FEDERAL COURT OF AUSTRALIA

Registrar of Aboriginal and Torres Strait Islander Corporations v Matcham (No 2) [2014] FCA 27

THE COURT ORDERS THAT:

1.    Pursuant to s 386-15(1) of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) (the Act), the respondent pay compensation to Katungul Aboriginal Corporation Community and Medical Services (ICN 1816) (Katungul) in the amount of $705,905.07.

2.    Pursuant to s 279-15(1) of the Act, the respondent be disqualified from managing Aboriginal and Torres Strait Islander corporations for a period of 15 years.

3.    Pursuant to s 386-10(1) of the Act, the respondent pay to the Commonwealth of Australia a pecuniary penalty of $500,000.

4.    The respondent pay the costs of the proceeding.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

Introduction

1    From June 2007 to February 2012, the first respondent (Mr Matcham) was the Chief Executive Officer of a corporation known as Katungul Aboriginal Corporation Community and Medical Services (Katungul) which was registered under the provisions of the Corporations (Aboriginal and Torres Strait Islander Act) 2006 (Cth) (the Act).

2    In June 2012, the applicant (the Registrar) commenced this proceeding seeking declarations, compensation, pecuniary penalties and disqualification orders arising from allegations against Mr Matcham of breaches of his statutory duties of care and diligence, as well as his duty of good faith and his duty not to act improperly to gain an advantage for himself.

3    In summary, the Registrar alleged that on many separate occasions over a four year period, Mr Matcham received payments from Katungul totalling more than $700,000 to which he had no entitlement. The payments which are the subject of the proceeding consist of bonus payments, time in lieu payments, non-salary payments, credit card payments, excess superannuation contributions and excess recreation leave payments.

4    When the matter was called on for hearing on 2 September 2013, senior counsel who then appeared for Mr Matcham indicated that his client would consent to the making of declarations in terms of those set out in the originating application. A statement of agreed facts signed by Mr Matcham was handed up later in the day but there was then a debate as to the terms of the declarations. The statement of agreed facts contained admissions by Mr Matcham of all of the contraventions alleged by the Registrar in the statement of claim. What took place at the hearing is explained in my reasons for judgment in Registrar of Aboriginal and Torres Strait Islander Corporations v Matcham [2013] FCA 912 (“Matcham (No 1)”).

5    Relevantly, it was agreed between the parties on 2 September 2013 that the remaining issues, namely, pecuniary penalties, compensation and the period of disqualification would stand over until 13 November 2013. Reference was made by Mr Matcham’s senior counsel in the course of argument on 2 September 2013 to the fact that Mr Matcham has been in receipt of medical treatment for the past two years and that reports were to be obtained for the purpose of evidence about that topic at the November hearing. In the meantime, on 11 September 2013 I made declarations of contraventions by Mr Matcham of the civil penalty provisions of the Act as explained in Matcham (No 1).

6    Some time after the September hearing date Mr Matcham terminated the retainer of his solicitors and counsel and retained new solicitors. On 11 November 2013, without any prior notice to the Registrar, Mr Matcham’s new solicitors filed an interlocutory application seeking orders that the hearing fixed for 13 November 2013 be vacated. The ground of the application, as disclosed in supporting affidavits, was that Mr Matcham has been diagnosed with post-traumatic stress disorder (PTSD) and major depression and that he did not understand what he was doing when he signed the agreed statement of facts.

7    For reasons which I will explain later, I refused to vacate the hearing. Mr Matcham’s solicitor and counsel, who were retained on a limited basis, then withdrew from the hearing. Mr Matcham then asked to be excused from further attendance himself. I excused his further attendance after pointing out to him that Senior Counsel for the Registrar had indicated her intention to proceed with the application for orders in Mr Matcham’s absence.

The regulatory framework under the Act

8    The Act was introduced in 2006 to replace the Aboriginal Councils and Associations Act 1976 (Cth) (the ACA Act). The Revised Explanatory Memorandum, Corporations (Aboriginal and Torres Strait Islander) Bill 2006 (Cth) explains in paragraph 1.2 of the outline that the Bill aligns with modern corporate governance standards and corporations law but maintains a special statute of incorporation for Aboriginal and Torres Strait Islander peoples that takes account of the special risks and requirements of the Indigenous corporate sector. Consistently with this, the preamble to the Act states that it is a special measure for the advancement and protection of Aboriginal peoples and Torres Strait Islanders.

9    In addition, the objects of the Act stated in Ch 1 provide for the establishment of the role of the Registrar and for the regulation of bodies registered under the Act, as well as, inter alia, for the imposition of duties of officers and their regulation.

10    The objects of the Act are designed to recognise that Aboriginal and Torres Strait Islander peoples, in some circumstances, have special needs for incorporation, assistance, monitoring and regulation which the Corporations Act 2001 (Cth) (Corporations Act) is unable to meet.

11    Relevantly, in Ch 6, the Act imposes upon directors and officers duties of care and diligence, good faith and the duty to not improperly use his or her position to gain an advantage for himself or herself or to cause detriment to the corporation. These duties are states in Ch 6, Part 6-4, Division 265.

12    The duty of care and diligence is stated in section 265-1 of the Act in terms that mirror those of s 180(1) of the Corporations Act.

13    The duty of good faith appears in s 265-5 in language which has its analogue in s 181(1) of the Corporations Act.

14    The duty not to improperly use the position of director or officer of the corporation is stated in s 265-10. The analogue of that section is s 182(1) of the Corporations Act.

15    The review of the ACA Act which resulted in the enactment of the Act recommended a range of civil and criminal penalties similar to the approach adopted in the Corporations Act, particularly in regard to cases of dishonest or bad faith actions on the part of directors or officers. The Revised Explanatory Memorandum states in paragraph 1.23 of the notes to Ch 6 of the Bill that:

The review highlighted the need to protect the members of CATSI corporations from the actions of “rogue” directors or officers.

16    This was achieved through the enactment of the duties of directors and officers referred to above and, at least in part, by the establishment of a civil penalty regime in Ch 8 of the Act in similar terms to the civil penalty provisions stated in Part 9.4B of the Corporations Act.

17    The civil consequences of contravening the civil penalty provisions of the Act are stated in Div 386 of the Act.

18    The power to make declarations of contravention of civil penalty provisions, including s 265-1, s 265-5 and s 265-10 is contained in s 386-1 of the Act. The analogue of s 386-1 of the Act is found in s 1317E of the Corporations Act. I discussed the requirements of this provision when I made declarations of multiple contraventions by Mr Matcham of the civil penalty provisions of the Act: see Matcham (No 1) at [9] ff.

19    The power to order pecuniary penalties is found in s 386-10(1) as follows:

(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 386-1; and

(b)    the contravention:

(i)    materially prejudices the interests of the Aboriginal and Torres Strait Islander corporation affected by the contravention or the interests of its members; or

(ii)    materially prejudices the ability of the Aboriginal and Torres Strait Islander corporation affected by the contravention to pay its creditors; or

(iii)    is serious.

20    Section 386-10 of the Act has its analogue in s 1317G of the Corporations Act.

21    The power to order compensation is found in s 386-15(1) of the Act as follows:

(1)    A Court may order a person to compensate an Aboriginal and Torres Strait Islander corporation for damage suffered by the corporation if:

(a)    the person has contravened a civil penalty provision in relation to the corporation; and

(b)    the damage resulted from the contravention.

The order must specify the amount of the compensation.

Note:    An order may be made under this subsection whether or not a declaration of contravention has been made under section 386-1.

22    Section 386-15 of the Act has its analogue in s 1317H of the Corporations Act.

23    The power to order disqualification is not found in Ch 8 of the Act but, as with its analogue in the Corporations Act is found in the chapter which deals with officers and employees. The relevant chapters are Ch 6 of the Act and Ch 2D of the Corporations Act. The relevant section of the Act is s 279-15 which is found in Part 6-5, Div 279. Its analogue in the Corporations Act is s 206C which is found in Part 2D.6 of Chapter 2D.

24    Section 279-15(1) of the Act provides as follows:

(1)    On application by the Registrar, the Court may disqualify a person from managing Aboriginal and Torres Strait Islander corporations for a period that the Court considers appropriate if:

(a)    a declaration is made under:

(i)    section 386-1 (civil penalty provision) that the person has contravened a civil penalty provision; or

(ii)    section 1317E of the Corporations Act (civil penalty provision) that the person has contravened a corporation/scheme civil penalty provision (within the meaning of that Act); and

(b)    the Court is satisfied that the disqualification is justified.

25    Section 279-15(2) provides that, in determining whether the disqualification is justified, the Court may have regard to the factors set out in paras (a) and (b) of that subsection as follows:

(a)    the person’s conduct in relation to the management, business or property of any Aboriginal and Torres Strait Islander corporation or Corporations Act corporation; and

(b)    any other matters that the Court considers appropriate.

26    The overlap between the power of disqualification conferred on the Court under the provisions of the Act and the Corporations Act is reinforced by the provisions of s 279-15(1)(a)(ii) and s 279-15(2)(a) as set out above and s 206C(3) of the Corporations Act. The latter provision states that the reference in s 206C(2)(a) to the Court’s entitlement to have regard to the person’s conduct in the management of a “corporation”:

… includes a reference to an Aboriginal and Torres Strait Islander corporation.

27    These provisions ensure that in an application by the Registrar under s 279-15, the Court can consider contraventions of the civil penalty provisions of the Corporations Act in addition to those under the Act. So too, in an application by ASIC under s 206C of the Corporations Act, the Court can consider contraventions under the Act in addition to those under the Corporations Act.

28    The civil penalty regime contained in Ch 8 of the Act is explained in paragraph 1.35 of the Notes on Clauses in the Revised Explanatory Memorandum. That paragraph observes that Ch 8 creates a civil penalty scheme based on Pt 9.4B of the Corporations Act. It states that, as in the Corporations Act, the civil penalty regime under the Act will provide appropriate sanctions for serious contraventions, including breaches of directors’ duties.

29    Paragraph 1.35 of the Revised Explanatory Memorandum continues as follows on page 27:

Including a civil penalty scheme in the Bill is appropriate considering that civil penalties have traditionally been directed against corporate wrongdoing if imprisonment is either not available or is inappropriate. The civil penalty scheme will also provide a strong financial disincentive against corporate wrongdoing and is an appropriate non-criminal alternative in the context of regulating Indigenous corporations.

The role of the Registrar

30    The evidence in this application includes an affidavit of Mr Anthony Raymond Beven, the Registrar of Aboriginal and Torres Strait Islander Corporations.

