Reported Decision : 259 ALR116 73 ACSR 638 New South Wales Supreme Court CITATION : Australian Securities and Investments Commission v Macdonald (No 12) [2009] NSWSC 714 This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S) : 27 July 2009 JUDGMENT DATE : 20 August 2009 JUDGMENT OF : Gzell J DECISION : Exoneration refused. Declarations of contraventions made. Disqualification orders made. Pecuniary penalties imposed. No order as to costs of some separate issues. CATCHWORDS : CORPORATIONS - Supervision, Regulation and Correction - breaches of civil penalty and other provisions - whether should be relieved from liability under s 1317S(2) or s 1318(1) of the Corporations Act - whether acted honestly - whether prohibition orders should be made under s 206C or s 206E - whether pecuniary penalty orders should be made under s 1317G(1) and s 1317G(1A) - COSTS - whether separate issues constituted by a group of discrete issues - whether no order for costs where the plaintiff succeeds on one separate issue and fails on another Corporations Act 2001 (Cth) Corporations Law (Cth) Uniform Civil Procedure Rules 2005 LEGISLATION CITED : James Hardie (Civil Penalty Compensation Release) Act 2005 James Hardie Former Subsidiaries (Winding up and Administration) Act 2005 James Hardie (Civil Liability) Act 2005 Civil Procedure Act 2005 CATEGORY : Consequential orders Australian Securities and Investments Commission v Macdonald (No 11) [2009] NSWSC 287; (2009) 256 ALR 199 Macdonald v Australian Securities and Investments Commission [2007] NSWCA 304; (2007) 65 ACSR 299 Daniels v Anderson (1995) 37 NSWLR 438 Commonwealth Bank of Australia v Friedrich (1991) 5 ACSR 115 Re HIH Insurance (in prov liq); Australian Securities and Investments Commission v Adler [2002] NSWSC 483; (2002) 42 ACSR 80 Australian Securities and Investments Commission v Vines [2005] NSWSC 1349; (2005) 65 NSWLR 281 Vines v Australian Securities and Investments Commission [2007] NSWCA 75; (2007) 62 ACSR 1 Powell & Anor v Fryer & Ors [2000] SASC 97; (2000) 18 ACLC 480 Powell v Fryer [2001] SASC 59; (2001) 37 ACSR 589 Hall v Poolman [2007] NSWSC 1330; (2007) 215 FLR 243 Nocton v Lord Ashburton [1914] AC 932 McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579 Australian Securities and Investments Commission v Edwards (No 3) [2006] NSWSC 376; (2006) 57 ACSR 209 R J Elrington Nominees Pty Ltd v Corporate Affairs Commission (SA) (1989) 1 ACSR 93 Corporate Affairs Commission v Papoulias (1990) 20 NSWLR 503 Australian Securities Commission v Forem-Freeway Enterprises Pty Ltd [1999] FCA 179; (1999) 30 ACSR 339 Deputy Commissioner of Taxation v Dick [2007] NSWCA 190; (2007) 242 ALR 152 Maelor Jones Investments (Noarlunga) Pty Limited v Heywood-Smith (1989) 54 SASR 285 Australian Securities and Investments Commission v Vines [2006] NSWSC 760; (2006) 58 ACSR 298 Australian Securities and Investments Commission v Whitlam (No 2) [2002] NSWSC 718; (2002) 42 ACSR 515 Deputy Commission of Taxation v Clark [2003] NSWCA 91; (2003) 57 NSWLR 113 Australian Securities and Investments Commission v Vines [2003] NSWSC 1116; (2003) 182 FLR 405 Australian Securities and Investments Commission v Southcorp Ltd (No 2) [2003] FCA 1369; (2003) 130 FCR 406 Exicom Pty Ltd v Futuris Corporation Ltd (1995) 123 FLR 394 CASES CITED : Rich v Australian Securities and Investments Commission [2004] HCA 42; (2004) 220 CLR 129 Re Chemeq Ltd; Australian Securities and Investments Commission v Chemeq Ltd [2006] FCA 936; (2006) 234 ALR 511 Vines v Australian Securities and Investments Commission [2007] NSWCA 126; (2006) 63 ACSR 505 Australian Softwood Forests Pty Ltd v Attorney-General (NSW) [1981] HCA 49; (1980-1981) 148 CLR 121 Corporate Affairs Commission of NSW v Transphere Pty Ltd (1988) 15 NSWLR 596 Australian Securities & Investments Commission v Sweeney [2001] NSWSC 114 Australian Securities and Investments Commission v Pegasus Leveraged Options Group Pty Ltd [2002] NSWSC 310; (2002) 41 ACSR 561 Australian Securities and Investments Commission v McDougall [2006] FCA 427; (2006) 229 ALR 158 Australian Securities and Investments Commission v FUELbanc Australia Ltd [2007] FCA 960; (2007) 162 FCR 174 Elliott v Australian Securities and Investments Commission [2004] VSCA 54; (2004) 10 VR 369 Australian Securities and Investments Commission v White [2006] VSC 239; (2006) 58 ACSR 261 Australian Securities and Investments Commission v Sydney Investment House Equities Pty Ltd [2009] NSWSC 144; (2009) 253 ALR 616 Australian Securities and Investments Commission v Vizard [2005] FCA 1037; (2005) 145 FCR 57 Australian Securities and Investments Commission v Beekink [2007] FCAFC 7; (2007) 238 ALR 595 Re OneTel Ltd (in liq); Australian Securities and Investments Commission v Rich [2003] NSWSC 186; (2003) 44 ACSR 682 Adler v Australian Securities and Investments Commission [2003] NSWCA 131; (2003) 179 FLR 1 Mill v The Queen (1988) 166 CLR 59 Pearce v The Queen [1998] 8 HCA 57; (1998) 194 CLR 610 Postiglione v The Queen (1996-1997) 189 CLR 295 Lowe v The Queen (1984) 154 CLR 606 Australian Competition and Consumer Commission v ABB Transmission and Distribution Ltd (No 2) [2002] FCA 559; (2002) 190 ALR 169 ASC v Donovan (1998) 28 ACSR 583 Hughes v Western Australian Cricket Australian Inc (1986) 8 ATPR 40-748 Waters v PC Henderson (Australia) Pty Ltd [1994] NSWCA 338; (1994) 254 ALR 328 James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 Alamdo Holdings Pty Ltd v Australian Window Furnishings (NSW) Pty Ltd [2008] NSWSC 7 TEXTS CITED : Ritchie's Supreme Court Procedure NSW Australian Securities and Investments Commission (Plaintiff) Peter Donald Macdonald (First Defendant) Peter James Shafron (Second Defendant) Phillip Graham Morley (Third Defendant) Michael Robert Brown (Fourth Defendant) Michael John Gillfillan (Fifth Defendant) PARTIES : Meredith Hellicar (Sixth Defendant) Martin Koffel (Seventh Defendant) Geoffrey Frederick O'Brien (Eighth Defendant) Gregory James Terry (Ninth Defendant) Peter John Willcox (Tenth Defendant) ABN 60 Pty Ltd (Eleventh Defendant) James Hardie Industries NV (Twelfth Defendant) FILE NUMBER(S) : SC 1490/07 Mr A Bannon SC/ Mr R Beech-Jones SC/ Ms D Hogan-Doran/ Ms S Pritchard / Ms J Single/ Mr A Kuklik (Plaintiff) Mr S Finch SC/ Mr D Studdy SC/ Mr D Mackay (First Defendant) Mr B Walker SC/ Mr M Holmes QC/ Mr R Lancaster/ Mr N Owens (Second Defendant) Mr B Oslington QC/ Mr R Dick/ Mr N Bender (Third Defendant) COUNSEL : Mr T Bathurst QC/ Mr R Whitington QC/ Mr R Hollo/ Mr R Hardcastle/ Mr I Colquhoun (Fourth to Seventh Defendants) Mr P Wood/ Mr M Henry (Eighth Defendant) Mr R McHugh SC/ Mr S Nixon (Ninth Defendant) Mr T Jucovic QC/ Mr R Scruby (Tenth Defendant) Mr I Pike (Eleventh Defendant) Mr A Meagher SC/ Ms K Morgan (Twelfth Defendant) Clayton Utz (Plaintiff) Minter Ellison (First Defendant) Middletons (Second Defendant) Henry Davis York (Third Defendant) SOLICITORS : Atanaskovic Hartnell (Fourth to Seventh Defendants) Arnold Bloch Leibler (Eighth Defendant) Blake Dawson (Ninth Defendant) Kemp Strang (Tenth Defendant) Baker & McKenzie (Eleventh Defendant) Mallesons Stephen Jaques (Twelfth Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION GZELL J THURSDAY 20 AUGUST 2009 1490/07 AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v PETER DONALD MACDONALD & ORS (NO 12) JUDGMENT 1 In Australian Securities and Investments Commission v Macdonald (No 11) [2009] NSWSC 287; (2009) 256 ALR 199 I found that each of the defendants had contravened a provision of the Corporations Act 2001 (Cth) or a provision of the Corporations Law (Cth) as carried over into the Corporations Act. 1 Exoneration 2 With the exception of the first defendant, Peter Donald Macdonald, and the eleventh defendant, ABN 60 Pty Ltd (ABN 60), formerly called James Hardie Industries Limited (JHIL), the defendants seek to be excused from their contraventions. 3 Those defendants, other than the twelfth defendant, James Hardie Industries NV (JHINV), breached their duty under s 180(1) of the Corporations Law as carried over into the Corporations Act (Section 180(1)). It provided: "A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they: (a) were a director or officer of a corporation in the corporation's circumstances; and (b) occupied the office held by, and had the same responsibilities within the corporation as, the director or officer." 4 The Corporations Act, s 1317E(1) (Section 1317E(1)) provides that if a Court is satisfied that a person has contravened one of the following provisions, called "civil penalty provisions", it must make a declaration of contravention. Section 180(1) is one of the following provisions. The power of the Court to exonerate in s 1317S(2) (Section 1317S(2)) arises with respect to eligible proceedings. That term is defined in s 1317S(1) to mean proceedings for a contravention of a civil penalty provision subject to specific additions and exclusions irrelevant for present purposes. Section 1317S(2) provides: "If: (a) eligible proceedings are brought against a person; and (b) in the proceedings it appears to the court that the person has, or may have, contravened a civil penalty provision but that: (i) the person acted honestly; and (ii) having regard to all the circumstances of the case (including, where applicable, those connected with the person's appointment as an officer, or employment as an employee, of a corporation or of a Part 5.7 body), the person ought fairly to be excused for the contravention; the court may relieve the person either wholly or partly from a liability to which the person would otherwise be subject, or that might otherwise be imposed on the person, because of the contravention." 5 It is open to the above defendants, therefore, being the JHIL executives Peter James Shafron, the second defendant, and Phillip Graham Morley, the third defendant, together with the non-executive directors of JHIL, Michael Robert Brown, the fourth defendant; Michael John Gillfillan, the fifth defendant; Meredith Hellicar, the sixth defendant; Martin Koffel, the seventh defendant; Geoffrey Frederick O'Brien, the eighth defendant; Gregory James Terry, the ninth defendant; and Peter John Willcox, the tenth defendant, to seek to be excused from their breaches of Section 180(1). 6 JHINV was in breach of its continuous disclosure obligation under s 674(2) of the Corporations Act (Section 674(2)). It applied to JHINV as a listed disclosing entity because listing rules required it to notify a market operator of information about specified events or matters as they arose for the purpose of the operator making that information available to participants in the market. Section 674(2) was in the following terms: "If: (a) this subsection applies to a listed disclosing entity; and (b) the entity has information that those provisions require the entity to notify to the market operator; and (c) that information: (i) is not generally available; and (ii) is information that a reasonable person would expect, if it were generally available, to have a material effect on the price or value of ED securities of the entity; the entity must notify the market operator of that information in accordance with those provisions." 7 Section 674(2) is a civil penalty provision in terms of Section 1317E(1) of the Corporations Act. It follows that JHINV is entitled to ask the Court to excuse it for its contravention under Section 1317S(2). 8 It is also open to Mr Shafron, Mr Morley, Mr Brown, Mr Gillfillan, Ms Hellicar, Mr Koffel, Mr O'Brien, Mr Terry and Mr Willcox to seek relief under s 1318(1) of the Corporations Act (Section 1318(1)) which provides: "If, in any civil proceeding against a person to whom this section applies for negligence, default, breach of trust or breach of duty in a capacity as such a person, it appears to the court before which the proceedings are taken that the person is or may be liable in respect of the negligence, default, or breach but that the person has acted honestly and that, having regard to all circumstances of the case, including those connected with the person's appointment, the person ought fairly to be excused for the negligence, default or breach, the court may relieve the person either wholly or partly from liability on such terms as the court thinks fit." 9 Section 1317S(7) of the Corporations Act provides that nothing in that section limits, or is limited by, Section 1318(1). 10 The bases upon which the Court may exculpate a person under Section 1317S(2) or Section 1318(1) are virtually identical as Spigelman CJ observed in Macdonald v Australian Securities and Investments Commission [2007] NSWCA 304; (2007) 65 ACSR 299 at 303 [22]. As the Chief Justice there observed and as was observed by Clarke and Sheller JJA in Daniels v Anderson (1995) 37 NSWLR 438 at 525, both provisions give the Court a wide discretion to relieve in whole or in part. 1.1 Acting honestly 11 The first element in the exercise of the Court's power under either provision is the requirement that the offending party acted honestly when breaching the statutory duty. 12 In Commonwealth Bank of Australia v Friedrich (1991) 5 ACSR 115 at 196 and 198, Tadgell J equated acting honestly for the purposes of forerunners of Section 1317S(2) and Section 1318(1) with a lack of moral turpitude. That meaning was adopted by Santow J in Re HIH Insurance (in prov liq); Australian Securities and Investments Commission v Adler [2002] NSWSC 483; (2002) 42 ACSR 80 at 123 [166] and by Austin J in Australian Securities and Investments Commission v Vines [2005] NSWSC 1349; (2005) 65 NSWLR 281 at 292 [43]. His Honour's conclusion that Mr Vines acted honestly was upheld on appeal in Vines v Australian Securities and Investments Commission [2007] NSWCA 75; (2007) 62 ACSR 1 at 110 [568] per Spigelman CJ, at 166-167 [797]-[800] per Santow JA and at 168 [805] per Ipp JA. 13 In Powell & Anor v Fryer & Ors [2000] SASC 97; (2000) 18 ACLC 480, Prior J gave judgment for liquidators in an action to recover compensation from the directors of a company for debts incurred by it while trading insolvently. At 488 [44] his Honour rejected the directors' application for relief under the forerunner to Section 1317S(2) as follows: "I do not think either defendant can be said to have acted honestly in the ordinary sense of that word or in a manner consistent with the meaning given to it in other provisions of corporation laws but even assuming that, having regard to all the circumstances of the case, I do not think that either of them ought fairly to be excused for any of their contraventions of the civil penalty provisions of the Corporations Law. In my view, both defendants were negligent and, indeed, reckless with respect to the company's financial position and capacity to trade. They did not act fairly but took advantage of indulgent creditors by allowing the company to continue to trade." 14 On appeal, Powell v Fryer [2001] SASC 59; (2001) 37 ACSR 589 at 605 [112], Olsson J cited the above passage and said at 605 [113] that all that needed to be said was that such a conclusion was demanded on the evidence. 15 In Hall v Poolman [2007] NSWSC 1330; (2007) 215 FLR 243 at 317 [320], Palmer J, having referred to the discussion of constructive fraud in Nocton v Lord Ashburton [1914] AC 932 at 954, commented that it had been easy to transpose into the word "honest" in companies legislation the special meaning attributed to fraud in Chancery parlance so that in Powell: "a failure to perform one's duty as a director, even if by genuine mistake or ignorance of the law, can be described as "failing to act honestly"." 16 With respect, I do not think Prior J went so far. His Honour was of the view that the directors had not acted honestly in the ordinary sense of that word. But even if they had, they had been reckless and had taken advantage of indulgent creditors and, having regard to all the circumstances, his Honour found they should not be excused. 17 Palmer J in Hall at 317 [322] pointed to the clear distinction between acting without prudence, skill or judgment and acting dishonestly and concluded at 318 [325] that acting honestly for the purposes of Section 1317S(2) and Section 1318(1) is to be determined by the ordinary meaning of the words. His Honour said: "In my view, when considering whether a person has acted honestly for the purposes of a defence under the CA, s 1317S(2)(b)(i) or s 1318, the court should be concerned only with the question whether the person has acted honestly in the ordinary meaning of that term, that is, whether the person has acted without deceit or conscious impropriety, without intent to gain improper benefit or advantage for himself, herself or for another, and without carelessness or imprudence to such a degree as to demonstrate that no genuine attempt at all has been to carry out the duties and obligations of his or her office imposed by the CA or the general law. A failure to consider the interests of the company as a whole, or more particularly the interests of creditors, may be of such a high degree as to demonstrate failure to act honestly in this sense. However, if failure to consider the interests of the company as a whole, including the interests of its creditors, does not rise to such a high degree but is the result of error of judgment, no finding of failure to act honestly should be made, but the failure must be taken into account as one of the circumstances of the case to which the court must have regard under the CA, ss 1317S(2)(b)(ii) and 1318." 18 Reference was made to what Gaudron J had said in McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579 at 596 [55] that dishonesty is an ordinary concept, not a term of art. While it is difficult on that account to define in any comprehensive manner, it is a matter to be determined by reference to the mental state of the person whose conduct is in issue. 19 But whether a person has acted honestly for the purposes of Section 1317S(2) or Section 1318(1) is not confined to a consideration of the subjective intention of the person in question. The lack of a subjective intention to deceive cannot avoid a conclusion that a person failed to act honestly if a reasonable person would have concluded that the conduct was dishonest. 20 Barrett J in Australian Securities and Investments Commission v Edwards (No 3) [2006] NSWSC 376; (2006) 57 ACSR 209 at 212 [8]-[9] pointed to authority for the proposition that dishonesty may exist in the absence of any subjective intention to deceive (R J Elrington Nominees Pty Ltd v Corporate Affairs Commission (SA) (1989) 1 ACSR 93 at 110; Corporate Affairs Commission v Papoulias (1990) 20 NSWLR 503 at 506). 21 In Australian Securities Commission v Forem-Freeway Enterprises Pty Ltd [1999] FCA 179; (1999) 30 ACSR 339 at 346, with respect to a sole director of an insolvent company who did not subjectively intend to defraud customers, Madgwick J said: "That Mr Morton did not subjectively intend outright to defraud customers of the company cannot avoid a conclusion that his behaviour in this regard was both unreasonable and dishonest. Any reasonable person in the position of a director of the company in the circumstances must have realised that at any given time its liabilities substantially exceeded its assets and that, by reason of the dishonoured cheques and the practice and/or entrenched fact of excessive delays in meeting customers' orders, the company could only meet its debts as they fell due by falling into default in relation to obligations to customers. That is not an ability to pay debts as they fall due, and any reasonable person would understand this. The extent of what I have called the entrenched fact of excessive delays in meeting customers' needs and the established practice of making unrealistic representations to them about how soon and how reliably they would get their equipment indicates that the boundary between self-deception as to the company's prospects and conscious deception of its customers had been crossed, and crossed at Mr Morton's behest. That was, in the ordinary meaning of the word, dishonest behaviour in relation to the affairs of the company." 22 In my view a person acts honestly for the purposes of Section 1317S(2) and Section 1318(1), in the ordinary meaning of that term, if that person's conduct is without moral turpitude in the sense that it is without deceit or conscious impropriety, without intent to gain improper benefit or advantage and without carelessness or imprudence at a level that negates the performance of the duty in question. That conclusion may be drawn from evidence of the person's subjective intent. But a lack of such subjective intent will not lead the Court to conclude that a person has acted honestly if a reasonable person in that position would regard the conduct as exhibiting moral turpitude. 1.2 Arguments in common 23 Common threads ran through the submissions with respect to acting honestly. Neither Mr Shafron nor Mr O'Brien nor Mr Terry gave evidence. The plaintiff, the Australian Securities and Investments Commission (ASIC), submitted that in the absence of evidence from them, the Court could not be positively persuaded that they acted honestly when contravening Section 180(1). 24 In Adler 42 ACSR at 123 [166], Santow J having referred to Friedrich and the interpretation of acting honestly as meaning without moral turpitude, said: "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." His Honour went on to say at [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", s 1317S(2)(b)(i), or that the person "has acted honestly" within the meaning of s 1318. 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." 25 ASIC extended the submission to those non-executive directors who gave evidence - Mr Brown, Mr Gillfillan, Ms Hellicar, Mr Koffel and Mr Willcox - on the basis that none of them gave evidence that they acted honestly when they breached Section 180(1). 26 There is no requirement in the legislation that a person must give evidence of honesty before a finding of acting honestly can be made. It is conceivable that it may appear to a court that a person has acted honestly from an examination of the circumstances surrounding the breach of duty and from other evidence such as testimonials as to the person's conduct before and after the breach of duty. 27 I would not exclude the discretions under Section 1317S(2) and Section 1318(1) simply on the basis that a defendant gave no evidence of honest intent. 28 ASIC did not allege dishonesty on the part of any defendant, with the exception of Mr Macdonald. It was not suggested that the Court should make any such finding with respect to the other defendants. 29 It was submitted that ASIC having disavowed any suggestion that the defendants had acted dishonestly, the Court should find that they had acted honestly in the ordinary meaning of that term. 30 The fallacy in that argument is that a finding of acting honestly does not follow automatically from the absence of an allegation of dishonesty as Santow JA observed in the above passage from Adler. 31 A more specific argument was raised on behalf of Mr Shafron. ASIC did not plead dishonesty against the defendants with the possible exception of Mr Macdonald. Counsel for ASIC did not cross-examine those defendants who gave evidence, putting dishonesty to them. It was submitted that ours being an adversarial system for the administration of justice and the proceedings being civil penalty proceedings, it should follow that it would appear to the Court that the defendants had acted honestly. 32 It was no part of ASIC's case against the defendants that they acted dishonestly and there was no need of a pleading nor cross-examination on that issue. 33 Section 1317S(2) and Section 1318(1) were pleaded in the defences of each defendant with the exception of ABN 60. There was no reply from ASIC. The Uniform Civil Procedure Rules 2005, Pt 14 r 14.27(2) provides that if there is no reply by a plaintiff to a defence there is an implied joinder of issue on that defence. 34 In response, it was submitted that relief granted under Section 1317S(2) and Section 1318(1) is, as Santow JA said in Deputy Commissioner of Taxation v Dick [2007] NSWCA 190; (2007) 242 ALR 152 at 174 [125], not by way of a defence but by way of a favourable exercise of the Court's discretion. 35 Be that as it may, relief was pleaded by way of defence. The absence of a reply is no basis for the contention that the defendants who thus pleaded should be deemed to have satisfied the requirement of acting honestly. It is for the Court to determine whether this prerequisite to the exercise of discretion has been established. It is not a matter that should be determined on a pleading point. 1.3 Draft ASX Announcement and non-executive directors 36 In Macdonald (No 11) I found that Mr Brown, Ms Hellicar, Mr O'Brien, Mr Terry and Mr Willcox breached Section 180(1) by voting in favour of a resolution to approve a draft announcement (Draft ASX Announcement) to be forwarded to the Australian Stock Exchange (ASX) at a meeting of the board of directors of JHIL on 15 February 2001 (15 February 2001 Meeting) and that Mr Gillfillan and Mr Koffel breached Section 180(1) by failing to request copies of the Draft ASX Announcement, failing to familiarise themselves with its terms by other means, or failing to abstain from voting in favour of the resolution to approve it. 37 The Draft ASX Announcement was in the following terms: " Legally privileged and confidential – for legal advice only Draft news release 14 February 2001 James Hardie resolves its Asbestos Liability Favourably for Claimants and Shareholders James Hardie Industries Limited (JHIL) announced today that it had established a foundation to compensate sufferers of asbestos-related diseases with claims against the company and fund medical research aimed at finding cures for these diseases. The Medical Research and Compensation Foundation (Foundation), to be chaired by Sir Llewellyn Edwards, will be completely independent of JHIL and will commence operation with assets of $284million. The Foundation will have sufficient funds to meet all legitimate compensation claims from people injured bv [sic] asbestos products manufactured in the past by two former subsidiaries of JHIL. JHIL CEO, Mr Peter Macdonald said that the establishment of a fully-funded Foundation provided the best resolution for all stakeholders "The establishment of the Medical Research and Compensation Foundation provides certainty for people with a legitimate claim against the former James Hardie companies which manufactured asbestos products," Mr Macdonald said. "The Foundation will concentrate solely on asbestos for the benefit of claimants allowing James Hardie to pursue its very exciting growth prospects for the benefit of shareholders." A separate fund of $3 million has also been set aside for scientific and medical research aimed at finding treatments and cures for asbestos diseases. The $284 million vested into the Foundation includes portfolios of commonly traded shares, a substantial cash reserve, properties which earn rent and insurance policies which cover workers compensation claims. Fund manager, Towers Perrin has been appointed to manage the Foundation's investments, which will generate investment income and capital growth. In establishing the Foundation, James Hardie sought expert advice from a number of firms, including actuaries Trowbridge, Access Economics and PricewaterhouseCoopersThis [sic] advice supplemented the company's long experience in the area of asbestos and formed the basis of determining the level of funding required to meet all future claims. "The directors of James Hardie are satisfied that the Foundation will have sufficient funds to meet all future claims," Mr Macdonald said. The initial $3 million for medical research will enable the Foundation to continue work on existing programs established by James Hardie as well as launch new programs. When all future claims have been concluded, the Foundation will convert any remaining assets to cash and these surplus funds will be donated to a reputable medical and or scientific research organisation involved in work on lung diseases. Mr Macdonald said, Sir Llewellyn Edwards, who had resigned as a director of James Hardie Industries Limited to take up his new appointment as chairman of the Foundation has enjoyed a long and distinguished career in medicine, politics and business. He is a director of a number of organizations including Westpac Banking Corporation and is also Chancellor of the University of Queensland. The other Foundation directors include Mr Michael Gill, Mr Peter Jollie and Mr Dennis Cooper. -ends- For further information: Greg Baxter Bus: Mob:" 38 The vice was that Mr Brown, Ms Hellicar, Mr O'Brien, Mr Terry and Mr Willcox voted in favour of the resolution when they knew that the Draft ASX Announcement conveyed or was capable of conveying that the material available to JHIL provided a reasonable basis for the assertion in the announcement that it was certain that the amount of funds made available to the Medical Research and Compensation Foundation (Foundation) would be sufficient to meet all legitimate present and future asbestos claims brought against two of JHIL's former subsidiaries, James Hardie & Coy Pty Limited (Coy), which subsequently changed its name to Amaca Pty Ltd (Amaca), and Jsekarb Pty Ltd (Jsekarb), which subsequently changed its name to Amaba Pty Ltd (Amaba). 39 They also knew that the Draft ASX Announcement conveyed or was capable of conveying that Mr Macdonald believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Coy and Jsekarb. 40 They knew that the Draft ASX Announcement conveyed or was capable of conveying that all of the directors, or at least a majority of them, believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Coy and Jsekarb. 41 They knew that the Draft ASX Announcement conveyed or was capable of conveying that JHIL had received expert advice from PricewaterhouseCoopers (PwC) that supported the statement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Coy and Jsekarb. 42 Finally, they knew that the Draft ASX Announcement conveyed or was capable of conveying that JHIL had received expert advice from Access Economics Pty Ltd (Access Economics) that supported the statement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Coy and Jsekarb. 43 Those directors ought to have known that the Draft ASX Announcement was misleading in those respects. 44 Mr Brown, Ms Hellicar and Mr Willcox said they had no recollection of the Draft ASX Announcement being tabled, considered or approved at the 15 February 2001 Meeting. I found to the contrary. 45 They said they would not have approved the Draft ASX Announcement had it been considered at the meeting as it made forward-looking statements with which they disagreed as being over emphatic. 46 Those acknowledgments are inconsistent with a finding that those persons acting honestly in approving the content of the Draft ASX Announcement in terms of Section 1317S(2) or Section 1318(1). They voted in favour of the Draft ASX Announcement when they said they disagreed with its assertions of sufficient funding. 