Reported Decision : 53 ACSR 623 (2005) 23 ACLC 556 New South Wales Supreme Court ONE.TEL LIMITED (IN LIQUIDATION) v JOHN DAVID RICH & ORS [2005] NSWSC 226 CITATION : This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S) : 4 February 2005 JUDGMENT DATE : 23 March 2005 JURISDICTION : Commercial List JUDGMENT OF : Bergin J DECISION : (1)The plaintiff does not have standing to seek declarations of contravention of civil penalty provisions of the Corporations Act 2001: (2) Proceedings for an order for compensation under s 1317H(1) (and s 1317HA(1)) of the Corporations Act, and their predecessors, are not proceedings for the imposition of a penalty: (3) The defendants are not required to file evidence in the proceedings. CATCHWORDS : [CORPORATIONS] - Applications for strike-out of those parts of the pleadings in which the plaintiff sought declarations of contravention under s 1317E of the Corporations Act - Lack of standing in plaintiff to make application under s 1317J - - [STATUTORY INTERPRETATION] - [CIVIL PENALTIES] - Whether the proceedings seeking a compensation order under s 1317H (and s 1317HA), and their predecessors, are proceedings for imposition of a penalty - Whether the defendants should be required to file evidence prior to trial - Proposed amendments to the Act to ensure fairness of trials - - [NOTES] - Status of "Note" in the statute - Whether in the category of marginal note, endnote or footnote - New category of Statutory Note. Acts Interpretation Act 1901 (Cth) Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (Cth) Corporate Law Reform Act 1992 (Cth) Corporate Law Reform Act 1994 (Cth) Corporations Act 2001 (Cth) Corporations Law (Securities and Futures) Amendment Act 1995 (Cth) LEGISLATION CITED : Corporations Legislation Amendment Act 1990 (Cth) Corporations Legislation Amendment Act 1994 (Cth) Corporations (Unlisted Property Trusts) Amendment Act 1991 (Cth) Financial Services Reform Act 2001 (Cth) First Corporate Law Simplification Act 1995 (Cth) Patents, Designs and Trade Marks Act 1883 (UK) Adams v Batley; Cole v Francis (1887) 18 QBD 625 Chandler v Director of Public Prosecutions [1964] AC 763 R v Schildkamp [1971] AC 1 Re Australian Federation of Construction Contractors; Ex Parte Billing (1986) 68 ALR 416 CASES CITED : Refrigerated Express Lines (Australasia) Pty Ltd v Australian Meat & Livestock Corporation & Ors [1979] 42 F.L.R 204 Rich v ASIC (2003) 48 ACSR 6 Rich v ASIC (2004) 78 ALJR 1354 Saunders & Anor v Wiel [1892] 2 Q.B. 18 The Ombudsman v Moroney [1983] 1 NSWLR 317 One.Tel Limited (in liquidation) (Plaintiff / Respondent) John David Rich (First Defendant / Applicant) PARTIES : Lifecell Pty Limited (Second Defendant / Applicant) Rodney Stephen Adler (Fifth Defendant / Applicant) FILE NUMBER(S) : SC 50207/02 M.J. Slattery QC, R.A. Dick, A. Zahra (Plaintiff / Respondent) COUNSEL : B.W. Walker SC, E. Collins (1st and 2nd Defendants / Applicants) J. Miller (5th Defendant / Applicant) Kemp Strang Lawyers (Plaintiff / Respondent) SOLICITORS : Joanne Kelly (First and Second Defendants / Applicant) Swaab Attorneys (Fifth Defendant / Applicant) LOWER COURT JURISDICTION : - 8 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST BERGIN J 23 MARCH 2005 50207/2002 ONE.TEL LIMITED (IN LIQUIDATION) V JOHN DAVID RICH & ORS JUDGMENT 1 The defendants, John David Rich (Rich) and Lifecell Pty Ltd (Lifecell), seek by Notice of Motion (the Rich/Lifecell Motion) an order that the Amended Summons filed by the plaintiff, One.Tel Limited (In Liquidation), be summarily dismissed or struck out, further and alternatively a declaration that the proceedings are a proceeding for the imposition of a penalty and further that that the order made for Rich and Lifecell to file and serve evidence be vacated. 2 The defendant, Rodney Stephen Adler (Adler), by Notice of Motion (the Adler Motion) seeks the same relief as sought in the Rich/Lifecell Motion and the vacation of the hearing date of 11 April 2004 for 10 days on the basis of an impending criminal trial. 3 The Motions were heard on 4 February 2005 when Mr BW Walker SC leading Ms E Collins of counsel appeared for Rich and Lifecell, Mr J Miller of counsel appeared for Adler and Mr MJ Slattery QC leading Mr RA Dick of counsel and Mr A Zahra of counsel appeared for the plaintiff. On 18 February 2005 the Court was advised by Adler's legal representatives that the order for vacation of the hearing was no longer pressed because Adler had pleaded guilty in the criminal proceedings and obviated the need for a criminal trial. In those circumstances I shall refer to Rich and Adler as "the Applicants" unless there is a need to refer to their positions or submissions individually. 4 In the Amended Summons filed on 3 November 2004 the plaintiff seeks against Rich and Adler (and other directors of the plaintiff) declarations of contravention of certain civil penalty provisions of the Corporations Law (the Law) and of the Corporations Act 2001 (the Act). However during the hearing of the Motions the plaintiff indicated that it will no longer press for any declarations of contravention of civil penalty provisions and will only seek, pursuant to s 1317J(2), an order for compensation under s 1317H of Part 9.4B of the Act and/or its predecessor under the Law, s 1317HD of Part 9.4B. There are other remedies sought in the Amended Summons, including equitable compensation, with which I need not deal because they are not relevant to the outcome of these Motions. 5 The Applicants claim that by reason of the requirement in s 1317E of the Act and/or s 1317EA of the Law, for the Court to make a declaration of contravention once it is satisfied that a civil penalty provision has been contravened, the Applicants are exposed to a civil penalty, irrespective of whether the plaintiff seeks a declaration of contravention. The plaintiff accepted that the Court is required to make a declaration pursuant to s 1317E of the Act and s 1317EA of the Law when it is satisfied that such contravention of a civil penalty provision has occurred, but submitted that s 1317E and s 1317EA only apply to proceedings in which ASIC, or formerly the Commission, seeks a declaration of contravention and a pecuniary penalty pursuant to s 1317J (1) of the Act or s 1317EA(3) of the Law. The alleged conduct 6 The plaintiff alleges that contraventions of civil penalty provisions of the Law and the Act occurred at various times between August 1998 and March 2000 inclusive. For example, it is alleged that the Applicants contravened various provisions in: (a) negotiating, arranging and executing the August 1998 amendments to an agreement described as the "Lifecell Consultancy Agreement [Amended Summons (AS) 52]; (b) negotiating, arranging, and executing further amendments made to the Lifecell Consultancy Agreement in April 1999 [AS 80]; arranging for and facilitating the passing of a resolution of the Remuneration Committee of the plaintiff known as the June 1999 Remuneration Resolution and in the making and receipt of the June 1999 payments [AS 88]; arranging for and facilitating the passing of a further resolution of the Remuneration Committee of the plaintiff described as the August 1999 Remuneration Resolution and in the making or receipt of the August 1999 payments [AS 96]; causing or permitting an omission from the 1999 Annual Report described as the 1999 Annual Report Non-Disclosure [AS 99 & 104]; providing information to a meeting of the Board of Directors in October 1999 [AS 113]; arranging for and facilitating the passing of a resolution of the Remuneration Committee in February 2000 and in the making or receipt of February 2000 payments [AS 104 & 122]; and providing information to the March 2000 board meeting [AS 131]. The Legislative history - Part 9.4B The 1992 provisions 7 A form of Part 9.4B was first inserted into the Law in 1992 by the Corporate Law Reform Act 1992 (the 1992 Act). That Part was entitled "Civil and Criminal Consequences of Contravening Civil Penalty Provisions". Division 2 of that Part was entitled "Civil Penalty Orders". Section 1317EA provided: 1317EA (1) This section applies if the Court is satisfied that a person has contravened a civil penalty provision, whether or not the contravention also constitutes an offence because of section 1317FA. Note: Section 1317HF provides that a certificate by a court that the court has declared a person to have contravened a civil penalty provision is conclusive evidence of the contravention. (2) The Court is to declare that the person has, by a specified act or omission, contravened that provision in relation to a specified corporation, but need not so declare if such a declaration is already in force under Division 4. (3) The Court may also make against the person either or both of the following orders in relation to the contravention: (a) an order prohibiting the person, for such period as is specified in the order, from managing a corporation; (b) an order that the person pay to the Commonwealth a pecuniary penalty of an amount so specified that does not exceed $200,000. (4) The Court is not to make an order under paragraph (3)(a) if it is satisfied that, despite the contravention, the person is a fit and proper person to manage a corporation. (5) The Court is not to make an order under paragraph (3)(b) unless it is satisfied that the contravention is a serious one. (6) The Court is not to make an order under paragraph (3)(b) if it is satisfied that an Australian court has ordered the person to pay damages in the nature of punitive damages because of the act or omission constituting the contravention. 