31    Mr Beven explains the role of the Registrar in his affidavit. He explains the regulatory role of the Registrar and describes the staff and number of his offices located at premises in Canberra, Perth, Broome, Darwin, Alice Springs, Cairns and Coffs Harbour.

32    The Revised Explanatory Memorandum explains that Ch 16 of the Act provides for the appointment of the Registrar and for the Registrar’s functions and powers. Paragraph 1.67 on page 32 points out that the functions of the Registrar are based on similar functions expressed in the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) and are designed to support the Registrar’s incorporation, monitoring and regulatory functions.

33    Mr Beven’s evidence is that, while his role is to be an active regulator, the resources of his office are limited and it is not possible to directly oversee all corporations registered under the Act.

34    Mr Beven goes on to say that in July 2008 he established an investigations and enforcement capability in his office with the aim of addressing misconduct and improving compliance with the Act. He states that the enforcement actions taken by his office, as well as other steps, have seen significant improvements in the governance and accountability of Aboriginal and Torres Strait Islander corporations.

Corporations registered under the Act

35    As at the date of Mr Beven’s affidavit there were 2,524 corporations registered under the Act. Approximately 60% of those corporations were based in remote parts of Australia.

36    Corporations registered under the Act typically provide important services to Aboriginal and Torres Strait Islander communities, such as health and medical services (of the type provided by Katungul), as well as, inter alia, education and aged care programs.

37    Many directors of Aboriginal and Torres Strait Islander corporations have poor levels of literacy and therefore rely heavily on external advisers, employed staff or the Registrar’s staff for advice and guidance.

38    Whilst the largest 20 Aboriginal and Torres Strait Islander corporations generate approximately 60% of their income from private sources, the majority of corporations, such as Katungul, rely almost entirely on government funding to conduct their operations and services.

Katungul

39    Katungul was incorporated under the ACA Act on 17 June 1993 and is now registered under the Act. It was registered under the Act at all times relevant to this proceeding.

40    Katungul is a not-for-profit Aboriginal owned and controlled entity. It is based in Narooma on the south coast of New South Wales. Katungul is a registered charity under the provisions of the Income Tax Assessment Act 1997 (Cth). It does not charge Aboriginal clients for the health services it provides.

41    Katungul was established to administer and operate an Aboriginal health care service to cater for the needs of Aboriginal and Torres Strait Islander people living on the south coast of New South Wales between Ulladulla and Bega. Its role in providing those services to meet the needs of Indigenous people in the region is explained by Mr Bunja Eric Smith, an Elder of the Walbunga People from the south coast of New South Wales. Mr Smith has been a member of the board of directors of Katungul since December 2010.

42    Katungul is funded by the Commonwealth Office of Aboriginal and Torres Strait Islander Health (OATSIH), which is part of the Department of Health and Ageing (the Department) and the New South Wales Ministry of Health. The funding is for the purpose of delivering primary and secondary health services through two medical centres located in Narooma and Bega.

Investigation of Mr Matcham’s conduct

43    Throughout the first half of 2011, Mr Smith questioned Mr Matcham at Katungul board meetings of concerning Katungul’s position, its finances and other issues concerning the quality of the services it was providing.

44    In particular, Mr Smith was concerned that Katungul was in financial difficulties and did not appear to be providing essential services to the local communities it was intended to serve. Mr Smith’s evidence, which I accept, is that by mid-2011 there was no service at Ulladulla, Batemans Bay, Mogo, Merimbula and Eden.

45    Mr Smith’s concerns were apparently communicated to the OATSIH. On 9 September 2011 Ms Jane Bennett of OATSIH wrote to Mr Ron Mason, the Chairperson of Katungul, drawing to his attention matters relating to Katungul’s financial and corporate governance arrangements.

46    Most importantly, the letter from Ms Bennett stated that the Department’s Audit and Fraud Control Branch intended to undertake an examination of Katungul’s financial records. The examination was scheduled for the week commencing 26 September 2011.

47    One of the matters to which Ms Bennett’s letter drew attention was that the Department had undertaken a title search of Katungul’s clinic at Gipps Street in Bega which identified a mortgage over the property in favour of the National Australia Bank, executed on 17 November 2009.

48    The letter went on to point out that the funding arrangements contained in the Purposes Deed made between Katungul and the Commonwealth in 2004 provided that Katungul would not mortgage the property without the Commonwealth’s prior consent and no such consent had been obtained.

49    The examination and audit referred to in Ms Bennett’s letter was carried out in the period from 26 to 30 September 2011. A confidential report of the audit stated that Katungul was in a difficult financial position and may not be able to pay its debts now or within the foreseeable future. It had access to “minimal cash” and:

… may not have the cash required to pay debts over the next three months.

50    The report went on to describe the large amount of unauthorised payments apparently drawn by Mr Matcham as follows:

The CEO appears to have approved four maximum bonus payments and 3,725 hours of time in lieu without the approval or agreement of the Board. Most of these payments were made over the last two years. The gross value of these payments is:

51    Reference was also made in the report to the unauthorised mortgage over Katungul’s clinic at Bega which was signed by Mr Matcham on 17 January 2009 in breach of the Purposes Deed between Katungul and the Commonwealth.

52    The report notes that Mr Matcham was absent on leave at the time of the audit but that he paid $50,000 of his own funds into Katungul’s bank account in late September 2011. Without that payment Katungul would have been unable to pay salaries and wages due on 30 September 2011.

53    Katungul’s financial difficulties culminated in the appointment of Mr Alan Lee Eldridge as special administrator of Katungul on 8 December 2011. The appointment was made by a delegate of the Registrar at the request of the board of directors of Katungul.

54    Mr Eldridge terminated Mr Matcham’s employment in January 2012, but in fact, Mr Matcham had been absent on sick leave from September 2011 when the Department’s examination of Katungul’s affairs took place.

The Administrator’s evidence

55    Mr Eldridge’s evidence demonstrates the parlous financial position of Katungul at the time of his appointment as administrator. Importantly, his evidence also shows the impact of Mr Matcham’s actions upon Katungul’s financial performance and financial position.

56    In the 2005/2006 financial year, which was the year before Mr Matcham’s appointment as CEO, Katungul had a profit of more than $172,000 and a surplus of working capital of slightly in excess of $464,000.

57    From 2007 to 31 December 2011 Katungul recorded losses (except in 2009/2010) totalling nearly $450,000. As at 31 December 2011 it had a deficiency of working capital of more than $422,000.

58    The audited financial statements of Katungul as at 30 June 2011 indicate that it held no cash in its bank accounts, notwithstanding the receipt in the course of that year of revenue (primarily from governmental funding) of over $3,200,000. Moreover, the company had an overdraft liability as at that date of nearly $57,000 owing to NAB.

59    Notwithstanding Katungul’s parlous financial state at the end of the 2011 financial year, Katungul’s records indicate that on 6 July 2011 it paid Mr Matcham a bonus of more than $65,000 and time in lieu payments of over $15,000 which increased its overdraft with the NAB. These payments form part of the unauthorised payments to Mr Matcham which are the subject of this proceeding.

60    Two months later, on 7 September 2011 Mr Matcham requested that NAB increase the amount of the overdraft facility. On 1 December 2011, shortly before Mr Eldridge’s appointment, the overdraft stood at more than $246,000.

61    Mr Matcham’s contract of employment with Katungul provided for a base salary of $165,000 (which included a salary sacrifice component of $32,098) and 18% superannuation of $29,700. There was no provision for time in lieu payments but the contract provided for a performance bonus of $15,000 to $35,000 subject to board approval. His total remuneration package was therefore $194,700 plus a possible bonus to a maximum figure of $35,000.

62    Mr Eldridge has calculated the total remuneration paid to Mr Matcham, before tax, and compared it to Katungul’s total revenue in each year of Mr Matcham’s employment. The table prepared by Mr Eldridge shows that Mr Matcham’s remuneration ranged from nearly $280,000 in 2007/2008 to more than $526,000 in 2010/2011. The percentage of Katungul’s total revenue paid to Mr Matcham in each of the years ranged from 8.71% in 2008/2009 to 16.11% in 2010/2011.

63    Mr Eldridge has worked with Aboriginal and Torres Strait Islander communities and organisations for 30 years during which he has examined and investigated corporate governance failings as well as misappropriation and malpractice by office holders and employees.

64    Mr Eldridge has also worked regularly with and reviewed many Aboriginal and Torres Strait Islander community controlled health services around Australia, including many that have significantly more revenue, obligations and responsibilities than Katungul. Significantly, he is not aware of one such entity that has remunerated or provided benefits to its chief executive officer of the magnitude that Mr Matcham received during the period of his employment with Katungul.

65    Mr Eldridge has calculated the total hours of time in lieu payments made by Katungul to Mr Matcham from 6 December 2007 to 6 July 2011. The total additional hours amounted to over 5,250 which was the equivalent of 691.68 working days calculated upon the basis of an ordinary Katungul working day. This equates to an average of nearly 173 additional working days for each of the four financial years from 2007 to 2011 (upon the assumption that the payment on 6 July 2011 related to hours claimed for the financial year ending 30 June 2011).

66    A time sheet for Mr Matcham which was annexed to an affidavit of Ms Cheryl Moreton, Katungul’s finance manager during the period of Mr Matcham’s employment, shows that Mr Matcham was said to have been working more than 23 hours a day, and sometimes more than 24 hours a day, during August 2010.

67    In Mr Eldridge’s opinion, from the investigations conducted by him, at the time of each bonus payment made by Katungul to Mr Matcham, Katungul was trading at a loss and was in a weak financial position, that is to say, it had a current or working capital deficiency.

68    In addition, in Mr Eldridge’s opinion at the time of each of the time in lieu payments by Katungul to Mr Matcham, Katungul was in a weak financial position and (other than at the time when payments were made in 2009/2010), it was trading at a loss.

69    Mr Eldridge expresses the opinion that the amounts paid by Katungul to Mr Matcham should have been, and could have been, used by it to deliver primary and secondary health services to Aboriginal people in the south coast area of New South Wales serviced by Katungul.

The Statement of Agreed Facts

70    The statement of agreed facts was signed by Mr Matcham on 2 September 2013. The document was also signed by the Registrar’s legal representative.

71    The signed statement of agreed facts commences by setting out non-contentious factual details including details of the incorporation and registration of Katungul and Mr Matcham’s employment as well as his duties as CEO. The document then sets out details of the various categories of unauthorised payments made by Katungul to Mr Matcham.

72    The details of payments described in the statement of agreed facts as “Bonus payments” commence at paragraph 27. That paragraph records payments of $205,550.08 paid to Mr Matcham as follows:

73    The document goes on to record that none of the bonus payments were authorised by a resolution at a meeting of the board of directors in accordance with the provisions of Mr Matcham’s contract or the relevant provision of the rule book which established the internal governance rules of Katungul, or otherwise approved for payment at a meeting of the board in accordance with the requirements of the contract or the rules.

