FEDERAL COURT OF AUSTRALIA

Registrar of Aboriginal and Torres Strait Islander Corporations v Murray [2015] FCA 346

THE COURT DECLARES THAT:

Failure to comply with requirements of the Corporation’s Rule Books, the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) and the Corporations (Aboriginal and Torres Strait Islander) Regulations 2007 (Cth)

First, Second and Fourth Respondents

1.    Pursuant to s 386-1(1) of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) (CATSI Act), the Court declares that:

(a)    in contravention of s 265-1(1) of the CATSI Act, the First, Second and Fourth Respondents failed to ensure that the Bunurong Land Council (Aboriginal Corporation) ICN 3630 (Corporation) took steps or had systems to comply with:

(i)    the following requirements of the Corporation’s Rule Books:

(1)    from 15 June 2009 until 28 January 2014, the requirement that the Corporation hold an annual general meeting (AGM) before the end of November each year;

(2)    from at least September 2008 until 14 June 2009, the requirements that the Committee of the Corporation meet at least once every three months, that a majority of family representatives of the Committee be present at committee meetings and that proper minutes of any committee meeting be kept;

(3)    from 15 June 2009 until 28 January 2014, the requirements that the directors of the Corporation meet at least every three months, that a majority of the directors be present at all times during such meetings and that minutes of directors’ meetings be kept by the Corporation;

(4)    from at least September 2008 until 28 January 2014, the requirement that the Corporation issue receipts for all money received by the Corporation;

(5)    from at least 15 June 2009 until 28 January 2014, the requirement that the Corporation’s accounts be approved for payment at a directors’ meeting;

(6)    from at least September 2008 until 28 January 2014, the requirement that all the Corporation’s money be deposited into the Corporation’s bank account;

(7)    from at least September 2008 until 28 January 2014, the requirement that the Corporation keep its financial records at the Corporation’s document access address;

(ii)    from 15 June 2009 to 28 January 2014, the requirements in ss 85-15(1) and (2) of the CATSI Act that the Corporation set out its name and Indigenous Corporation Number (ICN) on all invoices it issued;

(iii)    from at least September 2008 until 28 January 2014, in relation to record keeping requirements imposed in Pt 7-2 of the CATSI Act, namely:

(1)    the requirement imposed on the Corporation by s 322-10(1) of the CATSI Act to keep written financial records that correctly record and explain the Corporation’s transactions and financial position and performance and would enable true and fair financial reports to be prepared and audited; and

(2)    the requirement imposed on the Corporation by s 322-10(2) of the CATSI Act to retain such financial records for seven years after the transactions covered by the records are completed; and

(iv)    for the 2012-2013 financial year, the requirement in reg 333-16.01(3) of the Corporations (Aboriginal and Torres Strait Islander) Regulations 2007 (Cth) (Regulations) that it prepare a financial report,

and thereby each of the First, Second and Fourth Respondents, failed to exercise his or her powers and discharge his or her duties as a director of the Corporation with the degree of care and diligence that a reasonable person would exercise if that reasonable person were a director of an Aboriginal and Torres Strait Islander corporation in the Corporation’s circumstances and occupied the office held by, and had the same responsibilities within that corporation as, respectively, each of the First, Second and Fourth Respondents, and

(b)    in contravention of s 363-1(1) of the CATSI Act, by causing the Corporation not to comply, or failing to take steps to ensure the Corporation complied, each of the First, Second and Fourth Respondents failed to take all reasonable steps to comply with, or to secure compliance with, the record keeping requirements in paragraph 1(a)(iii) above.

Third Respondent

2.    Pursuant to s 386-1(1) of the CATSI Act, the Court declares that:

(a)    in contravention of s 265-1(1) of the CATSI Act, from about July 2010 until 28 January 2014, the Third Respondent failed to ensure that the Corporation took steps or had systems to comply with:

(i)    the following requirements of the Corporation’s Rule Books:

(1)    that the Corporation hold an AGM before the end of November each year;

(2)    that the directors of the Corporation meet at least every three months, that a majority of the directors be present at all times during such meetings and that minutes of directors’ meetings be kept by the Corporation;

(3)    that the Corporation issue receipts for all money received by the Corporation;

(4)    that the Corporation’s accounts be approved for payment at a directors’ meeting;

(5)    that all the Corporation’s money be deposited into the Corporation’s bank account;

(6)    that the Corporation keep its financial records at the Corporation’s document access address;

(ii)    the requirements in ss 85-15(1) and (2) of the CATSI Act that the Corporation set out its name and ICN on all invoices it issued;

(iii)    the record keeping requirements imposed in Pt 7-2 of the CATSI Act, namely:

(1)    the requirement imposed on the Corporation by s 322-10(1) of the CATSI Act to keep written financial records that correctly record and explain the Corporation’s transactions and financial position and performance and would enable true and fair financial reports to be prepared and audited; and

(2)    the requirement imposed on the Corporation by s 322-10(2) of the CATSI Act to retain such financial records for seven years after the transactions covered by the records are completed; and

(iv)    for the 2012-2013 financial year, the requirement in reg 333-16.01(3) of the Regulations that it prepare a financial report,

and thereby the Third Respondent, failed to exercise her powers and discharge her duties as a director of the Corporation with the degree of care and diligence that a reasonable person would exercise if that reasonable person were a director of an Aboriginal and Torres Strait Islander corporation in the Corporation’s circumstances and occupied the office held by, and had the same responsibilities within that corporation as, the Third Respondent, and

(b)    in contravention of s 363-1(1) of the CATSI Act, by causing the Corporation not to comply, or failing to take steps to ensure the Corporation complied, the Third Respondent failed to take all reasonable steps to comply with, or to secure compliance with, the record keeping requirements in paragraph 2(a)(iii) above.

Taxation obligations

First, Second and Fourth Respondents

3.    Pursuant to s 386-1(1) of the CATSI Act, the Court declares that in contravention of s 265-1(1) of the CATSI Act, the First, Second and Fourth Respondents failed to ensure that the Corporation took steps to comply with its taxation obligations, namely:

(a)    for the 2009-2010, 2011-2012 and 2012-2013 financial years, its obligation to accurately complete and submit Business Activity Statements;

(b)    for the 2009-2010, 2011-2012 and 2012-2013 financial years, its obligation to remit goods and services tax; and

(c)    from at least July 2010 to 28 January 2014, its obligation to make payments to reduce its debt to the Australian Taxation Office (ATO),

and thereby each of the First, Second and Fourth Respondents failed to exercise his or her powers and discharge his or her duties as a director of the Corporation with the degree of care and diligence that a reasonable person would exercise if that reasonable person were a director of an Aboriginal and Torres Strait Islander corporation in the Corporation’s circumstances and occupied the office held by, and had the same responsibilities within that corporation as, respectively, each of the First, Second and Fourth Respondents.

Third Respondent

4.    Pursuant to s 386-1(1) of the CATSI Act, the Court declares that in contravention of s 265-1(1) of the CATSI Act, the Third Respondent failed to ensure that the Corporation took steps to comply with its taxation obligations, namely its obligations to:

(a)    for the 2011-2012 and 2012-2013 financial years, accurately complete and submit Business Activity Statements;

(b)    for the 2011-2012 and 2012-2013 financial years, remit goods and services tax; and

(c)    from at least July 2010 to 28 January 2014, make payments to reduce its debt to the ATO,

and thereby the Third Respondent failed to exercise her powers and discharge her duties as a director of the Corporation with the degree of care and diligence that a reasonable person would exercise if that reasonable person were a director of an Aboriginal and Torres Strait Islander corporation in the Corporation’s circumstances and occupied the office held by, and had the same responsibilities within that corporation as, the Third Respondent.

Invoicing and money handling practices

First Respondent

5.    Pursuant to s 386-1(1) of the CATSI Act, the Court declares that the First Respondent intermingled the Corporation’s money with money in bank accounts that she controlled and which were not associated with the Corporation, by:

(a)    from at least September 2008 until 28 January 2014, issuing at least 41 invoices to third parties for work undertaken on behalf of the Corporation for the third party and directing the third party to make payment to a bank account that she controlled and which was not associated with the Corporation;

(b)    from July 2009 until 28 January 2014, issuing invoices to third parties for work undertaken on behalf of the Corporation for the third party and directing the third party to make payments directly to individuals who had undertaken the work on behalf of the Corporation;

(c)    between 1 July 2009 and 26 June 2013, directing individuals who had received payments for work they had undertaken on behalf of the Corporation to make payments totalling $151,690 into one of two bank accounts that she controlled and which were not associated with the Corporation;

and thereby the First Respondent:

(d)    contravened s 265-1(1) of the CATSI Act by failing to exercise her powers and discharge her duties as a director of the Corporation with the degree of care and diligence that a reasonable person would exercise if that reasonable person were a director of an Aboriginal and Torres Strait Islander corporation in the Corporation’s circumstances and occupied the office held by, and had the same responsibilities within that corporation as, the First Respondent; and

(e)    contravened s 265-10(1) of the CATSI Act by improperly using her position to:

(i)    gain an advantage for herself, namely the personal use of money belonging to the Corporation; and

(ii)    cause detriment to the Corporation, namely placing the Corporation in a position where it was unable to properly manage and track its own money and ensure its debts were paid as and when they fell due, or determine whether it had sufficient funds to pay its creditors, causing the Corporation to be insolvent within the meaning of s 694-80 of the CATSI Act, but for arrangements being made to delay payments to its creditors.

6.    Pursuant to s 386-1(1) of the CATSI Act, the Court declares that from 12 September 2008 until 20 January 2014, the First Respondent:

(a)    on at least 294 occasions, withdrew money from the bank account of the Corporation, totalling $731,380, without making or keeping any record of where that money was then directed; and

(b)    used a portion of the money that she withdrew from the Corporation’s bank account to pay herself a fee for work she undertook for the Corporation;

and thereby the First Respondent:

(c)    contravened s 265-1(1) of the CATSI Act by failing to exercise her powers and discharge her duties as a director of the Corporation with the degree of care and diligence that a reasonable person would exercise if that reasonable person were a director of an Aboriginal and Torres Strait Islander corporation in the Corporation’s circumstances and occupied the office held by, and had the same responsibilities within that corporation as, the First Respondent; and

(d)    contravened s 265-10(1) of the CATSI Act by improperly using her position to:

(i)    gain an advantage for herself, namely the retention of a portion of the Corporation’s money to pay herself a fee for work she undertook for the Corporation; and

(ii)    cause detriment to the Corporation, namely placing the Corporation in a position where it was unable to properly manage and track its own money and ensure its debts were paid as and when they fell due, or determine whether it had sufficient funds to pay its creditors, causing the Corporation to be insolvent within the meaning of s 694-80 of the CATSI Act, but for arrangements being made to delay payments to its creditors.

Monitoring of invoicing and money handling practices

Second and Fourth Respondents

7.    Pursuant to s 386-1(1) of the CATSI Act, the Court declares that in contravention of s 265-1(1) of the CATSI Act, from at least September 2008 until 28 January 2014, each of the Second and Fourth Respondents:

(a)    failed to take steps to put in place policies and practices at the Corporation to control and monitor the activities of the First Respondent in relation to invoicing and money handling practices; and

(b)    thereby failed to exercise his or her powers and discharge his or her duties as a director of the Corporation with the degree of care and diligence that a reasonable person would exercise if that reasonable person were a director of an Aboriginal and Torres Strait Islander corporation in the Corporation’s circumstances and occupied the office held by, and had the same responsibilities within that corporation as, the Second and Fourth Respondents.

Third Respondent

8.    Pursuant to s 386-1(1) of the CATSI Act, the Court declares that in contravention of s 265-1(1) of the CATSI Act, from about July 2010 until 28 January 2014, the Third Respondent:

(a)    failed to take steps to put in place policies and practices at the Corporation to control and monitor the activities of the First Respondent in relation to invoicing and money handling practices; and

(b)    thereby failed to exercise her powers and discharge her duties as a director of the Corporation with the degree of care and diligence that a reasonable person would exercise if that reasonable person were a director of an Aboriginal and Torres Strait Islander corporation in the Corporation’s circumstances and occupied the office held by, and had the same responsibilities within that corporation as, the Third Respondent.

AND THE COURT ORDERS THAT:

First Respondent

9.    Pursuant to s 386-15(1) of the CATSI Act, the First Respondent pay compensation to the Corporation in the amount of $7,717.98.

10.    Pursuant to s 279-15(1) of the CATSI Act, the First Respondent be disqualified from managing Aboriginal and Torres Strait Islander corporations for a period of 7 years.

11.    Pursuant to s 386-10(1) of the CATSI Act, the First Respondent pay to the Commonwealth of Australia a pecuniary penalty of $25,000, within 60 days or by such further time and by such instalments as the District Registrar may allow.

12.    The First Respondent pay the Applicant’s costs of the proceeding against the First Respondent, to be taxed unless agreed.

