Competition and Consumer Commission v George Weston Foods Ltd (2000) ATPR 41-763 ACC v Rural Press Limited [2001] ATPR 41-833 ACCC v Universal Music Australia Pty Limited (No. 2) [2002] FCA 192 ASIC v Adler & Ors [2002] NSWSC 171; (2002) 41 ACSR 72 ASC v Donovan (1998) 28 ACSR 583 ASC v Forem- Freeway Enterprises (1999) 30 ACSR 339 Beech Petroleum NL v Kennedy (1999) 48 NSWLR 1 Brickenden v London Loan and Savings (1934) 3 DLR 465 Commonwealth Bank of Australia v Friedrich (1990-1) 5 ACSR 115 Re Gold Coast Holdings Pty Ltd ASIC v Papatto (2000) 35 ACSR 107 ASIC v Hutchings (2001) 38 ACSR 387 ASIC v Parkes (2001) 38 ACSR 355 ASIC v Pegasus Leveraged Options Group P/L & Anor [2002] NSWSC 310 ASC v Roussi (1999) 32 ACSR 568 ASC v Donovan at 609; ASC v Spencer (1997) 25 ACSR 143 CASES CITED : Barisic v Devenport [1978] 2 NSWLR 111 Bell v Thompson (1943) 34 SR(NSW) 431 Commissioner for Corporate Affairs v Ekamper (1987) 12 ACLR 519 D'Angola v Rio Pioneer Gravel Co Pty Ltd [1979] 1 NSWLR 495 Re Magna Alloys & Research Pty Ltd (1975) ACLR 203 NW Frozen Foods Pty Ltd v ACC (1996) 71 FCR 285 P.O. Morris Ltd v Perrott and Bolton [1945] 1 All ER 567 Pearce v the Queen (1988) 194 CLR 610 Power (Brett) Wayne [1999] NSWCCA 25, 5 March 1999, unreported) Queensland v JL Holdings Pty Limited (1997) 189 CLR 146 R v Towey (1996) 21 ACSR 46 Re Strikers Management P/L;ASC v Dimitri (Burchett J, Federal Court of Australia, 7 May 1997, unreported) Re Tasmanian Spastics Association; ASC v Nolan (1996) 23 ACSR 743 Trade Practices Commission v CSR Limited [1991] ATPR 52-135 Trade Practices Commission v Simpson Pope Ltd (1980) 30 ALR 544 Trade Practices Commission v Stihl Chain Saws (Aust) Pty Ltd (1978) ATPR 17-882 Wong v R (2002) 185 ALR 233 DECISION : Orders for relief made; see paras 110, 124, 160, 187, 188. IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION SANTOW J No. 2753/01 In the matter of HIH INSURANCE LIMITED (in provisional liquidation) ACN 008 636 575 and HIH CASUALTY AND GENERAL INSURANCE LIMITED (in provisional liquidation) ACN 008 482 291 AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION Plaintiff RODNEY STEPHEN ADLER First Defendant RAYMOND REGINALD WILLIAMS Second Defendant DOMINIC FODERA Third Defendant ADLER CORPORATION PTY LTD (ACN 054 924 373) Fourth Defendant LYNDA SHARON ADLER Fifth Defendant JUDGMENT 30 May 2002 Tables of Contents Page INTRODUCTION 3 NARRATIVE 4 Background - the Impugned Transactions 4 CONTRAVENTIONS FOUND AGAINST DEFENDANTS 6 RELIEF SOUGHT BY ASIC 7 Declarations 7 Compensation 8 FACTUAL FINDINGS 10 Mr Adler and Adler Corporation - findings. 10 Mr Williams - findings. 12 Mr Fodera - findings. 13 ADDITIONAL EVIDENTIARY MATERIAL 14 Mr Williams - additional material 14 Mr Adler and Adler Corporation - additional material. 14 Mr Williams - affidavit material. 16 Mr Fodera - additional material. 17 Contribution 17 RELIEF SOUGHT 18 Disqualification - First Defendant 19 Conclusion 44 Compensation 46 Conclusion 49 Pecuniary Penalty 50 Mr Williams 58 Disqualification 62 Compensation 63 Pecuniary Penalty 63 Conclusion 63 Mr Fodera 63 Disqualification 67 Compensation 68 Pecuniary Penalty 69 Conclusion 71 OVERALL CONCLUSION AND ORDERS 71 INTRODUCTION 1 On 14 March 2002, I gave judgment in which I made findings of contraventions of the Corporations Act. Those findings were in relation to certain impugned transactions (see [5] to [12] below) involving one or more of four Defendants, namely Mr Adler, Mr Williams and Mr Fodera, and Adler Corporation Pty Ltd ("Adler Corporation"). Those findings are summarized below (see [13] to [18] below). They are described with greater particularity in the declarations subsequently made, whose formulation is explained in my subsequent judgment of 27 March 2002. 2 Relief, as laid down in orders made as early as 26 November 2001 and made with all parties' consent, was deferred till after liability had been determined, and after further submissions had been thereafter received. Submissions were subsequently made pursuant to the timetable subsequently agreed by all parties on 21 March 2002. Following those events, an application was made to the Court of Appeal by the First and Fourth Defendants for a stay of these further proceedings in the Equity Division; it was dismissed by Handley JA on 29 April 2002 with reasons. Consequently, this judgment now determines that relief. It does so, taking into account (a) further submissions, oral and written, made on behalf of each Defendant, and by ASIC; (b) additional affidavit evidence filed without material objection on behalf of the first three Defendants and other evidence of a limited nature admitted without objection (see [32] to [49] below). 3 The narrative which follows gives an overview of the relevant findings of the earlier judgment of 14 March 2002 and a distillation of the submissions. Greater elaboration follows, when I deal with each Defendant in terms of relief. 4 A foreshadowed application for a stay of any orders made pursuant to the judgment is for later consideration on 5 June 2002. NARRATIVE Background - the Impugned Transactions 5 This background section complements the narrative that is more fully elaborated in the Reasons for Judgment ("the Judgment" in ASIC v Adler & Ors [2002] NSWSC 171; (2002) 41 ACSR 72. That narrative and this judgment is cross-referenced to paragraphs of the Judgment. 6 The Plaintiff ("ASIC") relied upon what it has identified as nine "transactions", or "episodes", giving rise to contraventions of the Corporations Law by the First ("Adler") and Fourth ("Adler Corporation") Defendants. 7 In the Judgment at [4] these are grouped together four "sets" of transactions comprising nine in all, namely (a) the $10 million investment into the trust known as the Australian Equities Unit Trust ("AEUT") (one transaction); (b) the purchase, following (a) above, of shares in HIH Insurance Limited ("HIH") by the trust, out of part of the $10 million (one transaction); (c) the sales by Adler interests to the trust of three unlisted investments owned by them at cost (three transactions); and (d) four loans made by the trust to Adler associated interests (four transactions). 8 The first of the nine transactions ((a) above) was the payment by cheque of $10 million on 15 June 2000 by HIH Casualty and General Insurance Ltd ("HIHC") to Pacific Eagle Equity Pty Ltd ("PEE"), a company controlled by Mr Adler and the trustee of AEUT. It was this transaction, held to contravene s208 of the Corporations Law [193], which provided the foundation for claims of contraventions of the Corporations Law (s209(2)) upheld against Messrs Adler [199], Williams [199] and Fodera [217], and Adler Corporation [199] by reason of the respective involvement of each. 9 The second transaction ((b) above) was the payment by Mr Adler out of the said $10 million of a sum of $3,991,856.21 for the purchase of shares in HIH over an approximate two-week period starting on 15 June 2000. Those shares were subsequently sold by AEUT at a loss of $2,121,261.11 on 26 September 2000, just over three months later. It was this transaction with the preceding one which in combination contravened s260A of the Corporations Law [355]. It thus provided the foundation for claims of contraventions of the Corporations Law (s260D(2) upheld against Messrs Adler, Williams and Fodera and Adler Corporation, by reason of the respective involvement of each [369]. It also provided the basis for claims of contravention of the Corporations Law (director's and officer's duties) upheld against Messrs Adler [387], [394] (and see also [577(d)]), Williams [453] [461] and Fodera [512], and Adler Corporation [387] [775(4)] (and see also [732] in relation to Mr Adler's accessory liability in Mr Williams' contravention of s182 of the Corporations Law). 10 The third to fifth transactions ((c) above) involved the use of part of the $10 million payment for the purchase at cost from Adler interests of three investments in unlisted technology and communication stocks. Those purchases comprised the acquisition by AEUT of shares in dstore Limited on 25 August 2000 (for $500,002), Planet Soccer International Limited on 25 August 2000 (for $820,748) and Nomad Telecommunications Limited on 26 September 2000 (for $2,539,000). AEUT suffered a loss on these investments in the sum of $3,859,002 (disregarding interest). It was these transactions which provided the foundation for claims of contravention of directorial duties upheld against Mr Adler [577] [621] [678] and Adler Corporation [578], [621], [678]. 11 The sixth to ninth transactions involved Mr Adler causing AEUT to make four unsecured loans totalling $2,084,345 in the period between 26 July 2000 and 30 November 2000, to Morehuman Pty Ltd ($160,000), Intagrowth Fund No. 1 ($500,000), Pacific Capital Partners ($200,000) and PCP Ensor No. 2 Pty Limited ($1,275,475). It was these transactions which also provided the foundation for claims of contravention of directorial duties upheld against Mr Adler [694], [706], [730] and Adler Corporation [694], [706], [730]. 12 All of the Defendants contended at the hearing on relief that the transactions directly involving each of them should be viewed as a single transaction. Mr Adler and Adler Corporation in particular relied upon paragraphs [141] especially paras (c) and (f) thereof, [191] and [193] of the Judgment; see written submissions dated 3 May 2002, paras 27-28. CONTRAVENTIONS FOUND AGAINST DEFENDANTS 13 In the Judgment, HIH and HIHC (who were not parties to the proceedings) were held in the circumstances found to have contravened (a) s208 (related party financial benefits without shareholder approval) of the Corporations Law by the payment of $10 million to AEUT in the circumstances; and (b) s260A (financial assistance for the purchase of shares) of the Corporations Law by such payment of $10 million followed by the purchase of shares by AEUT from part of the $10 million; paras [182], [183] and[355]. 14 Mr Adler and Adler Corporation, as well as the Second Defendant ("Mr Williams") and Third Defendant ("Mr Fodera"), were also found to have been relevantly "involved" in those contraventions, so as to place themselves in breach of (respectively) ss209(2) and 260D(2) of the Corporations Law; [199], [217] & [369]. 15 Mr Adler was held to have contravened his directorial duties, or duties as an officer, that were owed to HIH and HIHC and (save in relation to s183) PEE, under ss180, 181, 182 and 183 of the Corporations Law, by reason of the transactions, described above: [387], [577], [694], [706] & [730]. Adler Corporation was found to have been "involved" in these contraventions, so as to be liable itself under ss181(2), 182(2) and 183(2) of the Corporations Law: [578]. Mr Adler was also relevantly involved in Williams' contravention of his duty under s182 so as to be liable himself under s182(2): [731]. 16 Mr Williams was held to have contravened his directorial duties, or duties as an officer, owed to HIH and HIHC, under ss180 and 182 of the Corporations Law, through his involvement with the payment of $10 million by HIHC to PEE: [453], [461]. 17 Mr Fodera was also held to have contravened his directorial duties, or duties as an officer, owed to HIH and HIHC under s180(1) of the Corporations Law, through his involvement with the payment of $10 million by HIHC to PEE: [512(a)]. 18 In submissions on relief, ASIC pointed out that it was found or derived from the Judgment that there were 101 contraventions of the Corporations Law by Mr Adler; 84 by Adler Corporation; seven by Mr Williams and five by Mr Fodera; see T, 31.20 and the attachment A to this judgment. This multiplicity was put by ASIC not so much as having significance as to pecuniary penalty, but of some general relevance in relation to disqualification as a director. RELIEF SOUGHT BY ASIC Declarations 19 Following publication of the Judgment, declarations were made in respect to these contraventions, pursuant to s1317E(1) of the Corporations Act 2001 (Cth) on 27 March 2002, with brief reasons accompanying, as to their formulation. 20 Apart from these declarations, ASIC sought disqualification orders, compensation orders and pecuniary penalties against Messrs Adler, Williams and Fodera pursuant to ss206C, 1317H and 1317G of the Corporations Act respectively, as well as compensation orders and pecuniary penalties against Adler Corporation. ASIC submitted that the disqualification orders for Mr Adler and Mr Williams should be significantly longer than for Mr Fodera. It also submitted that it should be borne in mind that s206G of the Corporations Act retains in the Court the discretion, should future application be made, to give leave in appropriate circumstances to disqualified persons again to manage corporations; also to impose exceptions and conditions on that leave; (s206G(3)). That should be contrasted with the "all or nothing" character of a disqualification order, save as to period; s206C. Compensation 21 In respect to the issue of compensation, the evidence from ASIC's expert, Mr Carter was accepted in the earlier judgment that HIH, HIHC and PEE suffered loss in respect of the $10 million payment in the sum of $7,768,000 plus interest from 31 August 2001: [741] – [742]. In supplementary affidavit evidence sworn by Mr Carter interest had been calculated up to 7 May 2002. ASIC submitted at the hearing on relief that the total loss was $8,095,451. That figure however requires adjustment following a concession made on behalf of ASIC during the hearing on relief, by giving credit for certain receipts for assumed repayments on maturity of the assumed 30 day bills. The parties agreed to submit a revised figure reflecting this. That revised figure, as since calculated by ASIC (see its letter of 16 May 2002 accompanying a revised calculation by Mr Carter as at 7 May 2002) is $7,958,112. That sum, together with interest from 7 May 2002 to the date of judgment, represents the compensation order now sought. There is however still apparently some dispute as to the proper arithmetic effect of ASIC's concession (see fax from First Defendant's solicitors of 16 May 2002). If not resolved, I shall if necessary hear submissions on the final calculation, whilst provisionally accepting ASIC's figure. 22 At the hearing on relief, issue was again taken as to whether any loss, or that loss, relevantly "resulted from" the identified contraventions, including the investment of monies in thirty-day bank bills. In particular, notwithstanding the Judgment (at [769] to [774] the Defendants submitted that: a) there had been no evidence that the monies would have been invested in thirty-day bank bills; and (b) there had been evidence at the hearing that had the transactions been brought to the attention of HIH's board, the transactions would have been ratified (disputed by ASIC); and (c) the investments made after the Board became aware of the original transaction totalled more than $4 million (T, 102.20 7 May 2002) (a submission which ASIC does not concede is an accurate reflection of the facts as there is no evidence that the Board were aware of the investments itemised in the schedule handed up, reproduced below). INVESTMENTS MADE AFTER 12 SEPTEMBER 2000 (according to Third Defendant) DATE TRANSACTION COST ($) CARTER 27.9.01 20 Sep 2000 Loan of $500,000 to Intagrowth Fund No 1 500,000.00 page 21 26 Sep 2000 Acquisition of 1,813,572 Nomad shares 2,554,234.00 page 13 26 Sep 2000 1/7 interest in Jewish Minds 100,000.00 page 21 3 Oct 2000 Acquisition of 1 million Psiron shares 1,000,000.00 page 14 4 Oct 2000 Acquisition of 2/7 interest in Jewish Minds 200,000.00 page 21 FACTUAL FINDINGS 23 At the hearing on relief, ASIC relied upon the factual findings made in the Judgment dated 14 March 2002. These findings are summarized in paragraph [774], under the heading "Recapitulation of Conclusions". ASIC also emphasised serious findings made against the Defendants personally, particularly Mr Adler and Mr Williams, to which reference will be made. Mr Adler and Adler Corporation - findings. 