74    Moreover, the statement of agreed facts states that at the times when he procured payment of the bonus payments, Mr Matcham knew that the payment had not been authorised by a resolution or approved for payment at a board meeting.

75    The statement of agreed facts goes on to contain further admissions of knowledge on the part of Mr Matcham that he had not, and could not, satisfy the requirements which operated as a condition precedent to the exercise of the discretion by the board to approve the payments.

76    Mr Matcham then admitted to the legal and factual consequences of the payments as follows:

37.    By procuring the ‘Bonus’ payments without the authority of the Board, the Respondent:

37.1.    acted in a manner that was inconsistent with how an ordinary person of ordinary prudence with the knowledge and experience of the Respondent might be expected to have acted in all the circumstances at the relevant time if he was acting on his own behalf;

37.2.    failed to exercise his powers and discharge his duties in good faith in the best interests of the Corporation;

37.3.    failed to exercise his powers for a proper purpose;

37.4.    improperly used his position to gain an advantage for himself;

37.5.    caused detriment to the Corporation; and

37.6.    acted contrary to the Rule Books.

77    The statement of agreed facts then deals with unauthorised payments described collectively as “time in lieu” payments. The document sets out details of 14 payments made by Katungul to Mr Matcham totalling $310,984.18 during the period from 22 July 2008 to 6 July 2011. It states that none of the time in lieu payments were authorised by a resolution at a meeting of the board or approved for payment at a board meeting.

78    There are then a number of admissions made by Mr Matcham to the effect that he should have known that he was not entitled to receive each of the time in lieu payments. The section of the document dealing with this topic concludes with admissions by Mr Matcham that his procurement of the time in lieu payments without the authority of the board had the legal and factual consequences expressed in the same terms as those which applied to the bonus payments.

79    The next topic referred to in the statement of agreed facts is unauthorised superannuation payments. The document records payments by Katungul to Mr Matcham of amounts in excess of his 18% superannuation entitlement as follows:

80    Mr Matcham admits in the following paragraphs that he should have known he was not entitled to the payments and that the payments were not permitted under the terms of his employment contract. He admits that by procuring the payments he acted in a manner that was inconsistent with how an ordinary person of ordinary prudence with his knowledge and experience might be expected to act and that by procuring the payments he caused detriment to Katungul.

81    The topic of unauthorised recreation leave payments is then addressed. Mr Matcham admits to procuring payments totalling $35,723.51 in excess of his entitlement under his employment contract. He makes admissions in relation to those payments in similar terms to those which he made in relation to the unauthorised superannuation payments.

82    Other unauthorised payments described as unauthorised non-salary payments are then addressed. The details of these payments are:

83    Mr Matcham then makes admissions to the effect that he was not entitled to the payments and that by procuring the payments he breached his duty of good faith and his duty not to improperly use his position to gain an advantage for himself. He also admits that by procuring the payments he caused detriment to Katungul.

84    Similar admissions are made by Mr Matcham in relation to his unauthorised use of a credit card issued to him by Katungul which he used to make private purchases including payments of relatively small amounts of life insurance premiums.

85    In addition Mr Matcham admits to signing the mortgage in favour of the NAB over Katungul’s Bega clinic without authority.

86    He also admits that the numerous unauthorised payments referred to above caused financial detriment to Katungul and that those moneys were not available to Katungul to pursue its charitable purposes.

87    Finally, Mr Matcham makes the following admissions in relation to the conduct described in the statement of agreed facts as follows:

77.    The conduct set out above has:

77.1    materially prejudiced the interests of the Corporation or the interests of its members;

77.2    materially prejudiced the ability of the Corporation to pay its creditors.

78.    The Corporation’s funds were used to confer substantial financial benefits on the Respondent, to the detriment of the fulfilment of the objectives of the Corporation and the purposes for which the funding was sourced from public funds provided to the Corporation pursuant to funding agreements with the Commonwealth of Australia.

The application to vacate the hearing

88    The orders sought by Mr Matcham in his interlocutory application included an order that he be given 21 days to file an application in accordance with r 39.05 of the Federal Court Rules 2011. That rule sets out the well-known bases of the Court’s jurisdiction to vary or set aside an order after it has been entered. It does not, on its face, appear to have application to the matters relied upon by Mr Matcham.

89    The interlocutory application was supported by two affidavits. The first was an affidavit of Mr Matcham in which he deposes to his state of mind when he signed the agreed statement of facts. He says he did not understand what he was doing when he signed the document. He says that he came away from the hearing on 2 September 2013 believing that he was going to have a full hearing on the merits.

90    Mr Matcham’s affidavit includes the following statement:

At the time of the swearing of this affidavit I maintain that at the time I entered consent to the facts in this matter I did not know the nature and effect of what I was doing. I believed that I was to have a full hearing of the matter to provide my innocence and to test the witnesses in cross examination and by all means available and should the application to set aside the consent orders be made I intend on instructing Michael Vassili and John Hatzistergos of counsel in the matter.

91    Earlier in his affidavit, Mr Matcham deposes to the approach he made to Michael Vassili Lawyers with a view to setting aside the statement of agreed facts and the declarations on which they were based. Mr Matcham says he first approached Mr Vassili on 2 October 2013.

92    The second affidavit was sworn by Indu Satkunanthan, a solicitor employed by Mr Vassili. The affidavit deposes to instructions received from Mr Matcham that he was suffering from a mental illness and that he did not understand the nature or effect of the statement of agreed facts. The affidavit goes on to express the solicitor’s concerns as to Mr Matcham’s capacity to provide instructions. Reports of a psychiatrist, Dr Burns and a psychologist, Mr Fitzpatrick are annexed to the affidavit.

93    Dr Burns states that he diagnosed Mr Matcham with PTSD and a major depressive disorder shortly after his first consultation in May 2013. Dr Burns considers that Mr Matcham had been suffering from these conditions for at least 12 months prior to the consultation.

94    The symptoms of Mr Matcham’s PTSD to which Dr Burns refers include episodes of amnestic fugue which is a dissociated state of mind in which the normal integration of cognitive functions become temporarily disintegrated.

95    Dr Burns goes on to express the opinion that at the time of the court proceedings “in late August and early September”, it is highly likely that Mr Matcham was experiencing symptoms of the psychiatric disorders which he diagnosed. He considers that it is highly likely that Mr Matcham did not have the capacity to properly instruct his lawyers at the time of the proceedings because of the symptoms of his illnesses and their impact on his cognitive skills.

96    Mr Fitzpatrick first consulted Mr Matcham on 28 October 2011. His diagnosis is to similar effect to that of Dr Burns.

97    Mr Matcham’s interlocutory application and the supporting affidavits were emailed to the Registrar’s solicitor on 11 November 2013, that is to say, the day when they were filed.

98    The Registrar’s solicitor (AGS) wrote to Mr Vassili on 12 November 2013 stating that the proposed application to vacate the penalty hearing would be opposed. The letter states that Mr Matcham would be required for cross-examination and that his affidavit is an incomplete and insufficient account of events relating to his late application.

99    In that regard, the letter from AGS refers to and attaches a tax invoice provided by Mr Matcham’s former lawyers. The tax invoice sets out records of communication between the lawyers and Mr Matcham before and after the hearing on 2 September 2013. Those attendances are not addressed in Mr Matcham’s affidavit and the descriptions of those attendances do not suggest any difficulty on Mr Matcham’s part in giving instructions.

100    The AGS’s letter of 12 November 2013 goes on to accurately summarise the effect of what took place on 2 September 2013. In particular, senior counsel who then appeared for Mr Matcham informed the Court he had received signed instructions from Mr Matcham to consent to declarations and Mr Matcham was in Court when the signed statement of agreed facts was handed up at about 2.45 pm.

101    Also, Mr Matcham was in Court when the witnesses for the Registrar who were present in Court under subpoena were excused from further attendance. He was still in Court when I fixed the penalty hearing for 13 November 2013.

102    The AGS’s letter went on to assert that Mr Matcham had waived privilege over communications relevant to the assessment of his claimed belief that he did not understand the documents he had signed and was to have a full hearing on the merits.

103    The AGS asked Mr Vassili to provide by close of business on 12 November 2013 copies of emails between Mr Matcham and his lawyers on certain relevant dates in August and September 2013 as well as the treating notes prepared by Dr Burns and Mr Fitzgerald.

104    The documents requested by AGS were not produced. In the course of the hearing on 13 November 2013 counsel for Mr Matcham made a claim for client legal privilege. She did so notwithstanding the provisions of s 122(2) of the Evidence Act 1995 (Cth) and the principles relating to waiver of privilege stated by the High Court in Mann v Carnell (1999) 201 CLR 1 at [28]-[29]. See also the recent review of the authorities by Davies J in Chaina v Presbyterian Church (NSW) Property Trust (No 9) [2013] NSWSC 212.

105    Ultimately, it became unnecessary for me to decide the question because it was plain from the material on which Mr Matcham sought to rely that the Registrar and the Court have not been given a complete account of what occurred on 2 September 2013 when Mr Matcham gave signed instructions to his lawyers and signed the agreed statement of facts. Nor has Mr Matcham provided a complete explanation of what occurred between 2 September 2013 and the present time.

106    In addition, Senior Counsel for the Registrar had no opportunity to properly test the medical evidence upon which Mr Matcham relied.

107    These deficiencies in the evidentiary foundation of the application formed a sufficient basis in themselves to dismiss it but there were a number of other reasons why I did so.

108    The critical considerations seemed to me to be the stage which the proceeding had reached, including its long history, and the course which would follow if I were to accede to Mr Matcham’s application. The considerations were informed by, but went beyond the overarching objects of the administration of justice stated in s 37M of the Federal Court of Australia Act 1976 (Cth) and endorsed by the High Court in AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 and Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Limited [2013] HCA 46.

109    This was not an application in which a party sought to raise, belatedly, an arguable defence. Rather it was an 11th hour application made by a respondent who has never filed any evidence in answer to the large body of evidence relied upon by the Registrar to prove the case against him notwithstanding opportunities extended to him at numerous directions hearings.

110    Moreover, it was an application made after Mr Matcham had signed, plainly enough on the advice of experienced senior and junior counsel, as well as experienced solicitors, a statement of agreed facts which admitted the serious claims against him.

111    The question of Mr Matcham’s mental state at the time (through not properly tested because of the delay in putting it in issue) is an unfortunate one but it was of little weight in the decision to refuse the adjournment.