8 Under the 1992 Act an application for a civil penalty order could be made by the Commission, a Commission delegate, or some other person authorised in writing by the Minister to make the application (s 1317EB). Such an application had to be made within 6 years of the contravention (s 1317EC). 9 The Explanatory Memorandum to the Corporate Law Reform Bill 1992 (the EM to the 1992 Bill) included the following in relation to what became s 1317EA: 134. Subsection (2) provides that in the circumstances to which this section applies the Court is to declare that the person has, by a specified act or omission, contravened that provision in relation to a specified corporation. Proposed Division 4 of Part 9.4B allows a court to make a declaration that a person has contravened a civil penalty provision in certain circumstances connected with the prosecution of an offence constituted by a contravention of a civil penalty provision. Subsection (2) therefore provides that the Court need not make a civil penalty declaration where another court has already made a declaration under proposed Division 4 that a person has contravened a civil penalty provision. 10 Section 4 of the 1992 Act defined "civil penalty order" as "a declaration or order made under section 1317EA of the Corporations Law of this jurisdiction". Division 5 of the 1992 Act was entitled "Compensation for loss suffered by corporation". Section 1317HA provided: 1317HA.(1) Where, on an application for a civil penalty order against a person in relation to a contravention, the Court is satisfied that: (a) the person committed the contravention; and (b) the corporation in relation to which the contravention was committed has suffered loss or damage as a result of the act or omission constituting the contravention; the Court may (whether or not it makes an order under subsection 1317EA(3)) order the person to pay to the corporation compensation of such amount as the order specifies. (2) A corporation may intervene in an application for a civil penalty order against a person in relation to a contravention, unless the application was made under Division 4. (3) A corporation that so intervenes is entitled to be heard: (a) only if the Court is satisfied that the person committed the contravention in relation to that corporation; and (b) only on the question whether the Court should order the person to pay compensation to the corporation because of the contravention. 11 Division 5 also included s 1317HD headed "Recovery of profits, and compensation for loss, resulting from contravention". It provided: 1317HD.(1) Where a person contravenes a civil penalty provision in relation to a corporation, the corporation may, by proceedings in a court of competent jurisdiction, recover from the person, as a debt due to the corporation: (a) if that or another person has made a profit because of the act or omission constituting the contravention - an amount equal to the amount of that profit; and (b) if the corporation has suffered loss or damage as a result of that act or omission - an amount equal to the amount of that loss or damage; whether or not: (c) the first-mentioned person has been convicted of an offence in relation to the contravention; or (d) a civil penalty order has been made against the first-mentioned person in relation to the contravention. 12 The EM to the 1992 Bill said this of the then proposed s 1317HD: 184. This section is based on Corporations Law subsection 232 (8), which will be repealed by clause 11 of the Bill. It applies where a person contravenes a civil penalty provision in relation to a corporation. It allows the corporation to recover from the person, as a debt due to the corporation, an amount equal to the loss or damage caused to the corporation because of the contravention, and any profit made because of the contravention by any other person. 185. An application may be made under this section irrespective of whether the person has been convicted of an offence, or a civil penalty order has been made, in relation to the contravention, but must be made within six years of the contravention. 13 Section 1317HF provided that a certificate signed by a registrar of the Court stating that the Court had declared that a person had contravened a specified civil penalty provision was conclusive evidence that the declaration had been made. The EM to the 1992 Bill referred to s 1317HF in the following way: 188. This section will help the corporation to rely on earlier proceedings to make a later application for compensation under proposed section 1317HD, without having to 're-prove' all the matters that were decided in the earlier proceedings. It will have a similar operation where a court (other than the Court) has made a declaration under proposed Division 4 that a person has contravened a civil penalty provision, and will in this context facilitate the making of applications under proposed section 1317EA for a civil penalty order. The 1999 provisions 14 In 1999 Part 9.4B was repealed and in its place a new Part 9.4B was inserted (the 1999 provisions). The new Part 9.4B was described in the Explanatory Memorandum to the Corporate Law Economic Reform Program Bill 1999 (the EM to the 1999 Bill) as a "rewrite without substantial change". 15 Section 1317E was introduced in the following terms: 1317E Declarations of contravention (1) If a Court is satisfied that a person has contravened 1 of the following provisions, it must make a declaration of contravention: [the various sections are then set out] These provisions are the civil penalty provisions . Note: Once a declaration has been made ASIC can then seek a pecuniary penalty order (section 1317G) or a disqualification order (section 206C). (2) A declaration of contravention must specify the following: (a) the Court that made the declaration (b) the civil penalty provision that was contravened (c) the person who contravened the provision (d) the conduct that constituted the contravention (e) the corporation or registered scheme to which the conduct related. 16 Section 1317F provided that a declaration of contravention is conclusive evidence of the matters referred to in s 1317E(2). Section 1317G provided that if a declaration of contravention had been made under s 1317E and the contravention was, amongst other things, serious, the Court "may" make an order that the person pay a pecuniary penalty to the Commonwealth of up to $200,000. 17 Section 1317H was in the following terms: 1317H Compensation orders Compensation for damage suffered (1) A Court may order a person to compensate a corporation or registered scheme for damage suffered by the corporation or scheme if: (a) the person has contravened a civil penalty provision in relation to the corporation or scheme; and (b) the damage resulted from the contravention. The order must specify the amount of the compensation. Damage includes profits (2) In determining the damage suffered by the corporation or scheme for the purposes of making a compensation order, include profits made by any person resulting from the contravention or the offence. Damage includes diminution of value of scheme property (3) In determining the damage suffered by the scheme for the purposes of making a compensation order, include any diminution in the value of the property of the scheme. (4) If the responsible entity for a registered scheme is ordered to compensate the scheme, the responsible entity must transfer the amount of the compensation to scheme property. If anyone else is ordered to compensate the scheme, the responsible entity may recover the compensation on behalf of the scheme. Recovery of damage (5) A compensation order may be enforced as if it were a judgment of the Court. 18 Section 1317 J provided: 1317J Who may apply for a declaration or order Application by ASIC (1) ASIC may apply for a declaration of contravention, a pecuniary penalty order or a compensation order. Application by corporation (2) The corporation, or the responsible entity for the registered scheme, may apply for a compensation order. (3) The corporation, or the responsible entity for the registered scheme, may intervene in an application for a declaration of contravention or a pecuniary penalty order in relation to the corporation or scheme. The corporation or responsible entity is entitled to be heard on all matters other than whether the declaration or order should be made. No one else may apply (4) No person may apply for a declaration of contravention, a pecuniary penalty order or a compensation order unless permitted by this section. (5) Subsection (4) does not exclude the operation of the Director of Public Prosecutions Act 1983 or that Act as applying as a law of this jurisdiction. The Corporations Act 2001 19 The Act did not make substantive changes to s 1317E other than to add sections to the list of civil penalty provisions in sub-section (1) and to add to the Note the words "(in the case of a corporate/scheme civil penalty provision)". Section 1317G was amended to delineate between pecuniary penalty orders for a contravention of a "corporate/scheme civil penalty provision" (ss (1) (aa)) and a contravention of a "financial services civil penalty provision" (ss (1A). There were no substantive changes to s 1317J. 20 The previous section 1317H "Compensation Orders" was amended. Two sections, 1317H "Compensation orders – corporation/scheme civil penalty provisions" and s 1317HA "Compensation orders – financial services civil penalty provisions" were introduced. The substance of those sections was the same as that in s 1317H of the 1999 provisions. 