13.    The Applicant shall not enforce the order in paragraph 12 above without the leave of the Court.

Second Respondent

14.    Pursuant to s 279-15(1) of the CATSI Act, the Second Respondent be disqualified from managing Aboriginal and Torres Strait Islander corporations for a period of 3 years.

15.    Pursuant to s 386-10(1) of the CATSI Act, the Second Respondent pay to the Commonwealth of Australia a pecuniary penalty of $10,000, within 60 days or by such further time and by such instalments as the District Registrar may allow.

16.    The Second Respondent pay the Applicant’s costs of the proceeding against the Second Respondent, to be taxed unless agreed.

17.    The Applicant shall not enforce the order in paragraph 16 above without the leave of the Court.

Third Respondent

18.    Pursuant to s 279-15(1) of the CATSI Act, the Third Respondent be disqualified from managing Aboriginal and Torres Strait Islander corporations for a period of 3 years.

19.    Pursuant to s 386-10(1) of the CATSI Act, the Third Respondent pay to the Commonwealth of Australia a pecuniary penalty of $5,000, within 60 days or by such further time and by such instalments as the District Registrar may allow.

20.    The Third Respondent pay the Applicant’s costs of the proceeding against the Third Respondent, to be taxed unless agreed.

21.    The Applicant shall not enforce the order in paragraph 20 above without the leave of the Court.

Fourth Respondent

22.    Pursuant to s 279-15(1) of the CATSI Act, the Fourth Respondent be disqualified from managing Aboriginal and Torres Strait Islander corporations for a period of 3 years.

23.    Pursuant to s 386-10(1) of the CATSI Act, the Fourth Respondent pay to the Commonwealth of Australia a pecuniary penalty of $10,000, within 60 days or by such further time and by such instalments as the District Registrar may allow.

24.    The Fourth Respondent pay the Applicant’s costs of the proceeding against the Fourth Respondent, to be taxed unless agreed.

25.    The Applicant shall not enforce the order in paragraph 24 above without the leave of the Court.

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

REASONS FOR JUDGMENT

1.    INTRODUCTION

1    The Registrar of Aboriginal and Torres Strait Islander Corporations (Registrar) seeks declarations, disqualification orders, a compensation order and pecuniary penalties for contraventions of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) (CATSI Act) by four former directors of the Bunurong Land Council (Aboriginal Corporation) ICN 3630 (Corporation). The directors are Ms Sonia Marie Murray (the first respondent) (Ms Murray), Mr Mervyn Brown (the second respondent) (Mr Brown), Ms Leonie Dickson (the third respondent) (Ms Dickson) and Ms Verna Nichols (the fourth respondent) (Ms Nichols).

2    Each of Ms Murray, Mr Brown and Ms Nichols was a director and officer of the Corporation from September 2008 to 28 January 2014 (relevant period). Ms Dickson was a director and officer of the Corporation from about July 2010 until the end of the relevant period.

3    From the Corporation’s inception on 30 June 2000 until the end of the relevant period, Ms Murray was responsible for the day to day management of the Corporation. She was the contact person for the Corporation, as that term is used in s 257-5(2) of the CATSI Act, from 13 May 2009 until the end of the relevant period. Ms Murray admits that she issued invoices on behalf of the Corporation, undertook administration and bookkeeping for the Corporation, managed the Corporation’s cultural heritage work program, engaged individuals to undertake cultural heritage work on behalf of the Corporation and made arrangements for the payment of money to and by the Corporation. From 30 June 2000 to the end of the relevant period, all decisions in relation to the day to day management of the Corporation were made by Ms Murray. Ms Murray sometimes consulted with one or more of the other respondents before making decisions relating to the day to day management of the Corporation, but otherwise Mr Brown, Ms Dickson and Ms Nichols played no active role in the management of the Corporation. Ms Murray regularly consulted the other respondents as elders in relation to Aboriginal cultural heritage and history.

4    These reasons for judgment will consider the CATSI Act, the factual background, the contravening conduct, the contraventions of the CATSI Act, the applicable legal principles and then turn to consider the relief sought against each respondent.

2.    CATSI ACT

5    The CATSI Act commenced on 1 July 2007 and replaced the Aboriginal Councils and Associations Act 1976 (Cth) (ACA Act). The Revised Explanatory Memorandum to the Corporations (Aboriginal and Torres Strait Islander) Bill 2006 (Cth) (which became the CATSI Act) explained that the Bill aligned with modern corporate governance standards and corporations law but maintained a special statute of incorporation for Aboriginal and Torres Strait Islander peoples that took account of the special risks and requirements of the Indigenous corporate sector: Registrar of Aboriginal and Torres Strait Islander Corporations v Matcham (No 2) [2014] FCA 27 (Matcham No 2) at [8]. As the Revised Explanatory Memorandum noted, the Bill “maximises alignment with the [Corporations Act 2001 (Cth)], but provides sufficient flexibility to accommodate specific cultural practices and tailoring to reflect the particular needs and circumstances of individual groups”.

6    The preamble to the CATSI Act states that the law is a special measure for the advancement and protection of Aboriginal peoples and Torres Strait Islanders.

7    The objects of the CATSI Act (in s 1-25) 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: Matcham No 2 at [10]. The objects of the CATSI Act are to provide for the establishment of the role of the Registrar and the Registrar’s functions and powers, and the incorporation, operation and regulation of appropriate bodies under the Act, as well as the imposition of duties on, and regulation of, officers of those bodies: s 1-25 of the CATSI Act.

8    Chapter 2 of the CATSI Act provides for Aboriginal and Torres Strait Islander corporations and their registration. Pursuant to s 29-5 of the CATSI Act, a certain percentage of the members of an Aboriginal and Torres Strait Islander corporation must be Aboriginal and Torres Strait Islander persons. If the corporation has five or more members, at least 51% of members must be Aboriginal and Torres Strait Islander persons; if it has fewer than five members but more than one member, all or all but one of the members must be Aboriginal and Torres Strait Islander persons; and if it has only one member, that member must be an Aboriginal and Torres Strait Islander person: see also reg 29-5.01 of the Corporations (Aboriginal and Torres Strait Islander) Regulations 2007 (Cth) (CATSI Regulations). Pursuant to s 37-1 of the CATSI Act, on the registration of an Aboriginal and Torres Strait Islander corporation, the Registrar must register the corporation as a small, medium or large corporation.

9    Chapter 3 of the CATSI Act provides for the ‘basic features’ of Aboriginal and Torres Strait Islander corporations. It includes provisions dealing with the internal governance rules of such corporations, the minimum number of members required, and the names and powers of an Aboriginal and Torres Strait Islander corporation. Section 57-1 records that the rules dealing with the internal governance of an Aboriginal and Torres Strait Islander corporation are of four kinds: common law rules, rules in the CATSI Act that cannot be replaced by the corporation’s constitution, replaceable rules in the CATSI Act that may be modified or replaced by the corporation’s constitution, and rules that are in the corporation’s constitution. Pursuant to s 69-1, the constitution of an Aboriginal and Torres Strait Islander corporation is the constitution that is registered in respect of the corporation. Chapter 3 also includes s 85-15, which provides that an Aboriginal and Torres Strait Islander corporation must set out its name on all its public documents and negotiable instruments: s 85-15(1). If the corporation’s Indigenous Corporation Number (ICN) is not included in its name, it also must set out the ICN with its name or one of the references to its name: s 85-15(2). An Aboriginal and Torres Strait Islander Corporation must have as part of its name one of the following sets of words ‘Aboriginal corporation’, ‘Torres Strait Islander corporation’, ‘Aboriginal and Torres Strait Islander corporation’, ‘Torres Strait Islander and Aboriginal corporation’ or ‘Indigenous Corporation’: s 85-1.

10    Chapter 4 of the CATSI Act provides for, amongst other things, the membership of Aboriginal and Torres Strait Islander corporations. Pursuant to s 180-1, an Aboriginal and Torres Strait Islander corporation must set up and maintain a register of members.

11    Chapter 5 of the CATSI Act deals with directors’ meetings and general meetings of Aboriginal and Torres Strait Islander corporations. It sets out the rules for those meetings, some of which may be modified or replaced by the corporation’s constitution.

12    Chapter 6 of the CATSI Act deals with the officers (and directors) of an Aboriginal and Torres Strait Islander corporation. Pursuant to s 252-1(1), unless the constitution of an Aboriginal and Torres Strait Islander corporation provides otherwise, the directors of a corporation are not to be paid remuneration. Pursuant to s 257-5(2), an Aboriginal and Torres Strait Islander corporation that is registered as a small or medium corporation must have a contact person.

13    Part 6-4 of the CATSI Act, entitled “Duties and powers of directors and other officers and employees” sets out some of the most significant duties of directors, secretaries, other officers and employees of Aboriginal and Torres Strait Islander corporations: s 262-1 of the CATSI Act. Other duties are imposed by other provisions of the CATSI Act, provisions of the Corporations Act that are applied to Aboriginal and Torres Strait Islander corporations, and other laws including the general law.

14    Three statutory duties imposed on directors and officers by the CATSI Act are relevant in this matter – those imposed by ss 265-1(1) and 265-10(1) in Ch 6 and that imposed by s 363-1(1) in Ch 7.

15    Section 265-1(1) of the CATSI Act relates to the duty to act with care and diligence:

A director or other officer of an Aboriginal and Torres Strait Islander corporation must exercise his or her powers and discharge his or her duties with the degree of care and diligence that a reasonable person would exercise if that reasonable person:

(a)     were a director or officer of an Aboriginal and Torres Strait Islander corporation in the corporation’s circumstances; and

(b)     occupied the office held by, and had the same responsibilities within the corporation as, the director or officer.

Note 1:     This subsection is a civil penalty provision (see section 386-1).

…

Each of Ms Murray, Mr Brown, Ms Dickson and Ms Nichols accepted that they owed this statutory duty under s 265-1(1). This duty mirrors s 180(1) of the Corporations Act: Matcham No 2 at [12].

16    Section 265-10(1) of the CATSI Act relates to the use of the director’s position:

A director, secretary, other officer or employee of an Aboriginal and Torres Strait Islander corporation must not improperly use his or her position to:

(a)    gain an advantage for himself or herself or someone else; or

(b)    cause detriment to the corporation.

Note 1:     This subsection is a civil penalty provision (see section 386-1).

…

Note 3:     The contact person for the corporation is covered by the reference to an employee of the corporation.

Ms Murray accepted that she owed this statutory duty under s 265-10(1). This duty mirrors s 182(1) of the Corporations Act: Matcham No 2 at [14].

17    Section 363-1(1), in Ch 7, imposes a duty on a director of an Aboriginal and Torres Strait Islander corporation to take all reasonable steps to comply with, or to secure compliance with, Pts 7-2 and 7-3 of the CATSI Act, which impose obligations in relation to record keeping and reporting. Section 363-1(1) provides:

A director of an Aboriginal and Torres Strait Islander corporation contravenes this section if he or she fails to take all reasonable steps to comply with, or to secure compliance with, Parts 7-2 and 7-3.

18    In this matter, there are two relevant obligations in Pts 7-2 and 7-3. First, an obligation to keep financial records. Section 322-10 of the CATSI Act provides:

(1)     An Aboriginal and Torres Strait Islander corporation must keep written financial records that:

(a)     correctly record and explain its transactions and financial position and performance; and

(b)     would enable true and fair financial reports to be prepared and audited.

The obligation to keep financial records of transactions extends to transactions undertaken as trustee.

Penalty:     25 penalty units or imprisonment for 6 months, or both.

Note:         Section 700-1 defines financial records.

Period for which records must be retained

(2)     The financial records must be retained for 7 years after the transactions covered by the records are completed.

Penalty:    25 penalty units or imprisonment for 6 months, or both.

19    Second, an obligation to prepare a financial report for each financial year in which the Corporation was registered under the CATSI Act on 30 June of that financial year as a small corporation that had a consolidated gross operating income greater than $100,000 and less than $5 million: reg 333-16.01(3) of the Regulations (see also s 333-5(1) of the CATSI Act).

20    As noted above, a failure by a director to take all reasonable steps to comply with, or to secure compliance with, those obligations regarding records and reporting will result in a contravention of s 363-1(1). Each of Ms Murray, Mr Brown, Ms Dickson and Ms Nichols accepted that they owed a statutory duty under s 363-1(1) to take all reasonable steps to comply with, or to secure compliance with, the requirements imposed by ss 322-10(1) and 322-10(2).

21    Chapter 8 of the CATSI Act establishes a civil penalty regime that is based on Pt 9.4B of the Corporations Act: Matcham No 2 at [28]. The civil penalty regime was enacted following a review of the ACA Act, which highlighted “the need to protect the members of CATSI corporations from the actions of ‘rogue’ directors or officers”: Matcham No 2 at [15].

22    Each of ss 265-1(1), 265-10(1) and 363-1(1) is a civil penalty provision: s 386-1(1) of the CATSI Act. If a Court is satisfied that a person has contravened one or more of those provisions (among others), it must make a declaration of contravention: s 386-1(1). A declaration of contravention must specify that the Court made the declaration, the civil penalty provision that was contravened, the person who contravened the provision, the conduct that constituted the contravention and the Aboriginal and Torres Strait Islander corporation affected by the contravention: s 386-1(2). Section 386-1 of the CATSI Act is analogous to s 1317E of the Corporations Act: Matcham No 2 at [18].