112    This was because I was entitled to infer from what took place before me on 2 September 2013 that Mr Matcham signed the agreed statement of facts on the considered advice of counsel and solicitors in light of the evidence against him and his failure to provide an answer to it, notwithstanding ample opportunity to do so. Thus, Mr Matcham’s asserted inability to understand the content of the document, or his contention that he did not understand what took place in court on 2 September 2013, are not really in point.

113    The signature of the document and the release of the Registrar’s witnesses from cross-examination, reflected the considered views of counsel and solicitors that the admissions should be made and that the matter should not proceed to a hearing on the merits. The only remaining question (apart from a debate about the terms of the declarations) was the civil penalties to be imposed. That part of the case was adjourned to 13 November 2013, solely for the purpose of Mr Matcham obtaining medical evidence relevant to the issue of penalty.

114    That is not to say that a course such as that which was taken on 2 September 2013 should be taken without proper instructions. But Mr Matcham states in express terms in his affidavit that he makes no complaint about his lawyers in respect of their conduct in obtaining his consent to the statement of agreed facts and the limitation of the hearing to the issue of penalty.

115    If I were to permit Mr Matcham to vacate the penalty hearing and apply to set aside the agreed statement of facts and the declarations which were based upon that document, a course adopted by counsel and solicitors, about whose conduct Mr Matcham makes no complaint, would be reversed. The result would be to enable Mr Matcham to try to have a hearing on the merits, in circumstances in which he has never filed any evidence supporting his professed innocence.

116    There were a large number of directions hearings in this and a related matter (NSD 119 of 2012) which were devoted, inter alia, to the establishment of a regime to provide for the release of funds to enable Mr Matcham to obtain legal representation. Funds were released from monies frozen by orders of the Court. The moneys were obtained from the sale of properties apparently purchased by Mr Matcham using all or part of the moneys he obtained from Katungul. The lawyers who were retained were plainly of the view that the course taken on 2 September 2013 was a proper one.

117    Moreover, to permit a collateral attack on what took place at the hearing on 2 September 2013 would be to expose the future course of this proceeding to unpredictable delay and expense. This would have to be borne by the Registrar who has important public functions to perform with limited resources. It would result in further erosion of the funds frozen by the Court’s orders.

118    This is a case with a strong public interest element. It involves allegations of serious misconduct in the management and conduct of the affairs of an Indigenous corporation. The achievement of a just, timely and cost-effective resolution of the proceeding is an important consideration. Here, justice has been served by providing Mr Matcham with more than ample time to file evidence in defence of the claims and to obtain legal representation to conduct his defence. Despite numerous opportunities given to him he did not file evidence in answer to the claims but, on legal advice took the course explained above.

119    Making every allowance possible for him in the light of the medical evidence (albeit untested) it would have been contrary to the interests of justice to permit the adjournment sought by Mr Matcham.

The relief sought

120    Apart from the declarations which I have already made, the Registrar seeks three substantive orders under the civil penalty regime imposed by the Act.

121    The first is an order for compensation to redress, as far as possible, the harm suffered by Katungul as a result of Mr Matcham’s contraventions.

122    The second is an order for disqualification which is sought primarily as a protective measure against the risk of future harm to corporations registered under the Act.

123    The third is an order for the payment of pecuniary penalties which are directed primarily towards the need for general and specific deterrence.

An overview of the principles of sentencing: “instinctive synthesis”

124    It is well established that the principles of sentencing which have been developed in the criminal law apply to the exercise of the discretion to impose civil penalties in those areas of the law which are regulated by civil penalty regimes: see the authorities cited by Foster J in Clean Energy Regulator v MT Solar Pty Ltd [2013] FCA 205 (“CER v MT Solar”) at [68]; see also Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383 (“Mornington v Jordan”) at [60]-[63]; Construction, Forestry, Mining and Energy Union v Cahill (2010) 269 ALR 1 (“CFMEU v Cahill”) at [39].

125    The evident purpose of the enactment of a civil penalty regime under the Act makes it clear that the same approach should apply to the imposition of penalties on directors and officers of Aboriginal and Torres Strait Islander corporations.

126    Thus, as the High Court emphasised in Markarian v The Queen (2005) 228 CLR 357 (“Markarian”), the Court, in the exercise of the discretion to impose a penalty, must weigh all the relevant circumstances in determining an appropriate penalty which marks the Court’s view of the seriousness of the offence: see Markarian at [27], [31], [66]-[68].

127    The approach which the Court adopted in Markarian is commonly described as “instinctive synthesis”. It accepts that in determining an appropriate penalty attention will almost always be required to the maximum penalty fixed by the statute so as to compare the worst possible case with the one before the Court. But it emphasises that the exercise is not a mathematical one and there is no single correct penalty: CER v MT Solar at [72].

128    In determining the appropriate penalty to be applied in the particular case, regard must be had to two other principles which I will address in more detail later. The first is the course of conduct principle and the second is the totality principle. These principles recognise that the same conduct should not be punished twice and that the total or aggregate penalty is not to be out of proportion to the circumstances of the case: CFMEU v Cahill at [39]-[41]; Mornington v Jordan at [5]-[9], [42]-[43] and [49].

The seriousness of the contraventions

129    As the CEO of Katungul, Mr Matcham was in a position of trust and responsibility. It was an essential part of his responsibilities to ensure that Katungul’s funds were spent for the purpose of carrying out Katungul’s charitable objects, namely the provision of health care to disadvantaged Indigenous persons living on the south coast of New South Wales.

130    It is plain that Mr Matcham abused his position of trust by obtaining payments of large amounts of money to which he was not entitled and which were obtained for his personal use. His breaches of trust were committed over a period of four years in circumstances which demonstrate that he should have been aware that he was not entitled to the payments.

131    The adverse effect of the payments on Katungul is also clear. Mr Eldridge’s evidence establishes that the unauthorised payments obtained by Mr Matcham contributed to Katungul’s parlous financial position. Moreover, to the extent that Mr Matcham obtained unauthorised payments from Katungul for his own benefit, he deprived the Indigenous community of the benefit of the expenditure of those funds for the provision of health care services.

132    The seriousness of Mr Matcham’s contraventions is therefore self-evident. The only real difficulty is to determine whether the payments were obtained dishonestly or through some misconception as to his entitlement to obtain the payments. The statement of agreed facts does not assist in the resolution of that issue because Mr Matcham makes no admission of conscious impropriety. Rather, the admissions are limited to the statutory formulation of each contravention.

133    However, there are a number of aspects of the evidence which point toward the conclusion that some of the payments were received by Mr Matcham with actual knowledge of impropriety.

134    The first is the size of the bonus payments received by Mr Matcham in August 2010 and July 2011 and the circumstances in which they were made. The second is the extravagance of the time in lieu payments.

The bonus payments

135    The August 2010 payment was three times the maximum payment permitted under Mr Matcham’s contract (subject of course to satisfaction of the preconditions). The July 2011 payment was nearly twice the permitted maximum.

136    In the statement of agreed facts Mr Matcham admits he knew that he had not and could not satisfy the preconditions to the exercise of the Board’s discretion and that he knew the payments had not been authorised or approved.

137    The force of these admissions is amply borne out in relation to the 2010 payment by a series of emails in January 2010 and, later in August 2010, contemporaneously with the payment of the bonuses of $105,000. It seems to me that these emails show that Mr Matcham acted dishonestly in procuring the payments in August 2010.

138    The emails commence with a question from Ms Moreton as to whether Mr Matcham’s contract included a bonus. Mr Matcham replied stating that it did but that he only asked for it once, in 2007. Ms Moreton then suggested that it should be paid six monthly, “until we catch up”. Mr Matcham replied stating:

Gee, I’d have to ask the Board … and with the new Board I don’t think it would happen.

139    Notwithstanding this, on 24 August 2010 Mr Matcham directed Ms Moreton to arrange payment to him of a bonus of $35,000 for each of the 2008, 2009 and 2010 financial years. He did so following an email request to Ms Moreton as to how he could come up with sufficient funds to pay a deposit on a property he wished to purchase. His request was made in an email to Ms Moreton dated 23 August 2010 which concluded with the statement that Mr Matcham was going to write a report to the Board for consideration of a bonus as the “last one was in 2007”.

140    Ms Moreton replied the following day, 24 August 2010 stating, amongst other things, that Mr Matcham’s employment contract provided for payment of a bonus of between $15,000 and $35,000 if he attained all performance and budget requirements. Later the same day Mr Matcham directed Ms Moreton to make the bonus payments totalling $105,000 to which I have referred.

141    Ms Moreton’s evidence was that she paid the funds the subject of Mr Matcham’s email direction (which included certain other funds) by electronic funds transfer to Mr Matcham’s personal bank account on 24 August 2010. Mr Matcham admits in the statement of agreed facts that the bonus payment of $105,000 was paid to him on that date.

142    Mr Matcham adduced no evidence of any written report to the Board. In any event it is clear from the August email chain that the payment was made almost immediately after Mr Matcham directed that the $105,000 be paid and without any attempt to demonstrate any entitlement to the payment of those funds.

143    It is also clear that Mr Matcham needed the funds for his own purpose, namely, to put down a deposit on a property. In my opinion, the circumstances revealed in the chain of emails on 23 and 24 August show a reckless disregard for the duties of his office and actual dishonesty.

144    When these circumstances are considered in light of Mr Matcham’s earlier acknowledgment in the January email as to the difficulties in obtaining Board approval, I am satisfied that Mr Matcham must have known that he was not entitled to the payment of the bonus of $105,000 in August 2010.

145    I make the same finding about the payment of the bonus of $65,000 in July 2011. As I have said, this was nearly twice the maximum amount permitted (with Board approval) under Mr Matcham’s contract. It could not even have been justified as a catch-up payment, assuming the other preconditions were met.

146    This is a civil proceeding to which the standard of proof under s 140 of the Evidence Act 1995 (Cth) applies. In coming to the view that the bonus payments referred to above were dishonestly obtained, I have taken into account the nature of the proceedings, as a civil penalty proceeding, and the gravity of the matters alleged.

The time in lieu payments

147    Mr Matcham kept his own timesheets. He identified the hours he claimed to have worked on the timesheets which he emailed to Ms Moreton for payment. Ms Moreton accepted the times recorded on the timesheets. She did not check them. Her failure to do so is obvious and regrettable but it does not overcome the seriousness of Mr Matcham’s misconduct.

148    The timesheets were patently extravagant. The claimed additional hours were out of all proportion with the time that any human being could work on a job. In my opinion Mr Matcham could not have made the claims without appreciating their extravagance.