2004 Amendments 21 The Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (the 2004 Act) was assented to on 30 June 2004. Section 3 of the 2004 Act commenced on 30 June 2004 and Schedule 4 commenced on 1 July 2004. Section 3 provided: 3 Schedule(s) Each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms. 22 Schedule 4, Part 4 entitled "Civil penalty provisions" included the following: 14 At the end of subsection 1317H(1) Add: Note: An order may be made under this subsection whether or not a declaration of contravention has been made under section 1317E. 15 At the end of subsection 1317HA(1) Add: Note: An order may be made under this subsection whether or not a declaration of contravention has been made under section 1317E. 16 At the end of subsection 1317J(2) Add: Note: An application for a compensation order may be made whether or not a declaration of contravention has been made under section 1317E. Rich v ASIC in the Court of Appeal 23 In Rich v ASIC 48 ACSR 6, (Rich v ASIC (CA)) there was no claim before the Court of Appeal that a compensation order made pursuant to s 1317H was a penalty. However, McColl JA said: 342. While the Act does not expressly require a declaration of contravention before a compensation order is made, it does require a finding that a person has contravened a corporation/scheme civil penalty provision in relation to the corporation seeking the order. Once a Court finds a civil penalty provision has been contravened, it must make a declaration of contravention: s 1317E(1). Thus, albeit indirectly, a declaration of contravention is a gateway to a s 1317H compensation order. 343. In my view, as will be apparent from the succeeding portions of this judgment, Part 9.4B proceedings are of a hybrid nature, displaying features found in both civil and criminal proceedings. I would not, therefore, classify s 1317H compensation order proceedings as "quintessentially a civil proceeding not involving the imposition of a penalty". While a compensation order appears to bear the classic traits of the outcome of civil proceedings, it is obtained in proceedings which depend upon a finding of a contravention of public law. It is not necessary, for the purposes of this judgment, to go further to consider the consequences of the position of s 1317H in the Part 9.4B matrix. I would note, however, that even if s 1317H proceedings did not involve the imposition of a penalty, that would not preclude a defendant in those proceedings from objecting to giving discovery or providing witness statements if the result would be to provide evidence against that person which may be used as a "link in the chain" to establish that person's liability to a penalty in other proceedings: Refrigerated Express Lines (A/Asia) Pty Limited v Australian Meat and Livestock Corporation (1979) 42 FLR 204 at 207 - 208. … 379. The statutory scheme of which s 206C forms part bears all the hallmarks of a scheme intended to impose disqualification as a punishment, or a consequence in the nature of punishment, albeit in a civil framework. These features are sufficient to attract penalty privilege. Although structured as a civil case both in terms of the procedures to be applied (s 1317L) and the onus of proof (s 1332), the proceedings are, in effect brought by the State and "accuse" the defendant of a contravention of a public law - just as, in the criminal context the defendant is accused of a breach of a statute. The civil penalty scheme pivots around the declaration of contravention which operates in the same sense as a finding of guilt and leads, in turn, to the imposition of one or other of the available civil penalty orders. It is not a suit which is purely of a civil nature. 24 Section 206C provides: Court power of disqualification - contravention of civil penalty provision 206C (1) [Power to disqualify] 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. 25 McColl JA's observations were made prior to the introduction of the "Notes" in s 1317H, s 1317HA and 1317J(2) but after the "Note" in s 1317E(1) had been introduced, that Note stating that: "Once a declaration has been made ASIC can then seek a pecuniary penalty order (section 1317G) or (in the case of a corporation/scheme civil penalty provision) a disqualification order (section 206C)". That Note was introduced in the 1999 amendments, [excluding the words "(in the case of a corporation/scheme civil penalty provision)" that were introduced into the Note in 2001]. Although McColl JA referred to the fact that a "finding" of a contravention of a civil penalty provision was a pre-requisite to the power to order compensation, her Honour also found that once such a finding is made the Court "must" make a declaration of contravention under s 1317E. McColl JA made no mention of the Note to s 1317E. The other members of the Court (Spigelman CJ and Ipp JA) did not analyse s 1317H or deal with the nature of a compensation order under s 1317H. Rich v ASIC in the High Court 26 In Rich v ASIC (2004) 78 ALJR 1354, the High Court made no mention of the existence or status of the Note at the end of s 1317E(1). In the joint judgment (Gleeson CJ, Gummow, Hayne, Callinan & Heydon JJ) when the provisions of s 1317E(1) are set out "so far as now relevant", at [14], the Note is not included. The joint judgment referred to s 1317E as giving the power to "seek" declarations. With the greatest respect, that appears to be a typographical error or slip because s 1317J(1) is the section giving the power, or entitlement, to ASIC to "seek" declarations of contravention. Section 1317E is a section requiring the Court to make a declaration of contravention if it is satisfied that there has been a contravention of the civil penalty provision listed in the subsection. 27 The joint judgment referred to the fact that ASIC sought compensation orders under s 1317H and set out the relevant provisions of that section. The appeal was argued in the High Court prior to the "Notes" being added to s 1317H(1), s 1317HA(1) and s 1317J(2). Understandably no mention was made of those Notes. Their Honours said: [16] The compensation orders which the Commission seeks are orders under s 1317H. Section 1317H(1) provides that: "A Court may order a person to compensate a corporation ... for damage suffered by the corporation ... if: (a) the person has contravened a corporation/scheme civil penalty provision in relation to the corporation ...; and (b) the damage resulted from the contravention. The order must specify the amount of the compensation." Sub-sections (2)-(5) of s 1317H provide (among other things) some amplification of what is meant by damage and provide for the way in which compensation orders may be enforced. For present purposes, nothing turns on those provisions. What is important to note is that the availability of both the relief for which s 1317E provides, and the relief for which s 1317H provides, depends upon demonstration of contravention of particular provisions of the Act which are identified as "corporation/scheme civil penalty provision[s]", a subset of the provisions described as "civil penalty provisions". 28 Importantly the joint judgment identified the respective "relief" provided by the two sections. The so-called "relief" provided for in s 1317E could only be the declaration of contravention, for which it is necessary to demonstrate contravention of a civil penalty provision. Only ASIC has standing to make such an application. Whereas the "relief" provided for in s 1317H is an order for compensation, for which it is also necessary to demonstrate contravention of a civil penalty provision. Their Honours also said: 22. It may be noted that the 2001 Act provides for what it describes as the civil consequences of contravening provisions that it classes as "civil penalty provisions". But neither the use of the expression "civil penalty provisions", nor the reference to civil consequences, conclusively determines whether these proceedings (seeking some sorts of relief under Pt 9.4B and, as well, disqualification orders) expose the appellants to penalties. The expression "civil penalty provisions" no doubt points towards that conclusion, but does so only because of its adoption as a convenient description for a disparate group of provisions. In the end, it is necessary to focus upon the content of the privilege against exposure to penalties and forfeitures rather than upon the use of the tag "civil penalty provisions". 