23    A Court may order a person to pay the Commonwealth a pecuniary penalty of up to $200,000 if a declaration of contravention by the person has been made under s 386-1 and the contravention (a) materially prejudices the interests of the Aboriginal and Torres Strait Islander corporation affected by the contravention or the interests of its members, or (b) materially prejudices the ability of the Aboriginal and Torres Strait Islander corporation affected by the contravention to pay its creditors, or (c) is serious: s 386-10(1). This provision is analogous to s 1317G of the Corporations Act: Matcham No 2 at [20].

24    A Court may order a person to compensate an Aboriginal and Torres Strait Islander corporation for damage suffered by the corporation if a person has contravened a civil penalty provision in relation to the corporation and the damage resulted from the contravention: s 386-15(1). The order must specify the amount of the compensation. This provision is analogous to s 1317H of the Corporations Act: Matcham No 2 at [22].

25    The Registrar may apply for a declaration of contravention, a pecuniary penalty order and a compensation order: s 386-20(1). Proceedings for a declaration of contravention, a pecuniary penalty order or a compensation order may be started no later than six years after the contravention: s 386-25.

26    The power to order disqualification is found in Ch 6 of the CATSI Act, which deals with officers and directors. Section 279-15(1) provides:

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.

27    Section 279-15(2) provides that, in determining whether the disqualification is justified, the Court may have regard to 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 any other matters that the Court considers appropriate.

3.    BACKGROUND

3.1    Statements of Agreed Facts

28    The Registrar and each respondent filed a statement of agreed facts and admissions between the Registrar and that respondent for the purposes of s 191 of the Evidence Act 1995 (Cth) and this proceeding only. At the hearing, each respondent agreed to certain amendments that had been proposed by the Registrar. The admissions concern breaches of duties and obligations each respondent owed as a director of the Corporation. Further, each respondent gave oral evidence. Ms Murray filed a written submission. The Registrar tendered three affidavits.

29    The facts recorded in those documents and that oral evidence were the entirety of the facts considered by the Court. The following factual summary has been extracted from those documents and that oral evidence. Unless otherwise specified, the facts are admissions against each respondent.

3.2    The Registrar

30    The Registrar was entitled to commence this proceeding and seek the relief that was set out in the amended originating application pursuant to ss 279-15 and 386-20 of the CATSI Act.

3.3    The Directors

3.3.1    Ms Murray

31    Ms Murray was the public officer and a member of the Governing Committee of the Corporation as that term is used in the ACA Act from at least early 2004.

32    Ms Murray was a director and officer of the Corporation (as those terms are used in s 683-1 of the CATSI Act) from the commencement of the CATSI Act on 1 July 2007 until 28 January 2014 (ie throughout the relevant period). As noted above at [3], Ms Murray was the contact person of the Corporation from 13 May 2009 until the end of the relevant period.

33    During the relevant period, Ms Murray was responsible for the day to day management and financial affairs of the Corporation. Ms Murray admits that she issued invoices on behalf of the Corporation, undertook administration and bookkeeping for the Corporation, managed the Corporation’s cultural heritage work program, engaged individuals to undertake cultural heritage work on behalf of the Corporation and made arrangements for the payment of money to and by the Corporation. During the relevant period, all decisions in relation to the day to day management of the Corporation were made by Ms Murray, sometimes after consultation with one or more of the other respondents: see [3] above.

34    Ms Murray admits that the activities she undertook in the day to day management of the Corporation were not documented prior to them being undertaken. At no time did Ms Murray have a written employment or services contract with the Corporation.

35    This paragraph is relevant to Ms Murray only. Ms Murray admits that she was the sole registered owner of the trading name “Hawkseye Heritage” from at least 1 April 2005, and was the sole controller of a Commonwealth Bank account in the name of “Sonia Murray, trading as Hawkseye Heritage” (Hawkseye Heritage bank account) from at least 1 July 2009.

36    Ms Murray gave sworn evidence and was cross examined. She also filed a written submission. She is 50 years of age. She is a single mum with three children – two teenage daughters and a son aged nine who has an inoperable brain tumour and is legally blind. Ms Murray is her son’s carer. Ms Murray does not own any land or property. She lives in a rental property. She owns her car. She currently works part time on a phone psychic line for a friend.

37    Ms Murray accepted the seriousness of the matters raised against her and expressed remorse. In a statement she filed with the Court she stated, in part:

I realise the seriousness of the charges against me and will never be able to say just how sorry I am that [I] didn’t keep proper records for the organisation. I realise I had a great responsibility to do this and I didn’t.

I did want to tell you that although I did these things they were never intentionally done to jeopardise my Elders and Community.

I have worked very hard for nearly 20 years for the Bunurong community, 7 days a week for what seemed like 24 hours a day. When I started the Bunurong community were assumed extinct, I fought long and hard, many times on my own with local councils, state government, and various departments to get us recognised as a people. I facilitated and negotiated my communities Native Title claim with the State of Victoria, and made 2 separate Registered Aboriginal Party [RAP] applications on my own to keep the Bunurong community involved in heritage. ORIC [The Office of the Registrar of Indigenous Corporations] has both of the RAP applications and the Native Title claim that as you can see contain an immense amount of work especially on research. Unfortunately I do not have those applications to submit to you as evidence but ORIC has them. One of the RAP applications contains over 50 references from various state departments, councils, consultants, and developers demonstrating just how hard I worked for the community.

…

I would like to ask that you also take into consideration that during this period [I] not only ran the day to day things for the organisation [I] was also nursing my daughter who passed away at 22 months and have over the past 5 years been taken care of my son who has an inoperable brain tumour and is legally blind. Financially I am struggling as a low income earner and carer for my son and have very little assets.

I am very passionate about my heritage and my community and am saddened by what has happened.

3.3.2    Mr Brown

38    Mr Brown was a member of the Governing Committee of the Corporation as that term is used in the ACA Act from at least 30 June 2000.

39    Mr Brown was a director and officer of the Corporation (as those terms are used in s 683-1 of the CATSI Act) from the commencement of the CATSI Act on 1 July 2007 until 28 January 2014 (ie throughout the relevant period).

40    As noted in [3] and [33] above, Ms Murray sometimes consulted with Mr Brown before making decisions in relation to the day to day management of the Corporation, but Mr Brown otherwise played no active role in the management of the Corporation, although Ms Murray regularly consulted Mr Brown on Aboriginal cultural heritage and history as an elder.

41    Mr Brown gave sworn evidence and was cross examined. He is 76 years of age and is on a disability pension. He has no savings and lives from one pension day to the next. Mr Brown lives with his grandson.

42    Mr Brown explained the proceedings and his admissions in this way:

Well, I signed an agreement that I should have done this and that as a director. … And, of course, I didn’t know what a bloody director does. … So I signed it because by white man’s law I broke the rules. … By Aboriginal law I didn’t, and I work on Aboriginal laws. And so I agreed that by the Act I broke the rules so I will take that on the chin. But we didn’t do anything that was – we thought was illegal. And we as a team decided that [Ms Murray] can handle everything, and I notice you kept saying about paying herself a wage. We agreed to that. We didn’t agree to an amount, but she’s not going to do all this stuff for nothing. So we agreed to that. How she went about it, I don’t know, but as far as I’m concerned by the rules of the Act, I broke them. By my rules I didn’t. So whatever penalty you give me, I will cop.

…

And my personal thing is this is all a beat up against [Ms Murray] and I know her very well and have known her for years and years and years, but as far as I’m concerned she hasn’t done a damn thing that’s dishonest. And we did speak to one another and we had our meetings in our own little way. As I told you before, we done it Aboriginal way. Now, we were up here because of the white man’s way, so we’ve got to pay the penalty.

3.3.3    Ms Dickson

43    Ms Dickson was a director and officer of the Corporation (as those terms are used in s 683-1 of the CATSI Act) from about July 2010 until 28 January 2014.

44    As noted at [3] and [33] above, Ms Murray sometimes consulted with Ms Dickson before making decisions in relation to the day to day management of the Corporation, but Ms Dickson otherwise played no active role in the management of the Corporation, although Ms Murray regularly consulted Ms Dickson on Aboriginal cultural heritage and history as an elder.

45    Ms Dickson gave sworn evidence but was not cross examined. She is 65 years of age. She has bowel cancer and is currently undergoing chemotherapy. In her words, she is “not doing real good”. Ms Dickson expects that she will be unable to continue to work while undergoing chemotherapy.

46    Ms Dickson admitted that they were “slack”, that they did not “do things by the book” and that they should have known better. Ms Dickson’s evidence was that they always had faith in Ms Murray and what she was doing for the Bunurong “mob” and that Ms Murray worked really hard.

47    Ms Dickson gave evidence that she knew about things that Ms Murray was doing before she became a director in July 2010, because “we talked, telephone conversations, when [Ms Murray] would come to Hobart, things that were happening, work that was being done so, you know, family interests so you would hear what was happening. So you know, you would pick all those things up”.

3.3.4    Ms Nichols

48    Ms Nichols was a member of the Governing Committee of the Corporation as that term is used in the ACA Act from 30 June 2000.

49    Ms Nichols was a director and officer of the Corporation (as those terms are used in s 683-1 of the CATSI Act) from the commencement of the CATSI Act on 1 July 2007 until 28 January 2014 (ie throughout the relevant period).

50    As noted in [3] and [33] above, Ms Murray sometimes consulted with Ms Nichols before making decisions in relation to the day to day management of the Corporation, but Ms Nichols otherwise played no active role in the management of the Corporation, although Ms Murray regularly consulted Ms Nichols on Aboriginal cultural heritage and history as an elder.

51    Ms Nichols gave sworn evidence but was not cross examined. She is 66 years of age and a pensioner that lives in a Housing Department house. She owns an old car and has no other assets. She cares for her elderly mother who will be 94 years of age this year. There was also some evidence to suggest that Ms Nichols is unwell.

52    Like Mr Brown and Ms Dickson, Ms Nichols’ evidence was that:

… I trusted – or I trust [Ms Murray] implicitly, and I’ve never known an Aboriginal woman who works so hard for her community, and without the work that she did put in there would be lots of Bunurong people that did not know that they were. So I would just like to say that I’m very proud of [Ms Murray] and the hard work she has put in on behalf of the Bunurong. …

3.4    The Corporation

3.4.1    Legislative Status

53    From 1 July 2007, the Corporation has been taken to be registered as an Aboriginal and Torres Strait Islander Corporation under the CATSI Act. It maintains this status. As at 30 June 2013, the Corporation was registered under the CATSI Act as a small corporation.

54    The Corporation is a “transitional corporation” within the meaning of item 1(1) of Sch 3 to the Corporations (Aboriginal and Torres Strait Islander) Consequential, Transitional and Other Measures Act 2006 (Cth) (Transitional Act), as it was an Aboriginal association that was incorporated under Pt IV of the ACA Act immediately before commencement of the CATSI Act.

3.4.2    Income

55    In the financial year ending 30 June 2013, the Corporation had consolidated gross operating income of approximately $121,550.

3.4.3    Rule Books

56    On 30 June 2000, a Rule Book for the Corporation was approved under the ACA Act (First Rule Book). The First Rule Book established the internal governance rules and objectives of the Corporation. The First Rule Book was taken to be registered under the CATSI Act as the Corporation’s constitution on 1 July 2007, pursuant to item 14 of Sch 3 to the Transitional Act.

57    The First Rule Book operated until 15 June 2009, when a delegate of the Registrar registered an amended Rule Book for the Corporation (Second Rule Book) as the constitution of the Corporation under s 69-1 of the CATSI Act. The Second Rule Book remained operational as at 28 January 2014.

58    During the relevant period, each of the First and Second Rule Books defined “Bunurong Land” to mean the traditional land and waters of the Bunurong people, which cover an area in Victoria and Bass Strait generally from the Curtis Islands to Wilson’s Promontory in South Gippsland, through South West Gippsland, Phillip Island, French Island, Western Port Bay, to the Dandenong Range, Mornington Peninsula, Port Phillip Bay to Werribee. “Bunurong People” was defined to mean Aboriginal persons of Bunurong descent who identify as Bunurong and are accepted by the directors as Bunurong people, noting that Bunurong is also known as Boonerwrung, Boonwurring and Bonurong.

59    The First and Second Rule Books listed the objectives of the Corporation as to:

(1)    Manage Bunurong Native Title business, including Native Title applications and agreements;

(2)    Support all Bunurong people in achieving their cultural, customary obligations and aspirations;

(3)    Retrieve and revive Bunurong language, culture and ceremonial practices;

(4)    Repatriate all Bunurong artefacts and skeletal remains;

(5)    Research, rehabilitate, manage and protect ecosystems, areas and objects of spiritual, ecological, cultural, historical and customary significance to members and ancestors;

(6)    Research, re-introduce, manage and protect flora and fauna of spiritual, ecological, cultural and customary significance to members, other Bunurong community members and ancestors;

(7)    Support Bunurong people in maintaining their connection with the land, the culture, heritage and history;

(8)    Be recognised as the Bunurong community and cultural voice; and

(9)    Represent the Bunurong people at all levels on all issues affecting or of interest to the Bunurong people.