149    It seems to me that the size of the claims, and the circumstances in which they were paid, show that Mr Matcham must have known that he was claiming payment for work he had not performed. I am satisfied that the payments were obtained dishonestly.

Other payments

150    The credit card payments were made for Mr Matcham’s personal purpose. They were not large payments but they could not have been made inadvertently.

151    The evidence does not establish that the unauthorised superannuation payments were obtained dishonestly. However, it is clear that Mr Matcham failed to act with the proper degree of care and diligence in not knowing that the payments fell outside his contractual entitlements.

152    The same observations apply to the unauthorised recreation leave payments.

153    Mr Matcham also acted without the proper degree of care and diligence by executing the mortgage in favour of the National Australia Bank (NAB) over Katungul’s Bega Clinic. The execution of the mortgage was a breach of Katungul’s funding arrangements with the Commonwealth because clause 2 of the Purposes Deed between Katungul and the Commonwealth prohibited the execution of the mortgage without the prior consent of the Commonwealth.

154    Mr Matcham should have been aware of the terms of the funding arrangements with the Commonwealth and that he was not authorised to execute the mortgage.

Compensation Orders

155    I set out at [21] above the terms of s 386-15(1) of the Act which confers power on the Court to order a person to compensate a corporation for damage suffered by the corporation.

156    The exercise of the power is discretionary. It may be exercised if the jurisdictional requirements are satisfied. The order must specify the amount of the compensation. It is not clear whether the amount ordered may be less than full compensation for the damage: Adler v Australian Securities and Investments Commission (2003) 46 ACSR 504 (“Adler (No 2)”) at [696].

157    There are two jurisdictional requirements for the exercise of the power. The first is that the person has contravened a civil penalty provision in relation to the corporation. The second is that the damage resulted from the contravention.

158    The first requirement is satisfied in the present case because Mr Matcham has admitted to contravention of the relevant civil penalty provisions.

159    The second requirement, namely, that the damage has “resulted from” the contravention, will be satisfied if the evidence establishes a causal connection so that the damage, as a matter of fact, was caused by the contravention. The words “resulted from” are to be given their ordinary meaning; that is, requiring a causal connection between the damage and the contravening conduct, free from the strictures of any analogy with equitable claims against fiduciaries: Adler (No 2) at [709].

160    The observations of Palmer J in Australian Securities and Investments Commission v Australian Investors Forum Pty Ltd (No 3) (2005) 56 ACSR 204 (“ASIC v Australian Investors Forum”) at [63] are to the same effect. All that the Registrar must show is that as a result of the delinquent officer acting in contravention of the Act, the corporation suffered loss by the transaction.

161    The corporation is not obliged to mitigate its loss or damage from the transaction by proceeding against third parties, such as auditors, before looking to the delinquent officer whose contravention of the Act caused the loss. The Registrar is entitled to look first to Mr Matcham to make good the loss: ASIC v Australian Investors Forum at [64].

162    Here it is plain that the necessary causal connection is established. The result of Mr Matcham’s unauthorised payments, made in contravention of the relevant provisions of the Act, was to deprive Katungul of the funds. The loss or damage flowed as a necessary consequence of Mr Matcham’s contraventions. There is no reason to order less than full compensation for the loss.

163    I will therefore order Mr Matcham to compensate Katungul in the amount of $705,905.07 made up as follows:

    $205,550.08    for the unauthorised bonuses

    $310,984.18    for the payments of time in lieu

    $50,198.54    for the excess superannuation payments

    $37, 944.71    for unauthorised recreation leave payments

    $94,160.37    for unauthorised non-salary payments

    $7,067.19    for unauthorised credit card payments

Disqualification

164    The guiding principles or relevant factors which inform the exercise of the power to order disqualification were distilled into 15 propositions by Santow J in Re HIH Insurance Ltd (in prov liq); Australian Securities and Investments Commission v Adler (2002) 42 ACSR 80 (“Adler (No 1)”) at [56]. His Honour’s decision is the leading authority on the subject: Rich v Australian Securities and Investments Commission (2004) 220 CLR 129 (“Rich”) at [48]; Australian Securities and Investments Commission v Beekink (2007) 238 ALR 595 (“Beekink”) at [80]. The principles identified by his Honour have been applied under the Act and are apt to guide the decision in the present case: see Registrar of Aboriginal and Torres Strait Islander Corporations v Ponto (2012) 208 FCR 346 at [108] per Reeves J.

165    The first four propositions distilled by Santow J address the public protective purpose of the power. This is the primary purpose of the disqualification power. However, general deterrence is also a factor to be taken into account in deciding whether, and if so, for what period, an order of disqualification should be made: Beekink at [81]-[83].

166    Propositions (viii) and (ix) address the need to consider the degree of seriousness of the contraventions. As Santow J said in proposition (viii):

Longer periods of disqualification are reserved for cases where contraventions have been of a serious nature such as those involving dishonesty …

(citation omitted)

167    Personal hardship to the defendant may be taken into account but there are limits to the extent to which it may inform the exercise of the power of disqualification. It cannot be permitted to prevail over the public protective purpose of a banning order. Nor can it permit the Court to overlook the importance of personal and general deterrence as central factors: Adler (No 1) at [80]; Beekink at [83]-[87].

168    A mitigating factor in considering the appropriate period of disqualification is the likelihood of the defendant reforming: Adler (No 1) at [56], proposition (xi).

169    Propositions (xiii) and (xiv) contain a useful distillation of the factors which lead to the imposition of lengthy periods of disqualification.

170    The factors which Santow J described as leading to the longest periods of disqualification, that is for 25 years or more include:

    large financial losses;

    high propensity that the defendant may engage in similar activities or conduct;

    lack of contrition or remorse;

    disregard for the law and compliance with corporate regulations; and

    dishonesty and intent to defraud.

171    The factors to which Santow J referred as leading to periods of disqualification of 7 to 12 years were those which lead to the conclusion that the cases were “serious” but not the “worst cases”. They include:

    serious incompetence and irresponsibility;

    substantial loss;

    deliberate conduct to enrich themselves at the expense of others but with lesser degrees of dishonesty;

    continued, knowing and wilful contraventions of the law and disregard for legal obligations; and

    lack of contrition or acceptance of responsibility but as against that, the prospect that the person may reform.

172    The distinction which Santow J drew between the factors which have led to disqualification orders in the “worst cases” and those which he described as serious, though not the worst cases, is not to be taken as indicating a bright line between particular types of cases. Nor can a penalty that was found to be appropriate, as a matter of fact, in the circumstances of one case dictate the appropriate penalty to be imposed in the different circumstances of another case: NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 295. The same may be said of his description in proposition (xv) of factors leading to the shortest periods of disqualification: see Adler (No 1) at [56].

173    The overriding principle is, as I said above, that the Court must weigh all the relevant circumstances. The guiding principles or relevant factors identified by Santow J may be applied, as appropriate in each case, so as to inform the exercise of the discretion to impose an appropriate penalty in light of all the circumstances of the case. However, they should not be treated as a rigid catalogue of matters which must be considered in every case: Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 (“AOS v McAlary-Smith”) at [91] per Buchanan J.

174    Here, the circumstances which in my opinion are of most significance are the seriousness of the contraventions, which in many instances involved an element of dishonesty, and the abuse of trust entailed in the contraventions.

175    In particular, Katungul’s funds were used in a pattern of deliberate conduct to confer substantial financial benefits on Mr Matcham to the detriment of the fulfilment of Katungul’s objectives, and contrary to the purposes for which the funds were supplied by the Commonwealth.

176    Mr Matcham made an admission to this effect in paragraph 78 of the statement of agreed facts but the obviousness of that conclusion is revealed, independently of the admission, by the administrator’s evidence, as well as the evidence contained in the report of the examination in September 2011.

177    Another important factor in the present case is Mr Matcham’s lack of contrition. Whilst he did sign the agreed statement of facts on 2 September 2013, he subsequently sought to withdraw his admissions in the circumstances explained above. The circumstances include his wish to defend the case so as to protest his innocence. His approach is inconsistent with any element of contrition.

178    I have taken into account to the extent possible, the untested evidence of Mr Matcham’s mental state, and my own observations of him in the witness box in the course of the adjournment application. It is apparent from what I saw of him that Mr Matcham is somewhat unstable.

179    It may follow that the imposition of a long period of disqualification might be thought to involve an element of personal hardship on Mr Matcham, although the nature of the hardship is different from that which was claimed by Mr Adler in Adler (No 1).

180    Nevertheless, whatever personal hardship may be suffered by Mr Matcham, the authorities to which I have referred make it clear that hardship cannot prevail over the protective purpose of a banning order: see [167] above.

181    I have also taken into account the fact that Mr Matcham paid $50,000 of his own funds to Katungul in late September 2011. However, this payment was not accompanied by any admission of wrongdoing and cannot, in my opinion, have any real significance as a mitigating factor in considering the appropriate period of disqualification.

182    Mr Matcham’s personal history may make it unlikely that he will be able to obtain a position of the type which he held at Katungul in the future. However, this must be weighed against the protective purpose of a banning order. The elements of personal and general deterrence must also be considered as central factors.

183    The seriousness of Mr Matcham’s behaviour, the abuse of trust which it involved and the absence of any real contrition or appreciation of his wrongdoing, all point toward a lengthy period of disqualification.

184    I do not consider Mr Matcham’s contraventions to fall within the worst cases justifying a ban of 25 years or more. But the circumstances which I have been at pains to emphasise involve serious misconduct which must be recognised in the length of the period of disqualification.

185    In my opinion, weighing all of the circumstances which I have described, the appropriate period of disqualification to mark the Court’s view of the seriousness of Mr Matcham’s contraventions, and to give effect to the protective purpose of the order, is a period of disqualification of 15 years.

Pecuniary penalties

Overview

186    The jurisdictional preconditions for the exercise of the power to order payment of a pecuniary penalty are contained in paragraphs (a) and (b) of s 386-10(1). The first is the making of a declaration of contravention of a civil penalty provision under s 386-1. The second is that the contravention materially prejudices the interests of the corporation or its ability to pay its creditors or that the contravention is serious.

187    Each of these conditions is satisfied in the present case but the question which arises is as to the determination of an appropriate pecuniary penalty for multiple contraventions of the Act.

188    A further question arises as to whether, and if so to what extent, I should take into account the fact that I propose to order Mr Matcham to pay compensation to Katungul and to order his disqualification from managing a corporation for 15 years.

Multiple contraventions

189    Declarations 2 to 22 deal with a number of separate bonus payments, time in lieu payments and certain other unauthorised payments obtained by Mr Matcham over a period of four years. Each of the payments is declared to have been made in contravention of three civil penalty provisions of the Act, being ss 265-1, 265-5 and 265-10.