47 This is not a finding of dishonesty. It is finding that because of the belief of Mr Brown, Ms Hellicar and Mr Willcox that the content of the Draft ASX Announcement was unsupportable, the Court cannot be satisfied that in voting in favour of its presentation to the ASX they acted honestly. 48 Since Mr O'Brien and Mr Terry did not give evidence, any finding that they acted honestly in approving the sending of the Draft ASX Announcement to the ASX must be based on the evidence of others and the documentary evidence. 49 Three identical copies of the Draft ASX Announcement were produced to ASIC. Two were from Allens Arthur Robinson (Allens) with handwritten comments by Mr Peter Cameron and Mr David Robb, both of whom attended the 15 February 2001 Meeting. The other one was produced by BIL Australia Pty Limited (BIL Australia). 50 Mr O'Brien was a director of BIL Australia and the local agent of BIL International Limited, formerly called Brierley Investments Limited (Brierley International). Mr Terry was a director of Brierley International, the ultimate holding company of BIL Australia. Mr O'Brien and Mr Terry were appointed directors of JHIL by virtue of the shareholding of Brierley International in JHIL. 51 It follows that copies of the Draft ASX Announcement were given to Mr O'Brien and Mr Terry at the meeting and the copy of Mr O'Brien or Mr Terry was kept by BIL Australia. 52 Mr O'Brien and Mr Terry were aware of the content of the Draft ASX Announcement and its approval at the 15 February 2001 Meeting. 53 The then chairman of the board of directors of JHIL, the late Alan Gordon McGregor, conducted board meetings by consensus. He would summarise an issue and usually ask whether the board was happy with that and people nodded or otherwise indicated their agreement by silence. 54 There was no evidence from anyone else that Mr O'Brien or Mr Terry spoke against the resolution to approve the Draft ASX Announcement. 55 The position is that they attended the 15 February 2001 Meeting, had copies of the Draft ASX Announcement before them and did not dissent from a resolution approving its content. 56 There is nothing in that evidence from which it appears to me that I should be positively satisfied that Mr O'Brien or Mr Terry acted honestly. 57 Mr Gillfillan and Mr Koffel breached their duty under Section 180(1) in that at the 15 February 2001 Meeting they failed to request that they be provided with a copy of the Draft ASX Announcement, to familiarise themselves with its terms, or to abstain from voting in favour of the resolution. 58 Mr Gillfillan and Mr Koffel attended the 15 February 2001 Meeting by telephone. The Draft ASX Announcement was not provided to them prior to or during the meeting. 59 Mr Gillfillan said that so far as he could recollect there was no discussion of the Draft ASX Announcement at the meeting. Mr Koffel said he had no recollection of anyone reading out the contents of the Draft ASX Announcement and he was not asked to approve its contents. 60 Mr Gillfillan said that had he been shown the Draft ASX Announcement he would not have approved it because it contained wording "so unequivocal and unqualified". Mr Koffel said if he had been provided with the Draft ASX Announcement he would not have approved it because of several broad statements that in the United States of America (US) would be interpreted as forward-looking. 61 Contrary to their recollection, the Draft ASX Announcement was considered at the 15 February 2001 Meeting. They should have been alerted at the stage of its discussion that an announcement was to be made to the ASX and the meeting was being asked to consider and approve a document, a copy of which they did not have. At the latest, they should have realised this when Mr McGregor summarised a resolution to approve the Draft ASX Announcement. Neither asked for a copy of the Draft ASX Announcement. Neither voiced an objection to the expression of approval of the release of the Draft ASX Announcement at the meeting. 62 This was the culmination of the project to create the Foundation and transfer Coy and Jsekarb to it. It was a matter that had been discussed at previous board meetings and a draft announcement with respect to it had been included in the board papers for the previous meeting. 63 It was not just mere inadvertence, imprudence or carelessness on the part of Mr Gillfillan and Mr Koffel not to have asked for a copy of the Draft ASX Announcement. The board was being asked to consider a matter additional to the circulated board papers relating to the formation of the Foundation, a most significant event in the life of JHIL. 64 The evidence does not persuade me that Mr Gillfillan or Mr Koffel acted honestly when they failed to request a copy of the Draft ASX Announcement, failed to familiarise themselves with its terms, or failed to abstain from voting in favour of the resolution to approve its publication. 65 I found that those individual defendants who swore that the Draft ASX Announcement was not before the meeting were mistaken. On raising the question what was the motive of the non-executive directors in approving the Draft ASX Announcement, I said they may well have believed they were acting in the best interests of the James Hardie group in divorcing asbestos claims against Coy and Jsekarb from the group. To quell any opposition to the formation of the Foundation and the transfer of Coy and Jsekarb to it they were prepared to allow JHIL to make unequivocal and unqualified statements as to the sufficiency of funding. 66 But neither of those comments sways the balance in favour of a conclusion that the non-executive directors acted honestly. It is the nature of the mistake and the circumstance in which it occurs that is significant. And belief by a director that he or she is acting in the best interests of a company does not require a Court to be satisfied that the person acted honestly, as witness the case of the director who causes a company to trade when insolvent in the belief that it might trade itself back into liquidity. 67 Mr Brown, Mr Gillfillan, Ms Hellicar, Mr Koffel, Mr O'Brien, Mr Terry and Mr Willcox have failed to satisfy me that in contravening Section 180(1) they acted honestly. They are not entitled to relief under Section 1317S(2) or Section 1318(1). 68 If I be wrong in this conclusion and the non-executive directors did act honestly, I would have exercised one or other of the discretions under Section 1317S(2) and Section 1318(1) against relief. As Austin J pointed out in Vines 65 NSWLR at 292 [44] there are two discretions under Section 1317S(2) and Section 1318(1), the first in terms of the second requirement, "under all the circumstances" and, if both requirements are established, the second discretion to relieve. 69 Because each case will depend on its own circumstances, it is difficult to lay down guiding principles with respect to the second limb of Section 1317S(2) and Section 1318(1) (Maelor Jones Investments (Noarlunga) Pty Limited v Heywood-Smith (1989) 54 SASR 285 at 292; Vines 65 NSWLR at 292-293 [46]). 70 But as Austin J observed in Vines 65 NSWLR at 291 [39] it is sensible and relevant to the exercise of the statutory discretion in Section 1317S(2) or Section 1318(1) to consider the degree to which a defendant's conduct has fallen short of the statutory standard of reasonable care and diligence. So, at [41] his Honour said that a person may be excused from liability even though the contravening conduct has been found to have been unreasonable. 71 In Vines 65 NSWLR at 293-294 [51] Austin J said that the presence or absence of contrition by a defendant could be taken into account. So should the seriousness of the contravention. His Honour said at 294 [52]: "Another relevant consideration is the seriousness of the contravention. This has three components: the importance of the provision contravened, in terms of public policy (as in Reiffel v ACN 075 839 266 Ltd ); the degree of flagrancy of the contravention; and the consequences of the contravention in terms of harm to others. In a case where the contravention amounts to mere inadvertent and temporary non-compliance with a procedural requirement having no damaging consequences (say, a contravention constituted by being late by a few days in filing a form) the court is likely to be much more ready to provide relief than in a case where the contravention is of a provision that has substantial importance from the point of view of public policy, or the defendant's contravention is reckless, or the contravening conduct has caused substantial loss." 72 At 295 [57] his Honour identified other matters relevant to the exercise of discretion: "Other matters that appear to me to be relevant to the exercise of the court's discretion under the second requirement, and/or its discretion to grant relief, are: whether the person concerned obtained and followed competent advice before acting in contravention (Austin, Ford and Ramsay, op cit, at 659 [17.18]); whether the conduct was in accordance with some established practice ( Maelor Jones Investments (Noarlunga) (at 293-295), discussing the Pacific Acceptance case); and whether the person concerned was paid for undertaking the contravening conduct ( Maelor Jones Investments (Noarlunga) (at 290-295))." 73 And at 295 [60]-[61], Austin J accepted a list of negative criteria pointing against the granting of relief under Section 1317S(2) or Section 1318(1). They are the obtaining of personal gain; the flagrancy of the breach; impropriety; consciousness of another's impropriety; and deceptiveness. 74 The circumstances of this case are set out in Macdonald (No 11) which should be read as one with these reasons. 75 It was submitted that the decision to approve the Draft ASX Announcement was made at the 15 February 2001 Meeting where many other resolutions were passed including the decision to establish the Foundation and the amount of funding with which it was to be provided. The board meeting was attended by JHIL management and a number of external advisers including representatives of UBS and Allens. No member of JHIL's management nor any of its advisers raised any concerns about the content of the Draft ASX Announcement. 76 UBS was retained to provide JHIL with assistance in preparation of announcements. Under the terms of its retainer, JHIL was to ensure that all announcements would only be published after discussion with UBS. Mr Wilson and Mr Sweetman of UBS were present at the meeting. 77 The fact that this was a busy board meeting does not excuse the non-executive directors' breach of duty. Nor was this a case for reliance upon management, a co-director or an expert adviser. Management had sought the board's approval and the task of approving the Draft ASX Announcement involved no more than an understanding of the English language used in the document. 78 The fact that neither management nor the advisers raised any problem about approving the Draft ASX Announcement does not advance the case of the non-executive directors in the unusual circumstances of this case. The document was brought to the board for its approval and approval was granted. It was incumbent upon the non-executive directors to ensure that the statements about full funding of the Foundation were accurate. They failed in their duty by approving statements that they ought to have known were misleading. 79 Furthermore, there was a contravention of standard practice with respect to the Draft ASX Announcement. That practice required the approval of a draft press release by line management and senior executives before its provision to the board. This was not done. And it offended the disclosure policy approved by the board. It was a last minute affair. None of the board or management or Allens had seen the document before the 15 February 2001 Meeting commenced. Its distribution at the meeting in those circumstances provided all the more reason for a detailed consideration of its content by each director. 80 It was submitted that the non-executive directors were entitled to assume that there had been compliance with the standard practice and disclosure policy adopted by the board when the Draft ASX Announcement was presented to them at the 15 February 2001 Meeting. I would not draw that inference, and inference it must be because there was no direct evidence from the non-executive directors that they had made this assumption. It was unusual that the board should be asked to approve a statement handed out at a meeting. 81 But even if a non-executive director made such an assumption, the duty remained to consider the terms of the Draft ASX Announcement and any justification for them and that took no more than an understanding of the English language. 82 The board had had communication strategy papers included in its board papers both for the 15 February 2001 Meeting and at earlier meetings. That material advised that a successful communication strategy was essential to the achievement of any separation and central to that was the need to convince stakeholders that there were sufficient assets available to meet all present and future legitimate asbestos claims. The board had rejected an earlier proposal of management to fund only to the level of the net assets of Coy and Jsekarb. But the message had to be accurate. It was not. 83 An opinion of James Allsop SC was before the meeting. He was asked: "Assuming that the directors of JHIL act honestly and genuinely believe that the proposal is in the best interests of the company, can they pass each of the resolutions proposed consistently with their statutory and common law duties?" 84 The answer was in the affirmative: if the directors honestly believed that the steps were in the interests of JHIL and if they had made reasonable inquiry to substantiate their belief, Mr Allsop was of the view that their duties were satisfied. But no resolution to approve the Draft ASX Announcement was put to Mr Allsop and the fact that his opinion was before the board does not advance the position of the non-executive directors. 85 It was submitted that what the non-executive directors did could not be characterised as a pattern of conduct over a period of time or involving personal gain, fraud or dishonesty. Rather the contraventions were isolated incidents in lengthy careers of service on the boards and in positions of high management of an array of companies performed by each of them with competence, diligence and honesty. 86 That is so. Each of the non-executive directors read impressive testimonial affidavits. 87 But they do not dictate the exercise of discretion in favour of the non-executive directors under Section 1317S(2) or Section 1318(1). The testimonial affidavits cover the period before and after the approval of the Draft ASX Announcement and the fact remains that the conduct of the non-executive directors in approving the Draft ASX Announcement was different from the conduct described in the testimonial affidavits and it is the characterisation of that conduct that is in issue. 88 The approval by the non-executive directors of the Draft ASX Announcement may have been an isolated event but it was one, nonetheless, that demanded their attention. Non-executive directors are required to exercise the degree of care and diligence that a reasonable person in their position would exercise, whether the matter calling for their attention is an isolated incident or not. 89 It was submitted it was significant that Mr Macdonald and Mr Shafron had been found to have failed to advise the board that the Draft ASX Announcement was expressed in too emphatic terms. 90 At the 15 February 2001 Meeting the board was presented with a cashflow exercise (Cashflow Model). It was submitted that it was significant that Mr Macdonald, Mr Shafron and Mr Morley had been found to have failed to advise the board of the limitations of the PwC and Access Economics reviews of the Cashflow Model. A board of directors, it was submitted, could not discharge their responsibility properly unless senior executives accurately laid information before the board. 91 That is true, but it does not exonerate the non-executive directors from their breach of duty when they accepted the task of approving the content of the Draft ASX Announcement on the information that was available to them. 92 With some variations from the Draft ASX Announcement and, in particular, the introduction of the word "anticipated" in relation to asbestos claims, the announcement was forwarded to the ASX (Final ASX Announcement). It was approved by Mr Macdonald. It was in the following terms: "media release 16 February 2001 James Hardie resolves its Asbestos Liability Favourably for Claimants and Shareholders James Hardie Industries Limited (JHIL) announced today that it had established a foundation to compensate sufferers of asbestos-related diseases with claims against two former James Hardie subsidiaries and fund medical research aimed at finding cures for these diseases. The Medical Research and Compensation Foundation (MRCF), to be chaired by Sir Llewellyn Edwards, will be completely independent of JHIL and will commence operation with assets of $293 million. The Foundation has sufficient funds to meet all legitimate compensation claims anticipated from people injured by asbestos products that were manufactured in the past by two former subsidiaries of JHIL. JHIL CEO, Mr Peter Macdonald said that the establishment of a fully-funded Foundation provided certainty for both claimants and shareholders. "The establishment of the Medical Research and Compensation Foundation provides certainty for people with a legitimate claim against the former James Hardie companies which manufactured asbestos products," Mr Macdonald said. "The Foundation will concentrate on managing its substantial assets for the benefit of claimants. Its establishment has effectively resolved James Hardie's asbestos liability and this will allow management to focus entirely on growing the company for the benefit of all shareholders." A separate fund of $3 million has also been granted to the Foundation for scientific and medical research aimed at finding treatments and cures for asbestos diseases. The $293 million assets of the Foundation include a portfolio of long term securities, a substantial cash reserve, properties which earn rent and insurance policies which cover various types of claims, including all workers compensation claims. Towers Perrin has been appointed to advise the Foundation on its investments, which will generate investment income and capital growth. In establishing the Foundation, James Hardie sought expert advice from a number of firms, including PricewaterhouseCoopers, Access Economics and the actuarial firm, Trowbridge. With this advice, supplementing the company's long experience in the area of asbestos, the directors of JHIL determined the level of funding required by the Foundation. "James Hardie is satisfied that the Foundation has sufficient funds to meet anticipated future claims," Mr Macdonald said. The initial $3 million for medical research will enable the Foundation to continue work on existing programs established by James Hardie as well as launch new programs. When all future claims have been concluded, surplus funds will be used to support further scientific and medical research on lung diseases. Mr Macdonald said Sir Llewellyn Edwards, who has resigned as a director of James Hardie Industries Limited to take up his new appointment as chairman of the Foundation, has enjoyed a long and distinguished career in medicine, politics and business. His experience with James Hardie will assist the Foundation to rapidly acquire the knowledge it needs to perform effectively. Sir Llew is a director of a number of organisations including Westpac Banking Corporation and is also Chancellor of the University of Queensland. The other Foundation directors are Mr Michael Gill, Mr Peter Jollie and Mr Dennis Cooper. Ends. For further details contact: Greg Baxter, Senior Vice President Corporate Affairs Tel: Mob: This document is available from the Investor Relations Section of the James Hardie website – www.jameshardie.com This document contains forward-looking statements. Forward-looking statements are subject to risks and uncertainties and, as a result readers should not place undue reliance on such statements. The inclusion of these forward-looking statements should not be regarded as a representation that the objectives or plans described will be realised." 93 I have excluded the telephone number and mobile number set out in the announcement. 94 It was submitted that the Draft ASX Announcement was not released to the public. The Final ASX Announcement was. But it was based upon the Draft ASX Announcement. 95 While none of the non-executive directors offered evidence of contrition, this was not a case of a defendant guilty of obvious and palpable wrongdoing maintaining innocence against the overwhelming weight of evidence (Australian Securities and Investments Commission v Vines [2006] NSWSC 760; (2006) 58 ACSR 298 at 331-332 [103]). 96 Furthermore, there is a tension when a matter is the subject of an appeal or likely to be the subject of an appeal and there is perceived to be some significance in a resolute continuance of a denial of events found by the primary judge (Australian Securities and Investments Commission v Whitlam (No 2) [2002] NSWSC 718; (2002) 42 ACSR 515 at 520 [16]). 97 I do not place a great deal of weight on the lack of evidence of contrition. 98 The first element of seriousness identified by Austin J was the importance of the provision contravened in terms of public policy. 99 Section 180(1) imposes a statutory duty much like the duty at common law. Its public policy value is to ensure that boards of directors of companies are composed of individuals with suitable skills to monitor the actions of management and to perform any special tasks for which they are appointed. In Deputy Commission of Taxation v Clark [2003] NSWCA 91; (2003) 57 NSWLR 113 at 140 [108]-[109] Spigelman CJ said: "What constitutes breach of the standards of care and of diligence, in a particular case, will depend on a wide variety of circumstances including the precise nature of the business conducted by the company and the composition of its board. However, the case law indicates that there is a core irreducible requirement of involvement in the management of the company. Although the standard of skill may vary in accordance with the particular skills of the director, the core, irreducible requirement of skill involves an objective test, such as "ordinary competence" ( Kemish , above at 373 per Foster J) or "reasonable ability" ( Rema Industries and Services Pty Ltd v Coad (1992) 107 ALR 374 at 382; 7 ACSR 251 at 259 per Lockhart J). An equivalent objective test applies to the core irreducible requirement of diligence, such as "reasonable steps to place themselves in a position to guide and monitor the management of the company" per Rogers CJ CommD in AWA Ltd v Daniels , above at 864, adopted by Clarke and Sheller JA on appeal in Daniels v Anderson at 501." 100 As Austin J points out in Australian Securities and Investments Commission v Vines [2003] NSWSC 1116; (2003) 182 FLR 405 at 415 [38] there is encompassed by the statutory formulation of care and diligence an objective standard measured by reference to what a reasonable man of ordinary prudence would do enhanced where the directorial appointment is based on special skill by an objective standard of skill referable to the circumstances, notwithstanding the absence of the word "skill" from the statutory formulation. 101 The circumstances in which Section 180(1) is breached will vary from the trivial where a bias towards exoneration under Section 1317S(2) will be likely, to the serious in which that bias will be unlikely, or less likely. 102 It was submitted that since the release of the Final ASX Announcement was but part of a series of communication strategies for informing the public of the separation of Coy and Jsekarb from the James Hardie group, the contravention of Section 180(1) was at the lower end of the spectrum of seriousness and misleading aspects of the Draft ASX Announcement were errors of emphasis in what the board was told was a single aspect of a much wider strategy in the approval and implementation of which the non-executive directors were not involved. 103 I do not accept that submission. This event, while isolated, was highly significant. The board had decided to form the Foundation, to settle Coy and Jsekarb upon it and to provide a level of funding to meet future asbestos claims. The non-executive directors knew from the board papers they had received at this and earlier meetings that JHIL had to convince the public that there were sufficient funds to meet all legitimate asbestos claims. They had rejected an earlier proposal that did not provide sufficient funding. They were aware of the significance of what was to be said in the Draft ASX Announcement about the level of funding. The information at their disposal did not support the emphatic terms of the Draft ASX Announcement. 104 This was a serious breach of duty and a flagrant one. The non-executive directors were endorsing JHIL's announcement to the market in emphatic terms that the Foundation had sufficient funds to pay all legitimate present and future asbestos claims, when they had no sufficient support for that statement and they knew, or ought to have known, that the announcement would influence the market. 105 Here the negligently made misleading statement was serious as it was a deliberate attempt to influence the market to an acceptance of the separation of Coy and Jsekarb, with their attendant asbestos claims, from the James Hardie group. 106 Included in the material made available to them at the 15 February 2001 Meeting was a sensitivity analysis forming part of the Cashflow Model. It demonstrated that a drop of 1% in the investment rate adopted in the Cashflow Model halved the fund. In other words, on a 51 year analysis, the fund would be exhausted somewhere between year 20 and year 25. The shortcomings of the Cashflow Model must have been obvious to the non-executive directors, or at least they ought to have been, and they should have realized that they were prevented from approving the unequivocal and unqualified statements as to the certainty of sufficient funding in the Draft ASX Announcement. 107 The meeting was not informed that PwC and Access Economics had been instructed not to analyse the assumptions underlying the Cashflow Model. All the non-executive directors were told was that PwC and Access Economics had found the Cashflow Model to be logically sound and technically correct. But that did not justify the emphatic statements made in the Draft ASX Announcement. That statement simply drew attention back to the Cashflow Model and its sensitivity analysis denied the accuracy of the statements as to sufficiency of funding in the Draft ASX Announcement. 108 There were a number of occasions subsequent to the meeting at which the Draft ASX Announcement was approved when the non-executive directors should have complained about the statements in the Draft ASX Announcement and other statements to like effect. None of them did. The evidence of those non-executive directors who gave evidence was that they did not read, or had no recollection of reading, such statements. I did not accept the chorus of denial of recollection to be genuine. 109 Like Austin J in Vines 65 NSWLR at 293 [51], I do not feel myself constrained to ignore conduct after the event. 110 It was submitted that my findings of unsatisfactory conduct on the part of Ms Hellicar should not be used in determining the presence or absence of honesty under Section 1317S(2) and Section 1318(1) as that matter had to be decided at the time of contravention. 111 As it has turned out my decision that Ms Hellicar has not satisfied me that she acted honestly in approving the Draft ASX Announcement was not based on findings as to credit. I arrived at that view for the same reasons as I found that Mr Brown and Mr Willcox had not satisfied me that they acted honestly in approving the Draft ASX Announcement. 112 It is true that the question of honesty must be determined at the time the duty is breached. But it cannot be correct to say that subsequent conduct cannot be taken into account. Findings as to credit subsequent to an event may be highly significant in determining whether an earlier breach of duty was nonetheless committed honestly. 113 Had it been necessary I would have relied upon my rejection of the chorus of denials and my findings of unsatisfactory conduct on the part of Ms Hellicar to conclude that the non-executive directors had not established that they acted honestly at the antecedent time they breached their duty of care and diligence. 114 It was submitted that there was no evidence of damage or harm emanating from the publication of the Final ASX Announcement other than the legal liability on the part of JHIL established in these proceedings. 115 The Final ASX Announcement would not have been understood to convey representations of certainty to sophisticated readers. They would have assumed, however, that such emphatic statements as the Final ASX Announcement contained could only be made if very conservative assumptions had been adopted by JHIL in determining the funding level for the Foundation. A risk free investment earnings rate was not adopted in the Cashflow Model. It adopted 11.7%. 116 There were a series of analysts' reports and newspaper articles regarding the establishment of the Foundation published shortly after the publication of the Final ASX Announcement. None of them stated that it was certain that there would be sufficient funds for asbestos claimants or that JHIL had said that this was certain. 117 Apart from the current proceedings, in which no penalty or costs order is sought against JHIL, no other proceeding in respect of the Final ASX Announcement has been brought, nor could now be brought successfully given the limitation period. 118 As Austin J observed in Vines 65 NSWLR at 294 [55] of this third component of seriousness, it can give rise to awkward and difficult questions of causation. What his Honour suggested, and I endorse, at 294-295 [56] is that it is sufficient to deal with this issue in general terms: "It was sufficient for Tadgell J in Commonwealth v Friedrich and for Mandie J in ASIC v Plymin (No 2) to advert to the effect of the defendants' contravening conduct in general terms, without making any specific findings about causation for the purpose of exercising the discretion. Consistently with that approach, it seems to me adequate, in the case of negligently misleading statements, to consider the degree of plausibility, in a general sense, of the contention that the contravening conduct caused or did not cause loss, having regard to the applicable principles of causation. The stronger the likelihood that loss has been caused, the more powerful this factor becomes as a factor against granting leave. Conversely, the weaker the likelihood is that the contravening conduct caused loss, the weaker is the "serious contravention" factor." 