60    The objectives in the First Rule Book also included that of protecting and managing Bunurong cultural heritage and community intellectual property rights, and improving relationships between the Bunurong people and the wider community. The objectives in the Second Rule Book also included that of protecting and managing Bunurong people and the wider community, and representing the Bunurong people and the wider community.

3.4.4    Provision of cultural heritage services

61    Since at least September 2008, pursuant to the Aboriginal Heritage Act 2006 (Vic), certain high impact activities such as specified building and infrastructure developments have required a “cultural heritage management plan”. The preparation of a cultural heritage management plan involves an assessment of the area to determine the nature of any Aboriginal cultural heritage present in the area and preparation of a written report setting out the results and recommendations for measures to manage and protect the identified Aboriginal cultural heritage: s 42(1) of the Aboriginal Heritage Act 2006 (Vic).

62    Since at least September 2008, the Corporation has been engaged by third parties (usually archaeological consultancy firms engaged by builders and developers) to assist in the development of cultural heritage management plans for proposed developments on Bunurong Land.

63    From at least September 2008 to 28 January 2014, Ms Murray was responsible for communicating with third parties who sought such services from the Corporation. She secured the services of independent contractors for the Corporation, referred to as “cultural heritage workers”. She made arrangements for the cultural heritage workers to attend planning meetings with third parties and attend at the proposed development sites, where they participated in an archaeological survey and/or excavations to identify any culturally significant aspects of the site or any artefacts located at the site. The Corporation charged the third parties between $500 and $750 a day for cultural heritage services.

64    It is admitted by Ms Murray, but not the other respondents, that Ms Murray paid herself between $200-$250 per day of the cultural heritage work charged to third parties, which was described as an administration fee. The balance of the money was paid to the cultural heritage workers. It will be necessary to return to this matter later in these reasons for judgment.

3.5    The Registrar’s investigation of the Corporation

65    On 12 September 2013, a delegate of the Registrar appointed examiners to examine the books and records of the Corporation. On 6 November 2013, the Registrar received a report containing the findings of the examiners. In their report, the examiners concluded that the financial records of the Corporation were inadequate and that the Corporation appeared to be insolvent.

66    On 24 January 2014, a delegate of the Registrar determined, pursuant to s 487-1 of the CATSI Act, that the Corporation was to be under special administration from 28 January 2014 to 30 June 2014, and appointed a special administrator.

67    The special administrator reconstructed the financial position of the Corporation, established proper financial processes and systems, set up books and records that ensured the Corporation complied with its record keeping and reporting obligations under ss 322-10(1), 322-10(2) and 333-5(1) of the CATSI Act, held the Corporation’s annual general meeting (AGM), entered into a repayment plan with the Australian Taxation Office (ATO), paid all outstanding creditors and established a board of directors. The fees and charges of the special administrator were paid by the Registrar and amounted to $60,454.63.

68    On 28 January 2014, the special administration of the Corporation commenced. Pursuant to s 496-1(a) of the CATSI Act, the office of each director of the Corporation became vacant on that appointment of the special administrator. On that day, a delegate of the Registrar issued notices under s 453-5(1)(c) of the CATSI Act to each respondent, requiring each to attend and answer questions put to them about the examinable affairs of the Corporation.

69    On 3 February 2014, the special administrator appointed Ms Vickie Newton to replace Ms Murray as the contact person for the Corporation.

70    On 10 February 2014, the special administrator terminated Ms Murray’s services for the Corporation. It was agreed by the Registrar and Mr Brown, Ms Dickson and Ms Nichols, but not Ms Murray, that the reason for the termination was the Corporation’s lack of funds.

71    This paragraph is relevant to Ms Murray only. On 20 February 2014, Ms Murray attended an examination as required by the s 453-5(1)(c) notice, and answered the questions put to her.

72    This paragraph is relevant to Mr Brown only. On 17 February 2014, Mr Brown attended an examination as required by the s 453-5(1)(c) notice, and answered the questions put to him. During the examination, Mr Brown admitted that he could not recall any AGMs being held for the Corporation, he did not know how to run a directors’ meeting and did not think he had attended one, he had not been given any financial records of the Corporation and he understood Ms Murray to have complete control over the operation of the Corporation.

73    This paragraph is relevant to Ms Dickson only. On 19 February 2014, Ms Nichols attended an examination as required by the s 453-5(1)(c) notice, and answered the questions put to her. During the examination, Ms Dickson admitted that she understood Ms Murray to have the day to day running of the Corporation and to oversee its finances, there had not been a directors’ meeting for some time, and since 2008, she had never seen bank statements for the Corporation.

74    This paragraph is relevant to Ms Nichols only. On 19 February 2014, Ms Nichols attended an examination as required by the s 453-5(1)(c) notice, and answered the questions put to her. During the examination, Ms Nichols admitted that she just helped make the big decisions when necessary, Ms Murray was in charge of the Corporation, and she trusted Ms Murray to provide information about the finances of the Corporation.

3.6    Contravening Conduct

3.6.1    Requirements of the Rule Books

3.6.1.1    Annual general meetings

75    Ms Murray, Mr Brown, and Ms Nichols each admit that from 15 June 2009 to 28 January 2014, they failed to take steps to ensure that the Corporation had policies and processes in place to ensure compliance with the requirement in cl 5.1 of the Second Rule Book that the Corporation hold an AGM before the end of November each year.

76    Ms Dickson admits that from about July 2010 to 28 January 2014, she failed to take steps to ensure that the Corporation had policies and processes in place to ensure compliance with the requirement in cl 5.1 of the Second Rule Book that the Corporation hold an AGM before the end of November each year.

77    The Corporation did not hold an AGM in the 2009, 2010, 2011, 2012, or 2013 calendar years.

3.6.1.2    Committee/Directors’ meetings

78    Ms Murray, Mr Brown, and Ms Nichols each admit that from at least September 2008 to 14 June 2009, they failed to take steps to ensure that the Corporation had policies and processes in place to ensure compliance with the following requirements of the First Rule Book:

(1)    The Committee meet at least once every three months: cl 10.9;

(2)    A majority of family representatives of the Committee be present at a Committee meeting: cl 10.10; and

(3)    Proper minutes of the meeting are kept: cl 10.12.

79    Ms Murray, Mr Brown, and Ms Nichols each admit that from 15 June 2009 to 28 January 2014, they failed to take steps to ensure that the Corporation had policies and processes in place to ensure compliance with the following requirements of the Second Rule Book:

(1)    The directors of the Corporation meet at least every three months: cl 6.16;

(2)    A majority of the directors be present at all times during such meetings: cl 6.17; and

(3)    Minutes of directors’ meetings (in writing or as an audio or video recording) be kept by the Corporation: cl 6.

80    Ms Dickson admits that from about July 2010 to 28 January 2014, she failed to take steps to ensure that the Corporation had policies and processes in place to ensure compliance with the requirements of the Second Rule Book set out in [79] above.

81    From at least September 2008 to 28 January 2014, the only directors’ meetings of the Corporation at which a majority of the directors were present throughout the meeting were held on 29 September 2013 and 11 December 2013.

3.6.1.3    Issuing receipts

82    Ms Murray, Mr Brown, and Ms Nichols each admit that from at least September 2008 to 28 January 2014, they failed to take steps to ensure that the Corporation had policies and processes in place to ensure compliance with the requirement in cl 20.1 of the First Rule Book and cl 9 of the Second Rule Book that the Corporation issue receipts for all money received by the Corporation.

83    Ms Dickson admits that from about July 2010 to 28 January 2014, she failed to take steps to ensure that the Corporation had policies and processes in place to ensure compliance with the requirement in cl 9 of the Second Rule Book that the Corporation issue receipts for all money received by the Corporation.

84    During this period, the Corporation did not issue receipts for any of the money it received.

3.6.1.4    Approving accounts at directors’ meetings

85    Ms Murray, Mr Brown, and Ms Nichols each admit that from 15 June 2009 to 28 January 2014, they failed to take steps to ensure that the Corporation had policies and processes in place to ensure compliance with the requirement in cl 9 of the Second Rule Book that the Corporation’s accounts be approved for payment at a directors’ meeting.

86    Ms Dickson admits that from about July 2010 to 28 January 2014, she failed to take steps to ensure that the Corporation had policies and processes in place to ensure compliance with the requirement in cl 9 of the Second Rule Book that the Corporation’s accounts be approved for payment at a directors’ meeting.

87    As the Corporation did not hold any meetings at which the majority of directors were present from 15 June 2009 to 29 September 2013 (see Section 3.6.1.2), no accounts were approved for payment at any directors’ meeting during this period. The minutes of the meetings held on 29 September 2013 and 11 December 2013 do not record that any accounts were approved.

3.6.1.5    Depositing Corporation’s money into the Corporation’s bank account

88    Ms Murray, Mr Brown, and Ms Nichols each admit that from at least September 2008 to 28 January 2014, they failed to take steps to ensure that the Corporation had policies and processes in place to ensure compliance with the requirement in cl 20.2 of the First Rule Book and cl 9 of the Second Rule Book that all the Corporation’s money be deposited into the Corporation’s bank account.

89    Ms Dickson admits that from about July 2010 to 28 January 2014, she failed to take steps to ensure that the Corporation had policies and processes in place to ensure compliance with the requirement in cl 9 of the Second Rule Book that all the Corporation’s money be deposited into the Corporation’s bank account.

90    Each respondent admits that on each of the dates listed in Schedule 1 to each Statement of Agreed Facts and Admissions, Ms Murray issued an invoice to a third party for work performed by a cultural heritage worker on behalf of the Corporation, which required the fee for the services to be paid either directly to the cultural heritage worker or to Hawkseye Heritage, not into the Corporation’s bank account.

91    Each respondent admits that Ms Murray issued more invoices to third parties for work performed by a cultural heritage worker on behalf of the Corporation, which required the fee for the services to be paid either directly to the cultural heritage worker or to Hawkseye Heritage, not into the Corporation’s bank account, than those listed in Schedule 1 to each Statement of Agreed Facts and Admissions.

3.6.2    Requirements of the CATSI Act regarding the inclusion of the Corporation’s full name and ICN on invoices

92    Ms Murray, Mr Brown, and Ms Nichols each admit from 15 June 2009 to 28 January 2014, they failed to take steps to ensure that the Corporation had policies and processes in place to ensure compliance with the requirement in s 85-15(1) of the CATSI Act that the Corporation include its full name (ie including the words ‘Aboriginal Corporation’) on its invoices or the requirement in s 85-15(2) that the Corporation include its ICN on its invoices. The requirement to include the words ‘Aboriginal Corporation’ in the name of this Corporation is imposed by s 85-1(3) of the CATSI Act.

93    Ms Dickson admits that from about July 2010 to 28 January 2014, she failed to take steps to ensure that the Corporation had policies and processes in place to ensure compliance with the requirement in s 85-15(1) of the CATSI Act that the Corporation include its full name (ie including the words ‘Aboriginal Corporation’) on its invoices or the requirement in s 85-15(2) that the Corporation include its ICN on its invoices.

94    Each respondent admits that from 15 June 2009 to 28 January 2014, the Corporation, through Ms Murray, issued at least 468 invoices that did not include the full name of the Corporation (as they did not include the words ‘Aboriginal Corporation’) or the Corporation’s ICN.

3.6.3    Invoicing and money handling practices

95    Each respondent admits that between September 2008 and 28 January 2014, on at least the dates listed in Schedule 2 to each Statement of Agreed Facts and Admissions, Ms Murray issued an invoice in the name of ‘Hawkseye Heritage’ to a third party, directing that third party to make a payment for work undertaken by cultural heritage workers on behalf of the Corporation to the Hawkseye Heritage bank account.

96    Each respondent admits that between 12 September 2008 and 28 January 2014, on at least each of the occasions identified in Schedule 3 to each Statement of Agreed Facts and Admissions, Ms Murray withdrew from the Corporation’s bank account by way of cash or cash cheque, a total of $731,380. Ms Murray admits that she did not make or keep a record of to whom the money was paid on any of these occasions.

97    Each respondent admits that Ms Murray used some of the money she withdrew by cash, or cash cheque or cheque from the Corporation’s bank account:

(1)    To pay cultural heritage workers and other expenses associated with the Corporation; and

(2)    To pay herself a fee for the work she undertook for the Corporation.

98    Each respondent admits that Ms Murray had no written authority from the Corporation or from Mr Brown, Ms Dickson or Ms Nichols to pay herself a fee for the work she undertook for the Corporation until December 2013.