190    A further declaration was made on 13 November 2013 in accordance with an interlocutory application filed by the Registrar. This declaration addressed another unauthorised time in lieu payment received by Mr Matcham.

191    Declaration 23 deals with Mr Matcham’s unauthorised use of the credit card issued by Katungul to pay for personal life insurance payments. In similar terms to declarations 2 to 22, this conduct is declared to have been in contravention of three civil penalty provisions under the Act.

192    Declarations 24 to 25 deal with excess superannuation contributions and excess recreation leave payments. In each instance, the payments are totalled, rather than being treated as separate payments, and are declared to have been in contravention of only one civil penalty provision.

193    Declaration 26 deals with Mr Matcham’s unauthorised execution of the mortgage to the NAB. This act, as in declarations 24 and 25, is declared to have been made in contravention of only one provision.

194    The determination of the appropriate penalties to be applied in these circumstances is governed by a number of well-established principles, all of which are drawn from the criminal law and apply equally in the context of civil penalties.

The general approach to multiple contraventions

195    First, if multiple provisions are simultaneously breached by the same wrongful act it is appropriate to impose a penalty for only the most serious of the multiple offences: Pearce v The Queen (1998) 194 CLR 610 at [40]; Mornington v Jordan at [5].

196    This approach reflects a fundamental principle of sentencing practice that double punishment should be avoided for the commission of multiple offences which contain common elements. The punishment to be exacted should reflect what the offender has done: Pearce v The Queen at [40]; AOS v McAlary-Smith at [96].

197    Second, separate contraventions arising from separate acts should ordinarily attract the imposition of a separate penalty appropriate for each contravention: AOS v McAlary-Smith at [96], citing McDonald v The Queen (1994) 48 FCR 555 at 556, 563; Re Idylic Solutions Pty Ltd; Australian Securities and Investments Commission v Hobbs (2013) 93 ACSR 421 (“Re Idylic”) at [418], citing Pearce v The Queen. However, it may be appropriate in some cases to treat the contraventions as part of a single multi-faceted “course of conduct”: Mornington v Jordan at [41], [49] citing Johnson v The Queen (2004) 205 ALR 346 and Hamberger v Construction, Forestry, Mining and Energy Union [2002] FCA 585; see also CFMEU v Cahill at [39], [41]-[42].

198    Third, the Court is required to conduct a final check to ensure that the total or aggregate penalty is not unjust or disproportionate to the circumstances of the case. If it is unjust or out of proportion, the penalty is to be moderated in accordance with the totality principle: Mill v The Queen (1988) 166 CLR 59 at 62-63; Mornington v Jordan at [9], [42].

The course of conduct principle

199    The “course of conduct” principle recognises that where there is an interrelationship between the legal and factual elements of two or more contraventions, care must be taken to ensure that the offender is not punished twice for what is essentially the same conduct: CFMEU v Cahill at [39], [41].

200    What amounts to the “same conduct” or “same criminality” is a fact specific enquiry. It is a matter of judgment to be exercised according to the facts of each case. But the Court is not obliged to apply the principle if the resulting penalty fails to reflect the degree of criminality involved in the particular case: CFMEU v Cahill at [42]; see also AB v The Queen (1999) 198 CLR 111 at [14].

201    The general objective of the course of conduct principle is to ensure that the sentence or penalty fairly reflects the substance of the offending conduct, rather than a purely mathematical total for each separate offence which may be technically identified: CER v MT Solar at [75] and the authorities cited there.

Application of the course of conduct principle

202    It seems to me that the Registrar is correct in submitting that I should impose separate penalties for each of the contraventions in relation to bonus payments (declarations 2 to 5), time in lieu payments (declarations 6 to 18, and the additional declaration made on 13 November 2013) and non-salary payments (declarations 19 to 22), rather treating them as involving one or more courses of conduct.

203    A penalty should be imposed on a “course of conduct” basis for the credit card payments (declaration 23), excess superannuation contributions (declaration 24) and excess recreation leave payments (declaration 25).

204    I will set out my reasons for adopting this approach below.

205    No question arises of the application of the course of conduct principle to the unauthorised execution of the mortgage (declaration 26). That contravention consisted of a single act rather than a multi-faceted course of conduct. It amounted to one contravention without any suggestion of an interrelationship with other contraventions, albeit that the existence of the mortgage may have enabled Mr Matcham to more readily draw on Katungul’s funds to obtain the payments to which he was not entitled.

Separate penalties for the contraventions stated in declarations 2 to 22 and additional declaration

206    There are a number of reasons why the contraventions embodied in declarations 2 to 22, and the additional declaration, should attract separate penalties rather than be treated as part of a single course of conduct, or bundles of separate courses of conduct having regard to the character of the contraventions, for example bonus payments or time in lieu payments.

207    First, each contravention involved a specific and separate payment to Mr Matcham, not part payments toward the drawing of one total amount.

208    Second, the payments were made on a number of separate dates over a period of approximately four years and were widely separated in time and amount over that period.

209    Third, the payments were made in widely different amounts, ranging from $3,173 to $105,000 in the case of the bonus payments, $634 to $46,632 for the time in lieu payments and $3,173 to $44,268 for the non-salary payments.

210    Separate penalties for each of those payments would therefore reflect the differing seriousness of the different amounts paid to Mr Matcham.

211    Fourth, the different payments had different consequences upon Katungul and the community to which it provided essential medical services. The different consequences were reflected by the payment of the different amounts and the state of Katungul’s finances when the payments were made, albeit that most were made when Katungul was in a weak financial condition.

212    Notably, declaration 4 addresses the bonus payment of $105,000, the payment of which caused Katungul to incur a liability to the Commissioner of Taxation in an amount of more than $67,000.

213    Fifth, each of the payments was distinct. Mr Matcham made separate and deliberate decisions to seek payments of the particular kind (bonus payments or time in lieu payments) in particular amounts. He gave directions to Ms Moreton for the payments to be made, and in some instances sought to justify the payments by the provision of exaggerated time sheets.

214    Sixth, the statement of agreed facts acknowledges the separate nature of these contraventions as do the declarations made in respect of them.

215    It may be true that Mr Matcham’s contraventions occurred in the pursuit of his overall objective of procuring payments from Katungul to which he was not entitled. But that approach is flawed because it characterises the wrongful conduct at a high level of generality without regard for the distinctive features of Mr Matcham’s conduct which I have set out above.

216    What seems to me to be critical in the present case is that the factually specific distillation reflected in the six specific features referred to above reveals the absence of any real interrelationship between the legal and, in particular, the factual elements of these offences: CFMEU v Cahill at [39], [41]; see also Mornington v Jordan at [51], [58].

217    Viewed in isolation, the various groups of payments, such as the bonus payments and time in lieu payments may be considered to be of the same character, but for the reasons set out above they are properly to be treated as separate acts, having separate significance in each case.

218    This approach is consistent with that which was adopted by Foster J in CER v MT Solar at [87]. Each payment was a separate wrongful act. It involved a separate claim for a different amount of money to which Mr Matcham was not entitled. The time in lieu payments involved separate and distinct paperwork in the form of timesheets which were apparently intended to provide a justification for the payments. Moreover, Mr Matcham chose to continue making his dishonest claims for payment on numerous occasions over a lengthy period.

219    Any lack of proportionality in the total amount of the penalties to be determined by treating the contraventions which are the subject of declarations 2 to 22, and the additional declaration, is required to be modified by the application of the totality principle which I will address later.

Penalties for contraventions in declarations 23, 24 and 25 on course of conduct basis

220    The contraventions described in declarations 23, 24 and 25 are compendious. Each encapsulates multiple separate contraventions of the Act, as for example the various payments made under the corporate credit card in 2010 and 2011 described in paragraph 66 of the statement of agreed facts.

221    The multiple unauthorised superannuation payments and unauthorised recreation leave payments are set out in the statement of agreed facts at paragraphs 47 and 53 respectively.

222    The Registrar accepts that it is appropriate to treat these contraventions on a course of conduct basis. To do so is consistent with the form in which the contraventions are expressed in the statement of agreed facts and with the nature of the payments.

223    The credit card payments were for relatively small amounts paid to Zurich Life Insurance, apparently by way of instalments due under a life insurance policy.

224    The evidence does not establish the means by which Mr Matcham obtained payment of the excess superannuation or unauthorised recreation leave. In particular the evidence does not reveal that Mr Matcham procured each payment through a separate direction. These payments are therefore to be contrasted with the bonuses and time in lieu payments.

The centrality of deterrence

225    It is well established that the principal purpose of imposing a pecuniary penalty is to act as a personal deterrent and as a general deterrent to others against engaging in the type of conduct that is the subject of the contravention. This proposition has been stated by courts in a very large number of authorities over a period of at least the last 20 years in circumstances involving breaches of the law of competition and trade practices as well as in relation to breaches of civil penalty provisions of the corporations law.

226    The centrality of the role of deterrence was recognised by French J in Trade Practices Commission v CSR Limited [1991] ATPR 41-076 (“TPC v CSR”). His Honour observed at 52,152 that the only object of the penalties imposed under the Trade Practices Act 1974 (Cth), as then in force, is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravener and others who may be tempted to contravene the legislation.

227    This statement of principle has been endorsed on numerous occasions by Full Courts of the Federal Court: see for example NW Frozen Foods at 292; Global One Mobile Entertainment Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 134 at [125]; Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2007] FCAFC 146 (“ACCC v Dataline”) at [60]; Schneider Electric (Australia) Pty Ltd v Australian Competition and Consumer Commission (2003) 196 ALR 611 at [3].

228    The centrality of deterrence, both personal and general, in relation to the determination of penalties to be imposed on errant directors has also been emphasised in High Court and Full Court authorities as well as in authoritative decisions of State courts: Rich at [50]-[52]; Beekink at [84]; Adler (No 1) at [125].

229    Nevertheless, the role of deterrence in determining the amount of a pecuniary penalty is subject to an overriding qualification. The amount of the penalty should be no greater than is necessary to achieve the objective of deterrence. Severity beyond such a figure would be oppressive and it is therefore necessary to strike an appropriate balance so as to avoid oppression: Adler (No 1) at [125]; NW Frozen Foods at 293.

230    The process of fixing the quantum of a penalty is of course not an exact science but it has been said that in determining the appropriate amount, the Court should not leave room for any impression of weakness in its resolve to achieve the deterrent objective of the imposition of a civil penalty: NW Frozen Foods at 291, 294-295. See also Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54 at [65]; Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249 at [62]-[63].

