FEDERAL COURT OF AUSTRALIA

Registrar of Aboriginal and Torres Strait Islander Corporations v Monaghan (No 2) [2016] FCA 1143

ORDERS

THE COURT ORDERS THAT:

First and Second Respondents

1.    From 25 March 2009 to 18 December 2013 (the Relevant Period), the first and second respondents each contravened s 265-1(1) of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) (CATSI Act) by failing to exercise his or her powers and discharge his or her duties as a director or officer of Southside Housing Aboriginal Corporation ICN 2379 (the Corporation) 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 that corporation as, each of the first and second respondents; and

by failing to:

(c)    manage and maintain the properties, previously owned and managed by the Corporation (the Properties), by taking steps to ensure that:

(i)    the Properties were maintained to an adequate physical standard; and

(ii)    the Corporation had sufficient funds to meet all of the costs and expenses in relation to the proper maintenance of the Properties; and

(d)    ensure that the Corporation took steps or had systems to comply with the practices required by its rule books and the CATSI Act and by failing to ensure proper practices were implemented for the management of the Corporation by taking steps to:

(i)    cause an annual general meeting (AGM) to be held by the Corporation (in each of the calendar years ended 2009 and 2012) in accordance with cl 4.1 of the Registrar Initiated Rule Book (which was effective from 22 June 2009);

(ii)    for any AGM of the Corporation that was held in 2009 or 2012, cause to be kept a record of the AGM or minutes of the AGM in accordance with cl 7 of the Registrar Initiated Rule Book;

(iii)    cause the Corporation to hold directors’ meetings at least once every three months in each of the 2009, 2010, 2012 and 2013 calendar years (as required by the Corporation’s rule book) in accordance with cl 5.16 of the Registrar Initiated Rule Book;

(iv)    for any directors’ meetings that were held in each of the 2009, 2010, 2012 and 2013 calendar years, cause to be kept a record of the meeting or minutes of the meetings in accordance with cl 7 of the Registrar Initiated Rule Book and s 220-5(1) of the CATSI Act;

(v)    ensure that the payment of all accounts was approved at directors’ meetings in those meetings held during the Relevant Period in accordance with cl 8 of the Registrar Initiated Rule Book; and

(vi)    cause the Corporation to maintain, or keep at its documents access address, a register of members and former members during the Relevant Period in accordance with cl 3.8 of the Registrar Initiated Rule Book and ss 180-1, 180-5, 180-10, 180-15 and 180-20 of the CATSI Act.

(e)    Formally disclose, in accordance with cl 10 of the Second Rule Book (registered between 31 August 1997 and 22 June 2009), cll 5.11 and 5.12 of the Registrar Initiated Rule Book, and s 265-10 of the CATSI Act, their personal interest in matters at directors’ meetings:

(i)    in respect of the first respondent, held on 23 May 2011, 11 July 2011, 17 October 2011 and 27 February 2012, at which the non-payment of rent or rental arrears by tenants of the Properties, and the non-payment of rent or rental arrears by a relative were discussed;

(ii)    in respect of the second respondent, held on 23 May 2011, 11 July 2011, 17 October 2011 and 27 February 2012, at which the non-payment of rent, rental arrears, and the non-payment of rent or rental arrears by a relative were discussed; and

(iii)    in respect of the second respondent, held on 23 May 2011, 11 July 2011, 17 October 2011, 19 December 2011 and 27 February 2012, at which the debt owing to ACTEW Corporation incurred for excess water usage by tenants of the Properties was discussed.

2.    Throughout the Relevant Period, the first and second respondents each contravened s 265-10(1) of the CATSI Act by improperly using his or her position as a director or officer of the Corporation to:

(a)    gain an advantage for herself and another person; and

(b)    cause detriment to the Corporation,

by failing to:

(c)    cause the Corporation to charge rent for the Properties which was sufficient to meet the costs and expenses associated with the Properties, including but not limited to maintaining the Properties;

(d)    cause the Corporation to take appropriate steps to recover rental arrears and excess water consumption charges;

(e)    cause the Corporation to take appropriate steps to require tenants of the Properties to repair or pay for damage caused to the Properties; and

(f)    formally disclose, in accordance with cl 11 of the Second Rule Book, cll 5.11 and 5.12 of the Registrar Initiated Rule Book, and s 265-10 of the CATSI Act, their personal interest in matters at directors’ meetings.

3.    Throughout the Relevant Period, the first and second respondents each contravened s 363-1(1) of the CATSI Act by failing to take all reasonable steps to ensure the Corporation complied with, or to secure compliance with, its record keeping and reporting requirements under Pts 7-2 and 7-3 of the CATSI Act, by failing to:

(a)    create and keep, or cause the Corporation to create or cause the Corporation to keep for seven years, adequate written financial records of books of account and source records;

(b)    ensure that an organised system of maintaining source business records was used;

(c)    ensure that an organised system of recording all transactions was used, such as registers;

(d)    ensure that bank reconciliations were completed by the Corporation to verify the accuracy of the records kept; and

(e)    ensure that written financial records correctly recorded the Corporation’s transactions and financial position and performance, and would enable true and fair financial reports to be prepared and audited.