24 Mr Adler was found to have instigated the $10 million investment, its investment in HIH shares, and its later application in making the unlisted investments loans. He did so without taking any steps towards obtaining the approval of the HIH Board, or its investment committee. His purpose in causing PEE to purchase shares in HIH was to stabilize or maintain the HIH share price, or at least prevent it from falling by an even greater amount than it did. He did this for the benefit of his company's substantial shareholding in HIH; evidenced by his deliberately passing up the opportunity to sell at a profit on 11 July 2000, and maximizing the ultimate loss to AEUT (and therefore HIH) by selling first his own company's shares in HIH, in a falling market (see [141], [165], [280]). Moreover, it was found that Mr Adler intended that the $10 million payment would not come to the attention of the investment committee (see [254]). 25 In respect to the unlisted investments, AEUT suffered the known (to Mr Adler) prospect of a likely loss on the three investments, when these investments were to varying degrees at real risk. It was found that there had been a heightened risk of a total loss between the time when Adler Corporation purchased these investments and the change in market conditions in mid-April 2000. Mr Adler had lost confidence in these investments and on-sold them to AEUT at cost to AEUT, without due diligence, and in a context of misleading statements and omissions by Mr Adler in relation to their sale: [681]. 26 In relation to the loans, Mr Adler caused PEE, as trustee of AEUT, to make the loans generally without adequate documentation, without adequate security and without advantage to AEUT. Specifically, the loans to Morehuman and Intagrowth Fund No 1 were made without adequate documentation, no documented obligation to pay interest and no security other than an inadequately documented guarantee. The loans to PCP and PCP Ensor were disadvantageous to HIH/PEE because they were made without security other than the Wolf (unsecured) guarantee and in respect of the PCP Ensor loan, for a very limited share of profits which was never paid. This was in a context where the loans were not brought to the attention of the other members of the Board or investment committee of HIH (except for Mr Williams): [694], [706] and [730]. Furthermore, Mr Adler had a substantial interest in Morehuman, Intagrowth Fund No 1 and PCP: [693], [705] and [708]. The PCP Ensor loans were favourable to Mr Adler because of his apparent entitlement to a very substantial share of the profits in respect of the Manly Development Project and payments via PCP's role as project manager in that project: [730]. It was found that the loans to Morehuman and Intagrowth Fund No 1 were repaid with interest: [690] and [702]. 27 In support of (and appended to) its written submissions, ASIC referred to several other findings in the Judgment against Mr Adler that were relevant to relief. Those findings included false impressions that Mr Adler conveyed to: financial journalists and the press ([121-7], [148], [155], [161], [219]); to the market generally through his s205G notice ([146] – [148]); to the solicitors for HIH ([169], [307]); to the Chairman of HIH ([300]); and to other directors and investors of HIH ([571-572], [611] – [613]). Mr Adler's failure to fully and frankly disclose his involvement in what had occurred, even at the end of 2000, and his semi-covert bypassing of proper corporate safeguards, was described in the Judgment as reflecting a consciousness of impropriety on Mr Adler's part([296], [387]). His conduct generally was designed to advance his own interests, and those of Adler Corporation, to the detriment of those companies to whom he had obligations as director or officer ([164(xi), [170], [277], [725]). At [776] it is stated that "on the evidence presently before me I consider that the contraventions by Mr Adler (and Adler Corporation) the most serious of all". 28 Mr Adler concedes that the findings made against him were serious, but says that the seriousness differs in respect of each aspect of the transaction. For example, Mr Adler submitted that a loan to an associate which was repaid in full with interest is of a much lower level of seriousness than some of the other findings against him. Mr Williams - findings. 29 It was found that the $10 million payment was carried out at Mr Adler's initiative and with Mr Williams' concurrence and direction [198]. Mr Williams caused and procured the payment; which followed prior discussions with Mr Adler regarding the trust, and the intended purchase of the shares in HIH [141], [398]. Mr Williams took no steps to obtain approval of the HIH Board or investment committee [141]. Moreover, it was found that Mr Williams intended that the $10 million payment would not come to the attention of the investment committee [254]. 30 ASIC also appended to its written supplementary submissions on relief a table containing reference to serious findings made against Mr Williams. It was found, essentially, that Mr Williams' conduct went beyond a mere error of judgment, and amounted to a gross disregard of HIH's interests [451]. His conduct featured misleading information being provided to the board of HIH [248], and the solicitors for HIH [307]. He failed to correct misstatements by the solicitors [334] and by Mr Adler [433]. His failure to fully and frankly describe his involvement at the end of 2000 constituted an admission of his consciousness of the impropriety surrounding the payment [296]. The Judgment also notes in conclusion that "he did not profit in the way Mr Adler and Adler Corporation profited by the investments derived from Adler Corporation or the loans made to Adler Corporation or Adler related entities [776]. Mr Fodera - findings. 31 Mr Fodera was found to have facilitated the $10 million payment, whilst removing a potential impediment (Mr Balhausen), though he tried to keep himself at a safe distance, or wash his hands of it; treating it as Mr Williams' deal [141], [215], [217], [398], [492]. He sensed the impropriety of the transaction [215]. He also took no steps to obtain investment committee or board approval [141], [512] from his return from overseas in July until 8 or 12 September 2000, when the auditors drew attention to the transaction [512] although it was found that Mr Fodera simply overlooked it [511]. It was found that Mr Fodera was not aware "of the prospect or actuality of those unlisted investments and loans" [513] and no finding of "lack of good faith or improper purpose or dishonesty" was made [512] The Judgment concludes that his "failings were of a significantly lesser order, though still amounting to contraventions in the respects earlier identified. Basically, his failure was as a responsible director in facilitating the original $10 million payment knowing it was to be used (in part) to buy HIH shares and in neglecting to ensure that the proper processes were followed for approval of the relevant transactions after Messrs Adler and Williams had failed to bring that about" [776]. ADDITIONAL EVIDENTIARY MATERIAL Mr Williams - additional material 32 At the commencement of the hearing on liability, on 26 November 2001, it was noted that the judgment would, in the event ASIC was successful, be provisional only in so far as the question of relief was concerned, and that the Defendants would be given the opportunity to file supplementary evidence as to character relevant to that issue. 33 At a directions hearing on 21 March 2002, which followed delivery of reasons for judgment, Mr Crutchfield, Counsel for Mr Williams, foreshadowed his client's intention to file an affidavit that would express his contrition and also explain the motivation for payment. Reference was made to the direction on 26 November 2001 and it was reiterated that evidence could only be filed as to character; statements of contrition would bear upon character. It was foreshadowed that statements of motive would be regarded as inadmissible. Mr Adler and Adler Corporation - additional material. 34 At the hearing of relief, Mr Adler relied upon two affidavits he had earlier sworn in an application to the Court of Appeal for a stay of the hearing on relief (which application was unsuccessful). Those affidavits were admitted on the condition that Mr Adler would not use them in relation to any further stay application. 35 In broad terms, those affidavits referred to publicity Mr Adler had received since the commencement of the proceedings, his business dealings through Adler Corporation, his resignation of public company directorships (and its financial consequences for him), the cessation of his involvement in equities and margin trading, his withdrawal from and sale of joint venture investments; his intention to resign from other private company directorships, and his inability to realize assets in the sum of $10 million. 36 Mr Adler also relied upon favourable affidavit evidence relating to his character from the Honourable Marcus Einfeld AO, QC, PhD, David Lance, Leon Carr and Rabbi Pinchus Feldman. 37 In addition to the findings in the Judgment against Mr Adler, ASIC relied upon an extract from the HIH Part B statement (tendered as PX15 in the liability hearing, but PRX2 in the relief hearing). Page 5 of that document revealed that Mr Adler had 61,698,210 shares in FAI, shortly prior to the takeover of FAI by HIH. 38 ASIC also relied upon a facsimile from Mr Adler's solicitors to ASIC dated 7 November 2001 (tendered as PRX4), responding to the latter's request for discovery of Mr Adler's trading in equity or property investments in June and July 2000. Mr Adler's solicitors rejected the request for discovery, citing that discovery of this category of documents would "involve searching and producing thousands of additional documents". 39 ASIC relied upon correspondence exchanged between Mr Peter Thompson and Mr Adler in March 2001 (tendered as PRX5). At that time, ASIC was investigating the circumstances surrounding payment of the $10 million, and sought to confirm that HIH had produced all relevant documents. In a memo dated 28 March 2001 addressed to many HIH directors (including Mr Adler), Mr Thompson sought information as to whether HIH had documents falling within a range of categories. In his facsimile response the same day (on the letterhead of Adler Corporation) Mr Adler described Mr Thompson's memo as "most dangerous and not thought out" and expressed his concern that the facsimile was not privileged. He concluded his facsimile by asserting that Mr Thompson was "putting at risk the company, everyone that you write to and yourself." Mr Williams - affidavit material. 40 Mr Williams read favourable affidavit evidence on character from Father David Smith and Professor Martin Silink. 41 He also swore an affidavit himself, in which he said he "deeply regret(s) the consequences of the PEE transaction on HIH and HIHC." 42 Paragraphs 2 and 3 (second and third sentences) of his affidavit were objected to by ASIC. The objection to para 2 was upheld. In respect to the part of para 3 objected to, Mr Williams was invited to put evidence in chief during the hearing. That opportunity was not utilized. 43 Mr Williams also relied upon an agreed statement of facts, which was in the following terms: "During the months of August, September, October and November 2001 representatives of the Plaintiff and the Second Defendant's legal advisers entered into negotiations in relation to the Plaintiff's claim against the Second Defendant. Offers of settlement were made on behalf of the Second Defendant which included offers to pay compensation, and costs and offers to consent to an Order that the Second Defendant be disqualified from managing corporations. The Plaintiff made a counter – offer to the Second Defendant's initial offer of settlement. The Second Defendant provided the Plaintiff with details of his financial circumstances on Statutory Declaration. Subsequent negotiations ultimately did not result in any settlement." 44 In addition to the findings in the Judgment against Mr Williams, ASIC relied upon ASIC tendered Minutes of Meeting of the HIH Board of Directors dated 19 January 2001, particularly at para 1.20, which related to the termination payment agreed to be made but ultimately not made to Mr Williams. 45 ASIC also relied upon an extract from the HIH Annual Report for 1999 – 2000 (PX5 in the liability hearing), which disclosed, inter alia, that Mr Williams received remuneration for the year ended 30 June 2000 in the sum of $1,147,692. 46 Mr Williams relied on Plaintiff's exhibit TB, 5/1836. It is common ground that Mr Williams sold no shares in HIH during the relevant period. Mr Fodera - additional material. 47 Mr Fodera referred to evidence given in cross – examination by Mr Gardener (T, 345), which expressed a positive opinion of Mr Fodera's character. He also read favourable affidavits as to character from Mr Simon Manchester, Rector of the St Thomas Anglican Church at North Sydney and from Mr Martin Dudley. 48 Mr Fodera also tendered documentary evidence (accepted by ASIC) indicating his resignations from a large number of wholly owned subsidiaries of HIH. Mr Fodera now only remains a director of Fodera Investments Pty Ltd, a family company. 49 In addition to the findings in the Judgment, ASIC relied upon an extract from the HIH Annual Report for 1999 – 2000 (PX5 in the liability hearing). It disclosed, inter alia, that Fodera received remuneration for the year ended 30 June 2000 in the sum of $677,128. Contribution 50 At the hearing on 6 May 2002 an application by Mr Williams was for the first time made seeking a declaration that matters of indemnity and/or contribution between the respective Defendants are to be considered as issues in these proceedings. For the reasons stated in my judgment of 6 May 2002 that application was declined. I quote [13] and [14] of that judgment: 13. Accepting, for present purposes, that the Court has a discretion to permit late filing of a cross-claim in the terms contemplated by the Second Defendant's Notice of Motion, I do not consider that such discretion should be exercised at the present stage in favour of permitting this course, or otherwise to permit contribution or indemnity to be argued at this stage. Applying the analogy of an application to amend and the principles laid down by the High Court in Queensland v JL Holdings Pty Limited (1997) 189 CLR 146, while cost orders may in some circumstances permit a dispensation where such cost orders adequately compensate the party otherwise prejudiced by the dispensation, the present case is rather one in which: (a) no such cost orders are proffered; (b) even if they were proffered, I am satisfied that the prejudice to the First Defendant is substantial and possibly irremediable depending on the nature and extent of the lost opportunity to cross-examine in relation to evidence bearing on contribution and indemnity; and (though this is not essential to my earlier conclusion) (c) there may be scope under s1317H of the Corporations Act 2001 to fashion compensation orders which do justice between the parties (I express no concluded view on that) though in saying that I am not to be understood as having formed any view as to the appropriateness of such differentiation in the particular circumstances, this being a matter for the current proceedings for relief; (d) the present stage of proceedings (two days only) could not accommodate lengthy argument on indemnity or contribution sought to be raised late in the day. 14. This judgment, interlocutory as it is, should not be taken as foreclosing the possibility of a future argument for contribution or indemnity, after judgment on relief has been handed down. The First Defendant may seek to argue to the contrary under the extended doctrine of res judicata; see in particular Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, though frankly acknowledging the difficulty in so doing. That is a matter for future consideration. RELIEF SOUGHT 51 The earlier narrative sets out the essential background to considering the three forms of relief sought against the First to Fourth Defendants. They are: (a) disqualification from managing corporations (s206C and s206E of the Corporations Act ); (b) compensation orders (s1317H of the Corporations Act); and (c) pecuniary penalty orders (s1317G of the Corporations Act). 