Relevant factors

231    Section 386-10 does not prescribe a statutory set of factors to be taken into account in assessing a penalty of appropriate deterrent value. Nor does its analogue in s 1317G of the Corporations Act. However, the approach which has commonly been adopted in relation to the imposition of civil penalties under other civil penalty regimes is to have regard to the list of factors identified by French J in TPC v CSR at 52,152-52,153 with appropriate modifications, having regard to the regulatory regime in question and the circumstances of the case: see NW Frozen Foods at 292; ACCC v Dataline at [58]-[61].

232    In Adler (No 1) at [126] Santow J did not refer to the “French factors”. Instead, his Honour set out a number of propositions, some of which I will address later. Nor were those factors referred to by Ward JA in Re Idylic but the considerations identified by her Honour at [435] in determining the quantum of the penalty in that case reflect similar considerations to the factors enumerated by French J in TPC v CSR.

233    It seems to me therefore that it is appropriate to have regard to the factors stated by French J, with appropriate modifications. However, consistently with what I said earlier, the checklist of factors should not be treated as a rigid catalogue.

234    Here, the regulatory regime and the circumstances of the case call for attention to six of the “French factors” and a further factor identified by Santow J in Adler (No 1):

1.    The first is the nature and extent of the contravening conduct, including the length of time over which it extended, the number of payments obtained and the amounts in question.

2.    The second is the loss and harm arising from the conduct, including the charitable nature of the corporation, the public purposes it was intended to serve and the lost opportunities to provide health care for disadvantaged Indigenous persons.

3.    The third is the circumstances in which the conduct took place, including the position held in the corporation by the contravener and the degree of dishonesty or carelessness involved in the corporation.

4.    The fourth is any relevant matters personal to the contravener, such as hardship. Hardship was one of the factors referred to by Santow J in Adler (No 1) at [126]. His Honour said that capacity to pay is a relevant consideration in determining a pecuniary penalty. The observations of Ward JA in Re Idylic at [427], [433] are to similar effect.

5.    The fifth is any steps taken to rectify the harm caused by the wrongdoing.

6.    The sixth is any contribution or co-operation with the authorities.

7.    Another factor identified by Santow J in Adler (No 1) at [126](iv) was the consequences of an associated disqualification order made against a defendant. See also Gillfillan v Australian Securities and Investments Commission [2012] NSWCA 370; (2012) 92 ACSR 460 (“Gillfillan”) at [330] per Sackville JA.

The centrality of general deterrence in the present case

235    There are a number of reasons why Mr Matcham’s contraventions should attract penalties which will act as a strong deterrent to others.

236    First, as I noted above, the review of the ACA Act which resulted in the enactment of the civil penalty provisions of the Act emphasised the need to protect members of corporations registered under the Act from the actions of “rogue” directors and officers.

237    The Act, under which the civil penalty provisions are intended to secure this objective, is a special measure for the advancement and protection of Aboriginal and Torres Strait Islander peoples. The authorities in similar regulatory regimes point to the importance of deterrence in achieving this objective in cases such as this.

238    Second, as also noted above, Aboriginal and Torres Strait Islander corporations typically provide essential services to local communities, such as the health and medical services supplied by Katungul. As the Registrar submitted, this underscores the need for a robust message to be given to persons responsible for the management of such corporations that contraventions of the Act will be treated seriously. The observations of Burchett and Kiefel JJ in NW Frozen Foods at 294-295 that the Court should not leave room for any impression of weakness in its resolve to secure deterrence are particularly apt here where contraventions such as the present affect the wellbeing of Indigenous communities.

239    Third, the effectiveness of the operation of Aboriginal and Torres Strait Islander corporations relies heavily upon voluntary compliance with the Act. The personal integrity and diligence of office-holders is of utmost importance. As I noted above, many directors of such corporations have poor levels of literacy and rely heavily on external advisers and employed staff, as well as upon the Registrar’s staff, for advice and guidance.

240    Any reduction in voluntary compliance would of course reduce the effectiveness of the scheme established under the Act and prejudice the ability of those corporations to provide the essential services for which they were established. It would also increase the regulatory burden on the Registrar’s already limited resources. The desirability of freeing up the resources of regulators, with the consequent ability to enable the regulator to use such resources to pursue other contraveners was recognised in Minister for Industry, Tourism and Resources v Mobil Oil Australia Ltd [2004] ATPR 41-993 at [53].

241    Fourth, non-compliance with the Act may not be readily detected, as is well illustrated in the present case. Mr Matcham’s contraventions continued over a four year period. They were not detected until Mr Smith expressed concerns about the financial position of Katungul which culminated in the examination by the Department’s Audit and Fraud Control Branch.

242    The imposition of a substantial penalty for Mr Matcham’s conduct should provide a strong incentive to officers and employees of other corporations to ensure compliance with the Act. The imposition of the penalty should help to reduce the risks of possible non-compliance, and will also reinforce the need to have regard to the conduct of other officers of such corporations.

243    Fifth, these proceedings have been widely publicised in the Aboriginal and Torres Strait Islander and mainstream media. A summary of the declarations made on 11 September 2013 was published on the Registrar’s website and distributed electronically to many Aboriginal and Torres Strait Islander corporations and the peak body for Aboriginal and Torres Strait Islander medical services. The Registrar took these steps because he has been regularly asked by corporations for an update on the proceedings. He also intends to publicise the orders for final relief.

244    Accordingly, the imposition of penalties in the present case will be brought to the attention of other persons involved in the management and affairs of Aboriginal and Torres Strait Islander corporations. This will reinforce the norms of compliant behaviour adopted by persons who have, and who intend, to comply with the Act, whilst at the same time sending a warning to others that non-compliant conduct will be severely punished.

Specific deterrence

245    In this case it seems to me that specific or personal deterrence is sufficiently accommodated by the disqualification order: Re Idylic at [404]; Gillfillan at [330].

Application of the “French factors”

1. The nature and extent of the contravening conduct

246    The nature and extent of Mr Matham’s contravening conduct has been set out above. It consists of a large number of contravening acts over a four year period, many of which involved an element of dishonesty and an abuse of trust. As I have already said, Katungul’s funds were deliberately misused by Mr Matcham to confer benefits on himself to the detriment of Katungul’s charitable objectives.

2. The loss and harm caused by the contravening conduct

247    I have also described above the loss and harm caused by Mr Matcham’s contravening conduct. It is unnecessary to repeat it.

3. The circumstances in which the conduct took place

248    The circumstances in which Mr Matcham’s conduct took place have been sufficiently described above.

4. Relevant matters personal to the contravener

249    Mr Matcham did not provide any evidence in the proceedings of matters personal to him which may be taken into account in relation to the quantum of the pecuniary penalty. However, I referred above to what I gleaned about one aspect of his personal circumstances.

250    Although Santow J said in Adler (No 1) at [126] that capacity to pay is a relevant consideration, other authorities suggest that this factor is of limited relevance. Indeed, in Australian Competition and Consumer Commission v High Adventure [2005] FCAFC 247; [2006] ATPR 42-091 at [11], a Full Court emphasised the primacy of general deterrence, even if the imposition of a penalty would lead to the financial ruin of the contravener. This approach has been followed in relation to the Corporations Act: Australian Securities and Investments Commission v Healey (No 2) (2011) 196 FCR 430 at [122]-[124].

251    In Re Idylic at [433] Ward JA accepted that a pecuniary penalty will in the ordinary course result in personal hardship and stress to the contravener. I also accept that such an order will have this effect on Mr Matcham, although as her Honour observed, it is impossible to measure the extent of the hardship in the absence of admissible evidence.

252    But even in the absence of such evidence, it seems to me that the matters which emerged in the course of the other proceeding before me (matter NSD 119 of 2012) indicate that Mr Matcham would be unable to satisfy an order for payment of a pecuniary penalty. Indeed, so much is clear from the nature of this proceeding itself.

253    Also, as I have already said, the order is likely to have some impact on Mr Matcham’s already troubled emotional state, but I am not able to gauge the full force of its impact.

254    Notwithstanding these considerations, the effect of the authorities to which I have referred seem to me to leave very little room for any allowance for personal hardship in the circumstances of the present case.

5. Any steps taken to repair or rectify the harm

255    As I have said, Mr Matcham paid $50,000 of “his own funds” to Katungul in September 2011. However, the payment was not made by way of any acknowledgment of wrongdoing. It is to be given only limited weight.

6. Contrition or co-operation with the authorities

256    The reasons why contrition and co-operation with the regulatory authorities are a relevant consideration were explained in NW Frozen Foods at 293-294 and Mornington v Jordan at [73]-[76] citing, inter alia, Cameron v The Queen (2002) 209 CLR 339.

257    Here, Mr Matcham has not co-operated with the authorities. The statement of agreed facts was not signed until the afternoon of the first day of the proposed hearing. It was not accompanied by any show of contrition or remorse. Indeed, Mr Matcham’s avowed intention to withdraw the statement of agreed facts is, as I have already said, inconsistent with contrition.

258    Mr Matcham’s overall approach to this proceeding demonstrates no suggestion that he is likely to ensure that the contraventions which have occurred in this case will not be repeated. The principal reasons why a discount for admission of liability are appropriate are not satisfied in the present case: Mornington v Jordan at [76].

259    This seems to me to be a case where very little or no discount for admission of liability should be granted. It is not a case where a “modest” discount of 10% should be accorded: Mornington v Jordan at [78].

7. The consequences of other civil penalty orders

260    I respectfully adopt the principle stated by Santow J in Adler (No 1) at [126] that in assessing a pecuniary penalty it is important to consider the consequences of an associated disqualification order for the defendant. His Honour went on to say that if the making of such an order has significant consequences, it may operate as a factor in favour of a lesser penalty, but if the order does not have such consequences for the defendant, it is likely to be only marginally relevant.

261    The principle accepted by Sackville JA in Gillfillan at [330] seems to me to depart from the more flexible approach stated in Adler (No 1) because his Honour accepted that:

… a pecuniary penalty should be imposed on the appellants only if an order for disqualification is an inadequate or inappropriate remedy.

262    However, I do not need to resolve any tension between those approaches because Sackville JA went on to say in Gillfillan that a pecuniary penalty was warranted in order to take into account the objective of general deterrence and the need for the Court to mark its disapproval of conduct which involved a substantial departure from proper legal and commercial standards. Those remarks apply with equal or greater force here.

263    However, the imposition of a pecuniary penalty serves a different objective from a disqualification order. The pecuniary penalty has a punitive character. Its primary object is general deterrence, although personal deterrence is also a relevant consideration. By contrast, an order for disqualification is protective in nature, albeit that the objects of general deterrence are also of considerable importance: Adler (No 1) at [56], [126].