29 The joint judgment referred to s 206C, extracted earlier, and included the following at [17]: "The relationship between a claim for relief under s 206C and a claim for a declaration of contravention under s 1317E is evident". Their Honours then said: [18] By contrast, the power of disqualification conferred by s 206E is not conditioned upon the making of a declaration of contravention. 30 Section 206E(1) provides that on the application by ASIC, the court "may disqualify a person from managing corporations for the period that the Court considers appropriate if: "(a) the person: … (ii) has at least twice contravened this Act while they were an officer of a body corporate". Notwithstanding the contrast drawn in relation to the lack of condition of a declaration of contravention for disqualification under s 206E, with only proof of contravention being necessary, their Honours held that disqualification was a penalty. 31 The joint judgment did not contrast the power to make an order for compensation under s 1317H with any other relief requiring the making of a declaration of contravention. However, their Honours said: [28] In several cases it has been held that exposure to loss of office is exposure to a penalty or forfeiture. And in Police Service Board v Morris [(1985) 156 CLR 397]) it was at least assumed that exposure to dismissal from a police force was a form of penalty. By contrast, however, orders for compensation have been held not to be penalties. 32 The authority referred to by their Honours, by footnote 35, in which compensation orders were held not to be penalties was Adams v Batley; Cole v Francis (1887) 18 QBD 625, with which I will deal below. 33 The joint judgment makes no other reference to the nature of compensation orders and such reference without demur might be assumed to be an approval of that position, that is, that orders for compensation are not penalties. However there was no contention before the High Court that the court before whom the compensation order is sought, must be satisfied that the person has contravened a civil penalty provision (s 1317H(1)(a)) and if so satisfied, has an obligation, under s 1317E, to make a declaration of contravention, thus exposing the person against whom the declaration is made to a penalty. Kirby J's observations must also be seen in that circumstance. His Honour said: [99] … In argument of the appeal, I raised a question whether the very large orders for compensation sought by the Commission might be characterised as penal because of their size. However, this was not contended and the better view is that they are, in character, as they are described: "compensatory". 34 The power to grant compensation pursuant to s1317H (excluding the Note for the moment) is not "conditioned upon" the making of a declaration of contravention. In this regard it has some similarity to s 206E. This is in contrast to the provisions of s 206C, the power to disqualify, and s 1317G, the power to order a person to pay a pecuniary penalty. Under s 206E, as is the case under s 1317H, proof is required of contravention of a civil penalty provision (at least twice in the case of s 206E). The joint judgment contrasted s 206E with s 206C, stating that disqualification under the former section is "not conditioned upon the making of a declaration of contravention" [18], but did not suggest that once the court finds, or is "satisfied", that contravention has occurred, s 1317E requires the court to make the declaration. Once again it must be said that this point was not argued. 35 The joint judgment made no reference to the observations made by McColl JA in relation to s 1317H, in particular her Honour's reference to the requirement to make the declaration under s 1317E once the contravention is proved pursuant to the requirements of s 1317H and her Honour's finding that a declaration of contravention is "a gateway to a s 1317H compensation order". Kirby J made no reference to McColl JA's findings in this regard when he concluded that the better view was that the proceedings for a compensation order were not for a penalty but were "compensatory" [99]. There is also the observation in the joint judgment that orders for compensation "have been held not to be penalties" [28]. It is accepted that if McColl JA is correct that the Court must make a declaration of contravention under s 1317E, once the contravention of the civil penalty is proved for the purposes of s 1317H(1)(a), the Applicants are exposed to a penalty. Adams v Batley; Cole v Francis 36 In contrasting the nature of compensation orders to orders for loss of office and observing that "orders for compensation have been held not to be penalties" the joint judgement referred only to Adams v Batley; Cole v Francis (1887) 18 QBD 625. The plaintiff in each of those cases made claims under section 2 of 3 & 4 Wm, c.15, an Act "to amend the Laws relating to Dramatic Literary Property", which provided: … if any Person shall … contrary to the Intent of this Act, or Right of the Author or his Assignee, represent, or cause to be represented, without the Consent in Writing of the Author or other Proprietor … any such Production ..or any Part thereof, every such Offender shall be liable for each and every such Representation to the Payment of an Amount not less than Forty Shillings, or to the full Amount of the Benefit or Advantage arising from such Representation, or the Injury or Loss sustained by the Plaintiff therefrom, whichever shall be the greater Damages, to the Author or other Proprietor of such Production so represented contrary to the true Intent and Meaning of this Act, to be recovered, together with Double Costs of Suit .. in any Court having Jurisdiction … in which the Offence shall be committed. … 37 The appeals in those cases arose from orders in chambers on applications for leave to administer interrogatories. In Adams v Batley Huddleston B refused leave on the ground that the action was for a penalty. In Cole v Francis Pollock B granted leave expressing the view that the action was not a "penal action". Day & Wills JJ rescinded the order in Adams v Batley and affirmed the order in Cole v Francis. Day J held that the use of the word "Offender" in the Act was "meant to designate the private right of property thereby created, and is used in the Act as a short and convenient expression of such person". Wills J also expressed the opinion that the sum of 40s was a "statutory assessment of the damages in the case of small injuries, where it is difficult or impossible to prove greater damages". In support of that opinion Wills J relied upon Jessel M.R.'s finding in Powell v Head 12 Ch. D. 686 that the plaintiff was entitled to recover one half of 40s, a finding that Wills J said "must have proceeded upon the ground that the sum was liquidated damages and not a penalty". 38 The defendant in Adams v Batley appealed and Lord Esher M.R., with whom Bowen & Fry LJJ. concurred, said at 629: I think it is clear that this payment is treated in the Act as a payment by way of damages and not by way of penalty. It is imposed not as a punishment upon the defendant, but as compensation to the plaintiff. 39 After referring to the terms of the section providing for the payment of the amount of "not less than forty shillings" Lord Esher continued at 630: If that payment is a penalty, who is to settle the amount – ought the jury to settle it; and if so, upon what considerations? Are they to look at the conduct of the defendant; or upon what are they to act? I can see no characteristic of a penalty in this payment. The section proceeds, "or to the full amount of the benefit or advantage arising from such representation, or the injury or loss sustained by the plaintiff therefrom, whichever shall be the greater damages." It was argued that the words "whichever shall be the greater damages" referred only to the two last alternatives given to the plaintiff, and that, if those words had been intended to refer to all three alternatives, the expression would have been "whichever shall be the greatest damages." I think that that criticism is hypercritical. The expression "greater damages" is at most a mere grammatical slip. In my opinion the legislature in using that expression had in mind all the three alternatives, and intended to enable the plaintiff to recover as damages and amount not less than 40 s . in respect of each representation, or the full amount of the benefit or advantage derived by the defendant from the representation, or the injury or loss sustained by the plaintiff therefrom. If that be the true view, the Act itself speaks of the first alternative liability as damages, and therefore treats the payment of an amount not less than 40 s . as a payment by way of damages. Sect. 2 also provides that the damages may be recovered "together with double costs of suit." I know of no instance where by the provisions of an Act of Parliament a penalty can be recovered together with double costs of suit. I am therefore of the opinion that this case is not brought within any rule of law which prevents interrogatories being administered to the defendant. Marin v Treacher [16 Q.B.D. 507] only establishes that there is no rule of law or ethical principle to prevent interrogatories being administered in this class of cases, except the rule which is founded on the old doctrine of Courts of Equity that they would not assist a common informer two obtain discovery. I do not say that the decisions of the Courts of Equity have not gone further, but that was the foundation of the doctrine. Cases have been cited in which judges have used the word "penalty" in describing similar payments to this, but the use of that word, when the question of the right to interrogate the defendant was not before the Court, does not make the payment of penalty for the purpose of deciding that question. 