52 I first deal with each of these forms of relief in relation to the First and Fourth Defendants (clearly however disqualification only applies to Mr Adler); thereafter I deal sequentially with the Second Defendant and Third Defendant. Disqualification - First Defendant 53 The relevant provisions of the Corporations Act applicable to disqualification are primarily to be found in s206C. It operates where a declaration has been made under the Corporations Act civil penalty provisions. The Court must be satisfied that the disqualification is justified taking into account the matters in subsection (2). Alternatively, such disqualification order can be made under s206E, where a person has at least twice been an officer of a body corporate that has contravened the Act, or such person has at least twice contravened the Act whilst an officer. This is provided in either case that the Court is satisfied the disqualification is justified, having regard to the same matters as apply in relation to s206C. 54 For convenience, I set out the two sections below: 206C. Court power of disqualification---contravention of civil penalty provision (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; and (b) the Court is satisfied that the disqualification is justified. (2) In determining whether the disqualification is justified, the Court may have regard to: (a) the person's conduct in relation to the management, business or property of any corporation; and (b) any other matters that the Court considers appropriate." 206E. Court power of disqualification---repeated contraventions of Act (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. (2) In determining whether the disqualification is justified, the Court may have regard to: (a) the person's conduct in relation to the management, business or property of any corporation; and (b) any other matters that the Court considers appropriate." 55 It is useful if, at the outset, I identify the propositions, by way of guiding principles or relevant factors, that can be derived from the cases which have dealt with these provisions or their predecessors. 56 The cases on disqualification gave orders ranging from life disqualification to 3 years. The propositions that may be derived from these cases include: (i) 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. ASIC v Hutchings (2001) 38 ACSR 387 at 395; ASIC v Pegasus Leveraged Options Group P/L & Anor [2002] NSWSC 310; ASC v Forem- Freeway Enterprises (1999) 30 ACSR 339 at 349-350; ASC v Donovan (1998) 28 ACSR 583 at 602; ASC v Roussi (1999) 32 ACSR 568 at 570 - 571 ; Re Strikers Management P/L;ASC v Dimitri (Burchett J, Federal Court of Australia, 7 May 1997, unreported); Re Tasmanian Spastics Association; ASC v Nolan (1996) 23 ACSR 743 at 751; (ii) 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: ASC v Roussi (supra) at 570; Re Gold Coast Holdings Pty Ltd ASIC v Papatto (2000) 35 ACSR 107 at 112; (iii) Protection of the public also envisages protection of individuals that deal with companies, including consumers, creditors, shareholders and investors: ASC v Roussi at 570; Re Gold Coast Holdings Pty Ltd (supra) at 112; Re Tasmanian Spastics Association (supra) at 751; (iv) The banning order is protective against present and future misuse of the corporate structure: ASC v Donovan (supra) at 603; (v) The order has a motive of personal deterrence, though it is not punitive: Re Magna Alloys & Research Pty Ltd (1975) ACLR 203 at 205; ASIC v Pegasus Leveraged Options Group P/L & Anor (supra); ASC v Donovan at 607; Re Tasmanian Spastics Association at 751; (vi) The objects of general deterrence are also sought to be achieved: ASC v Donovan at 602; (vii) 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: ASC v Donovan at 607; (viii) Longer periods of disqualification are reserved for cases where contraventions have been of a serious nature such as those involving dishonesty: ASC v Donovan at 605-607; (ix) In assessing an 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: ASIC v Pegasus Leveraged Options Group P/L & Anor ; ASIC v Parkes (2001) 38 ACSR 355 at 386; ASC v Forem-Freeway Enterprises ; ASC v Roussi at 570-571; (x) 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: ASC v Donovan at 607; ASIC v Parkes (supra) at 386; (xi) A mitigating factor in considering a period of disqualification is the likelihood of the defendant reforming: ASC v Forem-Freeway Enterprises at 351; (xii) The eight criteria to govern the exercise of the court's powers of disqualification set out in Commissioner for Corporate Affairs v Ekamper (1987) 12 ACLR 519 have been influential. It was held that in making such an order it is necessary to assess: - 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. ASC v Roussi at 570-571; Re Gold Coast Holdings Pty Ltd at 111; (xiii) Factors which lead to the imposition of the longest periods of disqualification (that is disqualifications 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 such as in management and financial consultancy. - Lack of contrition or remorse - Disregard for law and compliance with corporate regulations. - Dishonesty and intent to defraud - Previous convictions and contraventions for similar activities ASIC v Hutchings; ASIC v Pegasus Leveraged Options Group P/L & Anor ; ASC v Parkes ; (xiv) In cases in which the period of disqualification ranged from 7 years to 12 years, the factors evident and which lead to the conclusion that these cases were serious though not "worst cases", 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 - Lack of contrition or acceptance of responsibility, but as against that, the prospect that the individual may reform ASC v Forem-Freeway Enterprises ; ASC v Donovan ; ASC v Roussi; Re Strikers Management P/L ; Re Gold Coast Holdings Pty Ltd . The difficulty with Roussi's case is that disqualification for 10 years was ordered, as this was the period of disqualification that the ASC had sought. Had a longer period been applied for, Einfeld J may have considered giving a longer period: ASC v Roussi at 571; (xv) The factors leading to the shortest disqualifications, that is disqualifications for up to 3 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 - In Donovan's case, the respondent had expressed remorse and contrition, acted on advice of professionals and had not contested the proceedings ASC v Donovan; Re Tasmanian Spastics Association . 57 I have earlier set out the relevant findings in the judgment in summary form. These, Mr Adler in the written submissions on his behalf concedes, are "extremely serious". ASIC, in its supplementary submissions on relief, summarises the position in these terms: "So far as Adler is concerned, the findings indicate not only that he contravened the Corporations Law in many respects but also that he did so with knowledge of the impropriety of his conduct and for the purpose of advancing his own personal interests at the expense of the companies of which he was a director or officer. His conduct thus amounted to a most serious dishonesty, occurring not as an isolated act but as a pattern of conduct over a number of months. This conduct was coupled with persistent lies and deceits designed to conceal his conduct and/or its impropriety." 58 Attachment A to ASIC's submissions fairly summarises those "persistent lies and deceits and the associated impropriety", by reference to the relevant paragraphs in the Judgment which elaborates upon those matters. For convenient reference, I reproduce that attachment below: [121-7], [148] False impression conveyed by Adler to Mr Westfield, journalist, that Adler was purchasing the HIH shares on his own behalf or on behalf of family interests through some related trust. [146-8] Adler intended to convey the false impression to the market through his s.205G notice that he was purchasing the HIH shares on his own behalf or on behalf of family interests through some related trust. [155], [161], [148] False impression given by Adler to journalist, Mr Mellish, that he was using his own money to buy the HIH shares. [164(xi)], [277] Adler blatantly preferred his own interests over those of AEUT and HIH by selling Adler Corporation's shareholding in HIH before that of AEUT. [165] Adler's purpose in causing PEE to purchase HIH shares was to benefit his own company's shareholding in HIH, not to benefit AEUT or HIH. [169] Adler less than frank in giving instructions to Minter Ellison in June 2000. [170] By not selling the HIH shares held by AEUT in July 2000, Adler preferred his own interests to those of HIH. [191] Adler preferred his own position over that of HIH and HIHC in a number of respects. [219] Adler made no attempt to correct the misleading impression given by press publicity which he had played an important role in generating. [221] Adler wanted to avoid HIH obtaining its own advice. [254] Adler intended that the Investment Department be sidestepped. [278], [280], [321], [349] Adler's purpose in having PEE purchase HIH shares in June 2000 was not to enable PEE to make a profit on the resale of HIH shares but to advantage himself. [296] Adler's failure at the end of 2000 to fully and frankly describe what had occurred was an admission of his consciousness of the impropriety in what occurred. [300], [307] Adler falsely stated in a letter to the Chairman of HIH that he was unaware that neither the Board nor the Investment Committee knew of the creation of the trust. [307] At the end of 2000, Adler gave Minter Ellison materially false information. [334] Adler knew that Minter Ellison's letter of advice to the HIH Board contained a number of misstatements and omissions but made no attempt to correct them. [359], [364] Adler knew that the assistance given by HIHC to PEE to purchase shares in HIH materially prejudiced the interests of HIHC. [387] The semi-covert bypassing of proper corporate safeguards reflected consciousness of impropriety on Adler's part. [571-2], [611-3] Adler's Quarterly Report to HIH/HIHC and other investors contained a number of obviously false statements and gave a grossly misleading picture. [618-9] Adler's memo to HIH directors of 15 December 2000 gave a misleading impression in connection with Planet Soccer. [725] In connection with PCP and PCP Ensor, Adler blatantly exploited for his own advantage a shortcoming which was to be laid at his own door. He was clearly advancing his own and not PEE/HIH's interests and taking advantage of HIH/PEE's desperate need of cash. 59 Moreover, Mr Adler's conduct from the time the PEE transaction first came to the attention of the non-executive directors until the present time has manifested no contrition whatsoever. While it may go only to mitigation of a statutory penalty, lack of contrition has a direct bearing upon disqualification. For here the interest of the public must be paramount. Mr Adler has at all times, by himself and through his counsel, vigorously denied any wrongdoing. In those circumstances, there is nothing whatsoever in his conduct to suggest that he would in the future act any differently in the performance of his duties as a company director or officer that he did in relation to the relevant transactions. 60 It is well settled (see [56(i) to (iii)] above) that the primary purpose of the disqualification power is the protection of the public; see, for example, ASC v Forem-Freeway Enterprises Pty Ltd at 349. That its object is the need to protect the public, with its corollary of personal deterrence, does not mean that its aim should be punitive though personal deterrence is relevant. That is explained in the judgment of Bowen CJ in Re Magna Alloys & Research Pty Ltd (supra) at 205: "The policy to which s122 [the predecessor to s206C and s206E of the Corporations Act ] gives effect is that a person convicted of an offence of any of the type specified in that section is not to be permitted to act as a director or take part in the management of a company. The section is not punitive. It is designed to protect the public and to prevent the corporate structure from being used in the financial detriment of investors, shareholders, creditors and persons dealing with the company. In its operation, it is calculated to act as a safeguard against the corporate structure being used by individuals in a manner which is contrary to proper commercial standards." 61 Here, of course, the occasion for considering disqualification does not arise after the conviction by indictment for a criminal offence; compare s206B which provides for automatic disqualification in the circumstances there delineated. That of itself does not mean that because these proceedings have been by way of civil penalty, the Court is thereby constrained in the exercise of its discretion to apply a lesser period of disqualification than the mandatory five years under s206B. The discretion of the Court is still directed to the nature of the relevant person's conduct in relation to the management, business or property of any corporation. It is also directed, more broadly, to any other matters that the Court considers appropriate, once the Court is satisfied that the disqualification is justified. 62 In any event, we are here dealing with a repeated series of contraventions though that needs to be put in proper perspective. While in arithmetic terms, the declarations made on 27 March 2002 produced 101 contraventions by Mr Adler and a further 84 by Adler Corporation, that simply represents the result of multiplying the nine episodes or transactions giving rise to a contravention by the number of corporate entities involved and the number of sections of the Corporations Law contravened by that same conduct. I would agree that the most that could be said is that a multiplicity of contraventions by reference to breaches of not just one but several provisions of the Corporations Law (or Corporations Act) may give a broad indication of the seriousness of the contravention, but much more to the point is to look at the contraventions themselves. Thus two factors should be considered. First, the number of episodes or transactions. These are themselves numerous, nine in all for Mr Adler and the same number for Adler Corporation. 63 To this, the First and Fourth Defendants contend that the correct characterisation, having regard to findings in the judgment, are that all of these pieces of conduct in substance constituted a single transaction, reference being made to para [141] of the judgment, especially subparas (c) and (f) thereof, and paras [191] and [193]. It is therefore submitted that a single penalty only should be imposed. 64 I should say at the outset that the judgments provide no basis for such contention as I explain below. We are moreover here dealing with disqualification with its paramount protective purpose. Highly relevant is thus the number of companies suffering dereliction of duty by Mr Adler (HIH, HIHC and PEE) and the fact that there were nine instances of misconduct by Mr Adler. That the conduct in question was repeated and followed a pattern, simply makes it more serious in terms of dereliction, with consequently greater risk to the public if Mr Adler were allowed to continue to manage companies. 65 The specific references in the earlier judgment of 14 March 2002 provide on analysis no basis for treating the nine transactions or episodes as in substance a single transaction. It is one thing to treat the purchase of shares in HIH over some two weeks as a single transaction (para [141(f)], quite another to treat each of the other transactions as in substance one transaction when they are distinct though not unrelated. Thus, clearly, the provision of $10 million payment to AEUT is a discrete transaction from its subsequent application in purchasing shares in HIH. These likewise represent distinct contraventions, namely of s208 and s260A of the Corporations Act by HIH and HIHC, with Mr Adler and Adler Corporation being "involved" so as to contravene the s209(2) and s260D respectively. 66 Then there are three separate investments by AEUT in purchasing from Adler interests the three entities, dstore Limited, Planet Soccer International Limited and Nomad Telecommunications Limited. Then there are the further four loan transactions occurring when Mr Adler caused AEUT to make four separate unsecured loans to associated entities. There is nothing in the Judgment which justifies treating these transactions as one single transaction, though of similar motivation. 