264    Similar observations apply to the making of the order for payment of compensation. That order is merely compensatory. It requires a person against whom the order is made to restore the loss suffered by the corporation. It has no punitive element.

265    Here, there is no evidence as to whether the disqualification order will have any significant consequences for Mr Matcham. Nor, as I have already said, is there any evidence of his financial position. However, I am prepared to accept that the order for disqualification and the order for payment of compensation will in the ordinary course result in some hardship for Mr Matcham.

266    Nevertheless, having regard to the seriousness of the contraventions, the present case seems to me to call for an approach to similar effect to that adopted by Ward JA in Re Idylic. Her Honour there took into account the need to weigh the objectives of general deterrence to be met by the imposition of a pecuniary penalty against the likelihood of any personal hardship and the operation of an associated disqualification order. She came to the view in that case that the balance was to be struck in favour of the need for a pecuniary penalty: Re Idylic at [427]. The same approach applies to the factual considerations in the present case.

267    I will address this issue further when I deal with the application of the totality principle.

Fixing appropriate pecuniary penalties

268    The starting point in fixing the pecuniary penalties to be imposed on Mr Matcham is, as I have said, that I am required to impose a penalty that is appropriate for each contravention. I must then, at the end of the process, consider whether the aggregate is appropriate for the total contravening conduct.

269    The task which is involved therefore is to have regard to all of the factors discussed above, including the different factors involved in different contraventions to determine penalties of appropriate deterrent value in relation to each contravention. In carrying on this task, five propositions seem to me to provide guidance to arrive at an appropriate figure.

270    First, the requirements of deterrence are such that an appropriate penalty should be at least equal to, if not greater than, the amount of the unauthorised payment. This takes into account the punitive nature of the order and the fact that Mr Matcham will be ordered to pay compensation in an amount equal to the amount he obtained. What is required is an order for the payment of an additional sum so as to punish him for his wrongdoing and act as a general deterrent to others. The process is not a specific one but a penalty of at least the amount taken seems to me to be an appropriate starting point, although it is subject to the other guiding factors referred to below.

271    Second, it seems plain that contraventions involving dishonesty should attract penalties which are higher than those involving departures from the duty of care and diligence stated in s 265-1 of the Act.

272    Third, where a contravention involves a breach of multiple provisions of the Act, only the most serious is to be the subject of the imposition of a penalty. The Registrar accepts this approach which is in accordance with well-established authorities referred to above.

273    Fourth, in this case, where there has been shown to be a link between the amounts received by Mr Matcham and the harm to the local Indigenous community (albeit not able to be measured in monetary terms), the penalties should contain a substantial punitive element to reflect the seriousness of the conduct and to act as a warning or disincentive to others.

274    Fifth, the contraventions which are the subject of the course of conduct treatment, that is to say declarations 23, 24 and 25, should carry a higher multiple than if the contraventions were treated as a series of single contraventions. This reflects the fact that each of these contraventions consisted of a series of acts which would, but for the course of conduct principle, have been treated as a series of separate contraventions. A course of conduct contravention is therefore to be treated more seriously than a single contravention.

275    Applying these considerations, the unauthorised bonus payments which are the subject of declarations 2 to 5, the time in lieu payments which are the subject of declarations 6 to 18 and the additional declaration made on 13 November 2013, and the non-salary payments which are the subject of declarations 19 to 22 should carry a penalty of 2 to 3 times the amount taken by Mr Matcham. Each of these involves a single contravention in which the penalty should fall toward the lower end of the multiple adopted, although for reasons explained later, not necessarily at the low end of the scale having regard to the maximum penalty fixed by the Act.

276    Declaration 23 involved a deliberate act but it has been treated under the course of conduct principle. A multiple toward the higher end of the range should be applied.

277    Declarations 24 and 25 involve carelessness rather than dishonesty but they have been dealt with under the course of conduct principle. A penalty comprising a multiple of 1.5 to 2.0 times the amount taken should be imposed but the penalty should fall toward the higher end of this range to take into account the reduction already reflected in the application of the course of conduct principle.

278    Contravention 26 involved carelessness in the unauthorised execution of the mortgage to the NAB. A penalty should be imposed to reflect the seriousness of the unauthorised action taken by Mr Matcham in executing the mortgage.

279    I made one further declaration on 13 November 2013 in accordance with an interlocutory application filed by the Registrar on 30 September 2013. The declaration addressed contraventions by Mr Matcham of ss 265-1, 265-5 and 265-10 in causing Katungul to pay him an amount of $38,473.56 as an unauthorised time in lieu payment on 11 November 2010. That declaration was accidently omitted from the orders I made on 11 September 2013. It is to be penalised in the same way as the other time in lieu payments.

280    Senior Counsel for the Registrar provided a table of proposed penalties reflecting the application of the guiding factors mentioned above to each of the contraventions. I have considered each of the proposed penalties set out in the table and agree that, in light of my comments below, the table records an appropriate penalty for each contravention that is the subject of declarations 2 to 25 and the additional declaration made on 13 November 2013. However, for reasons explained later, I would order a slightly lower penalty than that which is proposed for contravention 26. The table is a useful one because it states the amount taken, whether the contravention was deliberate or careless and whether the course of conduct principle applies. I have reproduced the table as Table A to my reasons for judgment.

281    The table also reflects the Registrar’s submission that a reduction of $500,000 should be made against the total starting amount of over $1.4 million to allow for the compensation order and a further reduction of 30% for totality purposes. I will address these submissions later.

282    In considering the penalties proposed by the Registrar, and in coming to the view that I agree that each (except for contravention 26) is an appropriate penalty to mark the seriousness of the contravention, I have paid attention to the maximum penalties prescribed by the Act. This is because, as was pointed out in Markarian at [31], it invites a comparison between the worst possible case and the one before the Court, and when balanced with all other relevant factors, it provides a yardstick.

283    The contravention which is the subject of declaration 4 carries a penalty of $200,000 which is the maximum prescribed by s 386-10. In my opinion, the matters to which I referred in describing that contravention put it at the top of the range of seriousness making it an appropriate case for payment of the maximum penalty.

284    Declaration 5 carries a penalty of $130,000 which is toward the high end of the range of penalties prescribed by the Act. The contravention relates to a bonus payment made with actual knowledge by Mr Matcham in the same circumstances in which he obtained the earlier unauthorised payment. It was in the nature of a repeat offence and the penalty is an appropriate one.

285    The other penalties for the remaining unauthorised bonus payments, time in lieu payments and non-salary payments are sufficient to mark the seriousness of those contraventions taking into account the factors to which I have referred, in light of the maximum prescribed penalty.

286    Declaration 23 reflects the high end of the multiple of three times the amount taken because it was treated as a course of conduct contravention. In view of the small amounts involved, a penalty at the low range when compared with the maximum is appropriate.

287    Declarations 24 and 25 result in penalties toward the middle of the range of seriousness reflected in the maximum prescribed penalty. Each was of a sufficiently serious nature to warrant those amounts.

288    The circumstances in which Mr Matcham executed the mortgage to NAB are not known. In my opinion, a penalty of $20,000 is sufficient and I would impose a penalty of that amount rather than the $50,000 proposed by the Registrar.

289    In my opinion, no allowance should be made for the compensation order because, as I have said, pecuniary penalties are punitive whereas the compensation order merely orders the wrongdoer to repay the loss. I therefore do not see why credit should ordinarily be given for the fact that a wrongdoer is required to make good the loss resulting from his contravention.

290    However, I am prepared to proceed in the present case upon the basis that the reduction of $500,000 for the compensation order suggested by the Registrar is a concession which I ought to accept.

291    The total amount of the penalties is accordingly $1,401,000 less $500,000, that is to say $901,000. It is then necessary to turn to the totality principle.

Application of the totality principle

292    The totality principle was stated by the High Court in Mill v The Queen (1988) 166 CLR 59 at 62-63. It is a fundamental principle of sentencing practice and applies equally to criminal offences and civil penalties: see for example Mornington v Jordan at [5]-[9], [43]. By contrast with the course of conduct principle, the Court is bound to apply the totality principle where applicable; to fail to do so is appealable error: Mornington v Jordan at [9].

293    The effect of the totality principle is to require me in the present case to review the aggregate total of $901,000 and consider whether it is “just and appropriate”. It is not appropriate in cases such as the present to simply carry out the arithmetic arrived at by the imposition of a separate penalty for each contravention. Rather, what the Court is required to do is to (Mill v The Queen at 63):

… look at the totality of the criminal behaviour and ask itself what is the appropriate sentence for all of the offences.

294    Although the authorities do not appear to have said so explicitly, it may well be that the totality principle is related to the principle that the figure to be imposed should not be oppressive: Adler (No 1) at [125].

295    The Registrar submits that I should apply a factor of 30% for totality, which would reduce the total penalty to approximately $630,000. However, as I have been at pains to emphasise, there are questions of judgment involved and the process is not a scientific one.

296    I accept that a penalty of $900,000 is more than the amount required to meet the objects of deterrence in the light of the totality of Mr Matcham’s conduct considered as a whole.

297    Nevertheless, as in Re Idylic, the nature of Mr Matcham’s contravention is very serious involving a substantial departure from his duties as the Chief Executive Officer of Katungul. Moreover, as with Mr Hobbs in Re Idylic, Mr Matcham does not accept responsibility for his conduct. Nor does he recognise the effect of his misconduct on Katungul or the community it serves.

298    The losses caused by Mr Matcham’s contraventions are not as great as some which have been dealt with in other cases of miscreant directors or officers, but as this case demonstrates, they have had an effect which cannot be measured in monetary terms.

299    A reduction in the order of 50% for totality would reduce the total penalty to $450,000. That seems to me to be closer to the mark in determining the appropriate figure that reflects the severity of the conduct considered as a whole and in fixing a figure which is necessary to achieve the objective of deterrence.

300    However, it seems to me that the application of percentage figures cannot, in an area such as this, be treated as leading to the exact sum to be imposed. It merely serves to set the parameters around which an appropriate figure is to be assessed.

301    In my opinion the appropriate figure in the present case, in looking at the totality of Mr Matcham’s conduct, is $500,000.

Orders

302    The orders I will make are as follows:

303    First, I will order pursuant to s 386-15(1) of the Act that Mr Matcham pay compensation to Katungul in the amount of $705,905.07.

304    Second, I will order pursuant to s 279-15(1) that Mr Matcham be disqualified from managing Aboriginal and Torres Strait Islander corporations for a period of 15 years.

305    Third, I will order pursuant to s 386-10(1) that Mr Matcham pay to the Commonwealth a pecuniary penalty of $500,000.

Associate:

Dated:    5 February 2014

TABLE A – PENALTIES PROPOSED BY THE REGISTRAR