40 Saunders & Anor v Wiel [1892] 2 Q.B. 18 was an appeal from an order of the Master in Chambers disallowing an objection by the defendant to answer interrogatories on the ground that his answers might make him liable to penalties sought to be recovered pursuant to s 58 of the Patents, Designs and Trade Marks Act 1883 (46 & 47 Vict. C. 57). Sections 58 and 59 of that Act provided: 58. During the existence of copyright in any design - (a) it shall not be lawful for any person without the license or written consent of the registered proprietor to apply such design or any fraudulent or obvious imitation thereof, in the class or classes of goods in which such design is registered, for purposes of sale to any article of manufacture or to any substance artificial or natural or partly artificial and partly natural; and (b) it shall not be lawful for any person to publish or expose for sale any article of manufacture or any substance to which such design or any fraudulent or obvious imitation thereof shall have been so applied, knowing that the same has been so applied without the consent of the registered proprietor. Any person who acts in contravention of this section shall be liable for every offence to forfeit the sum not exceeding fifty pounds to the registered proprietor of the design, who may recover such sum as a simple contract debt by action in any court of competent jurisdiction. 59. Notwithstanding the remedy given by this Act for the recovery of such penalty as aforesaid, the registered proprietor of the design may (if he elects to do so) bring an action for the recovery of any damages arising from the application of any such design, or of any fraudulent or obvious imitation thereof for the purpose of sale, to any article of manufacture or substance, or from the publication sale or exposure for sale by any person of any article or substance to which such design or any fraudulent or obvious imitation thereof shall have been so applied, such person knowing that the proprietor had not given his consent to such application. 41 The marginal note to section 58 was "Penalty on piracy of registered design". The marginal note to section 59 was "Action for damages". On appeal, Denman J referred the matter to the Queen's Bench Division. Day J., with whom Charles J. concurred, said at 20: The question whether they are entitled to do so [compel answers to interrogatories] depends upon whether the sum so claimed is to be regarded as a penalty or as liquidated damages. I am clearly of opinion that it is to be regarded as a penalty, and that consequently the interrogatories need not be answered. Sect. 58 provides, that " it shall not be lawful" for any person to do any of the acts therein specified, and that "any person who acts in contravention of this section shall be liable for every offence to forfeit a sum not exceeding 50 l." That language points to the punishment of an offence, not to compensate for an injury. However, if there were any doubt about the matter, s. 59 sets it entirely at rest, for it speaks of the money recoverable under s. 58 as "such penalty as aforesaid." The case of Adams v Batley [18 Q.B.D. 625], upon which the plaintiffs relied, does not, in my judgement, assist them. That decision was under a different statute, in which the language was very different. The statute there in terms of speaks of the 40 s . as "damages," and it was upon that ground that the Court of Appeal decided the case as they did. That decision wholly turned upon the special language of the Act. 42 On appeal from the Queen's Bench Division, Lord Esher M.R., with whom Bowen & A.L.Smith LJJ. concurred, compared s 58 and s 59 and said at 323: There is thus a distinction drawn, and the only sensible interpretation of the statute is that, the two sections apply to two distinct remedies, the one by way of penalty, the other by way of damages. 43 In dealing with counsel's reliance on Adams v Batley Lord Esher M.R. said at 323-324: The statute is wholly different from the one we are considering, and we arrived at a conclusion that the action in that case was not to recover a penalty, but for damages. That conclusion was arrived at by looking at the context, which, though the word "offender" was used, took away from its prima facie meaning and left the action one for damages. In the present case there is nothing in the context to alter the ordinary meaning of the word used in s. 58; but on the contrary s. 59 fortifies the view that they are to be taken with their ordinary meaning. The section therefore relates to penalties alone, and interrogatories tending to show that the defendant has subjected himself to those penalties need not be answered. 44 Adams v Batley; Cole v Francis and the cases referred to above establish that the assessment of whether proceedings are for a penalty depends very much upon the terms of the statute pursuant to which the proceedings are brought. In my view the reference in the joint judgment in Rich v ASIC to Adams v Batley; Cole v Francis is not a reference upon which reliance can be placed to suggest that proceedings or orders for compensation brought or made under Part 9.4B of the Act do not involve exposure to a penalty. The High Court was not considering that question. Status of the Notes 45 Part IV of the Acts Interpretation Act 1901 (Cth), "General Provisions", includes the following: 13 Headings, schedules, marginal notes, footnotes and endnotes (1) The headings of the Parts Divisions and Subdivisions into which any Act is divided shall be deemed to be part of the Act. (2) Every schedule to an Act shall be deemed to form part thereof. (3) No marginal note, footnote or endnote to an Act, and no heading to a section of an Act, shall be taken to be part of the Act. 46 The Corporations Law, amended by the Corporations Legislation Amendment Act 1990, previously included a section, s 109D(3), which provided, inter alia, that "each footnote or end note to this Law, is taken not to be part of this Law". That was included at a time before there was national applicability of the corporations legislation. When that was achieved there was no longer a requirement for that section because the Acts Interpretation Act 1901 (Cth) applied to the legislation. Thus the absence of section 109D(3) or a section in similar terms, from later provisions is not relevant. 47 The words in s 3 of the 2004 Act are: "Each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms". The Act is "specified" in the Schedule and the language in the Schedule varies. The term "omit" is used when words of a section are to be removed. The term "insert" is used when words are to be included in a section, or "substitute" when different words are to be included in parts of the section where words have been omitted. When the Schedule refers to Notes, the word "Add" is used. The Schedule Items relevant to s 1317H(1), s 1317HA(1) and s 1317J(2) provide that the "Note" is added "at the end of the subsection" (Items 14, 15 and 16). The Note to s 1317E was inserted in the 1999 provisions and the amending Act included a section similar to section 3 of the 2004 Act. The Note to s 1317E was amended by the Financial Services Reform Act 2001 to add the words "(or in the case of a corporations scheme/civil penalty provision)". 48 "Notes" in the form under discussion seem to have been first used extensively in the 1992 Act although their first use appears to have been in the Corporations (Unlisted Property Trusts) Amendment Act 1991. The Explanatory Memoranda to those Acts make no mention of the Notes. There was some use of Notes in the Corporate Law Reform Act 1994 (1 note), the Corporations Legislation Amendment Act 1994 (4 notes), the Corporations Law (Securities and Futures) Amendment Act 1995 (2 notes), and there was extensive use of notes in the First Corporate Law Simplification Act 1995 (the Simplification Act). Many of these notes were what could reasonably be described as navigational, for example, the note at the end of s 206B of the Simplification Act: "For the redemption of redeemable preference shares see section 192". Others were more advisory in nature, for example the note at the end of s 206G: "A company that has to lodge documents under section 206D, 206E or 206F needs to lodge a notice under paragraph (2)(b) only if it wants for some reason to have less than 14 days between lodging the section 206D, 206E or 206F documents and entering into the buy-back agreement or the passing of the resolution". 