119 The publication of the Final ASX Announcement had the effect of maintaining the market price of JHIL shares. Thus, the market operated on a false basis and by reason of the misleading announcement the price of JHIL shares was artificially maintained. That increased the potential harm to JHIL if the misleading statements were revealed. 120 It was submitted that this effect lasted for only 41 minutes before the Press Conference Statements were made. But those statements did not supplant the effect of those contained in the Final ASX Announcement. They enforced them. 121 With respect to the other matters identified by Austin J of whether advice was taken, whether a standard practice was followed and whether the transgressor was paid, none raises an issue of significance in the circumstances of this case. 122 Of the negative criteria accepted by Austin J, none was present in this case with the exception of flagrancy of the breach. 123 Mr Gillfillan and Mr Koffel were appointed to the JHIL board to provide strategic advice in relation to JHIL's operations in the US. Those operations had become, and were expected to continue to be, the main source of profitability and revenue for the company. 124 It was submitted that the gravity of the contravention by them was of a lower scale than that of the other non-executive directors who were physically present at the 15 February 2001 Meeting and who approved the Draft ASX Announcement. Had any of the advisers and, in particular, Allens, been aware that the US directors were not entitled to rely on their fellow directors, management, or independent advisers, Allens would have insisted, it was submitted, that Mr Gillfillan and Mr Koffel be provided with copies of the Draft ASX Announcement. It was submitted that had Mr Gillfillan and Mr Koffel abstained from voting, the Draft ASX Announcement would still have been approved by the directors present at the meeting. 125 In the manner in which Mr McGregor conducted board meetings, the silence of Mr Gillfillan and Mr Koffel was, in effect, a vote approving the Draft ASX Announcement. 126 The fact that the Draft ASX Announcement would have been approved in any event does not excuse the conduct of the US directors. 127 Nor do I consider their breach of duty to be of a lower flagrancy to the conduct of those who attended the 15 February 2001 Meeting in person. There was discussion at the meeting of the Draft ASX Announcement. The statements as to the key message to be communicated to the market made at the meeting bore a correlation to the paragraphs of the Draft ASX Announcement. That in itself may have been sufficient for Mr Gillfillan and Mr Koffel to be taken to have approved the release of the Draft ASX Announcement. But there was clearly enough discussion to have alerted Mr Gillfillan and Mr Koffel to the fact that the board was considering a document that they did not have. Their failure to ask for a copy and their silence knowing that it would be taken as a vote in favour of approval was, in my view, just as flagrant as the approval of the Draft ASX Announcement by those who attended the meeting in person. 128 I dismiss the applications of Mr Brown, Mr Gillfillan, Ms Hellicar, Mr Koffel, Mr O'Brien, Mr Terry and Mr Willcox for relief under Section 1317S(2) and Section 1318(1). I must make declarations of contravention of Section 180(1) under Section 1317E(1). I will return later in these reasons to the form of the declarations. 1.4 Draft ASX Announcement and Mr Shafron 129 Mr Shafron was one of the company secretaries of JHIL. He is a qualified legal practitioner with Bachelor and Masters of Law degrees from the University of Sydney. He was admitted to practice in Australia and in California. He performed the role of general counsel. 130 In Macdonald (No 11) I found Mr Shafron in breach of Section 180(1) in failing to advise the board that the Draft ASX Announcement was expressed in too emphatic terms concerning the adequacy of the funding made available to meet all legitimate present and future asbestos claims brought against Coy and Jsekarb. 131 Mr Shafron did not give evidence. I have already rejected the submission of ASIC that unless a person gives evidence on the topic the Court cannot be satisfied that the person acted honestly for the purposes of Section 1317S(2) or Section 1318(1). 132 Mr Shafron did not read testimonial affidavits. But that does not mean that he is excluded from seeking relief under Section 1317S(2) or Section 1318(1). But the absence of evidence by him and other persons as to his character and directorial performance leaves him in a worse position than that of Mr O'Brien and Mr Terry. There is nothing in the evidence from which I am positively persuaded that Mr Shafron acted honestly in failing to advise the board of the too emphatic terms of the Draft ASX Announcement. 133 Mr Shafron was involved in the making of decisions that affected the whole or a substantial part of the business of JHIL. The separation proposal considered by the board at the meeting at which the Draft ASX Announcement was approved was such a decision. And Mr Shafron played a vital role in the board's deliberations thereby participating in the making of that decision. 134 As general counsel protecting JHIL from infringement of statutory obligations, it must have been obvious to Mr Shafron, or at least it ought to have been, that if JHIL authorised the release of a public statement concerning separation that was false and misleading, that would be harmful, or potentially harmful, to JHIL in that it might contravene or risk contravening s 995(2) (Section 995(2)) and s 999 (Section 999) of the Corporations Law as carried over into the Corporations Act. 135 Section 995(2) was in the following terms: "A person shall not, in or in connection with: (a) any dealing in securities; or (b) without limiting the generality of paragraph (a): (i) the allotment or issue of securities; (ii) a notice published in relation to securities; (iii) the making of, or the making of an evaluation of, or of a recommendation in relation to, offers under a takeover bid; (iv) the carrying on of any negotiations, the making of any arrangements or the doing of any other act preparatory to or in any other way related to any matter referred to in sub paragraph (i), (ii) or (iii); engage in conduct that is misleading or deceptive or is likely to mislead or deceive." 136 Section 999 was in the following terms: "A person must not make a statement, or disseminate information, that is false in a material particular or materially misleading and: (aa) is likely to induce other persons to subscribe for securities; or (a) is likely to induce the sale or purchase of securities by other persons; or (b) is likely to have the effect of increasing, reducing, maintaining or stabilising the market price of securities; if, when the person makes the statement or disseminates the information: (c) the person does not care whether the statement or information is true or false; or (d) the person knows or ought reasonably to have known that the statement or information is false in a material particular or materially misleading." 137 Guarding against legal risks to JHIL was at the core of Mr Shafron's responsibilities as general counsel. 138 Most of the submissions on behalf of Mr Shafron had been dealt with in considering the position of the non-executive directors. 139 It was submitted that it should be apparent to the Court from its own review of Mr Shafron's communications that they bespeak the honest execution of his duties as general counsel. In a general sense, that may be so. 140 It was submitted that the contraventions found should be considered to be isolated, out of character and probably explained by the presence at the board meeting of more experienced and senior external lawyers from Allens and inattention arising from a profoundly busy and demanding period of work before and at the meeting. 141 I have already dealt with these contentions with respect to the non-executive directors. They apply a fortiori to Mr Shafron whose duty it was to protect JHIL from legal harm. 142 ASIC submitted that it was appropriate for the Court to take into account that there was no cooperation from the defendants. I place little store on that submission so far as Mr Shafron is concerned. He resides in the US. He returned to Australia to attend ASIC's examination of him during its investigation and he instructed his solicitors in Australia to accept service when ASIC commenced these proceedings. 143 It was submitted that since the wording of the Draft ASX Announcement was not a matter for reliance upon management or outside experts, the directors should have known without being told by anyone that the Draft ASX Announcement was too emphatic and not supportable. It was submitted it was not a serious contravention to neglect to tell sophisticated, intelligent and experienced board members something they already knew or something that must have been obvious to them. It was submitted that it would have been against board etiquette for someone in Mr Shafron's position to do so. 144 I do not accept that submission. If the directors were not concerned at the emphatic terms of the Draft ASX Announcement it was Mr Shafron's duty as general counsel, in protecting JHIL, to warn them that the contents were too emphatic, etiquette or no etiquette. 145 Gregory John Baxter was the senior vice-president of corporate affairs of JHIL. His name appeared on the Draft ASX Announcement and on the Final ASX Announcement. Announcements to the ASX other than those of a financial nature were drafted by corporate affairs under his supervision. 146 It was submitted that Mr Baxter was the "real culprit". But that does not excuse Mr Shafron's breach of duty. 147 For similar reasons to those enunciated with respect to the non-executive directors, I dismiss Mr Shafron's application for relief under Section 1317S(2) and Section 1318(1) with respect to his failure to warn the board of the too emphatic content of the Draft ASX Announcement. I will make a declaration of contravention of Section 180(1) under Section 1317E(1) the form of which will be discussed later in these reasons. 1.5 Cashflow Model and Mr Shafron 148 In Macdonald (No 11) I found that Mr Shafron had breached Section 180(1) in failing to advise the JHIL board at the 15 February 2001 Meeting that a review of the Cashflow Model by PwC and Access Economics was limited to reporting on the logical soundness and technical correctness of the model, that it had not been verified and PwC and Access Economics had been specifically instructed not to consider the key assumptions adopted in it, being fixed investment earnings rates, litigation and management costs and future claim costs. 149 Mr Morley told the meeting that the Cashflow Model had been reviewed by PwC and Access Economics and they had found it to be logically sound and technically correct. He did not say that the reviews were limited to this analysis. He did not say that key variables had not been considered. 150 Mr Shafron knew, or ought to have known, that the unqualified statements that PwC and Access Economics had advised JHIL and that advice supplemented the company's long experience in the area of asbestos and formed the basis of determining the level of funding required to meet all future claims was false or misleading and potentially damaging to JHIL. 151 In the absence of explanation by Mr Morley, it was Mr Shafron's duty, in protecting JHIL from legal risk, to have advised the board of the limitations. 152 It was submitted that Mr Shafron's role in the discussions on this topic were secondary and, it was submitted, his level of default was not substantial. 153 Stephen Gregory Ashe was vice-president public affairs of JHIL. He reported to Mr Baxter. Mr Ashe sent an email to Mr Macdonald, Mr Shafron and Mr Morley. It suggested wording for the reports to be provided by PwC and Access Economics. The wording suggested included a finding that the Cashflow Model was logically sound and technically correct. It contained the statement that the Cashflow Model showed that a surplus of funds would exist after all claims had been paid. But the suggested wording concluded: "Key variables in the model which we have not checked and on which we express no opinion are: investment earnings rates litigation and management costs future claim costs." 154 It was submitted that it was Mr Macdonald and not Mr Shafron who responded to this email indicating that Mr Shafron's role was secondary. 155 The preparation of the Cashflow Model was the core responsibility of Mr Morley. It was Mr Morley who presented the Cashflow Model to the board meeting. Mr Shafron did not have carriage of the issue of the PwC and Access Economics reviews. It was submitted that responsibility fell much more to either Mr Morley or Mr Macdonald to address the board on this issue. 156 As with the breach of Section 180(1) by Mr Shafron with respect to the over emphatic statements in the Draft ASX Announcement, reference to the evidence, he having elected not to give evidence himself, does not provide a basis for it appearing to me that Mr Shafron acted honestly when he contravened a civil penalty provision and the first limb of Section 1317S(2) and that of Section 1318(1) has not been established and Mr Shafron is not entitled to relief under those provisions. 157 If I be wrong in that view I would have rejected the application for relief under those provisions under one or other of the two discretions in them. 158 No contrition is expressed in the submissions made on Mr Shafron's behalf. But I have already indicated my view on that topic. 159 It was submitted that the most likely inferred explanation of Mr Shafron's conduct was momentary inattention borne of a confidence that Mr Morley would address the board on the subject with his usual thoroughness and accuracy. 160 Mr Shafron was the second or third most senior executive of JHIL. He took part in the slide presentation at the 15 February 2001 Meeting in the unusual circumstance of the presentation to the board of a draft release and bearing in mind the flagrancy of the adoption of the over emphatic statements in it. 161 I do not accept that Mr Shafron's conduct is explained as momentary inattention. He understood that the scope of the review by PwC and Access Economics was limited and that key variables had not been considered. The Draft ASX Announcement contained the statement: "In establishing the Foundation, James Hardie sought expert advice from a number of firms, including actuaries Trowbridge, Access Economics and PricewaterhouseCoopersThis [sic] advice supplemented the company's long experience in the area of asbestos and formed the basis of determining the level of funding required to meet all future claims". 162 To allow that statement to pass when he knew that key assumptions in the Cashflow Model had not been checked by PwC and Access Economics was a flagrant breach on his part, albeit that primary responsibility lay with Mr Morley and, to a lesser extent, with Mr Macdonald. 163 I dismiss the application of Mr Shafron for relief under Section 1317S(2) and Section 1318(1) with respect to his failure to advise the board of JHIL of the limited nature of the reviews by PwC and Access Economics. The form of the declarations to be made under Section 1317E(1) will be dealt with later. 1.6 DOCI Information and Mr Shafron 164 At the 15 February 2001 Meeting the board resolved to execute a deed of covenant and indemnity (DOCI). Information in relation to the DOCI (DOCI Information) was not notified to the ASX shortly after the board meeting. As JHIL was a listed disclosing entity to which the provisions of the listing rules of the ASX rules applied and those rules, namely listing rule 3.1 (Listing Rule 3.1), required continuous disclosure, s 1001A(2) of the Corporations Law as carried over into Corporations Act (Section 1001A(2)) applied. It was in the following terms: "(1) This section applies to a listed disclosing entity if provisions of the listing rules of a securities exchange: (a) apply to the entity; and (b) require the entity to notify the securities exchange of information about specified events or matters as they arise for the purpose of the securities exchange making that information available to a stock market conducted by the securities exchange. (2) The disclosing entity must not contravene those provisions by intentionally, recklessly or negligently failing to notify the securities exchange of information: (a) that is not generally available; and (b) that a reasonable person would expect, if it were generally available, to have a material effect on the price or value of ED securities of the entity." 165 At that time Listing Rule 3.1 provided: "Once an entity is or becomes aware of any information concerning it that a reasonable person would expect to have a material effect on the price or value of the entity's securities, the entity must immediately tell ASX that information. "Information" includes information a reasonable person would expect an entity to give ASX to prevent a false market in the entity's securities. This rule does not apply to particular information while each of the following applies: 3.1.1 A reasonable person would not expect the information to be disclosed 3.1.2 The information is confidential 3.1.3 One or more of the following applies. (a) It would be a breach of law to disclose the information (b) The information concerns an incomplete proposal or negotiation (c) The information comprises matters of supposition or is insufficiently definite to warrant disclosure (d) The information is generated for the internal management purposes of the entity (e) The information is a trade secret." 166 The DOCI Information of which Mr Shafron became aware by the time of the 15 February 2001 Meeting was that, subject to certain terms and conditions, Coy and Jsekarb provided covenants that they would not make any claim against JHIL arising from or incidental to, the marketing, manufacture, processing, purchase, sale, distribution or importation, by Coy and Jsekarb, of asbestos or products containing asbestos, and in relation to past dividends, distributions and management fees (The Covenants). Secondly, that, subject to certain terms and conditions, Coy and Jsekarb would indemnify JHIL against claims which might be made against it, and all losses suffered or incurred by it, arising from or incidental to, the marketing, manufacture, processing, purchase, sale, distribution or importation, by Coy and Jsekarb, of asbestos or products containing asbestos (The Indemnities). Thirdly, that in consideration JHIL would make annual payments to Coy in each of the years 2001 to 2042 of $5,296,250, make annual payments to Jsekarb in each of the years 2001 to 2042 of $278,250 and, under certain conditions, accelerate payments to either or both of Coy and Jsekarb. Fourthly, Coy provided an option by an additional covenant to the "JHIL Shareholder", defined as the person who was the sole registered holder of all of the issued shares of JHIL, that on certain conditions, including the receipt of a notice from the JHIL Shareholder, it would acquire all of the shares of JHIL in whole and in one lot (The Put Option). 167 In Macdonald (No 11) I found that by failing to advise Mr Macdonald or the board of JHIL that it needed to consider whether JHIL was required to disclose the DOCI Information to the ASX; in failing to obtain advice for Mr Macdonald or the board or provide his own advice to the board as to whether they were required to disclose the DOCI Information to the ASX; or in failing to advise Mr Macdonald or the board to resolve or determine that JHIL would disclose the DOCI Information to the ASX; Mr Shafron failed to discharge his duties to JHIL with the degree of care and diligence that a reasonable person would exercise if an officer of a corporation in JHIL's circumstances and occupying the office held by Mr Shafron with the same responsibilities as he had. 168 It was submitted that Mr Shafron was entitled to assume that any disclosure obligation that JHIL had would have been the subject of advice by Allens before or at the 15 February 2001 Meeting. It was submitted that default on his part is explicable and was not substantial being consistent with a subjective understanding by Mr Shafron that questions of disclosure would or should have been the subject of advice by the expert legal advisers. 169 But Mr Shafron was aware that there was nothing in the board papers for the 15 February 2001 Meeting that dealt with the subject of disclosure, a topic upon which he was fully familiar having advised Mr Macdonald in writing on the continuous disclosure implications of Trowbridge reports obtained by JHIL some time earlier. He should have been alerted by the lack of a paper on disclosure to his need to ensure that the topic was canvassed at the meeting. 170 There was evidence that the continuous disclosure obligation was part and parcel of the role and responsibility, not only of a chief executive officer, but also of the chief financial officer and the company's secretary and general counsel. 171 It was submitted that Mr Macdonald and Mr Baxter were the two senior executives with actual and practical primary responsibility for questions of disclosure to the ASX. As the company's general counsel I would add Mr Shafron to that list. 172 It was submitted that the Final ASX Announcement stated that the Foundation would commence operation with assets of $293m, a figure that included the amounts payable under the DOCI and amounted to a disclosure of a material part of the DOCI Information. I rejected that argument in Macdonald (No 11). This could not be a disclosure in compliance with Listing Rule 3.1. There was no mention of the DOCI, nor The Covenants, nor The Indemnities, nor The Put Option. 173 It was submitted that the evidence revealed that the failure to disclose the DOCI Information caused the absence in the market of information that would have had a material positive effect on the price of JHIL's shares reinforcing the positive effect about the statements. But, again, this means that the market was operating on a false basis and the price for JHIL shares was artificially increased. 174 Furthermore, the continuous disclosure obligation is not limited to disclosure of information likely to have a material negative effect on share price. It applies equally to information likely to have a material positive effect on share price. 175 It was submitted that JHIL's annual report released five months after the 15 February 2001 Meeting disclosed relevant financial information in relation to it, namely the amounts paid and payable under it. 176 Again this is a submission I rejected in Macdonald (No 11). The annual report contained a note to the accounts in explanation of a provision of $73.4m in relation to the Foundation. The disclosure made no mention of The Covenants, The Indemnities or The Put Option. 177 The DOCI Information was disclosed to the United States Securities and Exchange Commission eight months after the 15 February 2001 Meeting. But the DOCI Information was required to be disclosed at about the time the DOCI was executed. 178 As with the other breaches of Section 180(1), the evidence does not establish a basis upon which it appears to the Court that Mr Shafron acted honestly in failing to advise on disclosure of the DOCI Information at the 15 February 2001 Meeting and Mr Shafron has not satisfied the first limb of Section 1317S(2) and Section 1318(1) and is not entitled to relief under those provisions. 179 If it were appropriate to consider the second limb of those provisions, it has been said that the continuous disclosure provisions are intended, amongst other things, to prevent selective disclosure of market sensitive information (Australian Securities and Investments Commission v Southcorp Ltd (No 2) [2003] FCA 1369; (2003) 130 FCR 406 at 408 [2]). Protective legislation should be construed beneficially to the public (Exicom Pty Ltd v Futuris Corporation Ltd (1995) 123 FLR 394 at 397), even if a distinction between "punitive" and "protective" proceedings or orders is elusive (Rich v Australian Securities and Investments Commission [2004] HCA 42; (2004) 220 CLR 129 at 145 [32]). The importance of Section 1001A(2) in terms of public policy is that it seeks to enforce immediate disclosure of information not generally available that might be expected to have a material effect on the price of listed shares. The significance that the legislature places upon continuous disclosure was discussed by French J in Re Chemeq Ltd; Australian Securities and Investments Commission v Chemeq Ltd [2006] FCA 936; (2006) 234 ALR 511 at 522-523 [42]-[46]. 180 The failure of JHIL to disclose the DOCI Information was flagrant. So was Mr Shafron's failure to bring the matter to the attention of Mr Macdonald or the board. The legislation requires disclosure of fresh information in a timely fashion. Accurate and timely information is an essential requisite of an informed share market. 181 I dismiss the application of Mr Shafron for relief under Section 1317S(2) and Section 1318(1) with respect to his failure to advise on the need to disclose the DOCI Information. I will make a declaration under Section 1317E(1) in a form to which I will return later in these reasons. 1.7 Cashflow Model and Mr Morley 182 In similar terms to my finding with respect to Mr Shafron on the limited nature of the reviews by PwC and Access Economics, I found in Macdonald (No 11) that Mr Morley also breached his duty under Section 180(1) in failing to advise the 15 February 2001 Meeting of the limited nature of the reviews by PwC and Access Economics. 183 Mr Morley was the chief financial officer of JHIL who oversaw the development of the Cashflow Model. 184 At the 15 February 2001 Meeting the slide presentation included a slide on fund life expectancy/sensitivity. It contained a reference to future funds availability that Mr Morley addressed, advising the directors that available future funds depended on three major assumptions: the Trowbridge cashflows, the assets of the fund and the earnings of the fund. 185 Mr Morley took the board through the Cashflow Model. Of the sensitivity table in it, Mr Morley told the meeting that using Trowbridge's most likely scenario the table showed the assets available from year 10 through to year 51 at varying earnings rates on a pre-tax basis. The table also showed that if the earnings rate was reduced from 11.7% to 10.7% the fund would be exhausted somewhere between year 20 and year 25. 186 Mr Morley said Mr Macdonald then addressed a bullet point on the key assumptions slide and said that the model showed that a surplus was the most likely outcome. Mr Morley then addressed the final bullet point on the slide and said the Cashflow Model had been reviewed by PwC and Access Economics and they had found it to be logically sound and technically correct. 187 Mr Morley was aware that neither PwC nor Access Economics had addressed key assumptions in the Cashflow Model. He had received the email from Mr Ashe. He said nothing about these limitations at the 15 February 2001 Meeting. 188 ASIC submitted that while Mr Morley gave evidence, the Court could not be positively persuaded that he had acted honestly when contravening Section 180(1) because he gave no evidence that he had acted honestly in so doing. 189 A finding that a person acted honestly for the purposes of Section 1317S(2) and Section 1318(1) is not determined by a self-serving statement to that effect by the person seeking exoneration. The Court will determine the matter on the evidence. The evidence included the testimony of Mr Morley at trial, including lengthy cross-examination. It included his affidavit sworn for the purpose of this current hearing. Mr Morley was originally required for cross-examination by ASIC but that requirement was subsequently withdrawn. In addition Mr Morley relied upon impressive testimonial affidavits. 190 It was submitted that Mr Morley's character witnesses reinforced a conclusion that the breach of duty by Mr Morley was out of character with the manner in which he customarily performed his duties and militated against the conclusion that in committing the breach he did not act honestly as opposed to carelessly failing to appreciate that what he said might mislead unless something was added. It was submitted that Mr Morley's failure to advise the board of the limitations in the PwC and Access Economics reviews is probably characterised as an isolated error of judgment falling well short of a failure to act honestly. 191 I am not prepared to reach those conclusions. Mr Morley knew that PwC and Access Economics had not reviewed key variables in the Cashflow Model. One of those key variables was investment earning rates. Mr Morley explained to the meeting the sensitivity of the Cashflow Model to the adopted investment earnings rate of 11.7%. The Cashflow Model suggested that there would be a surplus in year 51. But Mr Morley pointed out that if the investment earnings rate was 10.7% the life of the fund would be halved. Mr Morley must have known that to make the statement he did conveyed the impression that PwC and Access Economics had given their imprimatur to the Cashflow Model. 192 In the absence of an explanation by Mr Morley of how he came not to mention the limitations in the PwC and Access Economics reviews I am not persuaded that I should make the positive finding that in failing to advise the board of the limitations in the reviews he acted honestly. 193 Mr Morley has failed to establish the first limb of Section 1317S(2) and Section 1318(1) and is not entitled to relief under those provisions. 194 If I be wrong in that view I would, as with other defendants, have rejected relief under one or other of the two discretions in them. 195 If Mr Shafron's failure to advise the meeting of the limitations in the reviews conducted by PwC and Access Economics was a flagrant breach of duty under Section 180(1), a fortiori with respect to Mr Morley who was responsible for the Cashflow Model. 196 Mr Morley has apologised. In his affidavit read in this hearing he swore: "Having carefully considered the judge's reasoning and taking into account his conclusions that what I said was capable of giving a misleading impression, I regret that I did not elaborate further on the PwC and Access Economics reviews. I have always prided myself on my openness and thoroughness in ensuring that all relevant information is made available to those who require it in a professional context, whether that is to board members, investors, regulators and so on. Accordingly, I deeply regret that I conducted myself in a way that has been judged by a Justice of the New South Wales Supreme Court as falling short of the standards of care and diligence expected of a reasonable CFO in like position." 