99    It was agreed by the Registrar, Ms Murray and Mr Brown that, during the relevant period, each of the other directors of the Corporation were aware that Ms Murray was paying herself a fee for the work she undertook on behalf of the Corporation, but not the amount of the fee. In Mr Brown’s view, Ms Murray worked very hard.

100    Each Respondent admits that between July 2009 and 28 January 2014, Ms Murray issued invoices for cultural heritage services supplied on behalf of the Corporation to third parties in which she directed payment to be made directly to at least 13 separately named cultural heritage workers.

101    Each respondent admits that prior to issuing invoices directing third parties to make payments directly to the following cultural heritage workers, Ms Murray directed:

(1)    Michael Haley, Sean Kelly and Phaedra Murray to pay between $200 and $250 per day of work into the Hawkseye Heritage bank account;

(2)    Daniel Turnbull to pay between $200 and $250 per day of work into a Commonwealth Bank account held in Ms Murray’s name; and

(3)    Iris Pepper to pay between $200 and $250 per day of work into either an ANZ bank account in Ms Murray’s name or a National Australia bank account in Ms Murray’s name.

Ms Murray described the fees she paid to herself as ‘administration fees’.

102    Each respondent admits that pursuant to the directions of Ms Murray in [101] above:

(1)    Between 26 November 2009 and 10 May 2013, the payments identified in Schedule 4 to each Statement of Agreed Facts and Admissions, a total of $69,740, were made by Michael Haley, Sean Kelly and Phaedra Murray into the Hawkseye Heritage bank account; and

(2)    Between 1 July 2009 and 26 June 2013, the payments identified in Schedule 5 to each Statement of Agreed Facts and Admissions, a total of $81,950, were made by Daniel Turnbull into a Commonwealth Bank account held in Ms Murray’s name.

103    Each respondent admits that Ms Murray’s conduct referred to in [95]-[102] above led to the intermingling of the Corporation’s money with Ms Murray’s money and the money of Hawkseye Heritage.

104    Ms Murray admits that her record keeping and money handling practices set out in [90], [91] and [95] to [103] above did not permit the Corporation to identify the Corporation’s money with any accuracy.

105    Mr Brown, Ms Dickson and Ms Nichols admit that they failed to take steps to ensure that Ms Murray did not engage in the invoicing and payment practices referred to in [90], [91] and [95] to [103] above, that the money of the Corporation was not intermingled with Ms Murray’s money and the money of Hawkseye Heritage, and that, during the relevant period, they did not take steps to put in place policies and practices at the Corporation to control and monitor Ms Murray’s activities.

3.6.4    Taxation obligations

106    Each respondent admits that from 13 March 2009 to 28 January 2014, Ms Murray issued 243 invoices to third parties for cultural heritage services on behalf of the Corporation that included goods and services tax (GST) totalling $33,790.

107    Each respondent admits that in the 2009-2010, 2011-2012 and the 2012-2013 financial years, Ms Murray failed to provide the Corporation’s accountant with the information required to submit accurate returns in Business Activity Statements (BAS) to the ATO as required.

108    Each respondent admits that, as a consequence, the Corporation, through its accountant:

(1)    Submitted nil returns in BAS for the 2009-2010 financial year, the 2011-2012 financial year and the 2012-2013 financial year (as was required) as the accountant determined it was best to avoid late fees for BAS lodgement by taking this course; and

(2)    Did not pay or cause to be paid GST to the ATO attributable to the invoices issued on behalf of the Corporation in respect of the 2009-2010 financial year, the 2011-2012 financial year and the 2012-2013 financial year as was required.

109    Each respondent admits that from in or about October 2008, the Corporation owed a debt to the ATO as follows (ATO debt):

110    Each respondent admits that, as indicated in the table, the Corporation incurred interest expenses totalling $23,023.82 as a result of the failure to pay GST on time to the ATO.

111    Each respondent further admits that on 13 June 2014, while the Corporation was under special administration, the ATO agreed to a remission of $15,305.84 of these interest charges.

112    Each respondent admits that in or about January 2009, the Corporation had in place a payment plan with the ATO for the payment of the ATO debt. The payment plan was negotiated and agreed to on behalf of the Corporation solely by Ms Murray. Ms Murray, as the controlling mind of the Corporation and the day to day manager, was responsible for making the payments by the Corporation under the payment plan to the ATO. After agreeing to the payment plan and making some payments pursuant to the payment plan, the Corporation stopped complying with the payment plan in the 2010-2011 financial year.

113    Each respondent admits that as at 28 January 2014, the Corporation, based on the written financial records available, was not able to determine whether or not it had sufficient funds to pay its creditors, including the ATO, and was insolvent within the meaning of s 694-80 of the CATSI Act, but for making arrangements with creditors to delay payment to them by the Corporation.

114    Each of Ms Murray, Mr Brown and Ms Nichols admits that by reason of the matters referred to in [107]-[108] above, for the 2009-2010, 2011-2012 and 2012-2013 financial years, they failed to ensure processes were in place to ensure the Corporation met its obligations to accurately complete and submit BAS and to remit GST. In relation to Ms Murray, this failure is admitted to have occurred additionally by reason of the matters referred to in [106].

115    Ms Dickson admits that by reason of the matters referred to in [107]-[108] above, for the 2011-2012 and 2012-2013 financial years, she failed to ensure processes were in place to ensure the Corporation met its obligations to accurately complete and submit BAS and to remit GST.

116    By reason of the matters referred to in [112] above, from at least July 2010 to 28 January 2014, each respondent admits that they failed to ensure processes were in place to ensure the Corporation met its obligations to make payments to reduce its debt to the ATO.

3.6.5    Record keeping and reporting requirements under the CATSI Act

3.6.5.1    Financial record keeping requirements

117    It is admitted by each respondent that during the relevant period, ss 322-10(1) and (2) of the CATSI Act required the Corporation to keep written financial records for 7 years after the transactions covered by the records were complete that:

(1)    Correctly recorded and explained its transactions and financial position and performance; and

(2)    Would enable true and fair financial reports to be prepared and audited.

118    It is further admitted by each respondent that from at least September 2008 to 28 January 2014, cl 22.1 of the First Rule Book and cl 8 of the Second Rule Book also required the Corporation to keep its financial records at its document access address.

119    From at least July 2010 to 28 January 2014 (in the case of Ms Dickson) and from at least September 2008 to 28 January 2014 (in the case of the other respondents), none of Mr Brown, Ms Dickson, and Ms Nichols or Ms Murray (as day to day manager of the Corporation) created, caused to be created or caused to be kept for 7 years, written financial records of:

(1)    The Corporation’s bank statements prior to April 2011;

(2)    Butts from the cheque book for the Corporation’s bank account;

(3)    Books of account such as journals or ledgers to explain what funds were paid and why; or

(4)    Source records, including:

(a)    Any invoices for transactions that caused money to be deposited into the Corporation’s bank account prior to 13 March 2009 and some of the invoices for transactions that caused money to be deposited into the Corporation’s bank account after 13 March 2009;

(b)    Receipts for payments received;

(c)    Work agreements or work orders with cultural heritage workers; or

(d)    Agreements, contracts, or work orders with third parties requiring work to be undertaken by cultural heritage workers on behalf of the Corporation.

120    Each respondent admits that from 12 September 2008 to 28 January 2014, Ms Murray:

(1)    Used cash cheques to withdraw at least $731,380 from the Corporation’s bank account, without creating any record of the person to whom those funds were provided on a cheque butt or elsewhere; and

(2)    Used cheques (including the cash cheques identified in (1) above) to withdraw at least $929,021.64 from the Corporation’s bank account, without creating any record of the person to whom the cheque was made out.

121    Each respondent also admits that from 12 September 2008 to 28 January 2014 at least $924,111.50 was deposited into the Corporation’s bank account without Ms Murray creating any record of the person or entity that had provided the funds, in a deposit book or elsewhere. Ms Murray admits that much of the amount deposited was deposited in cash.

122    Each respondent also admits that from at least September 2008 to 28 January 2014, the financial records kept or created by Ms Murray for the Corporation were inadequate and incomplete as:

(1)    No organised system of maintaining source business records was used;

(2)    No organised system of recording all transactions, such as a system involving use of registers, was used; and

(3)    No bank reconciliations were completed by the Corporation to verify the accuracy of the records that were kept.

123    Each respondent then admits that as a result of the Corporation’s inadequate records:

(1)    The special administrator appointed to the Corporation was unable to properly identify the source and destination of large amounts of money that had gone into and out of the Corporation’s bank account; and

(2)    The Corporation’s records did not permit accurate financial reports to be created.

124    It is not in dispute that by reason of the matters referred to in [119]-[122], each respondent failed to ensure that there were systems and practices in place to ensure that the records kept by the Corporation met the minimum requirements in s 322-10(1) and (2) of the CATSI Act.

3.6.5.2    Failure to prepare financial report in financial year 2012/2013

125    None of Mr Brown, Ms Dickson, and Ms Nichols or Ms Murray (as day to day manager of the Corporation) caused a financial report to be prepared for the 2012-2013 financial year (as required by reg 333-16.01 of the Regulations), in circumstances where the Corporation was registered under the CATSI Act on 30 June 2013 as a small corporation and had a consolidated gross operating income for that financial year that was greater than $100,000 but less than $5 million.

4.    THE CONTRAVENTIONS OF THE CATSI ACT

4.1    Contraventions of s 265-1(1)

126    Section 265-1(1) of the CATSI Act has been set out earlier: see [15] above. Each respondent admits that they owed a duty under that section: see [15] above.

127    Each respondent admits that they contravened s 265-1(1) of the CATSI Act by:

(1)    Failing to ensure that the Corporation took steps or had systems to comply with:

(a)    Requirements of the Corporation’s Rule Books to hold AGMs, to hold and keep minutes of Committee/directors’ meetings, that the Corporation issue receipts for money received by the Corporation, that the Corporation’s accounts be approved for payment at directors’ meetings, and that the Corporation’s money be deposited in the Corporation’s bank account: see [75]-[91] above;

(b)    The requirement in s 85-15 of the CATSI Act to use the Corporation’s name and ICN on its invoices: see [92]-[94] above;

(c)    The record keeping requirements imposed by s 322-10(1) and (2) of the CATSI Act, and the requirements of cl 22 of the First Rule Book and cl 8 of the Second Rule Book that financial records be kept at the Corporation’s document access address: see [118]-[124] above;

(d)    For the 2012-2013 financial year, the requirement in reg 333-16.01 of the Regulations to prepare a financial report: see [125] above; and

(2)    Failing to ensure the Corporation took steps to comply with its taxation obligations: see [106]-[116] above,

such that each respondent thereby exercised their powers and discharged their duties as a director of the Corporation other than with the degree of care and diligence that a reasonable person would exercise if that reasonable person were a director of an Aboriginal and Torres Strait Islander corporation in the Corporation’s circumstances and occupied the office held by, and had the same responsibilities within the corporation as, each of the respondents.

128    In addition, Ms Murray admits that by failing to meet the requirements in relation to the issuing of receipts, record keeping and money handling practices referred to in [92], [95]-[104] and [118]-[123], she contravened s 265-1(1) of the CATSI Act by exercising her powers and discharging her duties as a director of the Corporation other than with the degree of care and diligence that a reasonable person would exercise if that reasonable person was a director of an Aboriginal and Torres Strait Islander corporation in the Corporation’s circumstances, and occupied the office held by, and had the same responsibilities within the corporation as, Ms Murray.

129    Further, Mr Brown, Ms Dickson and Ms Nichols each admit that by engaging in the conduct at [105], they failed to take steps to put in place policies and practices at the Corporation to control and monitor the activities of Ms Murray in relation to invoicing and money handling practices, and thereby each contravened s 265-1(1) of the CATSI Act by exercising their powers and discharging their duties as a director of the Corporation other than with the degree of care and diligence that a reasonable person would exercise if that reasonable person were a director of an Aboriginal and Torres Strait Islander corporation in the Corporation’s circumstances, and occupied the office held by, and had the same responsibilities within the corporation as, each of Mr Brown, Ms Dickson and Ms Nichols.

4.2    Contravention of s 265-10(1)

130    Section 265-10(1) of the CATSI Act has been set out earlier: see [16] above. Ms Murray accepted that she owed this statutory duty under 265-10(1): see [16] above.

131    Ms Murray admits that by engaging in the conduct described in [128] above, she contravened s 265-10(1) of the CATSI Act by improperly using her position as a director of the Corporation to:

(1)    Make unaccounted withdrawals from the Corporation’s bank account, without written authority of the directors, a portion of which she retained;

(2)    Require payments of money payable to the Corporation from third parties and cultural heritage workers into bank accounts held and controlled by Ms Murray in her own name and that of Hawkseye Heritage, giving her personal use of that money;

(3)    Use invoicing and record keeping practices which led to the intermingling of the Corporation’s money with that of Ms Murray which, combined with the failure to maintain proper financial records, placed the Corporation in the position that it was unable to properly manage and track its own money and ensure its debts were paid as and when they fell due;

(4)    Prevent the Corporation from determining whether or not it had sufficient funds to pay its creditors, including the ATO, and causing the Corporation to be insolvent within the meaning of s 694-80 of the CATSI Act, but for making arrangements with creditors to delay payment to them by the Corporation; and,

by the conduct in (1) and (2), Ms Murray gained an advantage for herself, and by the conduct in (1)-(4), she caused detriment to the Corporation.