67 By way of analogy, whilst in Australian Competition and Consumer Commission v George Weston Foods Ltd (2000) ATPR ¶41-763 the ACCC was unsuccessful in arguing that conduct in which the respondent had attempted to involve two retailers in price-fixing amounted to separate contraventions, in Trade Practices Commission v Simpson Pope Ltd (1980) 30 ALR 544 Franki J said, appositely to the present context: "[D]ifferent acts of a supplier, each of which is a contravention of s48 because it falls within or more of the categories of acts set out in s96(3), which take place at different times and in relation to three different customers, are not to be regarded as "the same conduct" within s76(3). The words 'the same conduct' in s76(3) must be more limited in scope than the words 'any similar conduct' which appear at the end of s76(1)." [these references are of course to the Trade Practices Act 1974 Cth. 68 In considering the effect of the multiple contraventions, for purposes of determining whether or not to make a disqualification order, the relevant transactions are to be judged individually as well for their cumulative effect. Thus in applying s206E of the Corporations Act, not only has there been at least two contraventions of the Act by HIH and at least two contraventions of the Act by HIHC, but the relevant person, here Mr Adler, did not merely fail to take reasonable steps to prevent the contravention but was himself directly involved in it so as himself to contravene the Act. That clearly reinforces the basis for applying s206E with a substantial disqualification order. 69 Indeed the gravity of the contraventions as well as their repetition in distinct transactions, numbering nine in all, make a powerful case for the lengthiest disqualification period. 70 The principles of parity which guide the exercise of judicial discretion do not produce any neat arithmetic algorithm from other cases though the earlier propositions([56] above) give some guidance. I would adopt what is said by Hill J in ACCC v Universal Music Australia Pty Limited (No. 2) [2002] FCA 192 at [34] where, in the analogous context of the Trade Practices Act he says: "Hence, while pecuniary penalties imposed in one case provide a guide, that guide will seldom if ever be able to be used mechanically." 71 Austin J, while making similar observation, in ASIC v Parkes [2001] 38 ACSR 355 at 386 refers to a number of factors which are directly applicable to the present case and its circumstances: "In reaching this conclusion [disqualification for 25 years], 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 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 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, it will not prevent him from earning income as an employee, using his undoubted financial skills under proper supervision." 72 In the present case each of those factors are present, though it should be noted that Mr Adler himself did not assert any personal explanation for what he had done. Rather, through his legal advisers, he denied that there was any contravention in the circumstances, a denial which is at odds with the findings of the Judgment and thus cannot stand. 73 A review of the cases demonstrates that a wide range of banning periods have been imposed by the courts. For the most serious, there is prohibition for life, though in one case with a right to apply for variation after five years; ASIC v Hutchings. 74 Section 206G permits a disqualified person applying to the court at any time "for leave to manage: (a) a corporation; or (b) a particular class of corporation; or (c) a particular corporation; if the person was not disqualified by ASIC." That order granting leave "may be expressed to be subject to exceptions and conditions determined by the court"; see s206G(1) and (3) of the Corporations Act . This is in contrast to the lack of any provision for exceptions and conditions in ss206C and 206E. 75 Windeyer J in ASIC v Hutchings framed his orders in such a way that the right to apply after five years on three months' notice was for a variation of the order disqualifying the relevant directors for life. 76 My earlier review of the now relatively numerous cases in which disqualification orders have been made of varying lengths, does not add significantly to the list of factors identified by Austin J in Parkes, given the almost infinite variety of facts and discretionary considerations. 77 Against the very substantial disqualification order pressed upon me by ASIC, the First Defendant advances the following private interest considerations which it is said should be "weighed against the public interest grounds upon which a disqualification order should be made against Adler". "(a) In his affidavit affirmed on 17 April 2002, Adler said that his sources of income comprised directorship and consultancy fees, equities trading, and investment in private and joint venture enterprises. Almost of all of these business interests are carried on through Adler Corporation Pty Limited, which is a private company, and of which Adler and his wife are the only directors and shareholders. (b) Adler Corporation carries on its business both in its own right and also as trustee of Glowine Investment Trust. Mrs Adler has little involvement in the day to day management of Adler Corporation or the Glowine Investment Trust. On a day to day basis, the strategic decision making, and financial and investment decisions, are made by Adler. (c) The activities of Adler Corporation depend upon: (i) Mr Adler's personal business relationships that have been built up over many years; and (ii) Mr Adler's assessment of and preference for particular risks and opportunities in transactions or investments. (d) Many of the private and joint ventures in which Adler Corporation has invested depend upon the continuing support of investors such as Adler Corporation and Adler's personal relationships with those enterprises. " 78 It is then submitted that in the alternative: (a) any disqualification order should be made for a limited period of time, and only be made in relation to the management of public companies, on the basis that disqualification for a limited period for managing public companies strikes a fair balance between the public interest in Adler not managing corporations that use public capital, against his private interest in maintaining his ability to earn a livelihood for himself and his family, or (b) that at the very least, a disqualification order should permit Mr Adler to be involved in the management of Adler Corporation and its wholly-owned subsidiaries, on the basis that the failure to provide such an exception would be harsh, oppressive and unfair against Mr Adler because it would deprive him of the means of earning substantially all of his income. 79 There are fundamental problems in the way of any such course. The first, is that, as stated by Anderson J in Re Gold Coast Holdings Pty Limited (in liq) (supra); ASIC v Papatto (supra) at 112, while qualification orders are protective rather than punitive, interests to be protected include "those of the public who may unwittingly deal with companies run by people who are not suitable to be involved in the management of companies and the public interest generality and the transparency and accountability of companies and the suitability of directors to hold office". [emphasis added]. Clearly members of the public will not cease to deal with companies that are private should Mr Adler continue to be permitted to be involved in their management. Likewise in relation to Adler Corporation. Indeed the fact that he was so permitted to be involved with their management would signal the safety of so dealing. This could be as creditor or customer, even if, as a private company, a member of the public is not able to be a direct investor. The public dangers of that are self-evident. 80 The public protective purpose must clearly be paramount. That precludes a simple balancing exercise. While the disqualification order should not be disproportionate to the public protective purpose it is intended to serve, for that indeed would be punitive, it would subvert that public purpose if private interest considerations were to prevail or preclude an order which went no further than necessary to serve that public purpose. A lesser period of disqualification than that, designed to serve a private interest consideration, would thus sacrifice the public interests to be protected. 81 The second matter is one of jurisdiction. Section 206C and s206E both confer upon the Court the power to "disqualify a person from managing corporations". There is no suggestion that an order may discriminate between corporations and thus operate distributively only against a certain class of corporation such as any corporation that is not a public company, or any corporation that is not Adler Corporation and its wholly-owned subsidiaries. Indeed, that logically follows from the public protective purpose earlier identified. 82 Moreover, the power of the Court to grant leave under s206G, in contrast to s206C and s206E, does contain language expressly permitting application for leave to manage "a particular class of corporation", or "a particular corporation". That strongly suggests that the associated disqualification provisions are not to be read as permitting a qualified order. 83 To this the First Defendant submitted in argument there was a solution, namely for the Court to order disqualification and then entertain, shortly after, an application pursuant to s206G for reinstatement of those corporations of a narrower class, as earlier sought. 84 While there is no constraint under s206G upon Mr Adler seeking after disqualification, at any time, for leave to manage, such a contemplated preordained sequence would be a contrivance to which this Court should not lend itself. Nor should any longer period be imposed than appropriate based on the premise that a future application, whether or not contemplated from the outset, can always be made to terminate the disqualification. The period of disqualification is set in light of all information before the Court at the time. A later application, if made, is made based on all then known information, including events since. 85 The final impediment, even were there no jurisdictional one, is that the proposed distinction between the management of public companies and private ones is unjustified. That the latter but not the former be permitted Mr Adler to manage, proceeds on the false assumption that the statutory protective purpose can sensibly be based upon whether the corporation uses "public capital". Quite clearly, that protective purpose is not so narrowly based. Members of the public may deal equally with private companies as public companies. Their dealings are broader than simply the provision of equity capital. They include commercial dealings across the whole spectrum, being a spectrum in which private companies may deal as readily as public companies. Thus protection of the public envisages protection of individuals that deal with companies, public or private, including consumers and creditors as well as shareholders and investors (see [56(iii)] above). It is simply nonsense to suppose that the private status of a company represents some kind of safety zone for members of the public in their dealings; that some kind of cordon sanitaire can be placed around private companies so members of the public never deal with them. The statistics are replete with instances where the public have been duped in their dealings with private companies. The present contraventions have indeed occurred in relation to private corporations; Adler Corporation as the contravenor under Mr Adler's control and PEE as suffering some of the contraventions. Indirectly, the public suffered, as shareholders of HIH. One might moreover reasonably argue that the public need even greater protection dealing with private companies. This is because public companies are subject to the disciplines applicable by statute and, where listed, the Stock Exchange Rules, whereas private companies are subject to a more permissive statutory regime. 86 The alternative suggestion, that Mr Adler be permitted to be involved solely in the management of Adler Corporation and its wholly-owned subsidiaries, may suggest that, perhaps with additional constraints, these difficulties could be overcome; on the basis, presumably, that Adler Corporation would only deal with sophisticated investors who could look after themselves. However, in laying down protection for the public, it is not to be understood that the protection is not also needed for sophisticated investors from the public who may otherwise deal with a private company in good faith and then find that its management betrayed the same failings that had led to earlier contraventions. As was said by Madgwick J in ASC v Forem-Freeway Enterprises Pty Ltd (supra) at 350, "[I]t is a legal privilege to be able to [manage a company]: most people manage to make a living without doing it." 87 Here, concededly, Mr Adler will be impeded in his field of activity, which includes financial consultancy and investment, including joint ventures, but that is the very area where he has committed the relevant contraventions. That puts in stark relief the need to make the public protective purpose paramount over Mr Adler's private interests, though it be the case that disqualifying him may require him to be a passive investor with no seat on the board or role in management. Whether that of itself prevents him investing is a matter for him and not a matter for the court to enter into. To the extent that Adler Corporation and its wholly-owned subsidiaries are already engaged in ongoing financial or business activity, should a disqualification order be made against Mr Adler he will simply have to find others to carry on that activity or manage it, independently of him, on the basis that he must, in the public interest, be excluded wholly from that activity. That is, at least until such time as a court is persuaded to grant leave pursuant to s206G, if it be so persuaded in light of the then known facts. 88 The First Defendant stated in the written submissions that, "the failure to provide such an exception would be harsh, oppressive and unfair against Mr Adler because it would deprive him of the means of earning substantially all of his income." (see para 7). The short answer is that if that be the consequence, a proposition not self-evident, then that is a consequence brought about by Mr Adler's own misconduct. 89 I turn finally to the character evidence in affidavits sworn by Mr Carr on 23 April 2002 who is a stockbroker who has dealt with Mr Adler over the last twenty years, Mr Lance on 23 April 2002 has since 1984 "met with Mr Adler as often as twice a month for the purpose of bringing investment situations and opportunities to his attention" (para 8). Then there are the affidavits which do not relate to business dealings with Mr Adler, being those, respectively, of Rabbi Feldman and The Hon Marcus Einfeld, AO, QC, PhD. 90 Taking first the affidavits of Mr Carr and Mr Lance, both these are diminished in weight because their proponents have an interest in Court orders not being made concerning Mr Adler. That is to say, if such Court orders inhibited future stockbroking orders in the case of Mr Carr and future investment opportunities in the case of Mr Lance. 91 Mr Carr states that he has not observed Mr Adler act against the interests of FAI. But that is of no particular significance given first that Mr Carr, as a relative outsider, would not be in a position to observe Mr Adler's dealings with FAI with any great familiarity, and second, in any case, Mr Adler's interests and FAI's would ordinarily, though not inevitably, be closely aligned, given his large shareholding in FAI (see PX15). 92 Mr Carr states that he has not read the judgment of 14 March 2002 or any extracts from it except those referred to in the Plaintiff's supplementary submissions on relief, contained in Attachments A and B thereto to which earlier reference has been made (see [58] above in particular). He states, at para 13, that "having read those paragraphs of Justice Santow's judgment, my view of Mr Adler's integrity and honesty remains unchanged". 