197 That stands in Mr Morley's favour. But for the reasons stated with respect to Mr Shafron and for the reasons stated above I do not accept the submission of aberration and those matters outweigh the fact of contrition. 198 I dismiss the application of Mr Morley for relief under Section 1317S(2) and Section 1318(1) with respect to his failure to advise the board of JHIL of the limited nature of the reviews by PwC and Access Economics. I will make a declaration under Section 1317E(1) in the form to be dealt with later in these reasons. 1.8 ABN 60 Information and JHINV 199 At a meeting of the board of directors of JHINV on 25 March 2003 (25 March 2003 Meeting) the transfer of JHIL out of the James Hardie group was approved. 200 As part of a members' scheme of arrangement approved by this Court on 11 October 2001, JHIL issued to JHINV 100,000 partly paid shares at a cost of $50 with an uncalled amount of $19,603.62 giving a total uncalled capital of $1.96 billion. 201 The steps approved at the 25 March 2003 Meeting were the cancellation of the partly paid shares by JHIL; a consolidation of JHIL share capital into one fully paid share held by JHINV; the reduction of JHIL share capital by approximately $1.5m and payment of that amount to JHINV; the execution of a trust deed by JHINV settling $2,000 on a foundation (ABN 60 Foundation); the execution of a deed of covenant, indemnity and access (DOCIA) by JHINV and JHIL; the issue of 1,000 shares by JHIL to the ABN 60 Foundation; and the cancellation by JHIL of its one fully paid share owned by JHINV for no consideration (ABN 60 Information). 202 In Macdonald (No 11) I found that JHINV breached Section 674(2) by failing to provide the ABN 60 Information to the ASX on or about 25 March 2003. 203 Allens gave advice in January 2003 that the ABN 60 Information should be disclosed. A number of arguments against disclosure were put to Allens and in a second advice in March 2003 they said that if JHINV correctly held the view that announcing the transaction to the market would not affect the price of its shares nor affect any decision by persons who commonly invested whether or not to buy them, disclosure was unnecessary. 204 Allens had provided draft advice as to how to calculate JHIL's potential asbestos liabilities for the purpose of determining whether there was any need for JHIL to retain the partly paid shares. Mr Morley considered that advice and calculated the potential liability at $11.762m. 205 Prior to the 25 March 2003 Meeting the JHINV disclosure committee met to consider whether the transfer of JHIL and the cancellation of the partly paid shares and related transactions should be disclosed. Mr Baxter's advice to that committee was that it was unnecessary to disclose the transaction to the market. That view was based in part on JHINV's stated position that it had no asbestos liability, did not expect to have a liability and did not provide for any such liability and the potential liability of JHIL, calculated by Mr Morley, was more than covered by JHIL's net assets. 206 It was submitted that there was no dishonesty or impropriety on the part of JHINV. The question of disclosure was properly identified by JHINV and was the subject of legal advice and consideration by senior management and the directors. It was submitted that the decision not to disclose was made by a committee of the board in accordance with JHINV's established policy and procedures in relation to continuous disclosure principles and obligations. It was submitted that JHINV made an error of judgment and that it acted honestly and in good faith believing that the question to be considered was the materiality of the quantum of JHIL's potential liabilities and taking into account that matter, JHINV's conclusion was an available one. 207 It had been put to Mr Humphris that if he assumed that the company had assessed the value of potential liability of JHIL at about $12m and it separated JHIL with net assets to provide for those liabilities the transaction would not be a material one. He agreed but said it depended on how good the calculation was. 208 I determined that the question was not what the management of JHINV believed to be a material transaction: the question was whether the investing public would regard the ABN 60 Information as having a material effect on the JHINV share price. 209 One of the beliefs of JHINV that Allens had said was necessary if the ABN 60 Information was not to be disclosed was that announcing the transaction to the market would not affect any decision by persons who commonly invested, whether or not to buy its shares. That question was not addressed in Mr Baxter's email. 210 To look at the question of disclosure solely on the basis of the potential liability of JHIL for asbestos claims, ignores the fact that there was a negative perception in the market and amongst lenders, rational or irrational, as a result of a perceived connection of JHINV to asbestos through its shareholding in JHIL. Time and effort was expended by JHINV in removing JHIL from the James Hardie group and thereby abating the negative perception. In those circumstances the investing public was likely to regard the ABN 60 Information as having a material effect on the JHINV share price. 211 JHINV should have known that the question they were addressing with respect to disclosure was not the question required by the legislation. And in the absence of evidence as to why the question required by the legislation was not addressed, I am not prepared to infer that JHINV acted honestly in failing to disclose the ABN 60 Information. 212 JHINV has failed to establish the first limb of Section 1317S(2) and is not entitled to the relief it affords. 213 As with the other defendants, if I be wrong in that view, I would have exercised one or other of the discretions in Section 1317S(2) against granting relief. 214 There was no contrition in the submissions on behalf of JHINV but I place little store on that circumstance for the reasons expressed above. 215 I have already addressed the public policy issues with respect to continuous disclosure in considering Section 1001A(2). In this case the breach was flagrant. The requirement of continuous disclosure is important in achieving an informed market. The legislation clearly identified the question to be addressed: would a reasonable person have expected the ABN 60 Information to have had a material effect on the price or value of JHINV shares? 216 A reasonable person would have so concluded in light of the negative sentiment of financiers and the market. JHINV had experienced difficulty in renewing loans because of a perceived connection to JHIL and its potential asbestos liabilities. The severing of the connection between JHINV and JHIL was likely to reduce that negative sentiment. A reasonable person would have expected the ABN 60 Information, by which that severance was to take place, to have had a material effect on the price of JHINV shares. 217 The failure to disclose the ABN 60 Information meant that the market was acting on a false premise, with potential harm to some investors. Decisions to sell shares in JHINV were made on the false assumption that JHINV shares were linked to potential asbestos claims when that perception should have been abated. Shareholders in JHINV who sold shortly after 25 March 2003 may well have sold at a lower price than they would have demanded if the ABN 60 Information had been disclosed to the market. 218 Of the other matters identified by Austin J in Vines 65 NSWLR at 295 [57], while JHINV received legal advice, it failed to address one of the prerequisites to non-disclosure of the ABN 60 Information identified by Allens. It adopted its standard practice of consideration by its disclosure committee, but the committee addressed the wrong question. 219 JHINV did not exhibit the negative constraints identified by Austin J in Vines 65 NSWLR at 295 [60]-[61] of personal gain, impropriety, consciousness of another's impropriety, or deceptiveness. It did exhibit flagrancy. And that feature and potential harm in my view outweigh the absence of other negative constraints. 220 JHINV has failed to satisfy me that it is entitled to relief under Section 1317S(2) and I dismiss its application. I must make a declaration of contravention of Section 674(2) under Section 1317E(1). 2 Declarations 221 A common theme in the submissions with respect to the terms of the declarations that I must make under Section 1317E(1) was the alleged duplication of declarations regarding the same conduct. 222 In Vines v Australian Securities and Investments Commission [2007] NSWCA 126; (2006) 63 ACSR 505 at 509 [14], Spigelman CJ noted that there was duplication in some of the declarations made in that case: "In order to understand the reasons of Austin J it is relevant to note that his Honour made 11 declarations of contravention with respect to various aspects of Mr Vines' conduct. Some of these declarations overlapped, in the sense that they were referable to the same action or inaction, involving ancillary conduct. In this sense his Honour's analysis involved 11 contraventions. For reasons set out in this court's earlier judgment, it was convenient to analyse the contraventions as seven in number." 223 Ipp JA warned against duplication at 549 [214]-[215]: "In making more than one declaration of contravention, care must be taken not to duplicate conduct declared to constitute a contravention as that may result in a person being penalised more than once for the same conduct. It might well be arguable that, as regards the six declarations of contravention that remain alive and are the subject of this appeal, there is a degree of duplication…." His Honour then cited the above passage in the reasons for judgment of Spigelman CJ. 2.1 Declarations in relation to Mr Macdonald 224 I found that Mr Macdonald, like the non-executive directors, was in breach of Section 180(1) in voting in favour of the Draft ASX Announcement. ASIC seeks a declaration that he knew that the Draft ASX Announcement conveyed, or was capable of conveying, the various matters pleaded and he knew or ought to have known that the Draft ASX Announcement was misleading in those respects. 225 It was submitted that the first part of the declaration should be that Mr Macdonald "knew or ought to have known" that the Draft ASX Announcement conveyed, or was capable of conveying, those matters. 226 I reject that submission. I equated Mr Macdonald's position as director to that of the non-executive directors and of them I found that they must have been aware that the Draft ASX Announcement conveyed, or was capable of conveying, those matters. 227 I found that Mr Macdonald contravened Section 180(1) in approving the Final ASX Announcement for release, or in failing to advise that it not be released, or in failing to advise that it be amended before being released to remove the respects in which it was misleading. 228 A similar argument was raised with respect to ASIC's proposed declaration that he knew that the Final ASX Announcement conveyed, or was capable of conveying, the various matters pleaded. It was submitted the declaration should read he "knew or ought to have known". For the reasons set out above I reject that submission. 229 I found Mr Macdonald had breached Section 180(1) in either approving for release to the ASX an announcement dated 23 February 2001 (23 February 2001 ASX Announcement), or failing to advise that it not be released, or failing to advise that it be amended before being released to remove the respects in which it was misleading. 230 ASIC proposes a declaration that says Mr Macdonald knew that the announcement conveyed or was capable of conveying the various matters pleaded and that he knew, or ought to have known, that it was misleading in those respects. 231 Again, it was submitted on behalf of Mr Macdonald that the first part of the declaration should read he "knew or ought to have known". That submission is rejected. 232 A similar rejection of submission applies to the contravention of Section 180(1) constituted by a further announcement of 21 March 2001 (21 March 2001 ASX Announcement). 233 ASIC seeks declarations with respect to my findings that Mr Macdonald was in breach of Section 180(1) by either approving for release to the ASX a set of slides (ASX Slides), or failing to advise that they not be released, in making a presentation in Edinburgh (Edinburgh Representations) and another presentation in London (London Representations) containing statements to the effect that the Foundation was fully funded. 234 Submissions that in each case the collocation should be that he "knew or ought to have known" that they conveyed or were capable of conveying the various matters pleaded are rejected. I found that Mr Macdonald was aware that the Edinburgh Representations, the London Representations and the ASX Slides were false or misleading and not in a minor way. 235 It was submitted that the contraventions in relation to the release of the ASX Slides, the Edinburgh Representations and the London Representations should be combined into one declaration to avoid duplication. I reject that submission. While each event was closely linked temporally, each constituted a separate representation. 236 In its draft declarations, ASIC treats Mr Macdonald's failure to advise of the limitations in the PwC review as a breach of Section 180(1) separate from his failure to advise of the limitations in the Access Economics review. It was submitted that this constituted duplication. I agree. The impugned conduct was a single failure to advise the board of JHIL that both reviews were limited. 237 I will make declarations with respect to Mr Macdonald in the following terms. The Court declares that: 1. The First Defendant contravened s 180(1) of the Corporations Law as carried over into the Corporations Act 2001 (Cth) ( Section 180(1) ) in relation to ABN 60 Pty Ltd (formerly known as James Hardie Industries Ltd) ( JHIL ) by his conduct, as a director and Chief Executive Officer of that corporation, in voting on 15 February 2001 in favour of a resolution of the directors to approve a draft ASX announcement ( Draft ASX Announcement ) and authorise its execution and sending to the Australian Stock Exchange ( ASX ) in circumstances where: (a) he knew that the Draft ASX Announcement conveyed or was capable of conveying that: (i) the material available to JHIL provided a reasonable basis for the assertion in the announcement that it was certain that the amount of funds made available to the Medical Research and Compensation Foundation ( Foundation ) would be sufficient to meet all legitimate present and future asbestos claims brought against two of JHIL's former subsidiaries, Amaca Pty Ltd ( Amaca ) and Amaba Pty Ltd ( Amaba ); (ii) he believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (iii) all of the directors or at least the majority of them believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (iv) JHIL had received expert advice from PricewaterhouseCoopers ( PwC ) and Access Economics that supported the statement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (b) he knew or ought to have known that the Draft ASX Announcement was misleading in those respects. 2. The First Defendant contravened Section 180(1) in relation to JHIL by his conduct, as a director and Chief Executive Officer of that corporation on or about 15 February 2001 when its board of directors voted in favour of a resolution to approve the Draft ASX Announcement and authorise its execution and sending to the ASX, in failing to advise the board that: (a) the Draft ASX Announcement was expressed in too emphatic terms concerning the adequacy of the funding made available to meet all legitimate present and future asbestos claims against Amaca and Amaba; and (b) in that respect the Draft ASX Announcement was misleading. 3. The First Defendant contravened Section 180(1) in relation to JHIL by his conduct, as a director and Chief Executive Officer of that corporation, on or about 15 February 2001 in failing to advise its board of directors that the reviews of a cashflow model ( Cashflow Model ) of the funding being made available to meet asbestos claims brought against Amaca and Amaba had been undertaken by PwC and Access Economics: (a) were limited to reporting on the logical soundness and technical correctness of the Cashflow Model; (b) had not verified, and PwC and Access Economics had been specifically instructed not to consider, the key assumptions adopted by the Cashflow Model, being: (i) fixed investment earnings rates; (ii) litigation and management costs; and (iii) future claim costs. 4. The First Defendant contravened Section 180(1) in relation to JHIL by his conduct, as a director and Chief Executive Officer of that corporation, in either approving for release to the ASX an announcement ( Final ASX Announcement ), failing to advise that it not be released, or failing to advise that it be amended before being released to remove the respects in which it was misleading in circumstances where: (a) he knew that the Final ASX Announcement conveyed or was capable of conveying that: (i) the material available to JHIL provided a reasonable basis for the assertion in the announcement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (ii) Mr Macdonald believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (iii) all of the directors or at least a majority of them believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (iv) JHIL had received expert advice from PwC and Access Economics that supported the statement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (b) he knew or ought to have known that the Final ASX Announcement was misleading in those respects. 5. The First Defendant contravened Section 180(1) in relation to JHIL by his conduct, as a director and Chief Executive Officer of that corporation, on or about 16 February 2001 at a press conference during which he made statements which conveyed that: (a) it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (b) the material available to JHIL provided a reasonable basis for the assertion that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (c) he believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (d) JHIL had received expert advice from PwC and Access Economics that supported the statement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; and (e) JHIL did not have any potential claims on the assets of Amaca and Amaba, in circumstances where he knew or ought to have known that those statements were false and misleading in those respects. 6. The first defendant contravened Section 180(1) in relation to JHIL by his conduct, as a director and Chief Executive Officer of that corporation, on or about 23 February 2001 in either approving for release to the ASX an announcement bearing that date ( 23 February 2001 ASX Announcement ), or failing to advise that it not be released, or failing to advise that it be amended before being released to remove the respects in which it was misleading in circumstances where: (a) he knew that the 23 February 2001 ASX Announcement conveyed or was capable of conveying that: (i) it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present or future asbestos claims brought against Amaca and Amaba; (ii) the material available to JHIL provided a reasonable basis for the assertion in the announcement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (iii) he believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (b) he knew or ought to have known that the 23 February 2001 ASX Announcement was misleading in those respects. 7. The First Defendant contravened Section 180(1) in relation to JHIL by his conduct, as a director and Chief Executive Officer of that corporation, on or about 21 March 2001 in either approving for release to the ASX an announcement bearing that date ( 21 March 2001 ASX Announcement ), or failing to advise that it not be released, or failing to advise that it be amended before being released to remove the respects in which it was misleading in circumstances where: (a) he knew that the 21 March 2001 ASX Announcement conveyed or was capable of conveying that: (i) it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (ii) the material available to JHIL provided a reasonable basis for the assertion in the announcement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos brought against Amaca and Amaba; (b) he knew or ought to have known that the 21 March 2001 ASX Announcement was misleading in those respects. 8. The First Defendant contravened Section 180(1) in relation to JHIL by his conduct, as a director and Chief Executive Officer of that corporation, on and from 15 February 2001 in failing to: (a) advise the Chairman or the board of JHIL as to whether or not the following information ( DOCI Information ) was required to be disclosed to the ASX namely that JHIL had entered into a deed of covenant and indemnity with Amaca and Amaba pursuant to which: (i) Amaca and Amaba provided certain covenants and indemnities to JHIL in respect of its potential asbestos liabilities; (ii) JHIL agreed to pay certain amounts in exchange for those covenants and indemnities; (iii) Amaca agreed that it would acquire all the shares in JHIL if it was put to it by a sole registered shareholder of the entirety of JHIL shares; (b) seek and consider advice and satisfy himself in relation to whether JHIL was required to disclose the DOCI Information to the ASX; (c) resolve or determine that JHIL would disclose the DOCI Information to the ASX; and (d) raise with or propose to the Chairman or the board of JHIL that they needed to consider and determine whether or not to disclose the DOCI Information to the ASX; in circumstances where Mr Macdonald knew or ought to have known that: (e) if JHIL failed to disclose the DOCI Information to the ASX it risked contravening s 1001A(2) of the Corporations Law ; and (f) if the DOCI Information was not disclosed to the ASX and JHIL had an obligation under the ASX Listing Rules to do so and that failure was revealed, it would be harmful to JHIL's interests and harm market perceptions of JHIL. 9. The First Defendant contravened Section 180(1) in relation to James Hardie Industries NV ( JHINV ) by his conduct, as a director and Chief Executive Officer of that corporation, on or about 10 June 2002 in either approving for release to the ASX a set of slides ( ASX Slides ), or failing to advise that they not be released in circumstances where: (a) he knew that the ASX Slides conveyed or were capable of conveying that: (i) it was certain or highly likely that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (ii) the material available to JHINV provided a reasonable basis for the assertion that it was certain or highly likely that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims against Amaca and Amaba; (b) he knew that the ASX Slides were misleading in those respects. 10. The First Defendant contravened Section 180(1) in relation to JHINV by his conduct, as a director and Chief Executive Officer of that corporation, in making a presentation in Edinburgh on or about 10 June 2002 during which he made statements which conveyed that: (a) it was certain or highly likely that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (b) the material available to JHINV provided a reasonable basis for the assertion that it was certain or highly likely that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; in circumstances where he knew that those statements were false or misleading in those respects. 11. The First Defendant contravened Section 180(1) in relation to JHINV by his conduct, as a director and Chief Executive Officer of that corporation, in making a presentation in London on or about 11 June 2002 during which he made statements which conveyed that: (a) it was certain or highly likely that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (b) the material available to JHINV provided a reasonable basis for the assertion that it was certain or highly likely that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (c) the James Hardie Group had received legal advice that it had no remaining asbestos liabilities; in circumstances where he knew that those statements were false or misleading in those respects. 2.2 Declarations in relation to Mr Shafron 238 The draft declarations proposed by ASIC treats Mr Shafron's failure to advise that PwC's review was limited as a distinct contravention of Section 180(1) from his failure to advise the board that Access Economics review was limited. For the reasons set above I reject that approach. 239 ASIC has amended its draft declarations to rectify Mr Shafron's other complaint that his conduct with respect to the DOCI Information was in the alternative. 240 ASIC seeks a declaration that the impugned conduct was before, at or after the 15 February 2001 Meeting. It was submitted on Mr Shafron's behalf that my judgment dealt only with the period before and at the board meeting. I will confine the declaration to that period. I will make declarations in the following terms with respect to Mr Shafron. The Court declares that: 1. The Second Defendant contravened s 180(1) of the Corporations Law as carried over into the Corporations Act 2001 (Cth) ( Section 180(1) ) in relation to ABN 60 Pty Ltd (formerly known as James Hardie Industries Ltd) ( JHIL ) by his conduct, as an officer of that corporation, on or about 15 February 2001 when its board of directors voted in favour of a resolution to approve a draft ASX announcement ( Draft ASX Announcement ) and authorise its execution and sending to the Australian Stock Exchange ( ASX ), in failing to advise the board that: (a) the Draft ASX Announcement was expressed in too emphatic terms concerning the adequacy of the funding made available to meet all legitimate present and future asbestos claims brought against two of JHIL's former subsidiaries Amaca Pty Ltd ( Amaca) and Amaba Pty Ltd ( Amaba ); and (b) in that respect the Draft ASX Announcement was misleading. 2. The Second Defendant contravened Section 180(1) in relation to JHIL by his conduct, as an officer of that corporation, on or about 15 February 2001 in failing to advise its board of directors that reviews of a cashflow model ( Cashflow Model ) of the funding being made available to meet asbestos claims brought against Amaca and Amaba that had been undertaken by PricewaterhouseCoopers ( PwC ) and Access Economics: (a) were limited to reporting on the logical soundness and technical correctness of the Cashflow Model; (b) had not verified, and PwC and Access Economics had been specifically instructed not to consider, the key assumptions adopted by the Cashflow Model, being: (i) fixed investment earnings rates; (ii) litigation and management costs; and (iii) future claim costs. 3. The Second Defendant contravened Section 180(1) in relation to JHIL by his conduct, as an officer of that corporation, before and at the board meeting of 15 February 2001 in failing either to: (a) advise the Chief Executive Officer or the board of JHIL that it needed to consider whether or not JHIL was required to disclose the following information ( DOCI Information ) to the ASX, namely, that JHIL had entered into a Deed of Covenant and Indemnity pursuant to which: (i) Amaca and Amaba provided certain covenants and indemnities to JHIL in respect to its potential asbestos liabilities; (ii) JHIL agreed to pay certain amounts in exchange for those covenants and indemnities; (iii) Amaca agreed that it would acquire all the shares in JHIL if it was put to it by a sole registered shareholder of the entirety of JHIL shares; or (b) obtain advice for the Chief Executive Officer or the board, or provide his own advice to the board as to whether or not they were required to disclose the DOCI Information to the ASX; or (c) advise the Chief Executive Officer or the board to resolve or determine that JHIL would disclose the DOCI Information to the ASX; in circumstances where the second defendant knew or ought to have known that: (d) if JHIL failed to disclose the DOCI Information to the ASX it risked contravening s 1001A(2) of the Corporations Law as carried over into the Corporations Act ; and (e) if the DOCI Information was not disclosed to the ASX and JHIL had an obligation under the ASX Listing Rules to do so and that failure was revealed, it would be harmful to JHIL's interests and harm market perceptions of JHIL. 2.3 Declarations in relation to Mr Morley 241 ASIC proposed two declarations against Mr Morley with respect to his failure to advise the board of the shortcomings in the reviews of the Cashflow Model by PwC and Access Economics. For the reasons set out above I am of the view that only one declaration should be made against him with in relation to his failure to advise with respect to both reviews. I will make a declaration in the following terms. The Court declares that: 1. The Third Defendant contravened s 180(1) of the Corporations Law as carried over into the Corporations Act 2001 (Cth) ( Section 180(1) ) in relation to ABN 60 Pty Ltd (formerly known as James Hardie Industries Ltd) ( JHIL ) by his conduct, as an officer of that corporation, on or about 15 February 2001 in failing to advise its board of directors that reviews of a cashflow model ( Cashflow Model ) of the funding being made available to meet asbestos claims brought against two of JHIL's former subsidiaries Amaca Pty Ltd and Amaba Pty Ltd that had been undertaken by PricewaterhouseCoopers ( PwC ) and Access Economics: (a) were limited to reporting on the logical soundness and technical correctness of the Cashflow Model; (b) had not verified, and PwC and Access Economics had been specifically instructed not to consider, the key assumptions adopted by the Cashflow Model, being: (i) fixed investment earnings rates; (ii) litigation and management costs; and (iii) future claim costs. 