49 The Act makes no provision in relation to the status of the Notes. Specifically Part 1.2 does not define "Note". The relevant Explanatory Memoranda (EM) do provide some guidance. An EM may be considered in the interpretation of a provision where "the meaning of the provision to be construed is ambiguous": s 15AB(2)(e) Acts Interpretation Act; Re Australian Federation of Construction Contractors; Ex Parte Billing (1986) 68 ALR 416, at 420 per Gibbs C. J., Mason, Wilson, Brennan, Deane and Dawson JJ. The ambiguities that arise are: (a) whether or not the provisions of Part 9.4B require the Court to make a declaration of contravention under s 1317E when a contravention of a civil penalty provision is proved for the purpose of s 1317H(1)(a) of the Act; and (b) whether ASIC is entitled to make an application for compensation whether or not a declaration of contravention has been made under s 1317E of the Act. 50 Notes are discussed in paragraphs 5.69, 5.88, 5.239, 5.402, 5.468 and 5.603 of the EM to the 2004 Bill. For instance paragraph 5.468 includes the following: Items 6 and 7 will amend subsections 674 (2) and 675 (2) by inserting in each a note stating that an infringement notice may be issued for an alleged contravention of these subsections. (Emphasis added) 51 The EM also refers to the "amendments" to s 1317J, s 1317H and s 1317HA. It does not expressly refer to the Notes. However, the only amendments to those sections were the addition of the Notes at the end of the respective relevant subsections. The relevant parts of the EM provide: Part 4: Civil penalty provisions Overview 5.398 The amendments to the Corporations Act contained in this Part of the Bill will: ... · clarify that an application for a compensation order can be made in relation to contraventions of the civil penalty provisions regardless of whether a declaration of contravention has been made; … Declarations of contravention and compensation orders 5.400 Amendments to sections 1317H, 1317HA and 1317J will ensure that persons and bodies corporate can apply for a compensation order in relation to contraventions of the civil penalty provisions, and such compensation orders to be made, regardless of whether a declaration of contravention in relation to those civil penalty provisions has been made (items 14, 15, 16 and 17). Applicants for a compensation order under sections 1317H and 1317HA will still have to prove a contravention and that damage resulted from it. 52 The terms of the 2004 Act and these paragraphs of the EM lead me to the conclusion that Parliament intended the insertion of the Notes to operate as an amendment to the body of the Act, rather than to operate in the manner of a marginal note, an endnote or a footnote. Marginal notes, endnotes and footnotes that are not included in the manner in which the Notes under consideration have been included, do not form part of an Act. This has been held to be so because they are "not the product of anything done in Parliament": Reg v Schildkamp [1971] AC 1 at 10 per Lord Reid; Chandler v Director of Public Prosecutions [1964] AC 763, per Lord Reid at 789. However in The Ombudsman v Moroney (1983) 1 NSWLR 317 at 324G, Street CJ referred to the "invariable practice" of Bills being presented to Parliament with proposed sections being accompanied by marginal notes. The Chief Justice expressed the view that, if the marginal note "passes through Parliament unamended" and is "printed on the formal Bill to which Royal assent is given in due course", there was "every reason" to regard marginal notes as "a legitimate source upon which to draw as an aid to construction of the section" the marginal note accompanied. His Honour continued at 325C: To the objection that Members of Parliament take no responsibility for the reliability of marginal notes as distinct from the text of sections, it could be answered that it is high time that they did. Marginal notes are plain to be seen in the printed Bill as well as the Act, and it could well come as a surprise to many Members of Parliament, and to the public at large, to be told that there is an arbitrary and inflexible rule precluding any reference to marginal notes as an aid to construction. I not only see no justification for such an arbitrary and inflexible rule, but I see every reason in commonsense and in law to permit such reference when the marginal note is properly authenticated. Whilst asserting, as I do, the permissibility of turning to an authenticated marginal note to assist in resolving the interpretation of a doubtful or ambiguous section, I fully recognise that, not being part of the Act, it cannot control the meaning of the section. It may well be only rarely that such doubt or ambiguity will arise as will result in useful reference to an authenticated marginal note for its resolution. As Lord Upjohn said in Director of Public Prosecutions v Schildkamp [1971] AC 1, at 28: " … I can conceive of cases were very rarely it might throw some light on the intentions of Parliament just as a punctuation mark." After all, to be realistic about the matter, Members of Parliament just as likely as lawyers to read a marginal note as an indication of what the section is about. And, from the public's point of view, it would seem to be bordering on the mischievous to insist that, although the marginal note was there on the clause, although it was there on the section when assented to, and although it appears in the publicly available print of the statute, nevertheless it must be wholly disregarded. To take such a view is, to my mind, carrying technicalities to an extreme and reading more into the authorities than they properly bear. 53 These rather powerful observations recognise that marginal notes are not part of the Act. It was the seemingly absurd prohibition on recourse to the notes as an aid to construction to which the Chief Justice's observations were directed. Although The Ombudsman v Moroney was not concerned with endnotes or footnotes, it is probable that if it had been, the same observations would have been made about them. However the notes under consideration here are different. They, unlike the marginal note to which Street CJ was referring in The Ombudsman v Moroney, are the subject of express provision in an amending statute which states that the Act in question is "amended or repealed" as set out in the amending Act's schedule. Although there is reference is s 3 of the 2004 Act to "any other item in the Schedule" having "effect according to its terms", I am not satisfied that this part of s 3 applies to the Notes. In my view that Notes are clearly "applicable item(s)" in the Act specified in the Schedule and are part of the amendments to the Act, being their addition to it in the locations specified. 54 I am satisfied that the Notes in s 1317E, s 1317H, s 1317HA and s 1317J(2) form part of the text of the Act and do not fall within the concept of marginal note, endnote or footnote in the Acts Interpretation Act 1901. These are notes of a new breed. They are Statutory Notes and the Act must be interpreted having regard to their content. A "note" has been defined as "an explanatory or critical annotation or comment appended to a passage" of the relevant text: Oxford English Dictionary. If this definition applies, and it seems to me to be appropriate to apply it, the effect of such an explanatory or critical annotation will depend on the language used in a particular Note and its context. Imposition of a penalty? 55 As I have already said, the Applicants submissions in support of the claim that the proceedings for an order for compensation under s 1317H(1) are for the imposition of a penalty, focus mainly on the requirement under s 1317E that the Court "must" make a declaration of contravention once it is satisfied that a person has contravened a civil penalty provision. The question is whether the Court is so obliged. 56 An analysis of Part 9.4B, inclusive of the Notes, identifies possible tension between the provisions of the relevant sections and perhaps in at least one instance, a possible oddity. In this context the Note in s 1317J(2) is important. That Note states that an application for a compensation order [by the corporation] may be made "whether or not a declaration of contravention has been made under s 1317E". Although ASIC is entitled under s 1317J(1) to make an application for compensation, no such Note was inserted at the end of that subsection. That absence may tend to suggest that a declaration of contravention is necessary prior to ASIC being able to make an application for compensation. 57 The corporation may intervene in proceedings brought by ASIC for a declaration of contravention and/or a pecuniary penalty order, but it is not entitled to be heard on whether such declaration or order should be made (s 1317J(3)). If it were able to make its application for compensation in the proceedings in which it intervened, then there would be the perhaps odd situation of ASIC having to await a declaration of contravention before it could apply for compensation against some of the defendants in the proceedings and the corporation not having to await such a declaration to apply for compensation against other defendants in the proceedings. In practical terms the corporation would more probably than not await the declaration so it could use it as evidence of the contravention of the civil penalty provision to enable it to prove that element as required by s 1317H(1)(a). 