93 I agree with ASIC's submissions that this can only sensibly be read as indicating that Mr Carr is confirming what his perception of Mr Adler has been from his dealings with him. The alternative view that Mr Carr is saying that he does not consider those findings reflect on Mr Adler's integrity and honesty is so absurd that it should not be attributed to Mr Carr in the absence of a clear statement to that effect. 94 The same observations apply to Mr Lance. 95 Turning to the affidavits of Rabbi Feldman and the Hon Marcus Einfeld, these could not reflect any familiarity with Mr Adler's business dealings but rather refer to his general good character. At para 10 of his affidavit Mr Einfeld aptly summarises the effect of the findings of this Court in relation to Mr Adler: "D]isregard for the law and property, dishonesty, deceit and impropriety of conduct for the purpose of advancing his own personal interests." 96 Neither Rabbi Feldman nor the Hon Marcus Einfeld had the opportunity to observe the detailed evidence and factual circumstances that underlay the conclusions reached. 97 I would adopt what ASIC say in its written submissions, namely, "that others in the community who have not had the same opportunities to examine the facts and circumstances which lie behind Adler's statements and conduct and are consequently not conscious of those characteristics should be regarded as a matter of concern which heightens the need for an extensive banning order to be made to protect the business community and investing public. Adler's plausibility thus works against him, rather than for him, in relation to the issues arising at this hearing." 98 Finally, none of the affidavits filed on behalf of Mr Adler are from persons who have sat with him as a director and that omission is significant. They can have little relevance to the question of a disqualification order. 99 Next, the First Defendant submits that ASIC's submissions, in relying upon an absence of contrition as a reason for a lengthy disqualification order, is not a factor that should be taken into account. The reason given is that this is a case which has the potential to be followed with criminal prosecution. 100 There are several matters which should be noted. First, Mr Adler's lack of contrition and unwillingness to proffer a full and frank account of what occurred is further illustrated by the proper and reasonable enquiry of him from Mr Thompson in March 2001 for relevant documents relating to ASIC's investigation of PEE's trading in HIH shares (TB, 1/286). Mr Adler's response was to describe Mr Thompson's enquiry as "dangerous" and to assert that Mr Thompson was "leading the ASIC to explore questions that they may not have considered" and that he was volunteering information which is "unnecessary, unwarranted, and not commercially sensible". Mr Adler concluded by warning Mr Thompson that he was putting the company, the addressees of the letter, and himself at risk. That is hardly the conduct of someone who might be entrusted with the management of a company, that he would actively wish to impede a proper investigation of its affairs, placing pressure on those who are called upon to provide information. While the adversarial process that may attend a protective stance by a director in these circumstances may not technically contravene the law, it is hardly a recommendation for entrusting the person concerned with the management of companies. 101 In any event, this submission overlooks two things. First, while it is true that the Corporations Act places no impediment on criminal proceedings being started against a person for conduct that is substantially the same as conduct constituting contravention of a civil penalty provision; s1317P that needs to be considered in context. It is difficult to see that the likelihood of bringing such criminal proceedings would be enhanced by an expression of contrition. There are also express provisions of s1317Q. These essentially preclude evidence of information given being admissible in such criminal proceedings if previously given in proceedings for a pecuniary penalty order, which these are, even if they seek other relief. This is in the situation where the conduct alleged to constitute the offence is substantially the same as the conduct that was claimed to constitute the contravention. The only exception is a criminal proceeding in respect of the falsity of evidence so given in the proceedings for the pecuniary penalty order. Since the court is entitled to assume that truthful evidence would be given in any civil penalty proceedings, that contingency is one which can be disregarded. Moreover, the Court retains a discretion to exclude evidence; see Judgment [503]. Then there are the procedures of a protective certificate under s128 of the Evidence Act 1995 (NSW), though there remains the difficulty of the interaction between s128(7) and (8). 102 While therefore such expression of contrition if constituting, or accompanied by, an admission of liability, might have rendered it unnecessary for ASIC to have had to make out its case in relation to the civil penalty proceedings before me, I do not consider that the possible sequel of criminal proceedings renders irrelevant the absence of any expression of contrition in the present context, despite the arguments dealt with below. 103 Thus it is said that contrition or remorse can never be justification for increasing a sentence but rather a relevant matter to be taken into account by way of mitigation or reduction of sentence (see, for example, Power (Brett) Wayne [1999] NSWCCA 25, 5 March 1999, unreported) at [21] and the authorities cited in Ivan Potas, "Sentencing Manual" (LBC, 2001) at 36-7). It is said therefore to follow that absence of contrition should not be a factor to be taken into account in the present case. 104 However, this overlooks that in the present context we are dealing not with a civil penalty, where that reasoning may be applicable, but a disqualification order. There it is highly relevant to know whether the director or officer is likely to contravene again as the earlier statement [57] of guiding factors makes clear. Absence of contrition must therefore be a factor favouring disqualification and moreover a lengthy period of it. At the least, Mr Adler could not invoke contrition as a reason for a lesser period of disqualification. 105 The next matter that is put on behalf of Mr Adler is that in determining the scope and extent of disqualification, the Court should consider the seriousness of the contraventions found against Mr Adler by reference to the standard of conduct of other directors of HIH. It is then said by the First Defendant that evidence was given at the hearing by three highly experienced and well qualified directors of HIH about their view of the relevant transactions so that the evidence of Messrs Cohen, Gardener and Stitt, QC provide the useful guidance to the appropriate level of censure. 106 I quote the relevant paragraphs of the First Defendant's written submissions (paras 11 to 15) below: 11. Cohen made appropriate inquiries concerning HIH's investment in AEUT before signing the company's financial report on 16 October 2000, and he was satisfied that the transaction was legal and proper: T85.4-30; 87.20-30; 105.33-35. As at 22 December 2000 when Cohen wrote to ASIC concerning the transaction, in his view there was no call to question the legality and propriety of the transaction: T87.37-45. Cohen conceded that as to legality and propriety, he would not have questioned the transaction in the middle of June 2000 any more than he would have at the end of December 2000: T93.37-49; 106.16-20. Both on 16 October 2000 and 22 December 2000, there was no aspect of the lack of prior approval of the transaction which led Cohen to regard it as contrary to good corporate governance: T96.10-14. Cohen was perfectly content as at 16 October 2000 and 22 December 2000 with the commercial terms of the transaction: T110.3-6. 12. Gardener conceded that if the AEUT matters had arisen at a board meeting after 15 June 2000, and he was asked to ratify that investment, then he would have voted in favour of ratification: T379.4-10. In re-examination, Gardener said that he would not have objected at the time if he had known about the transaction "if I thought that the outcome was likely, a successful outcome was likely": T382-8-10. Gardener recognised that a resolution to ratify such a transaction at a board meeting is not an empty procedure, but a real and meaningful business decision: T378.40-55. 13. Gardener did say in paragraph 19 of his affidavit that his initial reaction on 5 September 2000 was that he was 'horrified' and 'strongly advised that the matter be raised as a matter of urgency at the next meeting of the Audit Committee and the next meeting of the board'. But he agreed with the litmus test that if that was right, then obviously enough that is something which he would have done at the next meeting of the board (T352.40-43), yet he did not raise the matter at the next board meeting on 8.9.00 (T352.56-353.33) despite the fact that no fewer than 7 matters concerning corporate governance in connection with HIH's investments were recorded in the minutes of that meeting (T371.50-53), nor did he raise it at any of the following 5 meetings (T363.5-44). 14. Gardener is an experienced chartered accountant and was a member of the Audit Committee. He regarded the related party transactions note concerning the AEUT in the HIH Annual Report as a proper stance for HIH to take and inform users of the financial statements, and he perceived nothing unlawful or improper in the transaction: T357.16-46. Gardener abandoned each of the reasons given in paras 28-30 of his affidavit for having said he would not have approved the transaction. 15. Stitt QC is not only an experienced company director but also a highly experienced barrister, whose expertise includes commercial law generally, and who is familiar with the law concerning the duties of company directors: T461.19-32. Stitt QC was absent from the board meeting on 29 November 2000 and the only questions he raised at the board meeting on 14.12.00 concerning the AEUT were as to who was the Senior Counsel advising Arthur Andersen and what was the advice: T470.8-12. When Stitt QC read the draft of the 22.12.00 letter to ASIC with its attached schedule, it did not occur to him that the factual ingredients of any contravention of the Corporations Law had been established by the facts set out in the schedule: T474.38-46. The fact that Stitt QC was considering the letter in his capacity as a director focussing on the facts rather than as legal adviser (T474.11-31) renders his evidence all the more pertinent to a consideration of the position of the non-lawyer directors who are presently being sued." 107 In addition to these submissions, the First Defendant contended (as to causation) that, based on the authority of the Court of Appeal in Beech Petroleum NL v Kennedy (1999) 48 NSWLR 1 at 93, the Canadian case of Brickenden v London Loan and Savings (1934) 3 DLR 465 at 469 should not be taken to be "authority for the general proposition that, in no case involving breach of fiduciary duty, may the court consider what would have happened if the duty had been performed. The reasoning in Brickenden must now be understood in light of the House of Lord's decision in Target Holdings [ Target Holdings Ltd v Redfern (1996) 1 AC 421] in the cases which have applied it." 108 But even accepting that, the present case has as only one of its aspects, and that only evidentiary, the issue of a conflict of interest and duty and its normative aspects. It was the latter that was recognised to be relevant for causation in Beech Petroleum NL (supra) at 430. the present transactions, involving as they do breaches of the Corporations Law, in any event clearly preclude ratification as ASIC submitted in its liability submissions (R v Towey (1996) 21 ACSR 46 at 59 per Gleeson CJ). This is so even if there were otherwise the potential for ratification. Such potential for ratification is in any event denied by the conclusions earlier reached in the Judgment. There is, as the Judgment makes clear, a very real difference between prior approval of the transaction and ratification after the event "when presented with a fait accompli"; see [756] and [754] to [767]. And there is real doubt that ratification would have occurred had full disclosure of every aspect been made, including the unlisted investments and loans. I am now invited to take a different view of the evidence by the First Defendant in the relief phase of the proceedings to that earlier taken when determining liability. But the present phase is not an opportunity to re-agitate matters determined by the earlier Judgment. 109 Finally, to return to a point made at the outset. There is a fatal problem in the way of these contentions. It is identified at para 266(bis) of ASIC's earlier written submissions at trial. "The Plaintiff's primary submission is that the question as to what the board would have done if approval had been sought is irrelevant. This is because any such approval (whether with or without full disclosure of the material facts) would have involved a breach of their duties as directors (R v Towey (supra) per Gleeson CJ at 59)". I agree with that submission. Conclusion 110 Taking into account the factors which led to Austin J in Parkes imposing a banning order of 25 years, and being satisfied these are essentially applicable here though I do consider the absence of fraud relevant (see [112] below), I thus consider that the appropriate disqualification order for Mr Adler is 20 years. For the reasons that I have earlier identified, I do not consider there is any basis advanced by the First Defendant to justify making no order, nor an order for a short period, nor an order (were there power to do so) limited to public companies or companies other than Adler Corporation and its subsidiaries. I am satisfied that, despite the hardship this may entail for Mr Adler and, if relevant, the effect of the other relief imposed against Mr Adler (see below), any lesser order would not satisfy the public interest. I have set the period at 20 years, taking into account the absence of fraud but recognising that there is no expression by Mr Adler to indicate that he would not offend again, so that the public should be protected by a very substantial banning order though short of 25 years. I believe the public protective and deterrent purposes are thereby sufficiently served by this lengthy period, though an argument for lifetime disqualification is not without weight. 111 The distinguishing factors raised by the First Defendant in relation to Parkes were that Mr Parkes managed three corporations whilst an undischarged bankrupt, that he had an intent to defraud, and that he asserted convoluted explanations found to be implausible. But that Mr Adler instead committed offences involving dishonesty (though not fraud) rather than bankruptcy, justifies some differentiation though limited. The distinction between asserting convoluted explanations found to be implausible and asserting none at all, save blanket denial, could hardly operate in Mr Adler's favour. Finally, the contraventions here, as in Parkes, involved three corporations, namely HIH, HIHC, and PEE. 112 In setting the period of disqualification at 20 years, Mr Adler is not precluded at some future date, from attempting to demonstrate that he should again be permitted to manage a corporation, or a more limited class of corporation. I merely note that possibility, but bear very much in mind what is said in [84] above, by way of not imposing a longer period than necessary. Compensation 113 It is submitted by the First Defendant that orders for compensation should be limited to losses in respect of which ASIC has established a causal link with Mr Adler. It is then submitted that ASIC's case on causation of loss depends on an hypothesis as to what would have occurred if HIH/HIHC's $10 million investments in the trust was considered at a Board meeting of HIH, where, according to the First Defendant, "the evidence indicates that the investment would have been approved". 