4.3    Contraventions of s 363-1(1)

132    Section 363-1(1) of the CATSI Act has been set out earlier: see [17] above.

133    Each respondent admits that by engaging in the conduct identified in [127(1)(c)] above, they also contravened s 363-1 of the CATSI Act by causing the Corporation not to comply, or failing to take steps to ensure the Corporation complied, with the record keeping requirements imposed by s 322-10(1) and (2) of the CATSI Act.

4.4    Admitted effect of each contravention

134    Finally, each respondent admits that each contravention referred to in this Section 4:

(1)    Has materially prejudiced the interests of the Corporation;

(2)    Has materially prejudiced the ability of the Corporation to pay its creditors;

(3)    Is serious within the meaning of s 386-10(b)(iii) of the CATSI Act; and

(4)    Has caused damage to the Corporation.

135    Mr Brown, Ms Dickson and Ms Nichols further admit that each contravention has materially prejudiced the interests of the Corporation’s members.

136    It will be necessary to return to the detail of some of the contravening conduct later in these reasons for judgment.

5.    RELIEF

5.1    Introduction

137    In respect of each respondent, the Registrar seeks:

(1)    Declarations of contravention under s 386-1(1) of the CATSI Act;

(2)    A disqualification order under s 279-15(1) of the CATSI Act; and

(3)    A pecuniary penalty order under s 386-10(1) of the CATSI Act.

The Registrar also seeks a compensation order under s 386-15(1) of the CATSI Act against Ms Murray.

138    Each form of relief will be considered.

5.2    Declarations

139    Section 386-1(1) relevantly provides that if a Court is satisfied that a person has contravened one of the civil penalty provisions, which include ss 265-1(1), 265-10(1) and 363-1(1), it must make a declaration of contravention.

140    There is no dispute that each respondent has contravened a civil penalty provision. The Court has amended the form of some of the declarations sought by the Registrar to ensure that each declaration satisfies the requirements of s 363-1(2) and is framed with sufficient precision and particularity to reflect the contraventions: cf Registrar of Aboriginal and Torres Strait Islander Corporations v Matcham (2013) 216 FCR 393 (Matcham) at [26]-[31].

141    Some of the conduct engaged in contravened more than one civil penalty provision of the CATSI Act. For example, conduct in relation to financial record keeping: see [133] above. Taking into account the principle that the same conduct should be penalised only once, it is appropriate to consolidate declarations of contravention of different sections (that results from the same conduct) into one declaration of contravention: Matcham at [15]. The different courses of conduct are addressed further in Section 5.3.3 below.

142    The Court will make declarations of contravention (Declarations). It will be necessary to refer to them in assessing the pecuniary penalties.

5.3    Pecuniary Penalties

5.3.1    Introduction

143    A pecuniary penalty can be imposed where a declaration of contravention of a civil penalty provision has been made under s 386-1 and the contravention materially prejudiced the interests of the affected Aboriginal and Torres Strait Islander corporation or its ability to pay its creditors, or the contravention is serious: s 386-10(1) of the CATSI Act: see [23] above.

144    These two jurisdictional preconditions have been met in the present case. The Declarations have been addressed in Section 5.2 above and each respondent has admitted that the second precondition exists: see [134] above.

145    This section of the reasons for judgment will consider and apply the legal principles that guide the assessment of penalties for multiple contraventions, consider and apply the legal principles that guide the assessment of an appropriate penalty, including the central object of deterrence, and then address the question of the appropriate penalty amount.

5.3.2    Principles in relation to multiple contraventions

146    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: Matcham No 2 at [199] and Construction, Forestry, Mining and Energy Union v Cahill (2010) 194 IR 461 at [39] and [41].

147    These proceedings relate to many separate acts, which contravene a number of provisions of the CATSI Act, over various periods, some of which extend for in excess of five years. Accordingly, the proper assessment of appropriate penalties requires consideration of three well-established principles regarding the treatment of multiple contraventions (see Matcham No 2 at [194 ]-[198]):

(1)    If multiple provisions are simultaneously breached by the same wrongful act (as is the case here) it is appropriate to impose a penalty for only the most serious of the multiple offences;

(2)    Separate contraventions arising from separate acts should ordinarily attract separate penalties, however it may be appropriate in some cases to treat the contraventions as part of a single multi-faceted “course of conduct”;

(3)    A “final check” of the cumulative effect of the proposed penalties must be conducted to ensure the total or aggregate is not unjust or disproportionate to the circumstances of the case, in accordance with the totality principle. If necessary, the Court alters the final penalties to ensure that they are “just and appropriate”. As to the mechanism by which such adjustment is made, it is now recognised in the civil penalty context that the proper approach when applying the totality principle is to start by ascertaining the penalty that would be appropriate for each contravention and then, if necessary, reduce those amounts for reasons of totality, rather than determining an overall penalty and then dividing it among the various contraventions.: See Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 145 ALR 36; Clean Energy Regulator v MT Solar Pty Ltd [2013] FCA 205 at [81]-[82]; Ponzio v B & P CaelIi Constructions Pty Ltd (2007) 158 FCR 543 at [145]; Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 at [23]-[25] and [95]-[97]; Darlaston v Parker (No 2) (2010) 200 IR 353 and QR Ltd v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia [2010] FCAFC 150 at [61]-[63].

148    Before turning to the application of these principles, it is important to record that although related, the three principles must not be conflated. They are separate and distinct: see eg Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383 at [42]-[46]. That statement is important. Identifying how the principles are addressed in a particular case serves a regulatory purpose by making clear to the parties, the public, other potential contraveners and courts in future cases, how and why the penalties were imposed: see eg Pearce v The Queen (1998) 194 CLR 610 at [45]-[48].

149    When considering whether the penalty as a whole is appropriate, the Court must also have regard to any compensation and disqualification orders that are sought: Kerkhoffs v Registrar of Aboriginal and Torres Strait Islander Corporations [2014] FCAFC 66 at [17]-[21].

5.3.3    Course of Conduct

150    The Registrar submitted that a number of the acts or omissions of the respondents may properly be grouped into a single course of conduct and that the Court should apply the course of conduct principle in the exercise of its discretion to impose penalties on each of the respondents. The course of conduct analysis varied between the respondents.

5.3.3.1    Ms Murray

151    The Registrar submitted (and I accept) that the acts and omissions of Ms Murray that contravened the CATSI Act share sufficiently overlapping legal and factual elements to be grouped into four courses of conduct:

(1)    From September 2008 to 28 January 2014, a failure to ensure that the Corporation took steps or had systems to comply with:

(a)    The requirements of its Rule Books: para 1(a)(i) of the Declarations;

(b)    The requirement in s 85-15 of the CATSI Act that the Corporation set out its full name and ICN on all invoices it issued: para 1(a)(ii) of the Declarations;

(c)    The financial record keeping requirements in s 322-10(1) and (2) of the CATSI Act: para 1(a)(iii) of the Declarations; and

(d)    The requirement in reg 333-16.01(3) of the Regulations that the Corporation prepare a financial report for the 2012-2013 financial year: para 1(a)(iv) of the Declarations,

in contravention of s 265-1(1) of the CATSI Act and, in relation to the failure to comply with s 322-10(1) and (2), in contravention of s 363-1(1) of the CATSI Act (Reporting and Record Keeping Course of Conduct);

(2)    From 1 July 2009 to 28 January 2014, a failure to ensure that the Corporation took steps to comply with its taxation obligations, in contravention of s 265-1(1) of the CATSI Act: para 3 of Declarations (Taxation Obligations Course of Conduct);

(3)    From September 2008 to 28 January 2014, improper use of her position as a director of the Corporation to gain an advantage for herself or cause a detriment to the Corporation by intermingling the Corporation’s money with money in her control, in contravention of ss 265-1(1) s 265-10(1) of the CATSI Act: para 5 of the Declarations (Money Intermingling Course of Conduct); and

(4)    From 12 September 2008 to 28 January 2014, improper use of her position as a director of the Corporation to gain an advantage for herself or cause a detriment to the Corporation by making withdrawals from the Corporation’s bank account without recording where the withdrawn money was then directed, and retaining a portion of the withdrawn money to pay herself a fee for work she undertook for the Corporation, in contravention of ss 265-1(1) and 265-10(1) of the CATSI Act: para 6 of the Declarations (Money Withdrawal Course of Conduct).

5.3.3.2    Mr Brown and Ms Nichols

152    The Registrar submitted (and I accept) that the acts and omissions of Mr Brown and Ms Nichols that contravened the CATSI Act share sufficiently overlapping legal and factual elements to be grouped into three courses of conduct, namely the Reporting and Record Keeping Course of Conduct (see para 1(a) of the Declarations) and the Taxation Obligations Course of Conduct (see para 3 of the Declarations) in [151(1) and (2)] above and a third course of conduct, namely a failure from September 2008 to 28 January 2014 to put in place policies and practices at the Corporation to control and monitor the activities of Ms Murray in relation to invoicing and money handling practices, in contravention of s 265-1(1) of the CATSI Act: para 7 of the Declarations (Monitoring Course of Conduct).

5.3.3.3    Ms Dickson

153    The Registrar submitted (and I accept) that the acts and omissions of Ms Dickson that contravened the CATSI Act also share sufficiently overlapping legal and factual elements to be grouped into the same three courses of conduct as that identified for Mr Brown and Ms Nichols but in respect of a shorter period, namely July 2010 to 28 January 2014: see paras 2, 4 and 8 of the Declarations.

5.3.4    Principles for determining appropriate penalty for each contravention

5.3.4.1    Consideration of statutory maximum penalties

154    A statutory maximum penalty of $200,000 applies to each contravention: s 386-10(1). Careful attention to maximum penalties will almost always be required – first, because the legislature has legislated for them; second, because they invite comparison between the worst possible case and the case before the court at the time; and third, because in that regard they do provide, taken and balanced with all of the other relevant factors, a yardstick. However it will rarely be appropriate for a court to start with the maximum penalty and proceed by making a proportional deduction from that maximum: Markarian v The Queen (2005) 228 CLR 357 at [31].

155    Application of the “single course of conduct” principle does not convert the maximum penalty for one contravention into the maximum penalty for the course of conduct as a whole: Cahill at [42].

5.3.4.2    Centrality of deterrence

156    The principal purpose of imposing a pecuniary penalty, including in the context of the CATSI Act pecuniary penalty regime, 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: Matcham No 2 at [225].

157    Deterrence, both general and specific, is therefore not one of a number of factors to be considered in determining the appropriate penalty. It is the reason for having regard to such factors in the first place – to assess a penalty of appropriate deterrent value: see Trade Practices Commission v CSR Limited [1991] ATPR 41-076 at 52,152.

158    However, 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: Matcham No 2 at [229].

5.3.4.2.1    General deterrence in this case

159    The imposition of substantial penalties for the contravening conduct in this case will provide a strong incentive to other officers of corporations registered under the CATSI Act to take care to understand and ensure compliance with the requirements of the CATSI Act. This will not only reduce the risks of non-compliance, but will also help other officers have a more “astute” eye to non-compliant conduct and thus enable the more ready detection of other contravening conduct.

160    That is consistent with the views expressed by Jacobson J in Matcham No 2 at [235]-[244], including that:

(1)    The enactment of the civil penalty provisions of the CATSI Act emphasised the need to protect members of corporations registered under the Act from the actions of ‘rogue’ directors and officers;

(2)    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 therefore of utmost importance. Any reduction in voluntary compliance would reduce the effectiveness of the scheme established under the CATSI Act and increase the regulatory burden on the Registrar;

(3)    Non-compliance with the CATSI Act may not be readily detected.

5.3.4.2.2    Specific deterrence in this case

161    The respondents’ acknowledgement of their wrongdoing and ongoing co-operation is to be taken into account as reducing the need for specific deterrence. There are no denials of contraventions, there is remorse and the respondents’ capacity to pay is limited. A disqualification order will be made against each respondent, see Section 5.4 below.

162    The Registrar submitted and I accept that in the present case, as in Matcham No 2, specific deterrence is sufficiently accommodated by the making of the disqualification order: Matcham No 2 at [245].

5.3.4.3    Factors to be taken into account in determining a penalty of appropriate deterrent value

163    Section 386-10 does not prescribe a statutory set of factors to be taken into account in assessing a penalty of appropriate deterrent value.

164    In Matcham No 2, the Court held that it was appropriate, when considering penalties to be imposed under the CATSI Act, to have regard to the ‘French factors’ developed in the context of the pecuniary penalty regime in the Trade Practices Act 1974 (Cth) (TPA) (see TPC v CSR) and commonly applied in relation to a variety of civil penalty regimes: Matcham No 2 at [231]. The Court in Matcham No 2 emphasised that the ‘French factors’ may require modification, and should not be treated as a rigid catalogue: Matcham No 2 at [233].