2.4 Declarations in relation to Mr Brown, Ms Hellicar, Mr O'Brien, Mr Terry and Mr Willcox 242 ASIC seeks a declaration in identical form against Mr Brown, Ms Hellicar, Mr O'Brien, Mr Terry and Mr Willcox. The declaration treats the failure to advise of the limitations in the PwC and Access Economics reports as separate matters. I will treat them as one. 243 I will make a declaration in the following terms against Mr Brown and I will make declarations in identical terms against Ms Hellicar, Mr O'Brien, Mr Terry and Mr Willcox. The Court declares that: 1. The Fourth Defendant contravened s 180(1) of the Corporations Law as carried over into the Corporations Act 2001 (Cth) ( Section 180(1) ) in relation to ABN 60 Pty Ltd (formerly known as James Hardie Industries Ltd) ( JHIL ) by his conduct, as a director of that corporation, in voting on 15 February 2001 in favour of a resolution of the directors to approve a draft ASX announcement ( Draft ASX Announcement ) and authorise its execution and sending to the Australian Stock Exchange ( ASX ) in circumstances where: (a) he knew that the Draft ASX Announcement conveyed or was capable of conveying that: (i) the material available to JHIL provided a reasonable basis for the assertion in the announcement that it was certain that the amount of funds made available to the Medical Research and Compensation Foundation ( Foundation ) would be sufficient to meet all legitimate present and future asbestos claims brought against two of JHIL's former subsidiaries Amaca Pty Ltd ( Amaca ) and Amaba Pty Ltd ( Amaba ); (ii) JHIL's Chief Executive Officer, Mr Macdonald, believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (iii) all of the directors or at least a majority of them believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (iv) JHIL had received expert advice from PwC and Access Economics that supported the statement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (b) he ought to have known that the Draft ASX Announcement was misleading in those respects. 2.5 Declarations in relation to Mr Gillfillan and Mr Koffel 244 ASIC seeks a declaration in identical terms against Mr Gillfillan and Mr Koffel. I will make the following declaration against Mr Gillfillan and one in identical terms against Mr Koffel. The Court declares that: 1. The Fifth Defendant contravened s 180(1) of the Corporations Law as carried over into the Corporations Act 2001 (Cth) ( Section 180(1) ) in relation to ABN 60 Pty Ltd (formerly known as James Hardie Industries Ltd) ( JHIL ) in that, as a director of that company, at a meeting of the board of directors of that company on 15 February 2001 during which it resolved to approve a draft ASX announcement ( Draft ASX Announcement ) and authorised its execution and sending to the Australian Stock Exchange ( ASX ) he failed to take any of the following steps: (a) request that he be provided with a copy of the Draft ASX Announcement; (b) familiarise himself with its terms; or (c) abstain from voting in favour of the resolution to approve the Draft ASX Announcement and authorise its execution and sending to the ASX. 2.6 Declarations in relation to JHIL 245 JHIL does not rely upon the James Hardie (Civil Penalty Compensation Release) Act 2005 (JH Civil Penalty Compensation Release Act). 246 ABN 60 is in statutory winding up under the James Hardie Former Subsidiaries (Winding up and Administration) Act 2005 (JH Winding up Act). The winding up began on 8 February 2007 and was expected to last up to 40 years. It will continue until the Governor appoints an end to the winding up or until ABN 60 is deregistered under the Corporations Act. 247 The JH Winding up Act regulates the manner in which ABN 60 is able to operate, specifies the types of claims and payments it is liable to make and effectively bars the enforcement of claims against ABN 60 during its statutory winding up period. 248 The James Hardie (Civil Liability) Act 2005 (JH Civil Liability Act) extinguishes liabilities of ABN 60 in relation to conduct, the basis of these proceedings. The JH Civil Liability Act defines each of ABN 60, Amaba and Amaca as a "liable entity". It provides that civil liability incurred by ABN 60 in respect of "protected conduct" is extinguished. That term is defined to mean the transfer of the assets of, and the payment of dividends and management fees by, any specified liable entity; the establishment, funding and underfunding of the Foundation; the transfer of assets from ABN 60 to JHINV, the establishment of the ABN 60 Foundation and the ABN 60 Foundation Trust and the allotment of shares in ABN 60 to the ABN 60 Foundation; the corporate reorganisation of the James Hardie group on 15 February 2001; the corporate reorganisation of the James Hardie group between August and October 2001, including the scheme of arrangement approved by this Court in October 2001 under which JHINV became the holding company for the James Hardie group, and announcements or other representations made in relation to the effect or consequences of that scheme including representations made to this Court; the entry into the DOCI and the DOCIA and the amendment of the DOCIA by the Deed of Rectification executed by the parties to it on 3 February 2004; the issue by ABN 60 of shares in ABN 60 to JHINV and the cancellation of those shares in March 2003; the negotiation of, and entry into, the Heads of Agreement, the Final Funding Agreement or any Related Agreement. 249 The JH Civil Penalty Compensation Release Act applies to liability, including a liability imposed by or under legislation, to pay compensation for loss or damage resulting from conduct capable of being the subject of a pecuniary penalty. Any such liability incurred by ABN 60, amongst other entities, in respect of any protected conduct of that person is extinguished. 250 ASIC seeks no penalty against ABN 60. 251 I found that JHIL contravened Section 995(2) and Section 999 in publishing the Final ASX Announcement. I found it contravened Section 995(2) and Section 999 in the statements made at a press conference on 16 February 2001 (Press Conference Statements). I found that those provisions were contravened by JHIL in the 23 February 2001 ASX Announcement and in the 21 March 2001 ASX Announcement. I found that JHIL negligently failed to disclose the DOCI Information on 15 February 2001 in contravention of Listing Rule 3.1 and Section 1001A(2). 252 None of those contraventions was of a civil penalty provision and there is no compulsion on the Court under Section 1317E(1) to make declarations of contravention. 253 While ABN 60 objected to any declarations being made against it, it did not object to the form of the declarations proposed by ASIC. 254 In Australian Softwood Forests Pty Ltd v Attorney-General (NSW) [1981] HCA 49; (1980-1981) 148 CLR 121 the High Court overruled the New South Wales Court of Appeal and restored a declaration of contravention of company legislation made by the trial judge. 255 In Corporate Affairs Commission of NSW v Transphere Pty Ltd (1988) 15 NSWLR 596 at 608-609, Young J accepted a submission that the law as to declaratory orders had developed to such a stage that declarations should be made unless there were proper grounds to the contrary. His Honour cited as a proper ground the embarrassment caused in a practical sense to a non-party if the court made the declaration. His Honour concluded his analysis: "In my view the court should now adopt the view that it will grant declarations at the suit of the statutory authority which exists to regulate an industry or the professional association which regulates a profession." 256 That view has been followed by Austin J in Australian Securities & Investments Commission v Sweeney [2001] NSWSC 114 at [30]-[31]; by Davies AJ in Australian Securities and Investments Commission v Pegasus Leveraged Options Group Pty Ltd [2002] NSWSC 310; (2002) 41 ACSR 561 at 571 [38]-[39]; by Young J in Australian Securities and Investments Commission v McDougall [2006] FCA 427; (2006) 229 ALR 158 at 170 [55]; and by Heerey J in Australian Securities and Investments Commission v FUELbanc Australia Ltd [2007] FCA 960; (2007) 162 FCR 174 at 183 [56]-[57]. I adopt the same course. 257 In McDougall 229 ALR at 170 [55], Young J said that the making of a declaration on ASIC's application did not simply record the outcome of enforcement proceedings: "It may also be an appropriate way of marking the court's disapproval of contravening conduct." 258 ASIC's draft declarations with respect to JHIL treat the failure to advise the 15 February 2001 Meeting of the limitations in the PwC review as a distinct breach from the failure to advise of the limitations in the Access Economics review. In the declarations against JHIL I will treat them as a single breach. I will make the following declarations with respect to JHIL. The Court declares that: 1. On or about 16 Febraury 2001 ABN 60 Pty Ltd (formerly known as James Hardie Industries Ltd) ( JHIL ) contravened s 995(2) of the Corporations Law as carried over into the Corporations Act 2001 (Cth) ( Section 995(2) ) by engaging in conduct that was misleading and deceptive, or likely to mislead or deceive, in relation to a notice published in relation to securities, in that it published to the Australian Stock Exchange ( ASX ) an announcement that falsely and misleadingly represented that: (a) it was certain that the amount of funds made available to the Medical Research and Compensation Foundation ( Foundation ) would be sufficient to meet all legitimate present and future asbestos claims brought against two of JHIL's former subsidiaries, Amaca Pty Ltd ( Amaca ) and Amaba Pty Ltd ( Amaba ); (b) the material available to JHIL provided a reasonable basis for the assertion in the announcement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (c) JHIL's Chief Executive Officer, Mr Macdonald, believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (d) all the directors, or at least a majority of them, believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (e) JHIL had received expert advice from PricewaterhouseCoopers ( PwC ) and Access Economics that supported the statement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba. 2. On or about 16 February 2001 JHIL contravened s 999 of the Corporations Law as carried over into the Corporations Act 2001 (Cth) ( Section 999 ) by making a statement or disseminating information, namely, an announcement to the ASX that: (a) was false in a material particular or materially misleading in that it falsely represented that: (i) it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (ii) the material available to JHIL provided a reasonable basis for the assertion in the announcement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (iii) JHIL's Chief Executive Officer, Mr Macdonald, believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (iv) all of the directors, or at least the majority of them, believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; and (v) JHIL had received expert advice from PwC and Access Economics that supported the statement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (b) JHIL knew or ought to have known was false in a material particular or materially misleading; and (c) was likely to induce the sale or purchase of JHIL's shares and have the effect of increasing or maintaining the market price of JHIL shares. 3. On or about 16 February 2001 JHIL contravened Section 995(2) in that, in connection with dealings in securities, it engaged in conduct that was misleading and deceptive, or likely to mislead or deceive, in that its Chief Executive Officer, Mr Macdonald, made statements at a press conference that falsely and misleadingly represented that: (a) it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (b) the material available to JHIL provided a reasonable basis for the assertion that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (c) Mr Macdonald believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (d) JHIL had received expert advice from PwC and Access Economics that supported the statement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; and (e) JHIL did not have any potential claims on the assets of Amaca and Amaba. 4. On or about 16 February 2001 JHIL contravened Section 999 by making a statement or disseminating information, namely, statements made on its behalf by its Chief Executive Officer at a press conference that: (a) were false in a material particular or materially misleading in that they falsely represented that: (i) it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (ii) the material available to JHIL provided a reasonable basis for the assertion that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (iii) Mr Macdonald believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (iv) JHIL had received expert advice from PwC and Access Economics that supported the statement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; and (v) JHIL did not have any potential claims on the assets of Amaca and Amaba; (b) JHIL knew or ought to have known were false in a material particular or materially misleading; and (c) were likely to induce the sale or purchase of JHIL shares and have the effect of increasing or maintaining the market price of JHIL shares. 5. On or about 23 February 2001 JHIL contravened Section 995(2) by engaging in conduct that was misleading and deceptive in relation to a notice published in relation to securities, in that it published to the ASX an announcement that falsely and misleadingly represented that: (a) it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (b) the material available to JHIL provided a reasonable basis for the assertion in the announcement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; and (c) JHIL's Chief Executive Officer, Mr Macdonald, believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba. 6. On or about 23 February 2001 JHIL contravened Section 999 by making a statement or disseminating information, namely, an announcement to the ASX that: (a) was false in a material particular or materially misleading in that it falsely and misleadingly represented that: (i) it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (ii) the material available to JHIL provided a reasonable basis for the assertion in the announcement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; and (iii) JHIL's Chief Executive Officer, Mr Macdonald, believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (b) JHIL knew or ought to have known was false in a material particular or materially misleading; and (c) was likely to have the effect of maintaining or stabilising the market price of JHIL shares. 7. On or about 21 March 2001 JHIL contravened Section 995(2) by engaging in conduct that was misleading and deceptive in relation to a notice published in relation to securities, in that it published to the ASX an announcement that falsely and misleadingly represented that: (a) it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; and (b) the material available to JHIL provided a reasonable basis for the assertion in the announcement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba. 8. On or about 15 February 2001 JHIL contravened s 1001A(2) of the Corporations Law as carried over into the Corporations Act 2001 (Cth) by its conduct as a listed disclosing entity in contravening the provisions of ASX Listing Rule 3.1 and negligently failing to notify the ASX of the following information, namely, that it had entered into a Deed of Covenant and Indemnity with Amaca and Amaba pursuant to which: (a) Amaca and Amaba provided certain covenants and indemnities to JHIL in respect of its potential asbestos liabilities; (b) JHIL agreed to pay certain amounts in exchange for those covenants and indemnities; and (c) Amaca agreed that it would acquire all the shares in JHIL if it was put to it by a sole registered shareholder of the entirety of JHIL shares; in circumstances where a reasonable person would expect, if it were generally available, that information to have a material effect on the price or value of JHIL shares. 2.7 Declarations in relation to JHINV 259 In addition to a declaration with respect to JHINV's breach of Section 674(2), a civil penalty provision, ASIC seeks declarations with respect to the breaches of s 1041H(1) of the Corporations Act (Section 1041H(1)) and s 1041E(1) (Section 1041E(1)) I found JHINV to have made in relation to the ASX Slides. Since these provisions are not civil penalty provisions the Court is not compelled to make the declarations under Section 1317E(1). 260 It was submitted on behalf of JHINV that no utility would be served by making the declarations. 261 I reject that submission. Declarations of breach of those provisions are an appropriate way of marking the Court's disapproval of the conduct of JHINV. No embarrassment will be caused to a non-party if the declarations are made and the usual practice is for such declarations to be made at the suit of a statutory authority. 262 I will make declarations with respect to JHINV's contraventions in the following terms. The Court declares that: 1. On or about 10 June 2002 James Hardie Industries NV ( JHINV ) contravened s 1041H of the Corporations Act 2001 (Cth) by engaging in conduct in relation to a financial product, namely, shares in JHINV, that was misleading or deceptive or was likely to mislead or deceive in that it published to the Australian Stock Exchange ( ASX ) a set of slides ( ASX Slides ) which falsely and misleadingly represented that: (a) it was certain or highly likely that the amount of funds made available to the Medical Research and Compensation Foundation ( Foundation ) would be sufficient to meet all legitimate present and future asbestos claims brought against two former subsidiaries of ABN 60 Pty Ltd (formerly known as James Hardie Industries Ltd) ( JHIL ) Amaca Pty Ltd ( Amaca ) and Amaba Pty Ltd ( Amaba ); and (b) the material available to JHINV provided a reasonable basis for the assertion that it was certain or highly likely that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba. 2. On or about 10 June 2002 JHINV contravened s 1041E of the Corporations Act by making a statement or disseminating information to the ASX, namely, the ASX Slides that: (a) was false in a material particular or materially misleading in that it falsely and misleadingly represented that: (i) it was certain or highly likely that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; and (ii) the material available to JHINV provided a reasonable basis for the assertion that it was certain or highly likely that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (b) JHIL knew was false in a material particular or materially misleading; and (c) was likely to induce persons in Australia to acquire financial products, namely, securities in JHINV, and to have the effect of maintaining or stabilising the price for trading in financial products, namely, securities in JHINV. 3. On and from 25 March 2003 until 30 June 2003 JHINV contravened s 674(2) of the Corporations Act in that, as a listed disclosing entity to which the subsection applied, it failed to notify the ASX in accordance with the ASX Listing Rules of information that it had ( ABN 60 Information ) which those provisions required it to notify the ASX, namely, that JHINV and its subsidiary JHIL had arranged for JHIL's transfer out of the James Hardie group of companies by the following steps: (a) the cancellation on 15 March 2003 of partly paid shares issued by JHIL to JHINV; (b) the consolidation of JHIL's share capital into one fully paid share held by JHINV on 15 March 2003; (c) the reduction of JHIL's share capital by approximately $1.5m and payment of that amount to JHINV on 31 March 2003; (d) the execution of the ABN 60 Foundation Trust Deed by JHINV on 31 March 2003; (e) the execution of a Deed of Covenant, Indemnity and Access by JHINV and JHIL on 31 March 2003; (f) the issue of 1,000 shares by JHIL to the ABN 60 Foundation as trustee of the ABN 60 Trust on 31 March 2003; and (g) the cancellation by JHIL of its one fully paid share owned by JHINV for no consideration on or about 14 April 2003; in circumstances where: (h) the ABN 60 Information was not generally available; and (i) a reasonable person would expect, if it were generally available, the ABN 60 Information to have a material effect on the price or value of JHINV shares. 3 Penalty 263 In Forem-Freeway 30 ACSR at 349–350 [50] it was suggested that where a penalty is sought as well as a period prohibition it is desirable to deal with the protective aspect before the question of a pecuniary penalty. 264 ASIC seeks both orders of disqualification and pecuniary penalties against the individual directors. I will deal with disqualification first. 265 In Rich 220 CLR at 150-151 [45] McHugh J cited from the explanatory paper accompanying the first draft of the Corporate Law Reform Bill 1992 (Cth) as follows: "178. It is expected that in settling an appropriate [civil penalty] order, the Court would first give consideration to whether it should impose a civil penalty disqualification. The issue should be whether the defendant's conduct, whilst not criminal in nature, was so reprehensible and had such serious consequences as to warrant an order prohibiting the person from managing a corporation. For example, if gross negligence by a director had led directly to massive losses for shareholders, the Court may consider that a director should be disqualified for a substantial period, even where there was no question of a dishonest intent. The emphasis should be on preventing a recurrence of the contravention by the defendant, and providing a deterrent to other persons involved in the management of corporations. It is expected that the Courts would consider imposing a pecuniary penalty only if it considered that a civil penalty disqualification provided an inadequate or inappropriate remedy." 4 Disqualification 266 ASIC seeks disqualification orders under s 206C of the Corporations Act (Section 206C). So far as is relevant Section 206C is in the following terms: "(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 (i) section 1317E (civil penalty provision) that the person has contravened a corporation/scheme civil penalty provision; or (ii) …; 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. (3) …" 267 With respect to the executives of JHIL, Mr Macdonald, Mr Shafron and Mr Morley, ASIC seeks orders, in the alternative, under s 206E of the Corporations Act (Section 206E) which, so far as is relevant, is in the following terms: "(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) … and (b) the Court is satisfied that the disqualification is justified. (1A) … (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. (3) …" 268 As McHugh J said in Rich 220 CLR at 152 [48] the leading authority on the reasons for a court exercising its powers under Section 206C or Section 206E is Adler. Santow J in 42 ACSR at 97-99 [56] set out 15 propositions as follows: "(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. (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. (iii) Protection of the public also envisages protection of individuals that deal with companies, including consumers, creditors, shareholders and investors (iv) The banning order is protective against present and future misuse of the corporate structure. (v) The order has a motive of personal deterrence, though it is not punitive. (vi) The objects of general deterrence are also sought to be achieved. (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. (viii) Longer periods of disqualification are reserved for cases where contraventions have been of a serious nature such as those involving dishonesty. (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. (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. (xi) A mitigating factor in considering a period of disqualification is the likelihood of the defendant reforming. (xii) The eight criteria to govern the exercise of the court's powers of disqualification set out in Commissioner for Corporate Affairs (WA) 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 further proceedings. (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. (xiv) In cases in which the period of disqualification ranged from 7–12 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. (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." 269 In Elliott v Australian Securities and Investments Commission [2004] VSCA 54; (2004) 10 VR 369 at 407 [137] the Victorian Court of Appeal likened many of the items in Santow J's list to sentencing principles: "Many of the propositions and factors listed by Santow J bear a similarity to sentencing principles. Matters going to aggravation and mitigation in relation to contraventions of s 588G need to be considered and accorded proper weight. But above all else protection of the public and deterrence, specific and general, must also be given appropriate consideration. 270 In Rich 220 CLR at 155 [52] McHugh J said that both Santow J's list and the comments of the Victorian Court of Appeal indicated that factors taken into account in criminal jurisdiction – retribution, deterrence, reformation, contrition and protection of the public – were also central to determining whether a disqualification order should be made and, if so, the appropriate period of disqualification. 271 In Australian Securities and Investments Commission v White [2006] VSC 239; (2006) 58 ACSR 261 at 265 [18], Hargrave J referred to what McHugh J had said in Rich and distilled his analysis into four general categories of important matters to which Courts have regard when determining whether to order disqualification and if so for what period: "(1) the nature and seriousness of the contraventions; (2) protection of the public; (3) retribution and deterrence; (4) mitigating factors." 272 That analysis was recently accepted by Hamilton J in Australian Securities and Investments Commission v Sydney Investment House Equities Pty Ltd [2009] NSWSC 144; (2009) 253 ALR 616 at 620 [8]. 273 Since the decision in Rich it is clear that the purpose of a disqualification order is not only protective it is also punitive. It may be imposed by way of punishment and for general deterrence (Australian Securities and Investments Commission v Vizard [2005] FCA 1037; (2005) 145 FCR 57 at 65 [35]). 274 That general deterrence is a factor to be taken into account was affirmed by a Full Court of the Federal Court in Australian Securities and Investments Commission v Beekink [2007] FCAFC 7; (2007) 238 ALR 595 at 604 [83] it was held that the overwhelming weight of authority was that general deterrence was a factor to be taken into account in deciding whether, if so for what period, disqualification ought to be imposed. 275 But care must be taken in applying punitive measures. As Bryson J observed in Re OneTel Ltd (in liq); Australian Securities and Investments Commission v Rich [2003] NSWSC 186; (2003) 44 ACSR 682 at [26]: "I must respectfully say that I find a distinction between motives of deterrence and a punitive motive as difficult, in practical terms impossible to sustain. The punitive impact of such an order must be recognised; courts apply punitive measures with care, avoid excessive measures and have regard to the circumstances of individuals. No-one should be sacrificed to the public interest." 276 In Beekink 238 ALR at 607 [113] the Court endorsed this statement by Bryson J that no one should be sacrificed to the public interest. 4.1 Disqualification and Mr Macdonald 277 Mr Macdonald is guilty of eleven contraventions of Section 180(1). Contraventions are to be judged individually as well as for their cumulative effect. 278 In Adler 42 ACSR at 103 [68] Santow J observed that not only had there been at least two contraventions of the Corporations Act by HIH and at least two contraventions of by HIHC, the relevant person 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 and that reinforced the basis for applying Section 206E with a substantial disqualification order. That applies with equal force to Mr Macdonald. 279 Mr Macdonald was the driving force behind Project Green, the project to separate JHIL and its subsidiaries and the James Hardie group. He had the ultimate responsibility of planning the separation proposals. 280 Mr Macdonald knew or ought to have known that each of the Draft ASX Announcement, the Final ASX Announcement, the Press Conference Statements, the 23 February 2001 ASX Announcement and the 21 March 2001 ASX Announcement were misleading. 281 ASIC seeks further findings that Mr Macdonald knew that the statements were false or misleading or, alternatively, that he was reckless as to whether those statements were false or misleading. I do not propose to make additional findings at this stage of the proceedings. 282 In Vines 63 ACSR at 551-552 [233], Ipp JA said that for a contravention to be a serious one within meaning of the then provision dealing with disqualification, a higher degree of negligence than that required to establish civil liability for negligence is required. At 527 [110] Spigelman CJ agreed. 283 If Mr Macdonald did not know the statements were misleading, that he ought to have known, in the circumstances of this case, carries a degree of negligence beyond that needed to establish tortious liability. The alternative to his knowledge of the misleading nature of the statements is one of gross negligence. A fortiori with respect to statements that were false or misleading. 284 Mr Macdonald was the person appointed by JHIL to make public statements on its behalf concerning separation proposals. He was responsible for dealing with the board on this issue. He bore a high standard of care as a result of his responsibilities on the issue of separation. 285 ASIC put a series of indemnities into evidence and submitted that the possibility that some of the defendants might not have to pay a pecuniary penalty diminished the deterrent effect of a pecuniary penalty. The evidence is amorphous. It merely establishes the possibility that indemnities exist with respect to some defendants. And there is a real question whether the indemnities are ineffective in light of the embargo of a company or a related body corporate indemnifying a person against a liability, other than one for costs, for a pecuniary penalty order under Section 1317G in s 199A(2) of the Corporations Act. I do not propose to take the evidence into account in determining a period of disqualification or a pecuniary penalty. 286 Bearing the responsibility of leadership on the separation proposal before the board at the 15 February 2001 Meeting, Mr Macdonald's vote in favour of the resolution to approve the Draft ASX Announcement was a gross departure from the requisite standard of care and diligence that applied in the circumstances. The perceived need to convince the public of the benefits of the proposal led him to condone the use of over emphatic language in the Draft ASX Announcement. And he knew that if the Draft ASX Announcement was released to the public it was likely to have an effect on the JHIL share price. The purpose of the Draft ASX Announcement was to have the public approve the separation of Coy and Jsekarb from the James Hardie group. 287 The extent of the departure from the standard expected of a reasonable director in Mr Macdonald's position was less when he failed to warn the board of the over emphatic terms of the Draft ASX Announcement. This failure was an internal step in the chain that led to the potential announcement in the Draft ASX Announcement and the actual announcement in the Final ASX Announcement. 