114 There is the earlier conclusion that such approval would be without any legal efficacy whatsoever, even if as a factual matter it would have occurred at all, a proposition itself contrary to the findings in the Judgment there noted. The Judgment, in any event, concludes [768] that even on a common law basis of causation the loss in question would have occurred. 115 The First Defendant then attempts to re-agitate the calculation of loss by reference to $10 million being invested in 30 day bank bills, rather than in the other range of possibilities which the First Defendant presses; see paras 20 to 23 of the First Defendant's written submissions. However, the re-agitation of that matter is foreclosed by the findings in the Judgment where the proper analogy was determined to be that applicable to a defaulting trustee or other fiduciary; see judgment [769] to [774]. The only qualification on this is that earlier identified in this judgment (see [21] above) resulting in a figure of $7,958,112 according to the calculation provisionally accepted, subject to any further submissions on the final calculation. 116 The remaining issue concerns a matter raised in argument. It is this. If it be the case that each of the Defendants should have their responsibility gradated or differentiated in some way in relation to the compensation, recognising that compensation could never exceed the loss, thus precluding over-compensation, is it open to a Court to obviate the need for contribution proceedings by reflecting this in some way in the orders made? 117 The principles are clear enough and were not disputed. First, where a plaintiff obtains separate judgments against defendants jointly and severally liable, as would be the case here, whilst it may be desirable that at least one of the judgments should contain words making it clear that the plaintiff cannot have double satisfaction, the law provides that he cannot have double satisfaction even if the words are omitted; see P.O. Morris Ltd v Perrott and Bolton [1945] 1 All ER 567 and the statement of principle in "Joint Obligations" by Glanville L Williams (Butterworths, 1949) at 84. 118 Thus applying the analogy applicable to multiple tort-feasors, as is appropriate to a civil compensation order made under statute, where the same damage to the plaintiff may be the result of tortious conduct by more than one person, the plaintiff is free to choose which of such persons to sue. If the plaintiff chooses to sue only one of them, the plaintiff is entitled to judgment against that person for the full amount of any damages awarded. Where a plaintiff sues more than one defendant in tort in respect of the same damage, and more than one are held liable, the plaintiff is entitled to judgment against each and every one for the full amount of the damages awarded whether their liability is joint (Bell v Thompson (1943) 34 SR(NSW) 431 at 435 per Jordan CJ) or several and concurrent (Barisic v Devenport [1978] 2 NSWLR 111 at 116-7 per Moffitt P), such that the liability of the multiple tort-feasors is "solidary" rather than "proportionate" to their "responsibility" for the loss suffered; see the discussion in "The Law of Torts in Australia" by Trindade and Cane (Oxford) 3rd ed at 746. 119 Thus it is not open to any of the Defendants to argue, as against the Plaintiff, that their contribution to the damage was smaller than that of others or that they were only partly responsible, for such arguments can only be put in contribution proceedings between the Defendants, where the aim is to apportion liability amongst the tort feasors according to their relative responsibility. The Court can however conclude in relation to any particular Defendant, that in all the circumstances no compensation order should be made for the Court has a discretion whether or not to order compensation, denoted by the word "may" in s1317H(1). The Plaintiff is entitled to recover the whole of the amount of the loss against any one Defendant, or against a combination of the Defendants but may, of course, only recover in total the full amount of the loss; D'Angola v Rio Pioneer Gravel Co Pty Ltd [1979] 1 NSWLR 495. 120 In the course of argument I gave consideration to whether, by appropriate drafting of the orders, a proportionate differentiation between the Defendants could be validly achieved. This arises only were I to conclude such differentiation was indeed justified. The problem of doing so validly arises because of the absence of provision expressly permitting such differentiation in s1317H of the Corporations Act and indeed the indications to the contrary. Thus in requiring that the order "must specify the amount of the compensation" there is a substantial argument that any differentiation, whether based on some kind of formula or otherwise, is simply not in conformity with the statutory requirement for specification, nor with the well-settled principles of joint and several liability. The drafting submitted by the First Defendant, though without any submission as to its validity, was as set out below: "1. Order pursuant to section 1317H of the Corporations Act that each of the defendants pay compensation to HIH Casualty & General Insurance Company Limited in the sum of $[XXX] (the compensation sum), on condition that, subject to order 2 hereof, this order must be enforced: (a) as to not more than [X]% of the compensation sum against the first and fourth defendants; (b) as to not more than [Y]% of the compensation sum against the second defendant; and (c) as to not more than [Z]% of the compensation sum against the third defendant; 2.. Order 1 may be enforced against a defendant as to that part of the compensation sum in excess of the percentage referred to in order 1 respect of that defendant only if, and to the extent that, order 1 cannot be enforced against another defendant in the percentage referred to therein in respect of that defendant by reason of: (a) the bankruptcy or winding up of that defendant; or (b) the Court being satisfied that that defendant has insufficient assets to pay that percentage of the compensation sum." 121 ASIC strongly pressed against such an order on the basis that the proper place for determining apportionment issues was in properly constituted contribution proceedings and at the appropriate stage. 122 ASIC also properly did not wish to put itself at risk in the event of bankruptcy or winding-up of the relevant Defendant nor to place itself outside the scope of what is permitted by s1317H. The statute makes no provision for such conditions applying to any order. Rather it states in categoric terms that "[T]he order must specify the amount of the compensation". 123 The position could be further complicated by appeals and the possibility of stay applications being made. But aside from these considerations, I do not consider such differentiation appropriate in any event, beyond that involved in omitting Mr Fodera, altogether, as I would even were such differentiation legally possible. Conclusion 124 Having reflected on the matter, I consider that the conventional approach should be followed and that the compensation order should be made without differentiation against Mr Adler, Adler Corporation and Mr Williams. However, for reasons I will elaborate in relation to Mr Fodera, I have concluded that no compensation order should be made against him in all the circumstances. Those circumstances in essence are that while I do not consider he should be exonerated, I consider in the exercise of my discretion that no compensation order is appropriate in his case, given his substantially lesser role in occasioning the loss in question. Pecuniary Penalty 125 It is well established that the principal purpose of a pecuniary penalty is to act as a personal deterrent and a deterrent to the general public against a repetition of like conduct (ASC v Donovan (supra); Trade Practices Commission v CSR Limited [1991] ATPR 52-135). In Donovan, the court said: "If compliance with the appropriate standards of commercial conduct within the management of corporations by deterrents is the objective, then any penalty should be no greater than is necessary to achieve this objective. Otherwise severity above that figure would be oppressive." 126 Following a review of the relevant cases, I have attempted to summarise the propositions that may be derived. I recognise that, as with banning orders, there is no simple mechanical process for quantifying the appropriate penalty but some guidance can be derived from the principles and factors that are identified below. I should add that in a context where honesty or propriety of purpose is involved, the sphere of discourse applicable to economic legislation such as antitrust law is wholly distinct from corporations law with its emphasis on proper purpose and honesty; see more generally the discussion by ALRC in "Securing Compliance - Civil and Administrative Penalties in Australian Federal Regulation" Discussion Paper 65 April 2002 esp. Ch 18. These propositions have guided me in the present case. (i) The pecuniary penalty has a punitive character, but it is principally a personal and general deterrent to prevent the corporate structure from being used in a manner contrary to commercial standards. The penalty should be no greater than is necessary to achieve this object: ASC v Donovan at 608; (ii) To determine whether compensation is to be paid and in what amount it is necessary to consider the prospect of the respondent paying such compensation and the hardship to the defendant from such payment. Compensation has been ordered for an amount less than that lost even though there was little prospect of any of it being recovered: ASC v Forem – Freeway at 351; (iii) The capacity of the defendant to pay is a relevant consideration in determining a pecuniary penalty: ASC v Forem – Freeway at 351 –352; (iv) In assessing a pecuniary penalty it is important to consider the consequences of an associated disqualification order for the defendant. If the making of such an order has significant consequences, they may operate as a factor in favour of a lesser penalty. Where the disqualification order does not have significant consequences for the defendant, the prohibition order is likely to be only marginally relevant: Re Tasmanian Spastics Association at 751-752; (v) It is important to assess whether the order will prejudice the rehabilitation of the defendant: ASC v Forem – Freeway at 352; (vi) The size of the penalty is a question of discretion. The circumstances of one case should not dictate the size of the penalty on another case: ASC v Donovan at 608; (vii) In ASC v Forem – Freeway civil compensation of $200, 000 was ordered. This amount was lower than the losses to the company concerned. This amount was ordered, even though it was highly unlikely that the amount would ever be paid as the respondent was bankrupt. In this case it was held that precision in the amount was therefore unnecessary: ASC v Forem – Freeway at 351; (viii) A fine was not ordered in ASC v Forem – Freeway . However the ASC was given liberty to apply at a later stage in relation to this matter. The court held that the personal hardship to the respondent, the unintended punitive consequences of the other orders and the lack of capacity to pay, justified such order: ASC v Forem – Freeway at 351 – 352; (ix) Factors leading to the order of a penalty in the range of $20, 000 to $40, 000 included: - Defendant was aware of impropriety of actions - No intention to deprive company permanently of funds - Amounts in question not large - No deliberate falsification of accounts - Cases classed as being serious misconduct, but not worst cases. Re Tasmanian Spastics Association at 752; ASC v Donovan at 609 (x) Relevant factors leading to the court to order the lower range penalties in the range of $4,000 – $5,000 included: - Remorse and contrition shown - Efforts to repay misappropriated funds - Acted upon the advice of professionals - Did not contest the proceedings, or sought to save costs in proceedings - Tended to not involve dishonesty, but negligence or carelessness - Previous unblemished character - Further contraventions unlikely ASC v Donovan at 609; ASC v Spencer (1997) 25 ACSR 143 at 144-145 127 A similar approach has been taken in the trade practices context, including NW Frozen Foods Pty Ltd v ACC (1996) 71 FCR 285 and Trade Practices Commission v Stihl Chain Saws (Aust) Pty Ltd (1978) ATPR 17-882. More recently, in Australian Competition and Consumer Commission v ABB Transmission and Distribution Limited (No. 2) ([2002] FCA 559 ,3 May 2002, unreported) Finkelstein J dealt with the Trade Practice Act and in particular contraventions involving price-fixing. At para [38] Finkelstein J concluded that it was appropriate to impose a single penalty against each respondent for all contraventions committed by that respondent following ACC v Rural Press Limited [2001] ATPR 41-833. He noted that there were cases which suggest the existence of exceptions to the general rule that a separate penalty should be imposed for each offence. 128 Finkelstein J also makes reference to the "totality" principle, to the effect that "where a penalty is being imposed for a number of offences, it is necessary to ensure that the penalties in aggregate are just and appropriate: Mill v R (1988) 166 CLR 59, 63." [at 39] 129 A more detailed discussion of the totality principle is to be found in "Sentencing Manual" Ivan Potas (supra) at 27 to 29, in particular emphasising the importance of the majority judgment of the High Court in Pearce v the Queen (1988) 194 CLR 610. 130 Following Pearce a judge sentencing an offender for more than one offence must now fix an appropriate sentence for each offence and then consider questions of cumulation or concurrence, as well, of course, as questions of totality. Such an approach is necessary in the High Court's view, to avoid the failure to take account of the differences in the conduct which are the subject of punishment on each count. It also avoids artificial claims of disparity between co-offenders; Pearce v the Queen (supra) at 623 to 625. Clearly the analogy is imperfect here; in particular I cannot replicate cumulation or concurrence in sentencing. 131 Finally, Finkelstein J at [40] invokes the "parity" principle as the basis for distinguishing between the different corporate respondents where their circumstances "disclose as important differences" such as their size and scale of operations and thus the relative impact of a penalty. In so doing he declined to follow the approach taken by the Full Court in NW Frozen Foods Pty Ltd v ACC (supra), concluding (at [40]): "and in the case of a contravention of antitrust legislation where deterrence is the main object of the penalty, that object would not be achieved if a small penalty was imposed on a large corporation just because that penalty was imposed on a co-offender. It would be equally inappropriate to use the parity principle to impose a crushing penalty on a small corporation." 132 He thus took into account that in imposing a penalty on the company of which one of the respondents was the principal shareholder, allowance should be made for this as otherwise that principal shareholder would in effect "be punished twice over". 133 In the particular circumstances of the present case, Adler Corporation is not to be taken as simply the alter ego of Mr Adler, though he is concededly in effective control of it. Moreover, as was noted at T, 46.50 to 57.27 (6 May 2002) the First and Fourth Defendants have at no stage provided accurate information as to the true beneficial ownership of the shareholder in Adler Corporation nor as to whether assets, and if so which ones, are held by Adler Corporation not in its own right but as trustee for an entity called Glowine Investment Trust (as alluded to in argument but never properly identified). 134 I have already concluded that I do not accept that the nine separate episodes or transactions are to be treated simply as one single transaction. Each of these involved serious contraventions of the Corporations Law and occurred as separate and distinct events though not unrelated. Material prejudice resulted from each of those events to the interests of HIH and HIHC, with the initial material prejudice from making available by payment $10 million to AEUT being exacerbated by each of the subsequent eight transactions. Thus in terms of s1317G of the Corporations Act, a declaration of contravention has been made, the contravention materially prejudices the interests of the corporation in each case, and "is serious". Thus, the discretion arises to order a pecuniary penalty order for each of the nine contraventions of up to $200,000, and that both against Mr Adler and Adler Corporation, in respect of each of those nine transactions. 