Third Respondent

4.    Throughout the period from 25 March 2009 to early 2012, the third respondent contravened s 363-1(1) of the CATSI Act by failing to take all reasonable steps to ensure the Corporation complied with, or to secure compliance with, its record keeping and reporting requirements under Pts 7-2 and 7-3 of the CATSI Act, by failing to:

(a)    create and keep, or cause the Corporation to create or cause the Corporation to keep for seven years, adequate written financial records of books of account and source records;

(b)    ensure that an organised system of maintaining source business records was used;

(c)    ensure that an organised system of recording all transactions was used, such as registers;

(d)    ensure that bank reconciliations were completed by the Corporation to verify the accuracy of the records kept; and

(e)    ensure that written financial records correctly recorded the Corporation’s transactions and financial position and performance, and would enable true and fair financial reports to be prepared and audited.

5.    Pursuant to s 279-15(1) of the CATSI Act, the third respondent be disqualified from managing any Aboriginal and Torres Strait Islander corporation for a period of six months.

6.    Within 14 days hereof, the third respondent must proffer an undertaking to the applicant, which is acceptable to the applicant, to repay to the Corporation any outstanding rent payable by the third respondent in respect of her tenancy at 6 Rolph Place, Gilmore. Such payments may be made by instalments, the amount of which must take into account the third respondent’s current and likely future financial circumstances.

7.    The applicant and the third respondent are to seek to agree costs in the light of these reasons and, if they are unable to reach an agreement, within 14 days hereof each should file and serve an outline of submissions not exceeding three pages in support of their respective positions on costs.

BY CONSENT THE COURT ORDERS THAT:

8.    Pursuant to s 279-15(1) of the CATSI Act, each of the first and second respondents be disqualified from managing any Aboriginal and Torres Strait Islander corporation for a period of five years.

9.    Pursuant to s 386-10(1) of the CATSI Act, each of the first and second respondents pay to the Commonwealth a pecuniary penalty in the amount of $38,500.

10.    Pursuant to s 581-20(2) of the CATSI Act, the first and second respondents pay the applicant’s costs of this proceeding.

11.    The applicant shall not enforce the order in paragraph 10 above without the leave of the Court.

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

REASONS FOR JUDGMENT

GRIFFITHS J:

INTRODUCTION

1    The Registrar of Aboriginal and Torres Strait Islander Corporations (the Registrar) sought declarations, disqualification orders, compensation orders and pecuniary penalties for contraventions of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) (CATSI Act) by three former directors of the Southside Housing Aboriginal Corporation ICN 2379 (the Corporation).

2    The primary objective of the Corporation is to provide affordable alternative housing for Aboriginal people in the inner south Canberra region. The respondents are Mr Fred Monaghan (Mr Monaghan), his estranged wife Ms Teresa Monaghan (Ms Monaghan), and Ms Kim Peters (Ms Peters). As will emerge below, it appears that there were additional directors of the Corporation during some or all of the period to which the relief sought by the Registrar relates, but no relief is sought against those other directors in this proceeding. The relevant period is 25 March 2009 to 18 December 2013 (the Relevant Period). The parties agree that:

(a)    Mr Monaghan was a director and/or officer of the Corporation for the period 2005 until 2009, then for the period 2012 to 2013;

(b)    Ms Monaghan was a director and/or officer of the Corporation for the period 2005 until 28 January 2014; and

(c)    Ms Peters was a director and/or officer of the Corporation for the period 15 December 2005 to early 2012. (It might be interpolated that there is some evidence which suggests that Ms Peters remained a director until late in December 2012, but the Court will act upon the agreed facts).

3    At the commencement of the hearing, Mr de Jersey, who appeared for the Registrar, informed the Court that the Registrar had reached an agreement with Mr and Ms Monaghan concerning relief against them. The Court was subsequently provided with draft proposed orders reflecting this agreement. Counsel for Mr and Ms Monaghan (Mr Pattenden and Ms Bindon respectively) were excused from attending the first day of the hearing, the primary focus of which then shifted to the Registrar’s case against Ms Peters.

4    These reasons for judgment will consider the CATSI Act, the Registrar’s role, a revised statement of agreed facts, the Registrar’s evidence, the respondents’ evidence, the contravening conduct, the contraventions of the CATSI Act and rule books, the applicable legal principles and the relief sought against each respondent. Although it remained a matter for the Court to be satisfied as to the appropriateness of the agreed proposed orders concerning Mr and Ms Monaghan, the balance of these reasons for judgment will primarily focus on general legal principles and contested matters relating to Ms Peters. The evidence relating to Mr and Ms Monaghan’s conduct as directors will also be outlined.