288 A like failure arose when Mr Macdonald failed to advise the board of the limitation in the PwC and Access Economics reviews of the Cashflow Model. Mr Macdonald knew of the limitations and must have been aware that if the other directors were aware of these limitations they might have taken a different view of the Draft ASX Announcement. To allow the bland statement by Mr Morley that PwC and Access Economics had found the Cashflow Model to be logically sound and technically correct to stand without reservation was an internal failure that led to the actual representations in the Final ASX Announcement. 289 Gross negligence was involved in Mr Macdonald's approval of the Final ASX Announcement. The attempted toning down of the emphatic language was unsuccessful. It still conveyed the certainty that the Foundation had sufficient funds to meet all legitimate present and future asbestos claims brought against Amaca and Amaba. Mr Macdonald had the chance to advise that it not be released or that it be amended. He deliberately chose to authorise its release knowing it conveyed the matters set out in the 4th declaration. 290 And statements that he knew or ought to have known were misleading were made in the Press Conference Statements and repeated in the 23 February 2001 ASX Announcement and the 21 March 2001 ASX Announcement. They, too, were serious breaches of the duty of care and diligence. They involved statements to the public that were misleading as he knew or ought to have known. 291 JHIL contravened Section 995(2) and Section 999 in making these statements. And Mr Macdonald was directly involved in each of the company's contraventions so as himself to have contravened the legislation. A substantial disqualification order is called for. 292 Also a serious breach was the failure of JHIL to disclose the DOCI Information in contravention of Section 1001A(2). Mr Macdonald's involvement in that failure was a serious breach of Section 180(1) on his part. The importance of continuous disclosure and the need for JHIL to consider whether it needed to disclose the DOCI Information has already been discussed. 293 And then there were the deliberate breaches when Mr Macdonald continued to use the language of full funding in the ASX Slides, in the Edinburgh Representations and in the London Representations. I found that despite his knowledge that the Foundation was seriously under funded, Mr Macdonald was prepared to extol JHINV to overseas analysts, fund managers and institutional investors by telling them that the Foundation was fully funded. 294 ASIC claimed that Mr Macdonald was in breach of s 181(1) of the Corporations Law as carried over into the Corporations Act (Section 181(1)) with respect to the Press Conference Statements. In February 2001 it was in the following terms: "A director or other officer of a corporation must exercise their powers and discharge their duties: (a) in good faith in the best interests of the corporation; and (b) for a proper purpose." 295 I said that Mr Macdonald may have been misguided in the extent to which he sought to sell the separation proposal. But in doing so there was no conflict between his personal interest and that of JHIL. He did not take advantage of his position to make a secret profit. He did not misappropriate the company's assets for himself. Like the non-executive directors in approving the Draft ASX Announcement, Mr Macdonald may have believed it was in the best interests of JHIL to be as emphatic as he could in selling the separation proposal. The evidence did not establish that Mr Macdonald acted for an improper or collateral purpose. Objectively judged, Mr Macdonald was overzealous, but he was overzealous in the interests of JHIL. 296 In the absence of an improper purpose, Section 181(1) was not engaged. 297 It was submitted that I had not made a finding of dishonesty with respect to Mr Macdonald. But I had with respect to the ASX Slides, the Edinburgh Representations and the London Representations. 298 In Adler v Australian Securities and Investments Commission [2003] NSWCA 131; (2003) 179 FLR 1 at 165-166 [748], Giles JA said that provided procedural fairness was afforded, there was no error in characterising a director's conduct as dishonest in deciding whether a pecuniary penalty or a period of disqualification should be ordered: "Section 1317G gives a discretion as to making a pecuniary penalty order, see "may" at its commencement and calls for an assessment of whether the contravention is serious. Sections 206C and 206E require that the court be satisfied "that the disqualification is justified", and provide that the court may have regard to "the person's conduct in relation to the management, business or property of any corporation" and "any other matters that the Court considers appropriate". For both pecuniary penalty and disqualification the task is normative, and the nature of the conduct of the person found to have contravened the civil penalty provision is relevant. That a director fails to exercise care and diligence through neglectful inattention is one thing; it is another thing if a director fails to exercise due care and diligence with knowledge that he is acting wrongly, contrary to the interests of the company, and in his own interests. Provided procedural fairness is afforded, there is no error in characterising the director's conduct as dishonest, if it fairly bears that characterisation, when it comes to deciding whether a pecuniary penalty should be imposed and if so in what amount, or to deciding whether disqualification is justified and if so for what period. It would be nonsense if that could not be done." 299 I do not regard his Honour's remarks as confined to the combination of elements in that case. In this case Mr Macdonald failed to exercise due care and diligence with knowledge that he was acting wrongly when he approved the release of the ASX Slides and made the Edinburgh Representations and the London Representations. 300 In rejecting ASIC's claim that Mr Macdonald was in contravention of Section 181(1) in making the Edinburgh Representations and the London Representations and in authorising the release of the UK Slides, or failing to prevent their release, I said that for the reasons discussed with respect to the Press Conference Statements I was not satisfied that Mr Macdonald acted in bad faith and for an improper purpose. They are the requirements for a contravention of Section 181(1). But that does not exclude a finding of dishonesty. Mr Macdonald may have thought he was acting in the best interests of JHINV when he dishonestly made the representations and hence he may not have acted for an improper purpose. 301 There have been multiple contraventions of Section 180(1) by Mr Macdonald. 302 In Mill v The Queen (1988) 166 CLR 59 at 63, the High Court approved a statement in a text book describing the totality principle as requiring a sentencer who had passed a series of sentences each properly calculated in relation to the offence for which it was imposed and each properly made consecutive in accordance with the principles governing consecutive sentences, to review the aggregate sentence and consider whether the aggregate was just and appropriate. 303 The High Court referred to Mill in Pearce v The Queen [1998] HCA 57 (1998) 194 CLR 610 in stating at 624 [45] that a judge sentencing an offender for more than one offence must fix an appropriate sentence for each offence and then consider questions of cumulation or concurrence, as well as questions of totality. 304 In Vines 63 ACSR at 509 [19] Spigelman CJ having cited the passage from Pearce said that directly analogous considerations apply in the context of the imposition of civil penalties in a case where there have been multiple contraventions. 305 Cumulation is an accumulative punishment that commences at the expiration of another punishment. A concurrent sentence is a sentence that is served at the same time as another sentence. 306 Because each case will depend on its own facts little assistance with respect to an appropriate penalty is gained by the consideration of sentences in other cases. 307 Some of Mr Macdonald's contraventions exhibit some of the features that Santow J extracted in 42 ACSR at 99 [56 (xiv)] from cases with periods of disqualification from 7 – 12 years. They exhibited serious incompetence and irresponsibility. In some, Mr Macdonald engaged in a deliberate course of conduct, albeit not to enrich himself at others' expense. He continued knowing and wilful contravention of the law and disregard for legal obligations. He also exhibited a lack of contrition but I have indicated my placing little store on this aspect of the matter. 308 Mr Macdonald and his family have suffered greatly as a result of the publicity associated with the special commission of inquiry conducted by the Honourable David Jackson AM QC (Special Commission) and these proceedings. 309 The impressive testimonials of him suggest that Mr Macdonald is a fit person to manage a company. He had an unblemished record prior to the incidents in question. The testimonials do not, however, exclude the need for some personal deterrence. There was persistence in making false representations that the Foundation was fully funded. 310 The degree of seriousness of Mr Macdonald's contraventions is high although his propensity to engage in similar conduct in the future is low. They all involved denying the market accurate information either by publishing misleading information or by withholding material information. Since a properly informed market depends on accurate and timely information, Mr Macdonald's failures were serious. When a market is misled, the share price of the misinformant is affected by a false assumption. Depending on the effect on the share price, a vendor may sell at too low a price: a purchaser may pay too much. Misinformation causes potential harm to the public. 311 Against the need to protect the public it is necessary to balance personal hardship and in this case I accept that the personal hurt that the attendant publicity has caused is significant. 312 The breaches are serious and general deterrence must also be taken into account. In my view a period of disqualification is in order. 313 Before taking the totality principle into account, ASIC seeks a disqualification in the range from 4 – 7 years for each of the contraventions in declarations 2 and 3, the internal failures to advise of the over emphatic language and the failure to advise of the limitations of the PwC and Access Economics reviews. ASIC seeks a disqualification in the range from 5 – 8 years for the contraventions in declarations 1 and 4 – 7, the misleading announcements to the public. In respect of the contravention in declaration 8, the failure to consider whether the DOCI Information should be disclosed, ASIC seeks a disqualification in the range from 4 – 7 years. With respect to the deliberate representations in declarations 9 – 11, ASIC seeks a disqualification in the range from 8 – 12 years. Applying the totality principle, ASIC submitted that a disqualification in the range from 12 – 16 years was appropriate. 314 Mr Macdonald submitted that a disqualification period of 5 – 7 years was appropriate. If there were 9 contraventions (Mr Macdonald submitted that duplication arose with respect to some further declarations) there should be imposed a 9 month disqualification with respect to each leading to a 6.75 year disqualification brought back to the range he submitted was appropriate under the totality principle. 315 I reject that approach. 9 months is too short and the submission attributes equal delinquency to each contravention. 316 I also reject ASIC's submission that the failure to consider whether the DOCI Information needed to be disclosed should be treated as of the same seriousness as the internal failures to advise on over emphatic language and limited expert reviews. In my view the failure to consider disclosure of the DOCI Information was at least as reprehensible as the misleading disclosures to the ASX and the public. 317 With respect to the contraventions in declarations 2 and 3 I would impose a disqualification of 5 years. With respect to the contraventions in declarations 1 and 4 – 8 I would impose a disqualification of 7 years. With respect to the contraventions in declarations 9 – 11 I would impose a disqualification of 10 years. With some of these impositions I would regard it as appropriate that they be served concurrently. Applying the totality principle, I will make a disqualification order against Mr Macdonald for 15 years. 4.2 Disqualification and Mr Shafron 318 Mr Shafron's contraventions in declarations 1 and 2 were of the internal failures to advise of the over emphatic language in the Draft ASX Announcement and the failure to advise of the limitations of the PwC and Access Economics reviews. His contravention in declaration 3 was the failure to consider whether the DOCI Information should be disclosed. 319 In Postiglione v The Queen (1996-1997) 189 CLR 295 it was held that the parity principle of sentencing requires that there should not be a marked disparity between sentences imposed on co-offenders which gives rise to a justifiable sense of grievance. 320 In Lowe v The Queen (1984) 154 CLR 606 at 609 Gibbs CJ said it was obviously desirable that persons who have been parties to the commission of the same offence should, if other things are equal, receive the same sentence. But other things are not always equal and such matters as the age, background, previous criminal history and general character of the offender, and the part which he or she played in the commission of the offence, have to be taken into account. 321 As Finkelstein J said in Australian Competition and Consumer Commission v ABB Transmission and Distribution Ltd (No 2) [2002] FCA 559; (2002) 190 ALR 169 at 180 [40]: "Next there is the parity principle. The principle is that "[w]here other things are equal persons concerned in the same crime should receive the same punishment; and where other things are not equal a due discrimination should be made": R v Tiddy (1969) SASR 575 at 577. The principle requires little explanation. Consistency in punishment is an attribute of a rational and fair system of justice." 322 Other things being equal, there must be, as Austin J said in Vines 58 ACSR at 316 [45], a persuasive rationale for any difference in the disqualification periods for each of the defendants. 323 Mr Shafron gave no evidence and read no testimonial evidence. There is, therefore, no third party evidence of his fitness to manage a company and no evidence for it not being necessary to consider personal deterrence. 324 It was submitted that Mr Shafron's contraventions were related to his conduct as general counsel and as a legal adviser and demonstrated no deficiency in the management of a corporation. The contraventions were of inadequate legal advice rather than company management. 325 That puts Mr Shafron in the same position as Mr Macdonald who through testimonials established his fitness to manage a company. 326 Mr Shafron is in his late forties. It was submitted he should not be debarred from managing a corporation for the better part of the prime of his professional life. 327 It was submitted that general deterrence was satisfied by the making of the declarations of contravention, that Mr Shafron's reputation and standing had been seriously adversely affected by the high level of publicity surrounding the Special Commission, these proceedings and the Court's findings. 328 Mr Macdonald also suffered from the publicity surrounding the Special Commission and these proceedings and the Court's findings. 329 I do not regard these matters as sufficient to justify a discriminatory order of disqualification of Mr Shafron. Mr Shafron's personal position is not greatly different from that of Mr Macdonald and their delinquency was essentially the same. Each had a duty to warn the board of JHIL of the over emphatic language of the Draft ASX Announcement and the limited nature of the PwC and Access Economics reviews. Each had a duty to ensure that JHIL gave consideration to the disclosure of the DOCI Information. 330 ASIC seeks a disqualification order against Mr Shafron in the range of 7 – 9 years. 331 I would impose the same periods of disqualification on Mr Shafron as I did with respect to Mr Macdonald. I would impose a disqualification of 5 years with respect to each of the contraventions in declarations 1 and 2. I would impose a disqualification of 7 years with respect to the contravention in declaration 3. Whether I treat the disqualifications as concurrent or discount them under the totality principle as consecutive disqualifications, I will make a disqualification order against Mr Shafron for 7 years. 4.3 Disqualification and Mr Morley 332 Mr Morley was guilty of one contravention of Section 180(1) in failing to advise the 15 February 2001 Meeting of the limitations in the reviews of the Cashflow Model by PwC and Access Economics. 333 ASIC submits that his period of disqualification should be in the range of 5 – 7 years. 334 It was submitted on Mr Morley's behalf that Section 206E did not apply to him because Mr Morley had committed but one contravention and the section required two. 335 ASIC does not now seek disqualification orders under Section 206E against the non-executive directors as only one contravention was established against them. They and Mr Morley may be subject to disqualification orders under Section 206C. 336 I prefer to confine the disqualification orders against Mr Macdonald and Mr Shafron to Section 206C for the sake of uniformity. 337 The testimonial evidence tendered on Mr Morley's behalf establishes his competence as a director in highly complimentary terms. The need for personal deterrence in his case is low. But that does not establish a need for a discriminatory order as against the disqualification I imposed on Mr Macdonald because the need for personal deterrence arose with respect to Mr Macdonald's deliberate breaches and not with respect to the breach of which Mr Morley is convicted. 338 Mr Morley expressed contrition. But I have said that I place little store on this element. 339 Mr Morley has also been affected by the allegations the subject of these proceedings having being first ventilated in the Special Commission. His prospects of holding directorships or senior management positions is severely limited. 340 I do not regard these factors as sufficiently different from those that apply to Mr Macdonald to justify a discriminatory order against Mr Morley. I will make a disqualification order against Mr Morley for 5 years. The totality principle does not apply to his single contravention. 4.4 Disqualification and Mr Brown, Mr Gillfillan, Ms Hellicar, Mr Koffel, Mr O'Brien, Mr Terry and Mr Willcox 341 Each of Mr Brown, Ms Hellicar, Mr O'Brien, Mr Terry and Mr Willcox contravened Section 180(1) in voting in favour of the Draft ASX Announcement. Mr Gillfillan and Mr Koffel contravened that provision in failing to request a copy. 342 In relation to these contraventions ASIC seeks disqualification orders of 5 years with respect to each of them. 343 Each of the non-executive directors tendered testimonials by persons of impressive stature who swore to their good character and competence. As indicated in Macdonald (No 11) each of the non-executive directors is highly qualified. They have had impressive careers as directors of public companies. Their testimonials speak glowingly of their ability. They establish the care, skill and competence they have displayed in roles at the executive or non-executive level. 344 The need for personal deterrence is low. The testimonial evidence is strongly in favour of their general honesty and probity. The testimonials also establish the fitness of each of the non-executive directors to manage a company. 345 But considerations of general deterrence and retribution remain and I do not regard these factors as differentiating the contravention by Mr Macdonald to such an extent that a discriminatory order should be made with respect to any of the non-executive directors. 346 Like the other individual defendants each has been affected adversely by the publicity associated with the Special Commission and with these proceedings. And the personal hurt to them and their families must be weighed in the balance. And so it was in relation to Mr Macdonald, Mr Shafron and Mr Morley. 347 The adverse publicity of the proceedings caused the subsequent resignations of Ms Hellicar and Mr Willcox from their board positions. I do not regard those facts, however, as sufficiently differentiating their position from that of Mr Macdonald to warrant discriminatory orders. 348 It was submitted on behalf of Mr O'Brien that his delinquency was less than the other non-executive directors because he had only attended three board meetings prior to the 15 February 2001 Meeting. 349 I do not regard that as demonstrating a need for a discriminatory order in his case. The task of approving the Draft ASX Announcement did not require the benefit of background material made available to other directors. It was a question of determining whether the language used in the Draft ASX Announcement was inappropriate. 350 It was submitted that if the Court concluded that a non-executive director was a fit and proper person to manage a corporation then, having regard to the matters set out in Section 206C, the Court should conclude that a disqualification order would not be justified. 351 I reject that submission. It does not automatically follow that a finding of fitness to manage a corporation means that the Court cannot be satisfied that disqualification is justified. In this case each of the non-executive directors breached Section 180(1). That fact might call for disqualification for personal deterrence, after all the contravention occurred, for general deterrence or for retribution notwithstanding the fitness of the person to manage a corporation. 352 It was submitted that the Court might backdate a disqualification order. Austin J did so in Vines 58 ACSR at 336 [125] on the basis that it had taken a very long time to reach the point when orders could be made. Those considerations do not apply in the present case. With the full cooperation of all concerned, the penalty hearing was completed in 45 days and the hearing on exoneration, penalties and costs was heard in one day. 353 I imposed a disqualification period of 7 years on Mr Macdonald's contravention in approving the Draft ASX Announcement. But I discounted that and the other disqualification periods imposed upon him under the totality principle. 354 In the case of the non-executive directors, I will discount the 7 year period and make a disqualification order against each of Mr Brown, Mr Gillfillan, Ms Hellicar, Mr Koffel, Mr O'Brien, Mr Terry and Mr Willcox of 5 years. 5 Pecuniary penalty 355 ASIC seeks pecuniary penalty orders against all the defendants with the exception of JHIL. 356 Section 1317G(1) of the Corporations Act (Section 1317G(1)) is in the following terms: "(1) A Court may order a person to pay the Commonwealth a pecuniary penalty of up to $200,000 if: (a) a declaration of contravention by the person has been made under section 1317E; and (aa) the contravention is of a corporation/scheme civil penalty provision; and (b) the contravention: (i) materially prejudices the interests of the corporation or scheme, or its members; or (ii) materially prejudices the corporation's ability to pay its creditors; or (iii) is serious." 357 A "corporation/scheme civil penalty provision" is defined in s 1317DA of the Corporations Act as a provision to which reference is made in Section 1317E(1) with exceptions irrelevant for present purposes. Section 180(1) is a corporation/scheme civil penalty provision. Section 1317G(1) presupposes a range of contraventions of Section 180(1) of which only the serious or materially prejudicial engage the provision. 358 For the purposes of this provision, each of the contraventions with respect to which I will make a declaration is serious. By the impugned statements and the failure to disclose the DOCI Information, the public was misled. The public was led to believe there were sufficient funds in the Foundation to meet all legitimate present and future asbestos claims. That was not so. That is a serious matter. The market was acting on a false premise. 359 The purpose of a pecuniary penalty is punishment as well as personal and general deterrence. 360 In ASC v Donovan (1998) 28 ACSR 583 at 608 Cooper J said that the purpose of a pecuniary penalty was to punish, but principally imposition of a pecuniary penalty is to act as a personal deterrent and a deterrent to the general public against a repetition of like conduct. His Honour went on to say that if compliance with the appropriate standards of commercial conduct in the management of corporations by deterrence is the object, any penalty should be no greater than is necessary to achieve this objective. 361 Santow J said much the same thing in Adler 42 ACSR at 114 [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." 362 Both passages were cited with approval by French J in Chemeq 234 ALR at 532 [91]. 363 In Beekink 238 ALR at 607 [115] the Court referring to Adler and Donovan reiterated that the principal purpose of a pecuniary penalty is to act as a personal and general deterrent against the repetition of like conduct. It should be no greater than is necessary in order to achieve this objective. 364 In Adler 42 ACSR at 114-116 [126] Santow J derived a number of propositions from the authorities: "(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. (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. (iii) the capacity of the defendant to pay is a relevant consideration in determining a pecuniary penalty. (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. (v) it is important to assess whether the order will prejudice the rehabilitation of the defendant. (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. (vii) in Australian Securities Commission 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. (viii) a fine was not ordered in 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. (ix) factors leading to the order of a penalty in the range of $20,000–$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. (x) relevant factors leading to the court to order the lower range penalties in the range of $4000–$5000 included: • remorse and contrition shown; • efforts to repay misappropriated funds; • acted upon the advice of professionals; • did not contest the proceedings, or sought to have costs in proceedings; • tended to not involve dishonesty, but negligence or carelessness; • previous unblemished character; • further contraventions unlikely." 365 It must be remembered that a pecuniary penalty is an additional sanction and due consideration must be given to the effect of a declaration of contravention. As Santow JA pointed out in Vines at 545 [194 (iii)] the level of seriousness must be such as to justify a superadded pecuniary penalty over other sanctions that include the very real prior sanction by way of reputational damage for a professional person of actually declaring a contravention to have occurred. 5.1 Pecuniary penalty and Mr Macdonald 366 The considerations that lead to the conclusion that Mr Macdonald's contraventions were serious have been addressed already. 367 In my view, punishment and general deterrence and, with respect to the contraventions in the last three declarations against Mr Macdonald, personal deterrence demand the imposition of a pecuniary penalty in addition to the period of disqualification of Mr Macdonald. 368 ASIC seeks a pecuniary penalty in the range $1.47m - $1.81m. It calculated this amount by attributing a penalty in the range $120,000 - $130,000 for the contraventions in declarations 2 and 3, the failures to advise the 15 February 2001 Meeting of the over emphatic language in the Draft ASX Announcement and the limitations in the reviews by PwC and Access Economics. ASIC had attributed two contraventions to these latter failings. 369 The same range was applied to the contravention in declaration 8, the failure to consider disclosure of the DOCI Information. 370 To the contraventions in declaration 1 and declarations 4 – 7, the announcements to the public, ASIC attributed a penalty in the range $140,000 - $160,000. 371 And for the deliberate announcements in declarations 9 – 11, ASIC attributed a range of $170,000 - $190,000. 372 ASIC's calculation on the basis of 12 contraventions led to an aggregation, it said, in the range $1.57m - $1.91m. In fact the aggregation is in the range $1.69m - $1.89m. ASIC then discounted the aggregation to its above suggested pecuniary penalty range. 373 If that mathematical approach is taken with respect to the 11 contraventions I have found, the aggregation would be in the range from $1.57m - $1.76m. 374 In my view attributing amounts of this order to the contraventions is significantly excessive. The maximum penalty to be reserved for the worst cases is $200,000 per contravention. ASIC's approach does not take adequate account of the other sanctions of declaration of contravention and period of disqualification. 375 Mr Macdonald submitted that a pecuniary penalty in the range of $200,000 - $250,000 was appropriate. 376 The seriousness of the contraventions calls for the imposition of a significant penalty with respect to each contravention. I attribute a penalty of $35,000 to each of the contraventions in declarations 2 and 3. For each of the contraventions in declaration 1 and declarations 4 – 7, I attribute a penalty of $40,000. For the contravention in declaration 8, for the same reasons expressed with respect to disqualification, I attribute a penalty of $40,000. And for the contraventions in declarations 9 – 11, I attribute a penalty of $50,000. In total this amounts to $460,000, which I discount to $350,000. 377 I will make an order that Mr Macdonald pay to the Commonwealth of Australia a pecuniary penalty of $350,000. 5.2 Pecuniary Penalty and Mr Shafron 378 Mr Shafron's contraventions were his failure to warn of the too emphatic language of the Draft ASX Announcement in declaration 1, his failure to disclose the limitations upon the reviews of PwC and Access Economics in declaration 2 and his failure to consider disclosure of the DOCI Information in declaration 3. 379 The parity principle would suggest that I attribute a penalty of $35,000 to each of the contraventions in declarations 1 and 2 and that I attribute a penalty of $40,000 to the contravention in declaration 3. That leads to a total of $110,000 that I would discount to $75,000. 380 I reject ASIC's attribution of a range of $120,000 - $130,000 to each contravention and a discounting of the result to a range of $320,000 - $450,000. To attribute a range of $120,000 to $130,000 to these contraventions is excessive. 381 It was submitted on Mr Shafron's behalf that with respect to the contravention in declaration 3, I should impose a penalty substantially less than that imposed upon Mr Macdonald. 