135 Again pressed upon me is the character evidence affidavits in which each deponent attests to Mr Adler's honourable behaviour in his involvement in business and in social and charitable concerns for many years (as to which see earlier). 136 It is also pressed that the Court should have regard to the punitive and deterrence effect that the conduct of these proceedings has already had on Mr Adler and in particular, (a) paragraphs 6 and 7 of Mr Adler's affidavit of 17 April 2002 described the effect of the wide publicity and para 7 also described the effect that the wide publicity surrounding this proceeding has had on Mr Adler's business life, and his income earning capacity; (b) paragraphs 14 and 15 of that affidavit are said to demonstrate the particular effect that that publicity has had on his ability to engage in equities trading activities; and (c) paragraphs 16 to 21 of that affidavit describe the difficulties he has encountered with his investments in private joint ventures, describing a number of instances in which Mr Adler has been forced to sell such interests, often, to Mr Adler's belief, at deflated values, such that these "fire sales" of assets have reduced the total book value of Adler Corporation assets with the result that Adler Corporation is at risk of breaching covenants it has given to the ANZ Bank. 137 It is said that Adler and Adler Corporation "have suffered significant losses, possibly amounting to millions of dollars, as a result of the conduct of the proceedings and the publicity surrounding them. It is submitted that this will have a substantial deterrent effect on Adler." [see First and Fourth Defendants' written submissions, para 31] 138 Finally, it is said that: "1. Order pursuant to section 1317H of the Corporations Act that each of the defendants pay compensation to HIH Casualty & General Insurance Company Limited in the sum of $[XXX] (the compensation sum), on condition that, subject to order 2 hereof, this order must be enforced: (a) as to not more than [X]% of the compensation sum against the first and fourth defendants; (b) as to not more than [Y]% of the compensation sum against the second defendant; and (c) as to not more than [Z]% of the compensation sum against the third defendant; 2. Order 1 may be enforced against a defendant as to that part of the compensation sum in excess of the percentage referred to in order 1 respect of that defendant only if, and to the extent that, order 1 cannot be enforced against another defendant in the percentage referred to therein in respect of that defendant by reason of: (a) the bankruptcy or winding up of that defendant; or (b) the Court being satisfied that that defendant has insufficient assets to pay that percentage of the compensation sum." 139 While contrition is in this context only a mitigating factor and could not increase the penalty, it is difficult to see how, in the absence of any statement of contrition, the significant losses said to have been suffered by Adler and Adler Corporation "will have a substantial deterrent effect on Adler"; see para 31 of the written submissions. 140 Taking all these matters into account, but particularly the seriousness of the contraventions and the dishonesty apparent in them, I have concluded that pecuniary penalty orders should be substantial. They should reflect that there were in reality four sets of transactions as I have earlier identified. I have sought to apply the totality principle in a way that would act as a personal and general deterrent but is not oppressive, bringing to bear what the High Court has referred to in sentencing as an "instinctive synthesis" of relevant factors; see Wong v R (2002) 185 ALR 233 at 252, para [75]. Thus so far as Mr Adler is concerned, I conclude the aggregate total of the pecuniary penalty orders should be $450,000 and likewise for Adler Corporation the aggregate of the pecuniary penalty orders should be $450,000. The subsequent arithmetic allocation of those penalty orders between the applicable contraventions (see Attachment A) unavoidably involves some artificiality but can be done here. I would prefer to characterise each aggregate of $450,000 as operating in practice as a single penalty against each of Mr Adler and Adler Corporation for all contraventions as Finkelstein J did in ACC v ABB Transmission and Distribution Limited (supra) at [38]. In applying the totality principle, where the penalty is pecuniary, it is clearly not open to me to avoid the problem, just as it was not open to Finkelstein J, by accumulation or concurrency orders. Were I to use the so-called division method, then each contravention would produce the relevant fraction of the total figure. 141 In articulating how that total figure is arrived at beyond the "instinctive synthesis" earlier referred to, I should simply say this. One might reasonably characterise the circumstances as involving four sets of transactions which unbundled, produces nine in all. Each gave rise to multiple contraventions. An appropriate outcome in totality is to impose pecuniary penalties aggregating as I have done. 142 These are substantial penalties including against Adler Corporation. The latter, as I have said, an associated entity, and I have taken that into account to the extent the limited and incomplete material proffered by the First and Fourth Defendants permits. They chose not to give a full picture, beyond the limited level earlier identified. Even were imposing a penalty as I have done on Adler Corporation to bring about a demonstrated further impact of, say, 50% on Mr Adler or indeed 100% if the family interests were equated to his, I would still consider that this outcome reflects the gravity of the contraventions, the material loss suffered by the companies concerned and the importance of both personal and general deterrence. There is no contrition of any kind which would warrant mitigation of the pecuniary penalty orders. Mr Williams 143 It is important that each of the remaining Defendants be individually considered in relation to whether any relief is applicable to them and, if so, what relief, or whether either should be exonerated. However, as individual consideration necessarily incorporates such of the principles as have been earlier stated in relation to Mr Adler and Adler Corporation as are properly applicable to the Second and Third Defendants, I shall not repeat them save where necessary. 144 Taking Mr Williams, the Judgment indicated that his conduct "went well beyond a mere error of judgment and amounted to a gross disregard of HIH's interests and of the need to protect those interests by proper safeguards in the circumstances that obtain" [451]. His purpose in relation to the purchase of HIH shares and in relation to the other investments was an improper one [296]. Furthermore, there was his failure at the end of 2000 to fully and frankly describe what has occurred in relation to the $10 million payment and AEUT, when the circumstances clearly called for such a description, which can be taken as admission of his consciousness of impropriety for what occurred in relation to those matters and therefore of that impropriety itself. That bears upon the improper purpose of Mr Williams; see [296]. 145 References to relevant findings in relation to Mr Williams are set out below in summary form, cross-referenced to the relevant paragraphs of the Judgment: [248] Williams gave false and misleading information to the HIH Board on 12 October 2000. [254] Williams intended that the Investment Department be sidestepped. [296] Williams' failure at the end of 2000 to fully and frankly describe what had occurred was an admission of his consciousness of the impropriety in what occurred. [307] At the end of 2000, Williams gave Minter Ellison materially false information. [334] Williams knew that Minter Ellison's letter of advice to the HIH Board contained a number of misstatements and omissions but made no attempt to correct them. [359], [365] Williams knew that the assistance given by HIHC to PEE to purchase shares in HIH materially prejudiced the interests of HIHC. [433] Williams had no particular concern that Adler was wrongly stating publicly that he, or interests associated with him, was purchasing HIH shares and that the market was thereby being misled. [451] Williams' conduct went well beyond a mere error of judgment and amounted to a gross disregard of HIH's interests. 146 The comments earlier made in relation to Mr Adler concerning the absence of contrition need to be read in the context of the affidavit filed by Mr Williams after the conclusion of the proceedings relating to the determination of liability, proceedings which were defended by Mr Williams though in a way which minimised his counsel's use of the Court's time. At para 2 of Mr William's affidavit of 24 April 2002 he says, "I have read the judgment of Mr Justice Santow delivered on 14 March 2002 in this proceeding. I deeply regret the consequences of the PEE transaction on HIH and HIHC." 147 While that expression of regret falls short of a frank acknowledgement of Mr Williams' own faults it is, though to a very limited degree, to be treated as some expression of contrition. I say limited because nowhere in the quoted words does he regret the consequences of his own role in bringing about the PEE transaction so that such mitigation as might result would be very modest. His counsel indicated inhibition, based on the prospect of criminal proceedings. To that my earlier comments are applicable. 148 Insofar as submissions were made on behalf of Mr Williams that he was himself deceived, that conclusion is not one I am able to reach and does not sit well with the findings which I have earlier summarised or the absence of any evidence from Mr Williams himself as to what he knew or did not know. 149 I put to one side the reference made by Mr Crutchfield on behalf of Mr Williams of a settlement offer. The fact that a party might make a settlement offer in no way indicates an acceptance of responsibility, particularly when the terms of that offer are not disclosed. I do not have any relevant details of the offer nor the basis upon which it did not proceed though one might infer that ASIC found it unacceptable. 150 What can be said in Mr Williams' favour in comparison to Mr Adler and Adler Corporation is that while committing a serious breach of s180 and s182 of the Corporations Law, the latter involved dishonesty only to the extent noted below. That is, in improperly using his position as a director of HIH and HIHC to gain an advantage from Mr Adler and likewise to cause detriment to HIH and HIHC in authorising the relevant payment without proper safeguards and without having the relevant mandate [461]. These findings against him thus differ in several respects from those against Mr Adler and Adler corporation. First there is no breach of s181 or s183. Second, Mr Williams contraventions stop after the second set of transactions and do not extend to the later ones. Third, he did not sell his shares in HIH and thus did not, to that extent, profit by any market the purchase of HIH shares, though he stood to benefit by any market stabilisation. 151 Taking all these matters into account, there yet remain those matters of impropriety and gross neglect as well as those earlier summarised, clearly pointing to lack of candour at the very least and some elements of concealment. In those circumstances, I do not consider that it would be an appropriate exercise of discretion to conclude that I should exercise such discretion as I may have, if impropriety can be reconciled with acting honestly, to grant relief from liability to Mr Williams pursuant to s1317S of the Corporations Act; nor that Mr Williams "ought fairly to be excused" for "the negligence default or breach" pursuant to s1318 of the Corporations Act. I leave to one side as not properly before me any evidence as to whether Mr Williams did or did not benefit by reason of the HIH Board's decision to withhold his termination payment in the amount of $3.4 million. 152 While Mr Williams may not have had actual knowledge that Mr Adler would regard PEE as a cipher which could or would be used for his personal benefit, he certainly knew that Mr Adler intended to cause PEE to acquire dstore and Planet Soccer, and he did not ensure that there would be any independent due diligence; [584] of Judgment. That there were third party investors in PEE does not detract from the fact that Mr Williams well knew that Mr Adler himself, or interests associated with him, were principal investors in PEE which was under Mr Adler's control. 153 At para 10 of the written submissions on behalf of Mr Williams dated 24 April 2002 the following is submitted: 10. It is submitted that Mr Williams' conduct was honest within the meaning of the sections. To show honesty in this regard, it is only necessary to show that the director was "without moral turpitude": Commonwealth Bank of Australia v Friedrich (1991) 5 ACSR 115 at 197. In Kenna & Brown Pty Ltd v Kenna (1991) 32 ACSR 430 at 456 Bergin J stated that although reasonableness is relevant, the removal of it as a requirement under the section "serves to focus the attention of the court primarily on the honestly of the director" at 456. In Commonwealth Bank of Australia v Friedrich (supra) the Court refused to grant relief to one of the directors because even though his conduct might have been honest, it was conduct of the "utmost folly; and it involved clear and flagrant breaches of both the letter and intent of the Code" at p198. It is submitted that Mr Williams conduct, notwithstanding the finding that it amounted to a serious departure from the standards expected of a person in Mr Williams' position, did not fall to that level." 154 I should say in response to that submission that to the contrary, the conduct of Mr Williams was indeed conduct of "the utmost folly"; and it involved "clear and flagrant breaches of both the letter and the intent of the Code", to repeat the language in Commonwealth Bank of Australia v Friedrich (1990-1) 5 ACSR 115 at 198. 155 I have already concluded that an order for contribution is a matter for future proceedings. 156 As to appropriate relief, I deal with this below in relation to: (a) disqualification; (b) compensation; and (c) pecuniary penalty. Disqualification 157 As to disqualification, I have already indicated the respects in which Mr Williams' conduct, though involving serious breaches, falls short of the level of seriousness applicable to Mr Adler. In all the circumstances, I consider that Mr Williams should be subject of a disqualification order for 10 years. Compensation 158 As regards compensation, I have earlier concluded that he should be equally liable to make that payment as Mr Adler and Adler Corporation. Matters of contribution do not presently arise for the reasons earlier stated. Pecuniary Penalty 159 As to pecuniary penalty, in applying a similar process of reasoning to that applicable to Mr Adler and Adler Corporation, but making the differentiation in terms of the differences between them, I consider that a pecuniary penalty totalling $250,000 in total should be applicable and thus applied to the relevant contraventions according to the same approach as I have earlier identified in relation to Mr Adler and Adler Corporation. Conclusion 160 The disqualification period of 10 years is imposed as also the liability for compensation and pecuniary penalty of $250,000. Mr Fodera 161 At the conclusion of the judgment of 14 March 2002 the following is stated: "As to Mr Fodera, I consider that his failings were of a significantly lesser order, though still amounting to contraventions in the respects earlier identified. Basically, his failure was as a responsible director in facilitating the original $10 million payment knowing it was to be used (in part) to buy HIH shares and in neglecting to ensure that the proper processes were followed for approval of the relevant transactions after Messrs Adler and Williams had failed to bring that about." [776] 162 This difference is acknowledged by ASIC in its supplementary submissions on relief. At para 10 the following is said: "The conduct of Fodera was not as serious as that of Adler and Williams. However, the Judgment indicates that he was knowingly involved in serious contraventions of the provisions concerning financial benefits to related parties [217] and financial assistance by a company to acquire shares in itself or its holding company [369]. Likewise, the findings indicate that in relation to the $10 million payment he failed to exercise the degree of care and diligence required by s.180 of the Corporations Act [462-512] in circumstances where "he did not want any involvement in the transaction because he sensed its impropriety; he was trying to wash his hands of it" [215]. 