58 Section 1317H(1) and 1317HA(1), inclusive of the Notes, provide that the Court may make an order for compensation "whether or not a declaration of contravention has been made under s 1317E". Under both of those sections the Court is only able to make an order for compensation if "the person" against whom the order is sought "has contravened a corporation/scheme civil penalty provision in relation to the corporation and the damage resulted from the contravention" (ss 1317H(1)(a); 1317HA(1)(a)). 59 On the one hand it would appear (by reason of the absence of a Note to s 1317J(1) in the same terms as the Note to s 1317J(2)) that ASIC is unable to make an application for a compensation order until a declaration of contravention has been made, and yet on the other hand the Court is able to make an order for compensation so long as the person "has contravened" the civil penalty provision and whether or not a declaration has been made. However if ASIC is only able to make the application for compensation after the declaration of contravention is made it would seem that the Notes to s 1317H and s 1317HA have to be read as applying only to proceedings for a compensation order that are brought by the corporation. Alternatively there may have been an oversight at the time the 2004 Act was drafted in failing to include a Note to s 1317J(1), that ASIC is also able to make an application for compensation whether or not a declaration of contravention has been made unde s 1317E of the Act. However that is something that the Court would be loath to infer in a Part of the Act that provides for such serious consequences for prospective defendants. 60 Once a declaration of contravention is made it is "conclusive evidence" of, inter alia, the person who contravened the civil penalty provision and the conduct that constituted the contravention (s 1317F). The "Note" in s 1317E provides that: "Once a declaration has been made ASIC can then seek a pecuniary penalty order (section 1317G) or (in the case of a corporation/scheme civil penalty provision) a disqualification order (section 206C)". As I have said earlier, that Note was introduced into the Law in the 1999 amendments in which there was a provision similar to s 3 of the 2004 Act. 61 The effect of such provisions, requiring ASIC to await the declaration of contravention, before being able to apply for a compensation order, may have been based upon the following: (a) it may have been assumed that proceedings for orders for compensation are not for the imposition of a penalty; (b) on that basis it may also have been assumed that prospective defendants may not be able to avail themselves of the relevant privilege in respect of orders requiring discovery and the filing of evidence; (c) as ASIC is also able to make application for declarations of contravention and/or pecuniary penalty orders, it may have been thought to be unfair to the prospective defendants to allow the regulator to make an application for compensation, in which proceedings there would need to be proof of the very facts that would expose the prospective defendants to the possibility of ASIC of relying on that proof to then move to seek a declaration of contravention and/or pecuniary penalty. The unfairness would stem from the fact that the privilege may not be available in the compensation proceedings, rendering nugatory any claim for privilege in the subsequent penalty proceedings for the declaration and pecuniary penalty. 62 That interpretation of the Act may seem to be fair, but it is difficult to assume that it was a basis for the absence of a Note to s 1317J(1). That is because the amendment to s 1317J(2), as described in the EM to the 2004 Bill was so described and proposed prior to the High Court decision in Rich v ASIC in which for the first time (other than in the dissenting view of McColl JA in Rich v ASIC (CA)) it was held that the ASIC proceedings for the declaration of contravention were for the imposition of a penalty. 63 In an application by the corporation under s 1317J(2) for a compensation order, which may be brought even if a declaration of contravention has not been made, ss 1317H(1) and 1317HA(1) permit the Court to make a compensation order even if a declaration of contravention has not been made. The possible tension that arises here is with s 1317E. If the Court is required to make a declaration of contravention if it is satisfied that a person has contravened a civil penalty provision and the Court is unable to make a compensation order unless the person "has contravened" the civil penalty provision, it is submitted by the Applicants that it follows that once that element is proved – once the Court is satisfied of that contravention – it "must" make a declaration of contravention. If that is right, it would not be possible for an order to be made under s 1317H and s 1317HA unless a declaration of contravention has been made. That would make nonsense of the Notes in s 1317H and s 1317HA. 64 There seems to have been a concerted effort, evidenced in part by the Simplification Act, to achieve a clearer style of drafting in corporations legislation. However the above consideration of this Part of the Act might tend to suggest that the achievement of such a style without express indication is indeed rather difficult. 65 Section 1317HD(1) of the 1992 Act provided that "where a person contravenes a civil penalty provision" the corporation could recover from that person profits made or an amount equal to loss or damage, "whether or not a civil penalty order has been made" against the person. A "civil penalty order" was defined as "a declaration or order made under section 1317EA of the Corporations Law of this jurisdiction" (s 4). Section 1317EA applied if the Court was "satisfied" that a person had contravened a civil penalty provision. Section 1317EA(2) provided that the Court "is to declare" that the person "contravened that provision". Section 1317EA(3) provided that the Court "may also make against the person" an order prohibiting the person from managing a corporation and/or a pecuniary penalty order not exceeding $200,000. 66 In the 1999 provisions, s 1317H was introduced in place of s 1317HD. Section 1317H required proof of a contravention of a civil penalty provision, but did not include the provision that an order for compensation could be made "whether or not" a "civil penalty order " had been made. However it was in these amendments in the 1999 provisions that the Note to s 1317E was inserted providing that "once the declaration" had been made ASIC "can then seek" a pecuniary penalty order or a disqualification order. Section 1317E must be read in the context of s 1317J. ASIC is the only party that is able to seek a declaration under s 1317E. It must also be read in the context of s 1317H not including a "condition" that a declaration must be made, but rather only that "a person has contravened" the relevant provision. 67 I am satisfied that the legislative intention of the 1999 provisions was that the introduction of the Note in s 1317E, read with s 1317J and s 1317H(1)(a), would make it clear that such section only applied to applications brought by ASIC for declarations of contravention of civil penalty provisions, and that this section was a "gateway" to the other "relief" it may "then seek", being the pecuniary penalty order and/or the disqualification order. It is not a gateway to an order for compensation under s 1317H or s 1317HA. I respectfully disagree with McColl JA's view to the contrary (Rich v ASIC (CA) par [342]). The amendments, the Statutory Notes, introduced in the 2004 Act do not change the position but rather "clarify" it. That seems to me to be why the Statutory Note method of amendment was used. 68 I agree that it probably would have been far clearer to the readers of the legislation if the words, "in an application brought by ASIC for a declaration under this section", had also been included at the commencement of s 1317E. However the regime of the Statutory Note had commenced and that was the vehicle that was chosen. 69 There are other aspects of Part 9.4B that support this interpretation of the Act. If the corporation decides to apply and is allowed to intervene in the ASIC proceedings in which declarations of contravention are sought, it is precluded from addressing on the appropriateness of the making of a declaration of contravention. That supports the finding that declarations are only made when sought by ASIC. Additionally it would seem absurd for a Court in proceedings for compensation brought by a corporation, separate from any ASIC proceedings, to be required to make a declaration under s 1317E in those proceedings in which the party (the corporation) seeking the relief (the compensation order) is not only precluded from seeking such a declaration but is also, by inference, precluded from making any submission about that very step. 70 I am of the view that s 1317E only applies to proceedings in which that "relief", as the High Court described it (par [16]), is sought by ASIC. There is therefore no requirement for a Court to make a declaration of contravention under s 1317E in proceedings for an order for compensation brought by a corporation under s 1317H or s 1317HA. I am of the view that proceedings for a compensation order under s 1317H or s 1317HA are not proceedings for the imposition of a penalty. 