382 I reject that submission. As the secretary and general counsel of JHIL, he had responsibility for the company's performance of its continuous disclosure obligations. His contravention is not of less seriousness than that of Mr Macdonald. In my view there is no basis for a discriminatory order with respect to Mr Shafron. 383 I will make an order that Mr Shafron pay to the Commonwealth of Australia a pecuniary penalty of $75,000. 5.3 Pecuniary Penalty and Mr Morley 384 Mr Morley has one contravention against him: his failure to disclose the limitations in the PwC and Access Economics reviews. 385 Applying the parity principle, I would order Mr Morley to pay a pecuniary penalty of $35,000. Since he has only one contravention, the totality principle does not apply. 386 ASIC applied a range of $120,000 - $130,000 to two contraventions. I reduced the contraventions to one to avoid duplication and have already indicated that the range applied by ASIC is excessive. 387 I will order Mr Morley to pay to the Commonwealth of Australia a pecuniary penalty of $35,000. 5.4 Pecuniary Penalty and Mr Brown, Mr Gillfillan, Ms Hellicar, Mr Koffel, Mr O'Brien, Mr Terry and Mr Willcox 388 Mr Brown, Ms Hellicar, Mr O'Brien, Mr Terry and Mr Willcox were guilty of one contravention with respect to their approval of the Draft ASX Announcement. Mr Gillfillan and Mr Koffel were guilty of one contravention with respect to their failure to call for a copy of the Draft ASX Announcement. I have treated these contraventions equally. 389 In determining a period of disqualification for the non-executive directors I took the period of 7 years that I attributed to Mr Macdonald for his contravention in approving the Draft ASX Announcement and discounted it to 5 years as the appropriate disqualification period for the non-executive directors. 390 I adopt a similar course with respect to pecuniary penalty. I have attributed a penalty of $40,000 to Mr Macdonald's breach that, together with the amounts attributed to other contraventions, was discounted. I discount the $40,000 to $30,000 in the case of each of the non-executive directors. 391 I will order that each of Mr Brown, Mr Gillfillan, Ms Hellicar, Mr Koffel, Mr O'Brien, Mr Terry and Mr Willcox pay to the Commonwealth of Australia a pecuniary penalty of $30,000. 5.5 Pecuniary Penalty and JHINV 392 JHINV's contraventions in declarations 1 and 2 related to the falsity in the ASX Slides. The contravention in declaration 3 was for its failure to disclose the ABN 60 Information. 393 The former two contraventions were of Section 1041H(1) and Section 1041E(1). They are not civil penalty provisions and no question of a pecuniary penalty arises with respect to those breaches. 394 A "financial services civil penalty provision" is excluded from the definition of a corporation/scheme civil penalty provision in s 1317DA of Corporations Act. That term is defined in that provision to include Section 674(2), the continuous disclosure provision. Section 1317G(1A) applies to a contravention of Section 674(2). It was in the following terms on 25 March 2003: "A Court may order a person to pay the Commonwealth a pecuniary penalty of up to $200,000 if: (a) a declaration of contravention by the person has been made under section 1317E; and (b) the contravention is of a financial services civil penalty provision; and (c) the contravention: (i) materially prejudices the interests of acquirers or disposers of the relevant financial products; or (ii) materially prejudices the issuer of the relevant financial products or, if the issuer is a corporation or scheme, the members of that corporation or scheme; or (iii) is serious." 395 French J set out a series of factors to be taken into account in imposing penalty in respect of a failure in the continuous disclosure obligation in Chemeq 234 ALR at 534 [99]: "From the preceding discussion I extract the following factors relevant to the level of penalty for contravention of the continuous disclosure provisions. The list is non-exhaustive: (1) The extent to which the information not disclosed would have been expected to and (if applicable) did affect the price of the contravening company's shares: s 674(2)(c). (2) The extent to which the information, if not generally available, would have been discoverable upon inquiry by a third party: s 676(2). (3) The extent (if any) to which acquirers or disposers of the company's shares were materially prejudiced by the non-disclosure: s 1317G(1A). (4) The extent to which (if at all) the contravention was the result of deliberate or reckless conduct by the corporation. (5) The extent to which the contravention was the result of negligent conduct by the corporation. (6) The period of time over which the contravention occurred. (7) The existence, within the corporation, of compliance systems in relation to its disclosure obligations including provisions for and evidence of education and internal enforcement of such systems. (8) Remedial and disciplinary steps taken after the contravention and directed to putting in place a compliance system or improving existing systems and disciplining officers responsible for the contravention. (9) The seniority of officers responsible for the non-disclosure and whether they included directors of the company. (10) Whether the directors of the corporation were aware of the facts which ought to have been disclosed and, if not, what processes were in place at the time, or put in place after the contravention to ensure their awareness of such facts in the future. (11) Any change in the composition of the board or senior managers since the contravention. (12) The degree of the corporation's cooperation with the regulator including any admission of contravention. (13) The prevalence of the particular class of non-disclosure in the wider corporate community." 396 The significance of JHINV's failure to disclose the ABN 60 Information has been discussed earlier in these reasons for judgment. 397 In terms of the first factor identified by French J (expected affect on price), I found that as a matter of hypothesis in the circumstance of a market rationally or irrationally devaluing JHINV shares because of a perceived connection through JHIL with a liability for asbestos claims, a reasonable person was likely to have regarded knowledge that JHIL was to be separated from the James Hardie group as being important and as having a material effect on the price or value of JHINV shares. 398 It was submitted that I did not address extent of that effect. That is so. I held the asbestos discount to be unquantifiable. 399 This is not a case in which actual price affectation is applicable. Because the information was not disclosed there was no effect of it on the price or value of JHINV shares. 400 With regard to the second factor (discoverability by inquiry), in March 2003, JHIL was a private company. ASIC maintained a register of private company filings. It charged a prescribed fee for persons to access documents it maintained through electronic means or at its Business Centre. Upon payment of the fee, any person could inspect and copy or electronically extract any document filed with ASIC. I found that information on an ASIC register that might, on payment of a fee, be searched and might reveal relevant information if the searcher was sufficiently astute to consider name changes and conducted a search for the ABN of JHIL, was not readily observable matter. I found that a member of the investing public should not be required to pay a fee for the privilege of conducting a search of the filings by private companies held by ASIC. Further, the filings did not reveal the execution of the DOCIA nor its covenant and indemnity. 401 With respect to the third factor (material prejudice) there was a partial disclosure of the ABN 60 Information on 15 May 2003 and it was submitted that JHINV's share price movement on that day favoured a finding that if the transfer of JHIL had been disclosed it was not material. The opening and closing range was only $0.20 with a high of $6.61 and a low $6.35 with an average trading price of $6.467. The volume of trades, however, was the highest it had been in a month. But the question is not an ex post facto one, whether the market did react to the later disclosure of some of the information. The question is whether a reasonable person would expect the information to have a material effect on the market price. 402 With regard to the fourth factor (deliberate or reckless conduct), JHINV took a deliberate decision not to disclose the information. In arriving at that decision it did not address the correct question. Nor did it address the matter Allens identified it should. JHINV's conduct was grossly negligent and if not reckless, it bordered on it. 403 It follows that as to the fifth factor (the extent to which the decision was negligent), that the contravention was the result of negligent conduct on the part of JHINV. 404 As to the sixth element (length of contravention) there was a failure to disclose all of the ABN 60 Information between 25 March 2003 and 30 June 2003. 405 Apart from the existence of a continuous disclosure and marketing communication policy, the seventh factor (compliance systems), was not addressed in evidence. It was submitted that the fact that consideration was given to whether the ABN 60 Information should be disclosed and the advice of Allens was taken, meant that a system existed. All that appears is that consideration was given to the question of disclosure. 406 There was no evidence that any remedial or disciplinary steps referred to in factor eight were taken. 407 As to the ninth factor (seniority of responsible officers), the senior executives and the board of directors of JHINV were involved in the decision not to disclose. 408 As to the tenth item (directors' knowledge), the directors of JHINV were aware of the facts that ought to have been disclosed and of the advices of Allens on the question. 409 As to the eleventh item (change in composition of board and management), Mr Macdonald, Mr Shafron, Mr Morley and Mr Baxter are no longer employees of JHINV and neither Mr McGregor nor Mr Brown nor Ms Hellicar are directors of JHINV. 410 As to item twelve (cooperation with ASIC), it has submitted with respect to most of the defendants that there was a lack of cooperation with it. I do not give great weight to that submission. In civil penalty proceedings defendants are entitled to put ASIC to proof of its allegations. 411 Finally, as to factor thirteen (prevalence of the non-disclosure), the non-disclosure in question was probably unique and, in any event, not of a class of information generally subject to the continuous disclosure obligation. 412 JHINV's continuous disclosure and marketing communication policy, updated to February 2008, was in evidence. 413 Judged by the above factors and for the reasons expressed earlier in these reasons for judgment, JHINV's contravention of its continuous disclosure obligation was so serious as to require a significant pecuniary penalty. But not of the order of $200,000 submitted by ASIC. 414 I attributed a pecuniary penalty of $40,000 to Mr Macdonald and to Mr Shafron for failing to consider whether the DOCI Information should be disclosed. The contravention by JHINV was more serious than that as it involved a deliberate decision not to disclose in the face of Allens' original advice and its non-compliance with Allens' subsequent advice. 415 I will make an order that JHINV pay to the Commonwealth of Australia a pecuniary penalty of $80,000. 6 Costs 416 A number of parties asked that I defer the question of costs until after I publish these reasons when additional evidence and argument could be presented. Because of the views I hold about costs I decline to take that course. 417 ASIC seeks an order that the defendants, with the exception of ABN 60, jointly pay 90% of its costs. 418 From my summary in Macdonald (No 11) from [1269], 57 alleged contraventions of the law are identified. ASIC succeeded with respect to 32 of them. That is a rate of 56%. 419 ASIC produced a table that identified 41 alleged contraventions of which 25 were successful giving a result of just under 61%. 420 On either view, these results suggest that ASIC's submission that its costs be discounted by but 10% should be rejected. Its failure rate with respect to the alleged contraventions suggests a higher discount. 421 Subject to rules of court, costs are in the discretion of the Court under the Civil Procedure Act 2005, s 98. The Uniform Civil Procedure Rules Pt 42 r 42.1 provides that if the Court makes any order as to costs the Court is to order that costs follow the event unless it appears to the Court that some other order should be made. 422 Toohey J in Hughes v Western Australian Cricket Association Inc (1986) 8 ATPR 40-748 at 48-136 said: "1 Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order. Ritter v Godfrey (1920) 2 KB 47. 2 Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed. Forster v Farquhar (1893) 1 QB 564. 3 A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party's costs of them. In this sense, "issue" does not mean a precise issue in the technical pleading sense but any disputed question of fact or law. Cretazzo v Lombardi (1975) 15 S.A.S.R. 4 at p. 12." 423 In Waters v PC Henderson (Australia) Pty Ltd [1994] NSWCA 338; (1994) 254 ALR 328, Mahoney JA approved a passage from Ritchie's Supreme Court Procedure NSW: "Where the proceedings involve multiple issues the application of the rule that costs follow the event may involve hardship where a party succeeds on some issues and yet fails on others. Particularly is this so where, for example, a defendant succeeds on issues that occupied the bulk of the time taken by the proceedings. Nevertheless unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed." See also: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [31] - [36]. 424 In Macdonald (No 11) I identified 10 issues: the Draft ASX Announcement, the DOCI Disclosure, the DOCI Execution, the Final ASX Announcement, the Press Conference Statements, the 23 February 2001 ASX Announcement, the 21 March 2001 ASX Announcement, the Scheme of Arrangement, the Roadshow Presentations and the cancellation of the partly paid shares. 425 ASIC produced a table in which it identified 13 issues. It divided the DOCI Disclosure issue into Failure to advise on Disclosure and Failure to Disclose. It divided the Scheme of Arrangement issue into Scheme of Arrangement - Final IM and Draft IM, Draft Court Letter and Final Court Letter and it divided the Roadshow Presentations into the Edinburgh Representations and the London Representations on the one hand and ASX Slides on the other. 426 In either event, it seems to me that there were in the proceedings issues or groups of issues that were separable or discrete. They related to different fact situations and differing participants. The defendants against whom the issues were raised were not uniform across the issues. 427 ASIC's table of issues showed that many witnesses gave evidence on more than one issue. It was submitted that it was impractical to divide the evidence between issues. 428 For example, ASIC alleged that Mr Macdonald was in breach of Section 181(1) in making the Press Conference Statements, the 23 February 2001 ASX Announcement and the 21 March 2001 ASX Announcement. 429 ASIC also alleged that Mr Macdonald was in breach of s 181(1) of the Corporations Act in June 2002 when he made the statements in the Edinburgh Representations and the London Representations and approved the release of the ASX Slides. The provision was then in identical terms to Section 181(1). 430 I found that ASIC had failed to make out any of those charges. ASIC submits, however, that they should not be differentiated from the charges under Section 180(1) because the same evidence was tendered with respect to both sets of charges. 431 A similar submission was made with respect to JHIL and the 21 March 2001 ASX Announcement. I found that ASIC had made out its claim that by issuing the 21 March 2001 ASX Announcement, JHIL contravened Section 995(2). But I found that ASIC had failed to establish that it had also breached Section 999. ASIC submitted that the same evidence was tendered with respect to both alleged contraventions. 432 ASIC failed to establish that Mr Morley was in breach of Section 180(1) when he executed the DOCI. ASIC concedes that this was a distinct issue but apart from William Koeck and Jeremy Kriewaldt who gave evidence solely on this issue, the remainder of the witnesses whose evidence went to this issue also gave evidence in support of other aspects of the proceedings. 433 ASIC alleged that the Draft IM to be sent to members of JHIL as part of the members' scheme of arrangement containing a statement to the effect that the partly paid shares enabled JHIL to call upon JHINV to pay if it was required to meet any liabilities of JHIL was false or misleading. ASIC also claimed that the Draft Court Letter containing the statement to the effect that JHIL would have, through existing reserves and access to funding in the form of the partly paid shares, the means to meet liabilities that it might incur in the future whether in relation to asbestos claims or otherwise, was false or misleading. The Final Court Letter contained a statement with respect to the partly paid shares to similar effect. ASIC alleged it was false or misleading. The Final IM containing the same statements with respect to the partly paid shares was dispatched to the shareholders of JHIL. With respect to all these documents ASIC failed to establish any contravention. 434 While accepting that these allegations constituted a distinct issue, with the exception of the evidence of Mr Hutley SC and the affidavit of Ms Laidler, ASIC submitted that the remainder of the witnesses relied upon to support these allegations were also relied upon to support aspects of the case in which ASIC was successful. 435 ASIC failed to establish a breach of Section 1041E(1) with respect to the Edinburgh Representations and the London Representations by JHINV or a breach by Mr Macdonald of Section 181(1). ASIC submitted, however, that the evidence was substantially the same as the evidence relied upon successfully in support of findings that JHINV was in breach of Section 1041E(1) with respect to the ASX Slides and Mr Macdonald's breach of Section 180(1) with respect to the Edinburgh Representations and the London Representations. 436 ASIC submitted that the costs payable by the defendants should be determined as a percentage of the whole of the plaintiff's costs rather than determining that the defendants pay costs of certain issues. Reliance was placed upon Alamdo Holdings Pty Ltd v Australian Window Furnishings (NSW) Pty Ltd [2008] NSWSC 7 at [36]: "The approach favoured by Alamdo, if its principal contention is not accepted, is that it should have a fixed percentage of its costs rather than some mathematically calculated portion – in other words, that it should simply be deprived of a portion of its costs on the basis of a general assessment of respective degrees of success. Such an approach is consistent with that taken in a number of cases where issue-by-issue treatment has been considered impracticable or inappropriate. I need only mention, by way of example, the decision of the Court of Appeal in South Sydney Council v Royal Botanic Gardens and Domain Trust (No 2) [2000] NSWCA 242." 437 That was a case for the costs of repair and remedial work and a loss of rent in a damages claim for breach of covenants contained in a lease of industrial premises. It was not a case in which discrete issues were identified. 438 I am told I should assume that the amount of costs in question are tens of millions of dollars. I am told that taxation of costs is likely to be protracted and expensive. ASIC foreshadows reliance upon the Civil Procedure Act, s 98(4). It provides, amongst other things, that at time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to a specified gross sum instead of assessed costs. 439 In a multi-party multi-issue proceeding such as this case, there is a problem about a costs order against defendants jointly. As already mentioned, some of the issues will not apply to some of the parties. For example, Mr Brown, Mr Gillfillan, Ms Hellicar, Mr Koffel, Mr O'Brien, Mr Terry and Mr Willcox were not charged with contraventions with respect to the DOCI Disclosure, the DOCI Execution, the Final ASX Announcement, the Press Conference Statements, the 23 February 2001 ASX Announcement, the 21 March 2001 ASX Announcement, the Roadshow Presentations or the cancellation of the partly paid shares. And Mr O'Brien and Mr Terry were not charged with contraventions in relation to the Scheme of Arrangement. 440 The allegations against Mr Morley were confined to his failure to advise the 15 February 2001 Meeting of the limited nature of the reviews of the Cashflow Model by PwC and Access Economics, the allegation that he failed to advise the meeting that the best estimate in two Trowbridge reports was too uncertain to be used as a basis to assess the adequacy of Coy and Jsekarb's funding which ASIC failed to establish and Mr Morley's alleged failure to obtain legal advice concerning the Put Option before executing the DOCI in which ASIC again failed. 441 Another deficiency in an order that defendants jointly pay costs is the unfairness of the liberty ASIC would have to proceed against any defendant. As Austin J observed in Vines 58 ACSR at 367 [268]: "… First, I agree with the submissions made on behalf of the defendants that the costs order should be expressed severally. It would be unfair to the defendants to put ASIC in the position of being able to recover the whole of its costs against one of the defendants, when the hearing related to separate allegations of contravention by each defendant..." 442 The solution to this problem is going to rely very much on impression. Mathematical accuracy is impossible. 443 In my view, there were two major subjects of evidence in the proceedings and other lesser issues. One subject was constituted by a group of discrete issues, the other by one discrete issue, or a group of two discrete issues if ASIC's identification of issues is preferred. 444 On the one hand we had the evidence in relation to the Draft ASX Announcement and the announcements that followed it in the Final ASX Announcement, the Press Conference Statements, the 23 February 2001 ASX Announcement and the 21 March 2001 ASX Announcement. 445 By and large the same witnesses gave evidence in relation to each of those discrete issues. According to ASIC's table there were 28 witnesses who addressed the Draft ASX Announcement, 28 who addressed the Final ASX Announcement, 29 who addressed the Press Conference Statements, 26 who addressed the 23 February 2001 ASX Announcement and 25 who addressed the 21 March 2001 ASX Announcement. There was a core of 24 witnesses who addressed each of those issues. 446 The evidence was concentrated on the Draft ASX Announcement with far less attention given to the other announcements. 447 With the exception of the allegations that Mr Macdonald, Mr Shafron and Mr Morley failed to advise the 15 February 2001 Meeting that the Trowbridge reports were too uncertain to be used to assess funding for Coy and Jsekarb ASIC was successful in its charges relating to the Draft ASX Announcement. 448 With the exception of its charges against Mr Macdonald under Section 181(1) and its charge against JHIL under Section 999 with respect to the 21 March 2001 ASX Announcement, ASIC was successful in its charges with respect to the other announcements. 449 The other large subject was the Scheme of Arrangement. It was addressed by 13 witnesses. But it was largely a documentary case with extensive cross-examination covering the period from 1998 to 2003 of those non-executive directors who gave evidence in a failed attempt to establish that the management of JHIL had proposed to the board that after the completion of the restructure through the members' scheme of arrangement, the Put Option would be exercised, the partly paid shares would be cancelled, the shares would be transferred to another trust, or JHIL would be liquidated, and the board either endorsed those proposals and intended that the steps be taken or had assumed that they would occur. 450 It is my impression that the evidence on each of these subjects was about equal. 451 In an alternative submission on costs, ASIC submitted that costs should be apportioned to 9 issues: Market announcement 15 February 2001, Market announcements 16 February 2001, Market announcements 23 February and 21 March 2001, DOCI – disclosure, DOCI – execution, Information memorandum for the 2001 scheme, Presentations to institutional investors: Macdonald – JHINV: Edinburgh, London and ASX, Cancellation of partly paid shares. 452 ASIC submitted that the costs of the market announcements were 51% of total costs with the costs of the 15 February 2001 announcement at 40%. On the other hand it estimated the costs of the information memorandum at only 12.5% of total costs. 453 The exercise upon which I am engaged cannot be determined with arithmetic precision. I doubt that if I had stood the question of costs over for further evidence and argument I would have been in any better position that I am now. Cross-examination would no doubt have challenged the method by which ASIC's estimations were made. 454 There was much more to the Scheme of Arrangement issue than the Draft IM or the Final IM. As I have said it involved extensive cross-examination of those non-executive directors who gave evidence of their intentions with respect to the partly paid shares. 455 I reject ASIC's estimation with respect to the Scheme of Arrangement issue and maintain my view that the costs of it were basically equal to the costs of the Draft ASX Announcement issue and the announcements that followed it. 456 In Australian Securities and Investments Commission v Whitlam (No 2) [2002] NSWSC 718; (2002) 42 ACSR 515 at 523 [29] I made no order as to costs in similar circumstances: "In the substantive proceedings, the plaintiff was substantially successful with respect to the matters the subject of my first declaration and, notwithstanding the making of my second declaration, the defendant was substantially successful with respect to it because of the relief granted. The normal rule would be that the plaintiff is entitled to the costs associated with the first declaration and the defendant is entitled to the costs associated with the second declaration. Considerations of the time taken with respect to separate issues might be used to determine the outcome. In the circumstance, however, I consider it appropriate that each party bear its own costs." 457 It was submitted that I should take the same course in this case. That seems to me to be the appropriate order I should make in this case with respect to the two major subjects. It gives effect to success and failure and the basic equality of cost between the subjects. And it avoids the problems of taxation of costs with respect to each subject. It does not give rise to any liability for costs of a defendant against whom those issues were not raised and it recognises that with respect to the non-executive directors other than Mr O'Brien and Mr Terry ASIC raised a Scheme of Arrangement issue and the Draft ASX Announcement issue against each of them. 458 It is not a perfect solution because no charges were laid against the non-executive directors with respect to the announcements that followed the Draft ASX Announcement. But, as I have said, far less attention was directed to them in evidence. 459 I will make no order as to costs of the group of issues comprising the allegations with respect to the Draft ASX Announcement, the Final ASX Announcement, the Press Conference Statements, the 23 February 2001 ASX Announcement and the 21 March 2001 ASX Announcement. 460 I will make no order as to costs of the Scheme of Arrangement issue. 461 With respect to the DOCI Execution issue, Mr Morley having succeeded on it but failed on the Draft ASX Announcement issue sought an order that ASIC pay him 80% of his costs. 462 Since the DOCI Execution issue involved far less evidence than the Draft ASX Announcement issue and my order with respect to it has relieved Mr Morley from paying substantial costs, I will follow the same approach and make no order to costs of the DOCI Execution issue such that Mr Morley and ASIC will bear their own costs of that issue. 463 ASIC succeeded in its claims against JHIL, Mr Macdonald and Mr Shafron with respect to the DOCI Disclosure issue. ASIC seeks no order for costs against JHIL. In my view, ASIC should bear those costs and not have them passed on to Mr Macdonald and Mr Shafron. 464 I will order that Mr Macdonald pay one third of ASIC's costs of the DOCI Disclosure issue and that Mr Shafron pay one third of those costs. 465 ASIC succeeded in its claim with respect to the cancellation of partly paid shares issue that JHINV failed to notify the ASX of the ABN 60 Information. I see no reason why costs should not follow the event with respect to that issue and I will order JHINV to pay ASIC's costs of the cancellation of partly paid shares issue. 466 With respect to the Roadshow Presentations issue ASIC was successful with respect to the part of its charges that JHINV was in breach of Section 1041E(1) and Section 1041H(1) with respect to the ASX Slides. But it failed in its charge that JHINV breached Section 1014E(1) with respect to the Edinburgh Representations and the London Representations. 467 Since both ASIC and JHINV were partially successful with respect to this issue I will order JHINV to pay 50% of ASIC's costs of the Roadshow Presentations issue. 7 Conclusion 468 In Australian Securities and Investments Commission v Macdonald (No 11) [2009] NSWSC 287; (2009) 256 ALR 199, I found that each of the defendants had contravened provisions of the Corporations Act 2001 (Cth) or provisions of the Corporations Law (Cth) as carried over into the Corporations Act. 469 With the exception of the first defendant, Peter Donald Macdonald, and the eleventh defendant, ABN 60 Pty Ltd, formerly called James Hardie Industries Ltd, all the other defendants sought to be excused from their contraventions under s 1317S(2) or s 1318(1) of the Corporations Act. 470 I have refused to exonerate any of those defendants. 471 I will make declarations of the contraventions of all defendants in the following terms. 