165    All relevant factors must be considered as part of the process commonly described as ‘instinctive synthesis’. This expression is used to make plain that the Court is called on to reach a single sentence which balances many different and conflicting features: see Markarian at [37]. The Court must weigh all relevant factors in a transparent and reasoned way, rather than starting from a predetermined penalty figure and making incremental additions or subtractions for each separate factor: MT Solar at [72], applying Markarian.

166    In Matcham No 2, the Court held that the regulatory regime and circumstances of the case called for attention to a number of the ‘French factors’ and a further factor identified by Santow J in Re HIH Insurance Ltd (in prov liq) and HIH Casualty and General Insurance Ltd (in prov liq); Australian Securities and Investments Commission v Adler (2002) 42 ACSR 80 (ASIC v Adler) at [126(iv)], namely the consequences of an associated disqualification order.

167    In this proceeding, each of the following will be considered in turn:

(1)    Nature and extent of the contravening conduct and the circumstances in which it took place;

(2)    Loss and harm caused by the contravening conduct

(3)    Circumstances in which the conduct took place, including the degree of dishonesty or carelessness involved in the contravention;

(4)    Relevant matters personal to the contravener, including hardship and capacity to pay;

(5)    Contrition or co-operation with the Registrar; and

(6)    Whether the contravener has engaged in similar conduct in the past;

The consequences of an associated disqualification order will be considered in the context of the totality principle.

5.3.5    Application of the principles for determining an appropriate penalty for each contravention

5.3.5.1    The nature and extent of the contravening conduct and the circumstances in which it took place

168    As directors and officers of the Corporation, each respondent was in a position of significant trust and responsibility. Each respondent breached their position of trust and responsibility over a number of years, by failing to perform even the most basic duties of a director and officer of the Corporation.

169    Mr Brown, Ms Dickson and Ms Nichols appear to have taken no steps whatsoever to monitor the financial position and performance of the Corporation, or to take any steps to monitor the activities or conduct of Ms Murray, the person with direct responsibility for the activities and financial management of the Corporation.

5.3.5.1.1    Reporting and Record Keeping Course of Conduct

170    Each respondent failed, over a number of years, to ensure that the Corporation took steps or had systems in place so that the Corporation complied with multiple requirements of the Rule Books that contained its internal governance requirements: see [127(1)(1)(a)] above. Ms Murray, Mr Brown and Ms Nichols engaged in this conduct in relation to the First and Second Rule Books during the relevant period, and Ms Dickson engaged in this conduct in relation to the Second Rule Book from July 2010 to the end of the relevant period.

171    As a result of this failure:

(1)    The Corporation held no AGMs for the 2009, 2010, 2011, 2012 or 2013 calendar years, despite the requirement in the Second Rule Book that they be held before November each year;

(2)    During the relevant period, the only Committee/directors’ meetings of the Corporation at which the majorities required by the Rule Books were present were held on 29 September and 11 December 2013 (after the Registrar appointed examiners to examine the books and records of the Corporation);

(3)    Throughout the relevant period, the Corporation did not issue receipts for any of the money it received (as required by the Rule Books);

(4)    From 15 June 2009 to 28 January 2014, the Corporation’s accounts were not approved for payment at directors’ meetings (as required by the Second Rule Book);

(5)    Throughout the relevant period, money payable to the Corporation was not always deposited into the Corporation’s bank account, and on at least the dates listed in Schedule 1 to each Statement of Agreed Facts and Admissions, third parties were directed by Ms Murray to pay that money to other individuals or entities. Schedule 1 to each Statement of Agreed Facts and Admissions shows that from 24 July 2009 to 14 January 2014, the Corporation issued invoices requiring payment from third parties to other individuals and entities of a total sum of $225,943.18; and

(6)    The Corporation did not keep its financial records at its document access address (as required by the Rule Books).

172    Each respondent also failed to ensure that the Corporation took steps or had systems in place to ensure that the Corporation complied with the requirement in s 85-15 of the CATSI Act that the Corporation’s name and ICN be used on its invoices. From 15 June 2009 to 28 January 2014, the Corporation issued at least 468 invoices that did not include the full name or ICN of the Corporation.

173    Each respondent also failed, over a number of years, to ensure that the Corporation took steps or had systems in place so that the Corporation complied with the financial record keeping requirements in s 322-10(1) and (2) of the CATSI Act.

174    Ms Murray, as the day to day manager of the Corporation, failed to keep even the most rudimentary of financial records. For example, she failed to keep butts from the cheque book for the Corporation’s bank account, in circumstances where she withdrew at least $929,021.64 from the Corporation’s bank account over the relevant period by way of cheque. Ms Murray also failed to keep receipts for payments received by the Corporation, making it impossible to know how much money the Corporation received over the relevant period. At least $924,111 (much of it in cash) was deposited into the Corporation’s bank account during the relevant period without Ms Murray creating any record of the person or entity that had provided the funds, in a deposit book or elsewhere.

175    The lack of financial records for the Corporation meant that the special administrator appointed by the Registrar to the Corporation was unable to properly identify the source and destination of large amounts of money that had gone into and out of the Corporation’s bank account and did not permit accurate financial reports to be created.

176    The failure to keep the required financial records constitutes a serious contravention of s 363-1(1) of the CATSI Act. For the purposes of the imposition of penalty for this course of conduct, the Registrar submitted, and I accept, that this contravention was the most serious.

177    For the 2012-2013 financial year, each respondent also failed to ensure that the Corporation took steps or had systems in place to comply with the requirement in the Regulations that a financial report be prepared. No report was prepared.

5.3.5.1.2    Taxation Obligations Course of Conduct

178    Each respondent failed to ensure that the Corporation took steps to comply with its taxation obligations, namely, to accurately complete and submit BAS, remit GST and make payments to reduce its debt to the ATO.

179    Despite issuing invoices for services provided on behalf of the Corporation that included GST, for three years, Ms Murray failed to provide the Corporation’s accountant with the necessary information to enable BAS to be filed for the Corporation with the ATO. The Corporation submitted nil returns in BAS for the 2009-2010, 2011-2012 and 2012-2013 financial years and did not pay GST to the ATO in respect of these financial years. As a result of this failure, the Corporation incurred a liability for interest expenses to the ATO totalling $23,023.82. From about October 2008, the Corporation owed a debt to the ATO.

180    Ms Murray negotiated and agreed a payment plan for the payment of this debt and was responsible for making payments under the plan. However, the Corporation stopped complying with the payment plan in the 2010-2011 financial year. The fact that the Corporation failed to meet its taxation obligations is illustrative of the lack of oversight and care shown by each respondent in their role as a director and officer of the Corporation, but is especially significant in relation to Ms Murray, given her additional role as day to day manager of the Corporation.

5.3.5.1.3    Money Intermingling Course of Conduct

181    From at least September 2008, the Corporation provided cultural heritage services to third parties, charging those parties between $500 and $750 per day for the services of cultural heritage workers.

182    Between September 2008 and 28 January 2014, on at least the dates listed in Schedule 2 to each Statement of Agreed Facts and Admissions, Ms Murray issued invoices for cultural heritage services provided on behalf of the Corporation to third parties in which she directed the third party to make payment into the Hawkseye Heritage bank account – a bank account that she controlled and which was not associated with the Corporation.

183    Between July 2009 and 28 January 2014, Ms Murray issued invoices for cultural heritage services supplied on behalf of the Corporation to third parties in which she directed the third party to make payment directly to the cultural heritage worker who had undertaken the work on behalf of the Corporation. Ms Murray directed some of the cultural heritage workers named on the invoices to pay an ‘administration fee’ of between $200 and $250 per day of cultural heritage work payments into bank accounts that she controlled and which were not associated with the Corporation.

184    As a result of these practices:

(1)    Payments totalling $69,740 were made by cultural heritage workers into the Hawkseye Heritage bank account, a bank account controlled by Ms Murray that was not associated with the Corporation, between 26 November 2009 and 10 May 2013; and

(2)    Payments totalling $81,950 were made by a cultural heritage worker into a bank account held in Ms Murray’s name between 1 July 2009 and 26 June 2013.

In this way, the money of the Corporation was intermingled with money controlled by Ms Murray and it was not possible to identify the Corporation’s money with any accuracy. For the purpose of imposing penalty for this course of conduct, the Registrar submitted, and I accept, that the contravention of s 265-10(1) was more serious than the contravention of s 265-(1).

5.3.5.1.4    Money Withdrawal Course of Conduct

185    Between 12 September 2008 and 28 January 2014, Ms Murray withdrew at least $929,021.64 from the Corporation’s bank account by way of cheque. No record of the person to whom the cheques were made out was created. Of this amount, at least $731,380 was withdrawn by way of cash cheques on the occasions identified in Schedule 3 to each Statement of Agreed Facts and Admissions.

186    Ms Murray used some of the money she withdrew from the Corporation’s bank account to pay cultural heritage workers and other expenses associated with the Corporation and to pay herself a fee for the work she undertook for the Corporation. As no record of any such payments was made or kept, it is impossible to know how much of the withdrawn money went to Ms Murray and how much went to the Corporation’s expenses.

187    Ms Murray filed a document entitled ‘Running Costs for the [Corporation] from administration monies’ in which she sought to reconstruct the amounts of the withdrawn money that went to paying various expenses. As the Registrar submitted, the contents of the document are unable to be verified by reference to any contemporaneous records, such as invoices or receipts. I do not accept that the document can be relied upon to establish what in fact happened to the Corporation’s funds. Indeed, during the course of the hearing, Ms Murray herself accepted that the document was inaccurate.

188    Ms Murray had no written authority from the Corporation or from Mr Brown, Ms Dickson or Ms Nichols to pay herself a fee for the work she undertook for the Corporation prior to December 2013. However, during the relevant period, at least Mr Brown was aware that Ms Murray was paying herself a fee for this work, although not the amount of the fee. None of Mr Brown, Ms Dickson or Ms Nichols therefore knew what proportion of the money Ms Murray was withdrawing from the Corporation’s bank account was being used as remuneration for the work she was undertaking and what proportion was being used for the expenses of the Corporation (and Ms Dickson and Ms Nichols may not even have known that Ms Murray was paying herself a fee).

189    For the purpose of imposing penalty for this course of conduct, the Registrar submitted, and I accept, that the contravention of s 265-10(1) was more serious than the contravention of s 265-(1).

5.3.5.1.5    Monitoring Course of Conduct

190    During the relevant period, and from July 2010 to the end of the relevant period, Mr Brown, Ms Dickson and Ms Nichols failed to take steps to put in place policies and practices at the Corporation to control and monitor Ms Murray’s activities in relation to invoicing and money handling practices as described, for example, in Sections 5.3.5.1.3 and 5.3.5.1.4 above.

191    As noted above, Mr Brown, Ms Dickson and Ms Nichols appear to have taken no steps whatsoever to monitor the activities or conduct of Ms Murray, the person with direct responsibility for the activities and financial management of the Corporation.

5.3.5.2    Loss and harm caused by the contravening conduct

192    Given the nature of the invoicing and payment practices, record keeping practices and consequent intermingling of the Corporation’s funds with funds in Ms Murray’s control it is not possible to accurately assess the extent of the damage caused by the majority of the contraventions.

193    However, the parties agree that:

(1)    Between 1 July 2009 and 26 June 2013, at least $151,690 that should have been paid to the Corporation was instead paid into accounts controlled by Ms Murray by cultural heritage workers; and

(2)    Between 12 September 2008 and 28 January 2014, Ms Murray withdrew a total of $731,380 by cash or cash cheque from the Corporation’s bank account without creating any record of the person to whom those funds were provided.

194    When the examiners appointed by the Registrar presented their report to the Registrar on 6 November 2013, they concluded that the financial records of the Corporation were inadequate and that it appeared to be insolvent, despite over $900,000 having been deposited into the Corporation’s bank account during the relevant period.

195    The loss caused by the Taxation Obligations Course of Conduct can however be quantified. The failure to pay GST on time to the ATO led to the Corporation incurring $23,023.82 in interest expenses. After the special administrator was appointed, the ATO agreed to a remission of $15,305.84 of the interest charges, leaving the sum of $7,717.98.

196    Further, the investigation of the contraventions in this matter caused significant diversion of public resources. The contraventions were identified in the course of an examination authorised and paid for by the Commonwealth and addressed through a special administration. The fees and charges of the special administrator were paid by the Registrar and amounted to $60,454.63.

5.3.5.3    Circumstances in which the conduct took place, including the degree of dishonesty or carelessness involved in the contravention

5.3.5.3.1    Ms Murray

197    The Registrar submitted, and I accept, that:

(1)    The Reporting Course of Conduct was reckless, and in all instances except for the failure in relation to the preparation of a financial report, was prolonged;

(2)    The Taxation Obligations Course of Conduct was reckless and prolonged;

(3)    The Money Intermingling Course of Conduct was deliberate and prolonged; and

(4)    The Money Withdrawal Course of Conduct was deliberate and prolonged.