71 The Applicants also referred (pars 82 to 89 of written submissions) to the plaintiff's intention to tender in chief extracts from the examinations of various former officers of the plaintiff, including Mr Rich. This intention was relied upon in conjunction with the pivotal submission that the Court was required to make a declaration under s 1317E as a gateway to a compensation order to submit that the proceedings were for the imposition of a penalty. As I have found against the Applicants in respect of their pivotal submission the reference to the plaintiff's intention is not necessary to explore further, other than to say, that it will be a matter for the trial judge to decide the admissibility of those extracts. 72 I refuse to make the declarations sought in the Notices of Motion that the proceedings are a proceeding for the imposition of a penalty. Compulsion to file evidence 73 The other order sought in the Rich Notice of Motion is for the vacation of the order made on 1 October 2004 for Rich and Lifecell to file their evidence on a date prior to trial. It has not been necessary to delineate between Lifecell and Rich for the purpose of these applications because, as I understand it, it is agreed that any evidence to be called on behalf of Lifecell would be evidence of Rich and would go to the same matters as the evidence to be called from Rich on his own behalf. Adler did not seek in his Notice of Motion an order vacating the order for the filing of evidence. 74 The processes provided by Part 9.4B enmesh the elements to be proved in proceedings for the recovery of a penalty (disqualification order or the pecuniary penalty) with proceedings for a compensation order. The facts to be proved to entitle ASIC to a declaration of contravention and consequential orders for disqualification or the imposition of the pecuniary penalty, are the same facts to be proved in proceedings to entitle ASIC or the corporation to a compensation order. That has been made abundantly clear by reason of the requirement to prove a contravention of a civil penalty provision before a compensation order can be made: s 1317H(1)(a) and s 1317HA(1). Proof of the same facts exposes the defendants to the possibility of ASIC, at a later time, seeking to rely upon that proof to seek a declaration of contravention under 1317E with consequential orders for disqualification and/or pecuniary penalties. Kirby J's observation in Rich v ASIC that "the better view" is that the proceedings under s 1317H are "compensatory" in nature rather than proceedings for a penalty, an observation with which I respectfully agree, does not detract from that position. 75 In Refrigerated Express Lines (A/Asia) Pty Ltd v Australian Meat and Live-Stock Corporation & Ors [1979] 42 F.L.R 204, at 207-208 Deane J said: It is a well-established principle that a defendant in proceedings which are solely for the recovery of a pecuniary penalty should not be ordered to disclose information or produce documents which may assist in establishing his liability to the penalty … Even where, … the proceedings are not for recovery of a penalty but to prevent and redress civil injury, a party to litigation ought not to be compelled to provide information or produce documents for inspection by the other party if the result thereof will be to provide evidence against him which may be used to establish his liability to a penalty in other proceedings ( Mayor of the County Borough of Derby v Derbyshire County Council [1897] A.C. 550 at p. 552]). 76 The examples and instances to which Deane J referred in that case were less certain than the obvious connection between proof of contraventions of civil penalty provisions of the Act and the capacity of ASIC, pursuant to s 1317J(1), to seek a declaration under s 1317E of contravention of a civil penalty provision. That takes me back to what I described as a "fair" interpretation of the Act in which ASIC is required to apply for a declaration of contravention prior to being able to make application for compensation. The definitive law on the exposure to civil penalties is most recent. The various amendments to the Law and the Act outlined earlier occurred when it was anticipated and/or understood that proceedings for declarations of contravention under s 1317E with consequential banning orders and pecuniary penalty orders were protective rather than penal. The High Court has put an end to that. However the development of procedures in the Court to reflect and accommodate that new position is evolving. That evolution has to occur in circumstances where there is some ambiguity in relation to the pre-requisite to ASIC's capacity to make application for a compensation order. 77 It seems to me that where a corporation makes an application for a compensation order, the proposed defendants ought be entitled to know whether ASIC intends to subsequently proceed against them for penalties based upon the possible proof of the contraventions of civil penalty provisions in the compensation proceedings brought by the corporation. In other words, in the light of the new law and the real possibility that the privilege available in penalty proceedings may be circumvented or rendered nugatory, by the company bringing compensation proceedings before ASIC brings penalty proceedings, some amendment seems to be needed to ensure that this does not occur. Such amendment might prohibit ASIC from proceeding against proposed defendants in relation to contraventions of civil penalty provisions proved in compensation proceedings brought by the corporation in separate proceedings from any ASIC proceedings and prior to any declaration of contravention having been made. There might also be a requirement on the corporation to advise ASIC that it intends to make an application for compensation under s 1317H or s 1317HA, so that ASIC may decide to bring penalty proceedings prior to the corporation's application for a compensation order. The corporation could then seek to intervene, but that intervention would not change the character of the ASIC proceedings being for the imposition of a penalty. Thus the proposed defendants would have the protection of the privilege. 78 Pending such amendment, the Court is able to adjust its procedures to ensure that a trial in which a corporation seeks a compensation order under s 1317H is fair to defendants who may be the subject of subsequent penalty proceedings brought by ASIC reliant upon the contraventions of the civil penalty provisions as proved in the compensation proceedings. 79 I am satisfied that an order requiring the defendants to file evidence offends the principles expounded by Deane J in Refrigerated Express Lines (A/Asia) Pty Ltd v Australian Meat and Live-Stock Corporation & Ors. The basis of the objection to the order for provision of evidence in these proceedings is that it requires the defendants to provide information, that is evidence, which may be used to establish their liability to a penalty in other proceedings. In my view that objection is a sound one. Conclusion 80 The first order sought in the Notices of Motion for the striking out or summary dismissal of the Amended Summons has been obviated by the plaintiff's concession and its indication that it no longer presses the claims for declarations of contravention. However it is clear that the plaintiff does not have standing to seek such declarations. A Further Amended Summons is to be filed. 81 The applications in the Notices of Motion for a declaration that the proceedings are a proceeding for the imposition of a penalty are refused. I am satisfied that I should vacate the order requiring the defendants to file evidence in these proceedings. It is a matter for them whether, at the end of the plaintiff's case they intend to call evidence to defend the proceedings, which have at their core the aim of establishing contraventions of civil penalty provisions of the Act. Orders 82 I make the order in paragraph 2 of the Notice of Motion filed on 24 December 2004 on behalf of Rich and Lifecell. I refuse the relief sought in paragraph 3 of that Notice of Motion. It is noted that the Order sought in paragraph 1 has been obviated by the plaintiff's concession that it needs to replead in recognition of its lack of standing. 83 I refuse the relief sought in paragraphs 1 and 2 of the Notice of Motion filed on 1 February 2005 on behalf of Adler. This Notice of motion did not seek an order vacating the order for the filing of evidence. 84 If the parties are unable to agree on a costs order they are to restore the matter to the list for the purpose of argument as to costs, such restoration should occur no later then 29 April 2005. 29/03/2005 - Typographical errors - Paragraph(s) 40, 52 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.