163 ASIC then submit these matters warrant a disqualification order for a significant period being made against Mr Fodera. Reference is made to the capacity of Mr Fodera to seek leave at some future date pursuant to s206G of the Corporations Act again to manage corporations, on the basis that he might at some stage in the future be able to demonstrate that he had become fit to manage a corporation. 164 ASIC in its submissions does not distinguish between Mr Fodera and Messrs Adler and Williams when it comes to the payment of compensation pursuant to s1317H(1), though acknowledging that the level of Mr Fodera's responsibility, though still causative of the loss that ensued, at least in the "but for" sense, was of a "significantly lesser order" than that of Messrs Adler and Williams. There is however the difficulty earlier identified, in attempting any such differentiation in the compensation orders, outside of separate proceedings for contribution. That said, in a proper case, it is open to order no compensation against Mr Fodera, within the scope of the discretion under s1317H(1). Finally, as regards the pecuniary penalties, ASIC contend that: "[I]n relation to Fodera, it is appropriate to impose single penalties in respect of two factual circumstances. Regard should be had to the fact that there were multiple contraventions by him in relation to the relevant factual circumstances, namely the $10 million payment and the purchase of shares in HIH. His conduct should be regarded as significantly less serious than that of Adler and Williams." 165 To this, Mr Fodera's submissions first respond by contending that Mr Fodera should be relieved from any penalty pursuant to either s1317S or s1318 of the Corporations Act. It is pointed out that there is no relevant distinction between those sections as applicable to the circumstances of Mr Fodera which are for a civil penalty. In particular, it is said that provided it is shown that the person concerned has acted honestly, this gives rise to a discretion in the Court under either provision to relieve the person concerned either wholly or partly from a liability to which the person would otherwise be subject where the person ought in the circumstances fairly to be excused. Section 1317S is of course applicable only to proceedings for a contravention of a civil penalty provision whereas s1318 is wider in scope. 166 It is submitted that under s1317S(2)(b)(i) the requirement is no higher than that it must "appear to the court" that the person has acted honestly. Acting honestly has been interpreted as meaning "without moral turpitude"; Commonwealth Bank Limited v Friedrich (supra) at 196. It would, however, be putting matters rather too high to say that there is no onus on a defendant to positively show honesty, in order to persuade the court to be positively satisfied that the person has acted honestly and to exercise its discretion favourably, if otherwise satisfied to do so. 167 As to honesty in the present context, there is as the Third Defendant points out, an express finding (Judgment [774] at p294 para (a)) where it is expressly stated that "no finding of lack of good faith or improper purpose or dishonesty is made in the case of Mr Fodera". The Third Defendant presses that there is no evidence to the contrary of the proposition that Mr Fodera acted honestly, notwithstanding the findings of breach of duty, though to this must be balanced the finding that "he did not want any involvement in the transaction because he sensed its impropriety; he was trying to wash his hands of it" [215]. 168 Sensing the impropriety of another falls short, by itself, of a finding of dishonesty. But that is not the same as the court reaching a positive satisfaction that the person concerned "has acted honestly", s1317S(2)(b)(i), or that the person "has acted honestly" within the meaning of s1318. If the court is unable to reach a conclusion as to the appearance of honesty, but is not prepared to make the grave finding of dishonesty, more especially in circumstances where no evidence has been given directly by Mr Fodera, the better view is that the jurisdiction to give dispensatory relief simply does not arise; indeed if it did arise, it would hardly be exercised favourably in the absence of demonstration of acting honestly, though that may not necessarily be enough. 169 Moreover, even were I in a position to make a finding that Mr Fodera had acted honestly, it would still be necessary to consider what weight should be given in the exercise of the resulting discretion, of the negative factor of Mr Fodera's consciousness of impropriety on the part of another. That is so, even if it be accepted that such consciousness of impropriety does not of itself amount to a failure to act honestly. 170 I should make clear that I make no finding that Mr Fodera sensed or should have sensed that the transaction involved fraud. But that does not mean that Mr Fodera may not have sensed that the transaction involved dishonesty at least as entailed in the deliberate bypassing of the Investment Committee and Board, though, as described in the Judgment, "semi-covert"; see [387]. 171 In referring earlier, as I have done, to Mr Fodera sensing the impropriety of the transaction, I should emphasise that the Judgment does not go so far as to attribute knowledge to Mr Fodera of the improper purpose of Mr Adler in maintaining or stabilising the HIH share price for his own advantage; Judgment [483]. 172 What the Judgment does do is conclude he facilitated the occurrence of the transaction whereby Mr Balhausen was bypassed as a potential impediment. That transaction, to his knowledge, was to involve the payment of money by way of a then apparently undocumented loan to a fellow director, via his company, giving him a 10% return with evident potential for a conflict of interest, with Mr Fodera "attempting to keep himself at a safe distance". Moreover, he knew that the $10 million was in part being used to purchase HIH shares without the matter going to either the Investment Committee or the Board. He was thus involved in a contravention of both s208 of the Corporations Act and s260 of the Corporations Act; see paras [215] to [217] and [367] to [369]. 173 As to the bypassing of the Investment Committee and Board, the Judgment makes no finding (beyond that in [511]) as to whether Mr Fodera originally set about bypassing the Investment Committee and Board or simply assumed Mr Williams would deal with those matters, though he took no steps later, probably overlooking the matter, to ensure the matter did go to the Investment Committee for ratification when he must have known that it had not been ratified. These are, taken as a whole with the other matters earlier noted, circumstances which preclude any dispensation under s1317S and s1318, even assuming that the jurisdiction to give such dispensation was satisfied by way of positive demonstration of the appearance of honesty, as distinct from an absence of proof of dishonesty. Disqualification 174 The question then becomes one of determining what if any relief should be provided against Mr Fodera, starting with his disqualification from the management of corporations. Having considered the circumstances carefully, and taking into account the protective purpose of the disqualification provisions, I do not consider it likely that Mr Fodera would fail in the future to appreciate the importance of ensuring that corporate approval processes are not bypassed, more especially in the case involving a director or other insider or transactions involving purchase of the parent's shares. In those circumstances, I do not consider disqualification as a director is warranted. Compensation 175 As to compensation pursuant to s1317H, as earlier stated, I consider that no compensation order against Mr Fodera is appropriate in the circumstances. Those circumstances reflect the very different character of Mr Fodera's conduct compared to Messrs Adler and Williams, either in relation to the initial payment (judgment [398]) and the fact that Mr Fodera had no actual knowledge or any reason to suspect that the money would be used for the investments procured by Mr Adler ([513] of Judgment). The nature of Mr Fodera's failure was indeed essentially that of omission ([511] of Judgment). 176 In reaching the conclusion I do, I do not accept that Mr Fodera's involvement was such as to fall outside either a common law test for causation by reference to commonsense considerations or, as I consider applicable, the equitable test for causation. Had Mr Fodera spoken out, in particular by insisting that, as was central to his responsibilities as Finance Director, that the proper processes should be followed including submission to the Investment Committee in advance, though recognising that he was pressed at the time with an overseas trip, there is good prospect that the proposal would not have gone ahead. Moreover, some of the loss from the failure to deal with the matter on his return from overseas in relation to the HIH shares, might have been avoided had he then acted promptly. Thus it should be noted that after Mr Fodera's return from overseas on 17 July 2000 ([473] of judgment) the HIH shares bought by AEUT could have been sold without loss and, indeed, at a significant profit (TB, 1/104C referred to at para 34 of Mr Fodera's written submissions). Moreover, the asset purchases and lending by PEE, with the exception of some of the loans in relation to PCP Ensor No 2, did not occur until after Mr Fodera's return from overseas. 177 Essentially my reason for considering that no compensation should be sought from Mr Fodera is that I am satisfied that though his involvement could not fairly be described as merely peripheral (given his particular responsibility as Finance Director to preserve and protect the funds of the company and, given that he played an important facilitating role), nonetheless it was only a facilitating role, in circumstances where, after his return from overseas, I think it more likely than not that he simply overlooked the need to refer the matter to the Investment Committee and Board rather than deliberately setting about having them bypassed [511]. That is in marked contrast to Mr Adler and Mr Williams. Pecuniary Penalty 178 Finally, I turn to pecuniary penalty under s1317G. 179 Here, some pecuniary penalty is I consider justified though not a large one. First, there is the fact of Mr Fodera's assistance and acquiescence which, as I have explained, should not be treated as peripheral or of relatively minor importance, though its importance should be considered significantly less than that of Mr Adler and Mr Williams. 180 The second circumstances is the seriousness of Mr Fodera's failure, more especially as Finance Director, to bring the proposed transaction to the attention of the Board and the Investment Committee, not only before his departure but, as is more significant, after his return, though it be the case that this was due to Mr Fodera simply overlooking it. 181 Third, is the absence of any statement of contrition in mitigation. I have already dealt with that aspect earlier in relation to Mr Adler and Mr Williams. I have stated that the fact that civil penalties do not preclude later criminal proceedings (s1317P of the Corporations Act) is not of itself reason for discounting the relevance of contrition altogether. Such mitigation as might have been warranted had contrition been proffered, is not available here. 182 Equally I do not accept that the financial loss to the HIH group, though substantially the responsibility of Mr Adler and Mr Williams can be treated as in no way the responsibility of Mr Fodera, though it be a significantly lesser one. 183 Weighed against a pecuniary penalty or justifying a low one, is the evidence particularly that of Mr Gardener, his fellow director, that Mr Fodera "is highly intelligent, extremely trustworthy and reliable and usually quite outspoken about his views" (T, 345.21) and that "it would be extremely remote" for Mr Fodera to re-offend (T, 345.49). This with the evidence of Mr Manchester and Mr Dudley concerning Mr Fodera's exemplary character does deserve some weight. 184 Taking the considerations from the judgment of Austin J in Parkes set out earlier, Mr Fodera's conduct, though in a "but for" sense responsible for the loss and damage, was not centrally responsible, though not merely peripheral. Second, Mr Fodera's contraventions have not been recurrent. Third, Mr Fodera has not asserted implausible explanations for what he did, though it should be pointed out that he asserted no explanation whatsoever by way of direct evidence. Finally, Mr Fodera (I agree) does not have a high propensity to engage in similar conduct, indeed is unlikely to. 185 The greater culpability of others should not however be taken to include Messrs Howard and Cassidy. 186 In all the circumstances, I consider that a relatively small penalty should be imposed, namely $5,000, within the category for lower range penalties. I am satisfied that the conditions of s1317G to apply are made out, namely that the contraventions did materially prejudice the interests of HIH and HIHC and were serious, though not of the level of seriousness of Messrs Adler and Williams. I also take into account that while personal deterrence to Mr Fodera may be disregarded, general deterrence is a relevant consideration; Re Tasmanian Spastics Association. I should add that comparing the position to the other Defendants, clearly Mr Fodera had nothing to gain by the transaction. Conclusion 187 In the case of Mr Fodera, no disqualification or compensation order should be made but a pecuniary penalty should be imposed of $5,000 in relation to all of the contraventions of Mr Fodera, such to be similarly calculated by reference to his contraventions as in the case of Mr Adler and Mr Williams. OVERALL CONCLUSION AND ORDERS 188 I propose to make orders in terms earlier set out in relation to Messrs Adler, Williams and Fodera and Adler Corporation. These include compensation orders against Messrs Adler and Williams and Adler Corporation, but not Mr Fodera. I will hear the parties as previously foreshadowed, in relation to the foreshadowed application for a stay of these orders by the First and Fourth Defendants. 189 So far as costs of this hearing and the previous hearing, as present advised, I consider costs should follow the event and be made equally against each of the four Defendants, though I will hear submission on costs if desired. ASIC v ADLER & ORS ATTACHMENT A NUMBER OF CONTRAVENTIONS (As per Declarations made on 27/3/02) Mr Adler Number of Declaration Contraventions 1. s209(2), HIH and HIHC 2 2. s260D(2), HIHC 1 3. ss180, 181, 182, 183, HIH, 9 events 36 4. ss180, 181, 182, 183, HIHC, 9 events 36 5. ss180, 181, 182, PEE, 8 events 24 6. s182(2), HIH 1 7. s182(2), HIHC 1 ___ 101 Mr Williams 8. s209(2), HIH and HIHC 2 9. s260D(2), HIHC 1 10. ss180, 182, HIH 2 11. ss180, 182, HIHC 2 ___ 7 Mr Fodera 12. s209(2), HIH and HIHC 2 13. s260D(2), HIHC 1 14. s180, HIH 15. s180, HIHC 1 ___ 5 Adler Corporation 16. ss181, 182, 183, HIH, 9 events 27 17. ss181, 182, 183, HIHC, 9 events 27 18. ss181, 182, PEE, 8 events 24 19. s209, s.260D, HIH, HIHC re s.208 and HIHC re s.260A 6 ___ 84 ********** Last Modified: 05/31/2002 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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