5.3.5.3.2    Other respondents

198    The Registrar submitted and I accept that their conduct in relation to the Reporting Course of Conduct, the Taxation Obligations Course of Conduct, and the Monitoring Course of Conduct was reckless and prolonged. It appears to have been caused by a failure to appreciate their duties as directors and officers of the Corporation and their trust of, and reliance on, Ms Murray as the day to day manager of the Corporation.

5.3.5.4    Relevant matters personal to the contravener, including hardship and capacity to pay

199    The personal position of each respondent has been addressed in Section 3.3 above.

200    The Registrar submitted that while capacity to pay is a relevant consideration, in the context of proceedings under the CATSI Act, it has been given little weight. In support of that submission, the Registrar referred to Matcham No 2, where Jacobson J noted that “a pecuniary penalty would in the ordinary course result in personal hardship and stress to the contravener”, and would have such an effect in that case, but nonetheless said that there was “very little room for any allowance for personal hardship in the circumstances of the present case” at [250]-[254]. At the hearing, Counsel for the Registrar stated that they drew that case to the Court’s attention, “but we do not seek to equate the circumstances of Mr Matcham’s case with the circumstances of this case. It was a very different set of contraventions”.

201    I reject the breadth of the Registrar’s submission. Capacity to pay is a relevant consideration and in the present case, must be given proper (not little) weight. None of the respondents has capacity to pay any significant pecuniary penalty.

5.3.5.5    Contrition or co-operation with the Registrar

202    Co-operation during an investigation and resultant proceedings can be a mitigating factor, which is relevant to the assessment of a penalty of appropriate deterrent value. Co-operation can lead to the freeing up of a regulator’s resources, and reflects a willingness to facilitate the course of justice.

203    Under the CATSI Act, it is important to note that contraventions such as those engaged in by the respondents are often difficult for the Registrar to detect and prove, particularly given that the Registrar relies in part upon accurate financial self-reporting by registered corporations in accordance with the CATSI Act and Regulations.

204    In circumstances involving co-operation and/or contrition, a discount may be applied to the pecuniary penalty that would otherwise be ordered. Here, each respondent has negotiated a statement of agreed facts and has admitted each contravention alleged against them. During the investigation that led to the commencement of these proceedings, each respondent attended at a compulsory interview and each of Mr Brown, Ms Dickson and Ms Nichols made frank admissions to a range of factual allegations.

205    In addition, Ms Murray has expressed remorse and contrition for her actions: see [37] above.

206    In these circumstances, the Registrar submitted that each respondent should be given a significant discount, in the order of a 25-30% reduction on the penalties that would otherwise be appropriate. The Registrar took that reduction into account in the penalties sought as outlined in Section 5.3.5.8 below. Absent this co-operation, the Registrar would have sought correspondingly higher penalties.

5.3.5.6    Whether the contravener has engaged in similar conduct in the past

207    None of the respondents is alleged to have engaged in any relevant conduct prior to the conduct addressed in this proceeding.

5.3.5.7    Penalties imposed For CATSI Act contraventions in other decisions

208    The Registrar provided a table of decisions where this Court has imposed pecuniary penalties for contraventions of the CATSI Act. I have reviewed the table. There are considerable differences between the present case and those cases listed in the table. The penalties imposed in those cases cannot and do not dictate the proper application of the relevant penalty principles to each respondent in this case.

5.3.5.8    Assessing Penalties

209    The Registrar submitted that taking into account all of the relevant factors, penalties in the following amounts and ranges were of appropriate deterrent value:

5.3.5.8.1    Ms Murray

210    For:

(1)    The Reporting and Record Keeping Course of Conduct – a penalty of $25,000;

(2)    The Taxation Obligations Course of Conduct – a penalty of $5,000;

(3)    The Money Intermingling Course of Conduct – a penalty of between $20,000 and $35,000; and

(4)    The Money Withdrawal Course of Conduct – a penalty of between $20,000 and $35,000.

5.3.5.8.2    Mr Brown and Ms Nichols

211    For:

(1)    The Reporting and Record Keeping Course of Conduct – a penalty of $15,000;

(2)    The Taxation Obligations Course of Conduct – a penalty of $2,000; and

(3)    The Monitoring Course of Conduct – a penalty of $15,000.

5.3.5.8.3    Ms Dickson

212    For:

(1)    The Reporting and Record Keeping Course of Conduct – a penalty of $12,000;

(2)    The Taxation Obligations Course of Conduct – a penalty of $2,000; and

(3)    The Monitoring Course of Conduct – a penalty of $12,000.

213    Two matters should be noted. The pecuniary penalties sought in relation to Ms Dickson’s conduct are lower than those sought in relation to Mr Brown and Ms Nichols because Ms Dickson’s period of directorship was shorter than those of Mr Brown and Ms Nichols, commencing in July 2010 rather than July 2007. Second, the Registrar submitted at the hearing (and I accept) that in relation to Mr Brown, Ms Nichols and Ms Dickson, the Reporting and Record Keeping Course of Conduct and the Monitoring Course of Conduct are “very connected”. As the Registrar put it, “[i]f directors’ meetings had been held, then perhaps all of the respondents would have had a greater degree of insight into the way that Ms Murray was operating the day to day management of the corporation”.

5.3.5.9    Application of the totality principle

214    There are separate penalties proposed for each respondent, as well as a disqualification order and, in the case of Ms Murray, a compensation order. All must be and have been considered in the “final check” for totality purposes.

215    Having regard to all the relevant considerations, it is appropriate that there be a reduction in the total penalty to be ordered against each respondent. A larger discount is appropriate for Mr Brown, Ms Dickson and Ms Nichols.

216    The total pecuniary penalty to be imposed on Ms Murray is $25,000. The total pecuniary penalty to be imposed on Mr Brown and Ms Nichols is $10,000 each. The total pecuniary penalty to be imposed on Ms Dickson is $5,000. These penalties are less than those sought by the Registrar. However, in the circumstances of this case, I consider that these final total pecuniary penalties are of appropriate deterrent value.

5.4    Disqualification Orders

5.4.1    Introduction, power and principles

217    The Registrar sought an order under s 279-15(1) of the CATSI Act, disqualifying:

(1)    Ms Murray from managing, or being a director of, any corporation for a period of between 5 and 7.5 years; and

(2)    Mr Brown, Ms Dickson and Ms Nichols from managing, or being a director of, any corporation for a period of 3 years.

218    The Court’s power to make orders disqualifying the respondents from managing Aboriginal and Torres Strait Islander corporations is addressed in [26]-[27] above.

219    The principles developed in relation to ss 206C and 206E of the Corporations Act (often referred to as the ‘Santow principles’) have been held to be apt to guide the exercise of the disqualification power contained in the CATSI Act: Matcham No 2 at [164]. However, as Jacobson J said in Matcham No 2, the Santow principles should not be treated as a rigid catalogue of matters that must be considered in every case, but instead may be applied, as appropriate in each case, so as to inform the exercise of the discretion: at [173].

220    What then are the Santow principles? They were distilled in ASIC v Adler at [56] to include:

(1)    Disqualification orders are designed to protect the public from the harmful use of the corporate structure or from use that is contrary to proper commercial standards.

(2)    Disqualification orders are designed to protect the public by seeking to safeguard the public interest in the transparency and accountability of companies and in the suitability of directors to hold office.

(3)    Protection of the public also envisages protection of individuals that deal with companies, including consumers, creditors, shareholders and investors.

(4)    A disqualification order is protective against present and future misuse of the corporate structure.

(5)    The order has a motive of personal deterrence, though it is not punitive.

(6)    The objects of general deterrence are also sought to be achieved.

(7)    In assessing the fitness of an individual to manage a company, it is necessary that they have an understanding of the proper role of the company director and the duty of due diligence that is owed to the company.

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

(9)    In assessing the appropriate length of prohibition, consideration has been given to the degree of seriousness of the contraventions, the propensity that the defendant may engage in similar conduct in the future and the likely harm that may be caused to the public.

(10)    It is necessary to balance the personal hardship to the defendant against the public interest and the need for protection of the public from any repeat of the conduct.

(11)    A mitigating factor in considering a period of disqualification is the likelihood of the defendant reforming.

(12)    The eight criteria to govern the exercise of the court’s powers of disqualification set out in Commissioner for Corporate Affairs (WA) v Ekamper (1987) 12 ACLR 519 are influential. The criteria were character of the offenders, nature of the breaches, structure of the companies and the nature of their business, interests of shareholders, creditors and employees, risks to others from the continuation of offenders as company directors, honesty and competence of offenders, hardship to offenders and their personal and commercial interests and offenders’ appreciation that future breaches could result in future proceedings.

(13)    Factors which lead to the imposition of the longest periods of disqualification (of 25 years or more), were large financial losses, high propensity that defendants may engage in similar activities or conduct, activities undertaken in fields in which there was potential to do great financial damage, lack of contrition or remorse, disregard for law and compliance with corporate regulations, dishonesty and intent to defraud and previous convictions and contraventions for similar activities.

(14)    In cases in which the period of disqualification ranged from 7 to 12 years, the factors included serious incompetence and irresponsibility, substantial loss, defendants had engaged in deliberate courses of conduct to enrich themselves at others’ expense, but with lesser degrees of dishonesty, continued, knowing and wilful contraventions of the law and disregard for legal obligations and lack of contrition or acceptance of responsibility, but as against that, the prospect that the individual may reform.

(15)    The factors leading to the shortest disqualifications, that is disqualification for up to three years, were although the defendants had personally gained from the conduct, they had endeavoured to repay or partially repay the amounts misappropriated, the defendants had no immediate or discernible future intention to hold a position as manager of a company and the defendant had expressed remorse and contrition, acted on the advice of professionals and had not contested the proceedings.

5.4.2    Ms Murray

221    Applying those principles to Ms Murray, she will be disqualified from managing Aboriginal and Torres Strait Islander corporations for seven years. Ms Murray has admitted to having engaged in a number of contraventions of the CATSI Act. The contraventions are of a serious nature, involving acts that are both deliberate and reckless and which resulted in detriment to the Corporation and personal advantage to Ms Murray.

222    This lengthy period of disqualification will serve to protect the Corporation and other Aboriginal and Torres Strait Islander corporations, as well as corporations generally.

5.4.3    Mr Brown, Ms Dickson and Ms Nichols

223    Applying those principles to Mr Brown, Ms Dickson and Ms Nichols, each will be disqualified from managing Aboriginal and Torres Strait Islander corporations for a period of three years.

224    Each respondent has admitted to multiple contraventions of the CATSI Act arising from a failure to take any steps to monitor the financial position and performance of the Corporation, or to take any steps to monitor the activities or conduct of Ms Murray, the person who they gave direct responsibility for the activities and financial management of the Corporation.

5.5    Compensation Order

225    The Court’s power to make a compensation order is addressed in [24] above.

226    The exercise of the power to order compensation under s 386-15(1) is discretionary, and may be exercised if the jurisdictional requirements are satisfied: see [24] above. Damage will result from the contravention if the evidence establishes a causal connection so that the damage, as a matter of fact, was caused by the contravention. 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): Matcham No 2 at [159]-[160].

227    The Registrar sought an order that Ms Murray compensate the Corporation for damage suffered by the Corporation in the amount of $7,717.98, being the unremitted amount of interest incurred on the Corporation’s tax debt: see [195] above. Both jurisdictional requirements are satisfied in the present case. By incurring this amount of unremitted interest, the Corporation suffered damage, which resulted from Ms Murray’s contraventions.

228    The Registrar submitted that in the present case, there was no reason why anything less than full compensation should be ordered. I agree.

5.6    Final Orders

229    Ms Murray will be disqualified from managing Aboriginal and Torres Strait Islander corporations for seven years and will be ordered to pay a pecuniary penalty of $25,000. Mr Brown and Ms Nichols will each be disqualified from managing Aboriginal and Torres Strait Islander corporations for three years and ordered to pay a pecuniary penalty of $10,000. Ms Dickson will be disqualified from managing Aboriginal and Torres Strait Islander corporations for three years and ordered to pay a pecuniary penalty of $5,000.

230    Following the conclusion of the hearing, the Court asked the Registrar to provide an additional two page submission outlining what amount of costs was sought against each respondent, and whether that amount of costs was to be considered in the context of the imposition of the pecuniary penalty. The Registrar confirmed that he sought an order that the respondents pay the Registrar’s costs of the proceedings as agreed or taxed. However, in light of the evidence that the respondents gave at the hearing about their financial positions, the Registrar was prepared to provide an undertaking to the Court not to take any steps to enforce any costs order made against any of the Respondents without leave of the Court. In this case, there is no reason why costs should not follow the event. The respondents will each be ordered to pay the Registrar’s costs of the proceeding against each of them. However, due to the financial position of each respondent, I will order that the Registrar not enforce those costs orders without the leave of the Court.

Associate:

Dated:    16 April 2015