472 With respect to Peter Donald Macdonald I will make declarations in these terms: The Court declares that: 1. The First Defendant contravened s 180(1) of the Corporations Law as carried over into the Corporations Act 2001 (Cth) ( Section 180(1) ) in relation to ABN 60 Pty Ltd (formerly known as James Hardie Industries Ltd) ( JHIL ) by his conduct, as a director and Chief Executive Officer of that corporation, in voting on 15 February 2001 in favour of a resolution of the directors to approve a draft ASX announcement ( Draft ASX Announcement ) and authorise its execution and sending to the Australian Stock Exchange ( ASX ) in circumstances where: (a) he knew that the Draft ASX Announcement conveyed or was capable of conveying that: (i) the material available to JHIL provided a reasonable basis for the assertion in the announcement that it was certain that the amount of funds made available to the Medical Research and Compensation Foundation ( Foundation ) would be sufficient to meet all legitimate present and future asbestos claims brought against two of JHIL's former subsidiaries, Amaca Pty Ltd ( Amaca ) and Amaba Pty Ltd ( Amaba ); (ii) he believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (iii) all of the directors or at least the majority of them believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (iv) JHIL had received expert advice from PricewaterhouseCoopers ( PwC ) and Access Economics that supported the statement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (b) he knew or ought to have known that the Draft ASX Announcement was misleading in those respects. 2. The First Defendant contravened Section 180(1) in relation to JHIL by his conduct, as a director and Chief Executive Officer of that corporation on or about 15 February 2001 when its board of directors voted in favour of a resolution to approve the Draft ASX Announcement and authorise its execution and sending to the ASX, in failing to advise the board that: (a) the Draft ASX Announcement was expressed in too emphatic terms concerning the adequacy of the funding made available to meet all legitimate present and future asbestos claims against Amaca and Amaba; and (b) in that respect the Draft ASX Announcement was misleading. 3. The First Defendant contravened Section 180(1) in relation to JHIL by his conduct, as a director and Chief Executive Officer of that corporation, on or about 15 February 2001 in failing to advise its board of directors that the reviews of a cashflow model ( Cashflow Model ) of the funding being made available to meet asbestos claims brought against Amaca and Amaba that had been undertaken by PwC and Access Economics: (a) were limited to reporting on the logical soundness and technical correctness of the Cashflow Model; (b) had not verified, and PwC and Access Economics had been specifically instructed not to consider, the key assumptions adopted by the Cashflow Model, being: (i) fixed investment earnings rates; (ii) litigation and management costs; and (iii) future claim costs. 4. The First Defendant contravened Section 180(1) in relation to JHIL by his conduct, as a director and Chief Executive Officer of that corporation, in either approving for release to the ASX an announcement ( Final ASX Announcement ), failing to advise that it not be released, or failing to advise that it be amended before being released to remove the respects in which it was misleading in circumstances where: (a) he knew that the Final ASX Announcement conveyed or was capable of conveying that: (i) the material available to JHIL provided a reasonable basis for the assertion in the announcement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (ii) Mr Macdonald believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (iii) all of the directors or at least a majority of them believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (iv) JHIL had received expert advice from PwC and Access Economics that supported the statement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (b) he knew or ought to have known that the Final ASX Announcement was misleading in those respects. 5. The First Defendant contravened Section 180(1) in relation to JHIL by his conduct, as a director and Chief Executive Officer of that corporation, on or about 16 February 2001 at a press conference during which he made statements which conveyed that: (a) it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (b) the material available to JHIL provided a reasonable basis for the assertion that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (c) he believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (d) JHIL had received expert advice from PwC and Access Economics that supported the statement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; and (e) JHIL did not have any potential claims on the assets of Amaca and Amaba, in circumstances where he knew or ought to have known that those statements were false and misleading in those respects. 6. The first defendant contravened Section 180(1) in relation to JHIL by his conduct, as a director and Chief Executive Officer of that corporation, on or about 23 February 2001 in either approving for release to the ASX an announcement bearing that date ( 23 February 2001 ASX Announcement ), or failing to advise that it not be released, or failing to advise that it be amended before being released to remove the respects in which it was misleading in circumstances where: (a) he knew that the 23 February 2001 ASX Announcement conveyed or was capable of conveying that: (i) it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present or future asbestos claims brought against Amaca and Amaba; (ii) the material available to JHIL provided a reasonable basis for the assertion in the announcement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (iii) he believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (b) he knew or ought to have known that the 23 February 2001 ASX Announcement was misleading in those respects. 7. The First Defendant contravened Section 180(1) in relation to JHIL by his conduct, as a director and Chief Executive Officer of that corporation, on or about 21 March 2001 in either approving for release to the ASX an announcement bearing that date ( 21 March 2001 ASX Announcement ), or failing to advise that it not be released, or failing to advise that it be amended before being released to remove the respects in which it was misleading in circumstances where: (a) he knew that the 21 March 2001 ASX Announcement conveyed or was capable of conveying that: (i) it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (ii) the material available to JHIL provided a reasonable basis for the assertion in the announcement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (b) he knew or ought to have known that the 21 March 2001 ASX Announcement was misleading in those respects. 8. The First Defendant contravened Section 180(1) in relation to JHIL by his conduct, as a director and Chief Executive Officer of that corporation, on and from 15 February 2001 in failing to: (a) advise the Chairman or the board of JHIL as to whether or not the following information ( DOCI Information ) was required to be disclosed to the ASX namely that JHIL had entered into a deed of covenant and indemnity with Amaca and Amaba pursuant to which: (i) Amaca and Amaba provided certain covenants and indemnities to JHIL in respect of its potential asbestos liabilities; (ii) JHIL agreed to pay certain amounts in exchange for those covenants and indemnities; (iii) Amaca agreed that it would acquire all the shares in JHIL if it was put to it by a sole registered shareholder of the entirety of JHIL shares; (b) seek and consider advice and satisfy himself in relation to whether JHIL was required to disclose the DOCI Information to the ASX; (c) resolve or determine that JHIL would disclose the DOCI Information to the ASX; and (d) raise with or propose to the Chairman or the board of JHIL that they needed to consider and determine whether or not to disclose the DOCI Information to the ASX; in circumstances where Mr Macdonald knew or ought to have known that: (e) if JHIL failed to disclose the DOCI Information to the ASX it risked contravening s 1001A(2) of the Corporations Law as carried over into the Corporations Act ; and (f) if the DOCI Information was not disclosed to the ASX and JHIL had an obligation under the ASX Listing Rules to do so and that failure was revealed, it would be harmful to JHIL's interests and harm market perceptions of JHIL. 9. The First Defendant contravened Section 180(1) in relation to James Hardie Industries NV ( JHINV ) by his conduct, as a director and Chief Executive Officer of that corporation, on or about 10 June 2002 in either approving for release to the ASX a set of slides ( ASX Slides ), or failing to advise that they not be released in circumstances where: (a) he knew that the ASX Slides conveyed or were capable of conveying that: (i) it was certain or highly likely that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (ii) the material available to JHINV provided a reasonable basis for the assertion that it was certain or highly likely that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (b) he knew that the ASX Slides were misleading in those respects. 10. The First Defendant contravened Section 180(1) in relation to JHINV by his conduct, as a director and Chief Executive Officer of that corporation, in making a presentation in Edinburgh on or about 10 June 2002 during which he made statements which conveyed that: (a) it was certain or highly likely that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (b) the material available to JHINV provided a reasonable basis for the assertion that it was certain or highly likely that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; in circumstances where he knew that those statements were false or misleading in those respects. 11. The First Defendant contravened Section 180(1) in relation to JHINV by his conduct, as a director and Chief Executive Officer of that corporation, in making a presentation in London on or about 11 June 2002 during which he made statements which conveyed that: (a) it was certain or highly likely that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (b) the material available to JHINV provided a reasonable basis for the assertion that it was certain or highly likely that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (c) the James Hardie Group had received legal advice that it had no remaining asbestos liabilities; in circumstances where he knew that those statements were false or misleading in those respects. 473 With respect to Peter James Shafron I will make declarations in these terms: The Court declares that: 1. The Second Defendant contravened s 180(1) of the Corporations Law as carried over into the Corporations Act 2001 (Cth) ( Section 180(1) ) in relation to ABN 60 Pty Ltd (formerly known as James Hardie Industries Ltd) ( JHIL ) by his conduct, as an officer of that corporation, on or about 15 February 2001 when its board of directors voted in favour of a resolution to approve a draft ASX announcement ( Draft ASX Announcement ) and authorise its execution and sending to the Australian Stock Exchange ( ASX ), in failing to advise the board that: (a) the Draft ASX Announcement was expressed in too emphatic terms concerning the adequacy of the funding made available to meet all legitimate present and future asbestos claims brought against two of JHIL's former subsidiaries Amaca Pty Ltd ( Amaca) and Amaba Pty Ltd ( Amaba ); and (b) in that respect the Draft ASX Announcement was misleading. 2. The Second Defendant contravened Section 180(1) in relation to JHIL by his conduct, as an officer of that corporation, on or about 15 February 2001 in failing to advise its board of directors that reviews of a cashflow model ( Cashflow Model ) of the funding being made available to meet asbestos claims brought against Amaca and Amaba that had been undertaken by PricewaterhouseCoopers ( PwC ) and Access Economics: (a) were limited to reporting on the logical soundness and technical correctness of the Cashflow Model; (b) had not verified, and PwC and Access Economics had been specifically instructed not to consider, the key assumptions adopted by the Cashflow Model, being: (i) fixed investment earnings rates; (ii) litigation and management costs; and (iii) future claim costs. 3. The Second Defendant contravened Section 180(1) in relation to JHIL by his conduct, as an officer of that corporation, before and at the board meeting of 15 February 2001 in failing either to: (a) advise the Chief Executive Officer or the board of JHIL that it needed to consider whether or not JHIL was required to disclose the following information ( DOCI Information ) to the ASX, namely, that JHIL had entered into a Deed of Covenant and Indemnity pursuant to which: (i) Amaca and Amaba provided certain covenants and indemnities to JHIL in respect to its potential asbestos liabilities; (ii) JHIL agreed to pay certain amounts in exchange for those covenants and indemnities; (iii) Amaca agreed that it would acquire all the shares in JHIL if it was put to it by a sole registered shareholder of the entirety of JHIL shares; or (b) obtain advice for the Chief Executive Officer or the board, or provide his own advice to the board as to whether or not they were required to disclose the DOCI Information to the ASX; or (c) advise the Chief Executive Officer or the board to resolve or determine that JHIL would disclose the DOCI Information to the ASX; in circumstances where the second defendant knew or ought to have known that: (d) if JHIL failed to disclose the DOCI Information to the ASX it risked contravening s 1001A(2) of the Corporations Law as carried over into the Corporations Act ; and (e) if the DOCI Information was not disclosed to the ASX and JHIL had an obligation under the ASX Listing Rules to do so and that failure was revealed, it would be harmful to JHIL's interests and harm market perceptions of JHIL. 474 With respect to Phillip Graham Morley I will make a declaration in these terms: The Court declares that: 1. The Third Defendant contravened s 180(1) of the Corporations Law as carried over into the Corporations Act 2001 (Cth) ( Section 180(1) ) in relation to ABN 60 Pty Ltd (formerly known as James Hardie Industries Ltd) ( JHIL ) by his conduct, as an officer of that corporation, on or about 15 February 2001 in failing to advise its board of directors that reviews of a cashflow model ( Cashflow Model ) of the funding being made available to meet asbestos claims brought against two of JHIL's former subsidiaries Amaca Pty Ltd and Amaba Pty Ltd that had been undertaken by PricewaterhouseCoopers ( PwC ) and Access Economics: (a) were limited to reporting on the logical soundness and technical correctness of the Cashflow Model; (b) had not verified, and PwC and Access Economics had been specifically instructed not to consider, the key assumptions adopted by the Cashflow Model, being: (i) fixed investment earnings rates; (ii) litigation and management costs; and (iii) future claim costs. 475 With respect to Michael Robert Brown I will make a declaration in these terms: The Court declares that: 1. The Fourth Defendant contravened s 180(1) of the Corporations Law as carried over into the Corporations Act 2001 (Cth) ( Section 180(1) ) in relation to ABN 60 Pty Ltd (formerly known as James Hardie Industries Ltd) ( JHIL ) by his conduct, as a director of that corporation, in voting on 15 February 2001 in favour of a resolution of the directors to approve a draft ASX announcement ( Draft ASX Announcement ) and authorise its execution and sending to the Australian Stock Exchange ( ASX ) in circumstances where: (a) he knew that the Draft ASX Announcement conveyed or was capable of conveying that: (i) the material available to JHIL provided a reasonable basis for the assertion in the announcement that it was certain that the amount of funds made available to the Medical Research and Compensation Foundation ( Foundation ) would be sufficient to meet all legitimate present and future asbestos claims brought against two of JHIL's former subsidiaries Amaca Pty Ltd ( Amaca ) and Amaba Pty Ltd ( Amaba ); (ii) JHIL's Chief Executive Officer, Mr Macdonald, believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (iii) all of the directors or at least a majority of them believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (iv) JHIL had received expert advice from PwC and Access Economics that supported the statement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (b) he ought to have known that the Draft ASX Announcement was misleading in those respects. 476 With respect to Meredith Hellicar, Geoffrey Frederick O'Brien, Gregory James Terry and Peter John Willcox I will make a declaration in identical terms to that to be made with respect to Mr Brown. 477 With respect to Michael John Gillfillan I will make a declaration in these terms: The Court declares that: 1. The Fifth Defendant contravened s 180(1) of the Corporations Law as carried over into the Corporations Act 2001 (Cth) ( Section 180(1) ) in relation to ABN 60 Pty Ltd (formerly known as James Hardie Industries Ltd) ( JHIL ) in that, as a director of that company, at a meeting of the board of directors of that company on 15 February 2001 during which it resolved to approve a draft ASX announcement ( Draft ASX Announcement ) and authorised its execution and sending to the Australian Stock Exchange ( ASX ) he failed to take any of the following steps: (a) request that he be provided with a copy of the Draft ASX Announcement; (b) familiarise himself with its terms; or (c) abstain from voting in favour of the resolution to approve the Draft ASX Announcement and authorise its execution and sending to the ASX. 478 With respect to Martin Koffel I will make a declaration in identical terms to that to be made with respect to Mr Gillfillan. 479 With respect to JHIL I will make declarations in these terms: The Court declares that: 1. On or about 16 Febraury 2001 ABN 60 Pty Ltd (formerly known as James Hardie Industries Ltd) ( JHIL ) contravened s 995(2) of the Corporations Law as carried over into the Corporations Act 2001 (Cth) ( Section 995(2) ) by engaging in conduct that was misleading and deceptive, or likely to mislead or deceive, in relation to a notice published in relation to securities, in that it published to the Australian Stock Exchange ( ASX ) an announcement that falsely and misleadingly represented that: (a) it was certain that the amount of funds made available to the Medical Research and Compensation Foundation ( Foundation ) would be sufficient to meet all legitimate present and future asbestos claims brought against two of JHIL's former subsidiaries, Amaca Pty Ltd ( Amaca ) and Amaba Pty Ltd ( Amaba ); (b) the material available to JHIL provided a reasonable basis for the assertion in the announcement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (c) JHIL's Chief Executive Officer, Mr Macdonald, believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (d) all the directors, or at least a majority of them, believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (e) JHIL had received expert advice from PricewaterhouseCoopers ( PwC ) and Access Economics that supported the statement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba. 2. On or about 16 February 2001 JHIL contravened s 999 of the Corporations Law as carried over into the Corporations Act ( Section 999 ) by making a statement or disseminating information, namely, an announcement to the ASX that: (a) was false in a material particular or materially misleading in that it falsely represented that: (i) it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (ii) the material available to JHIL provided a reasonable basis for the assertion in the announcement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (iii) JHIL's Chief Executive Officer, Mr Macdonald, believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (iv) all of the directors, or at least a majority of them, believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; and (v) JHIL had received expert advice from PwC and Access Economics that supported the statement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (b) JHIL knew or ought to have known was false in a material particular or materially misleading; and (c) was likely to induce the sale or purchase of JHIL's shares and have the effect of increasing or maintaining the market price of JHIL shares. 3. On or about 16 February 2001 JHIL contravened Section 995(2) in that, in connection with dealings in securities, it engaged in conduct that was misleading and deceptive, or likely to mislead or deceive, in that its Chief Executive Officer, Mr Macdonald, made statements at a press conference that falsely and misleadingly represented that: (a) it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (b) the material available to JHIL provided a reasonable basis for the assertion that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (c) Mr Macdonald believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (d) JHIL had received expert advice from PwC and Access Economics that supported the statement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; and (e) JHIL did not have any potential claims on the assets of Amaca and Amaba. 4. On or about 16 February 2001 JHIL contravened Section 999 by making a statement or disseminating information, namely, statements made on its behalf by its Chief Executive Officer at a press conference that: (a) were false in a material particular or materially misleading in that they falsely represented that: (i) it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (ii) the material available to JHIL provided a reasonable basis for the assertion that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (iii) Mr Macdonald believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (iv) JHIL had received expert advice from PwC and Access Economics that supported the statement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; and (v) JHIL did not have any potential claims on the assets of Amaca and Amaba; (b) JHIL knew or ought to have known were false in a material particular or materially misleading; and (c) were likely to induce the sale or purchase of JHIL shares and have the effect of increasing or maintaining the market price of JHIL shares. 5. On or about 23 February 2001 JHIL contravened Section 995(2) by engaging in conduct that was misleading and deceptive in relation to a notice published in relation to securities, in that it published to the ASX an announcement that falsely and misleadingly represented that: (a) it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (b) the material available to JHIL provided a reasonable basis for the assertion in the announcement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; and (c) JHIL's Chief Executive Officer, Mr Macdonald, believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba. 6. On or about 23 February 2001 JHIL contravened Section 999 by making a statement or disseminating information, namely, an announcement to the ASX that: (a) was false in a material particular or materially misleading in that it falsely and misleadingly represented that: (i) it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (ii) the material available to JHIL provided a reasonable basis for the assertion in the announcement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; and (iii) JHIL's Chief Executive Officer, Mr Macdonald, believed that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (b) JHIL knew or ought to have known was false in a material particular or materially misleading; and (c) was likely to have the effect of maintaining or stabilising the market price of JHIL shares. 7. On or about 21 March 2001 JHIL contravened Section 995(2) by engaging in conduct that was misleading and deceptive in relation to a notice published in relation to securities, in that it published to the ASX an announcement that falsely and misleadingly represented that: (a) it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; and (b) the material available to JHIL provided a reasonable basis for the assertion in the announcement that it was certain that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba. 8. On or about 15 February 2001 JHIL contravened s 1001A(2) of the Corporations Law as carried over into the Corporations Act by its conduct as a listed disclosing entity in contravening the provisions of ASX Listing Rule 3.1 and negligently failing to notify the ASX of the following information, namely, that it had entered into a Deed of Covenant and Indemnity with Amaca and Amaba pursuant to which: (a) Amaca and Amaba provided certain covenants and indemnities to JHIL in respect of its potential asbestos liabilities; (b) JHIL agreed to pay certain amounts in exchange for those covenants and indemnities; and (c) Amaca agreed that it would acquire all the shares in JHIL if they were put to it by a sole registered shareholder of the entirety of JHIL shares; in circumstances where a reasonable person would expect, if it were generally available, that information to have a material effect on the price or value of JHIL shares. 480 With respect to JHINV I will make declarations in these terms: The Court declares that: 1. On or about 10 June 2002 James Hardie Industries NV ( JHINV ) contravened s 1041H of the Corporations Act 2001 (Cth) by engaging in conduct in relation to a financial product, namely, shares in JHINV, that was misleading or deceptive or was likely to mislead or deceive in that it published to the Australian Stock Exchange ( ASX ) a set of slides ( ASX Slides ) which falsely and misleadingly represented that: (a) it was certain or highly likely that the amount of funds made available to the Medical Research and Compensation Foundation ( Foundation ) would be sufficient to meet all legitimate present and future asbestos claims brought against two former subsidiaries of ABN 60 Pty Ltd (formerly known as James Hardie Industries Ltd) ( JHIL ) Amaca Pty Ltd ( Amaca ) and Amaba Pty Ltd ( Amaba ); and (b) the material available to JHINV provided a reasonable basis for the assertion that it was certain or highly likely that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba. 2. On or about 10 June 2002 JHINV contravened s 1041E of the Corporations Act by making a statement or disseminating information to the ASX, namely, the ASX Slides that: (a) was false in a material particular or materially misleading in that it falsely and misleadingly represented that: (i) it was certain or highly likely that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; and (ii) the material available to JHINV provided a reasonable basis for the assertion that it was certain or highly likely that the amount of funds made available to the Foundation would be sufficient to meet all legitimate present and future asbestos claims brought against Amaca and Amaba; (b) JHINV knew was false in a material particular or materially misleading; and (c) was likely to induce persons in Australia to acquire financial products, namely, securities in JHINV, and to have the effect of maintaining or stabilising the price for trading in financial products, namely, securities in JHINV. 3. On and from 25 March 2003 until 30 June 2003 JHINV contravened s 674(2) of the Corporations Act in that, as a listed disclosing entity to which the subsection applied, it failed to notify the ASX in accordance with the ASX Listing Rules of information that it had ( ABN 60 Information ) which those provisions required it to notify the ASX, namely, that JHINV and its subsidiary JHIL had arranged for JHIL's transfer out of the James Hardie group of companies by the following steps: (a) the cancellation on 15 March 2003 of partly paid shares issued by JHIL to JHINV; (b) the consolidation of JHIL's share capital into one fully paid share held by JHINV on 15 March 2003; (c) the reduction of JHIL's share capital by approximately $1.5m and payment of that amount to JHINV on 31 March 2003; (d) the execution of the ABN 60 Foundation Trust Deed by JHINV on 31 March 2003; (e) the execution of a Deed of Covenant, Indemnity and Access by JHINV and JHIL on 31 March 2003; (f) the issue of 1,000 shares by JHIL to the ABN 60 Foundation as trustee of the ABN 60 Trust on 31 March 2003; and (g) the cancellation by JHIL of its one fully paid share owned by JHINV for no consideration on or about 14 April 2003; in circumstances where: (h) the ABN 60 Information was not generally available; and (i) a reasonable person would expect, if it were generally available, the ABN 60 Information to have a material effect on the price or value of JHINV shares. 481 I will make the following disqualification orders under s 206C of the Corporations Act. 482 I will make an order that Peter Donald Macdonald be disqualified from managing a corporation for a period of 15 years. 483 I will make an order that Peter James Shafron be disqualified from managing a corporation for a period 7 years. 484 I will make an order that Phillip Graham Morley be disqualified from managing a corporation for a period of 5 years. 485 I will make orders that each of Michael Robert Brown, Michael John Gillfillan, Meredith Hellicar, Martin Koffel, Geoffrey Frederick O'Brien, Gregory James Terry and Peter John Willcox be disqualified from managing a corporation for a period of 5 years. 486 I will impose the following pecuniary penalties under s 1317G(1) of the Corporations Act. 487 I will make an order that Mr Macdonald pay to the Commonwealth of Australia a pecuniary penalty of $350,000. 488 I will make an order that Mr Shafron pay to the Commonwealth of Australia a pecuniary penalty of $75,000. 489 I will make an order that Mr Morley pay to the Commonwealth of Australia a pecuniary penalty of $35,000. 490 I will make orders that each of Mr Brown, Mr Gillfillan, Ms Hellicar, Mr Koffel, Mr O'Brien, Mr Terry and Mr Willcox pay to the Commonwealth of Australia a pecuniary of $30,000. 491 I will impose the following pecuniary penalty under s 1317G(1A) of the Corporations Act. 492 I will make an order that James Hardie Industries NV pay to the Commonwealth of Australia a pecuniary penalty of $80,000. 493 In relation to costs I will make the following orders. 494 I will make no order as to costs of the group of issues comprising the allegations with respect to the Draft ASX Announcement, the Final ASX Announcement, the Press Conference Statements, the 23 February 2001 ASX Announcement and the 21 March 2001 ASX Announcement. 495 I will make no order as to costs of the Scheme of Arrangement issue. 496 I will make no order to costs of the DOCI Execution issue such that Mr Morley and ASIC will bear their own costs of that issue. 497 I will order Mr Macdonald to pay one third of ASIC's costs of the DOCI Disclosure issue and I will order Mr Shafron to pay one third of those costs. 498 I will order JHINV to pay ASIC's costs of the cancellation of partly paid shares issue. 499 I will order JHINV to pay 50% of ASIC's costs of the Roadshow Presentations issue. 500 I order the parties to bring in short minutes of orders reflecting these reasons. ********** 26/08/2009 - Revision to Paragraph 253 - Paragraph(s) 253 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.