Morley v Australian Securities and Investments Commission (No 2) Shafron v Australian Securities and Investments Commission (No 2) [2011] NSWCA 110

Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Morley v Australian Securities and Investments Commission (No 2) Shafron v Australian Securities and Investments Commission (No 2) [2011] NSWCA 110 Hearing dates: (On written submissions) Decision date: 06 May 2011 Before: Spigelman CJ, Beazley JA, Giles JA Decision: (1) In 2009/298408 (Mr Morley) - (a) Appeal against the costs order made on 27 August 2009 dismissed. (b) Set aside the order made on 27 August 2009 that the appellant be disqualified from managing a corporation for a period of 5 years, and in lieu thereof order that the appellant be disqualified from managing corporations for 2 years from 27 August 2009. (c) Set aside the order made on 27 August 2009 that the appellant pay to the Commonwealth of Australia a pecuniary penalty of $35,000, and in lieu thereof order that the appellant pay to the Commonwealth of Australia a pecuniary penalty of $20,000. (d) Make no order as to the costs of the appeal and cross-appeal. (e) Reserve liberty to apply in relation to part repayment of the pecuniary penalty of $35,000. (2) In 2009/298416 (Mr Shafron) - (a) Set aside the order made on 27 August 2009 that the appellant pay to the Commonwealth of Australia a pecuniary penalty of $75,000, and in lieu thereof order that the appellant pay to the Commonwealth of Australia a pecuniary penalty of $50,000, (b) Set aside the order made on 27 August 2009 that the appellant pay one third of the respondent's costs of the DOCI Disclosure issue, and in lieu thereof order that the appellant pay one quarter of the costs of that issue. (c) Make no order as to the costs of the appeal and cross-appeal. (d) Reserve liberty to apply in relation to part repayment of the pecuniary penalty of $75,000. [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Catchwords: CORPORATIONS - directors' statutory duty of care and diligence under s 180 of Corporations Law - contraventions of s 180 by secretary/general counsel (Mr Shafron) and chief financial officer (Mr Morley) - whether Mr Morley should be relieved from liability under ss 1317S or 1318 of Corporations Act - found acted honestly - but declined to find ought fairly to be excused - or to exercise discretion to relieve from liability - whether Mr Shafron or Mr Morley should be disqualified from managing corporations - whether they should be ordered to pay pecuniary penalties - assessments of periods of disqualification - assessments of pecuniary penalties - issues fact-specific - protective purposes of legislation - particular regard to general and in Mr Shafron's case personal deterrence - COSTS - limited costs appeal by Mr Morley - no error shown - adjustment of costs order against Mr Shafron by reason of partial success on appeal - orders made for costs on appeal. Legislation Cited: Crimes (Sentencing Procedure) Act 1999 Crimes (Sentencing Procedure) Amendment Act 2010 Cases Cited: Adler v Australian Securities and Investments Commission [2003] NSWCA 131; (2003) 46 ACSR 504; Australian Competition and Consumer Commission v ABB Transmission and Distribution Limited (No 2) [2002] FCA 559; (2002) 190 ALR 169; Australian Competition and Consumer Commission v High Adventure Pty Ltd [2005] FCAFC 247; Australian Securities and Investments Commission v Adler [2002] NSWCA 483; (2002) 42 ACSR 80; Australian Securities and Investments Commission v Beekink [2007] FCAFC 7; (2007) 238 ALR 595 re HIH Insurance (in provisional liquidation); Australian Securities and Investments Commission v Adler [2002] NSWSC 483; (2002) 24 ACSR 80; House v The King (1936) 55 CLR 499; James Hardie Industries NV v Australian Securities and Investments Commission [2010] NSWCA 332; (2010) 274 ALR 85; James Hardie & Co Pty Ltd v Putt (1998) 43 NSWLR 554; Lowe v The Queen (1984) 154 CLR 606; Re One.Tel (In liquidation); Australian Securities and Investments Commission v Rich [2003] NSWSC 186; (2003) 44 ACSR 682; Pearce v The Queen (1989) 194 CLR 610; Rich v Australian Securities and Investments Commission [2004] HCA 42; (2004) 220 CLR 129; Postiglione v The Queen [1997] HCA 26; (1997) 189 CLR 295, Vines v Australian Securities and Investments Commission [2007] NSWCA 75; (2007) 73 NSWLR 451; (2007) 62 ACSR 1; Category: Consequential orders Parties: Phillip Graham Morley - Appellant & Cross-Respondent (2009/00298408) Peter James Shafron - Appellant & Cross-Respondent (2009/00298416) Australian Securities and Investment Commission - Respondent and Cross-Appellant in both matters Representation: Counsel: B C Oslington QC, R A Dick SC & N H Bender - Morley B W Walker SC, R Lancaster SC & N J Owens - Shafron A J L Bannon SC, R T Beech-Jones SC, J Single & S E Pritchard - ASIC Solicitors: Henry Davis York - Morley Middletons - Shafron Clayton Utz - ASIC File Number(s): CA 2009/00298408 CA 2009/00298416 Decision under appeal Citation: Australian Securities and Investments Commission v Macdonald (No 11) [2009] NSWSC 287; and Australian Securities and Investments Commission v Macdonald (No 12) [2009] NSWSC 714 Before: Gzell J File Number(s): SC 1490/07