SUMMARY OF THE REGULATORY REGIME

5    The regulatory framework created by the CATSI Act was helpfully summarised by Jacobson J in Registrar of Aboriginal and Torres Strait Islander Corporation v Matcham (No 2) [2014] FCA 27; 97 ACSR 412 (Matcham) at [8]-[29] and by Gordon J in Registrar of Aboriginal and Torres Strait Islander Corporations v Murray [2015] FCA 346 (Murray) at [5]-[27]. The key relevant features of that framework may be outlined as follows.

6    The CATSI Act replaced the Aboriginal Councils and Associations Act 1976 (Cth) (ACA Act). 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. The Revised Explanatory Memorandum to the Corporations (Aboriginal and Torres Strait Islander) Bill 2006 (Cth) 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. The Revised Explanatory Memorandum noted in [1.7] that the Bill “maximises alignment with the [Corporations Act 2001 (Cth)] where practicable, but provides sufficient flexibility to accommodate specific cultural practices and tailoring to reflect the particular needs and circumstances of individual groups”.

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 at [10]. The express 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. By 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. This has some significance in circumstances where, as will emerge shortly, directors only receive remuneration if this is authorised by the constitution of the particular corporation. 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).

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, the minimum number of members required, and the names and powers of such corporations. Section 57-1 records that the rules dealing with internal governance 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.

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

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. Unless the constitution of such a corporation provides otherwise, the directors are not to be paid remuneration (s 252-1(1)).

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 here – 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 imposes a 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).

…

This duty mirrors s 180(1) of the Corporations Act: Matcham at [12].

16    Section 265-10(1) of the CATSI Act relates to the use inter alia of a 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.

This duty mirrors s 182 of the Corporations Act: Matcham at [14].

17    Section 363-1(1), in Ch 7, imposes a duty to take all reasonable steps to comply, 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    Section 322-10 of the CATSI Act (which is in Pt 7.2) 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    As noted above, a failure by a director to take all reasonable steps to comply with, or to secure compliance with, these obligations regarding records and reporting may result in a contravention of s 363-1(1).

20    Chapter 8 of the CATSI Act establishes a civil penalty regime that is based on Pt 9.4B of the Corporations Act: Matcham at [28]. The civil penalty regime was enacted following a review in 2002 of the ACA Act, which highlighted “the need to protect the members of CATSI corporations from the actions of ‘rogue’ directors or officers”: Matcham at [15].

21    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 at [18].

22    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 at [20].

23    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 at [22].

24    The Registrar may apply for a declaration of contravention, a pecuniary penalty order or 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.

25    The discretionary power to order disqualification is 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.

26    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 CATSI Act corporation or Corporations Act corporation and any other matters that the Court considers appropriate.

THE ROLE OF THE REGISTRAR

27    The current Registrar is Mr Anthony Beven. In his affidavit dated 20 March 2015, Mr Beven explained his regulatory role and referred to his 48 full-time equivalent staff and their offices located at premises in Canberra, Perth, Broome, Darwin, Alice Springs, Cairns and Coffs Harbour.

28    Mr Beven described his role as to build the capacity of CATSI Act corporations and their directors through “a number of unique statutory support functions, such as education programs, dispute resolution, research and policy” at [8]. Mr Beven deposed that the resources of his office are limited and he cannot directly oversee the daily governance and internal management of all corporations registered under the CATSI Act.

29    Mr Beven deposed that as at March 2015 there were 2600 such corporations registered and that approximately 60 percent of those corporations were based in remote or very remote areas. He said that nearly all the CATSI Act corporations are not-for-profit organisations, and more than 20 percent are registered charities.

30    Corporations registered under the CATSI Act normally provide important services to their Indigenous communities, including housing services of the type provided by the Corporation. Mr Beven stated that in the financial year 2011-2012 the top 500 corporations registered under the CATSI Act generated a combined income of $1.61 billion (an average income of $3.22 million), and held a combined value of $1.84 billion in assets. While the largest 20 corporations now generate 61 percent of their income from private sources, Mr Beven stated that the majority of these corporations rely almost entirely on government funding to fund their operations and services.

THE STATEMENT OF AGREED FACTS

31    The Registrar and each of the three respondents filed affidavit evidence which will be summarised shortly. The parties were also ultimately able to finalise an agreed statement of facts (the first statement of agreed facts). This occurred in late March 2016, shortly before the proceedings were then scheduled to commence. The proceedings were deferred at that time because of personal circumstances relating to Mr and Ms Monaghan.

32    As noted above, at the commencement of the hearing the Court was advised that the Registrar had reached an agreement with Mr and Ms Monaghan as to the proposed relief against them, which also involved some amendments to the first statement of agreed facts relating to them (the revised statement of agreed facts). No such agreement was reached with Ms Peters. The amendments, which only apply to Mr and Ms Monaghan, are to be found in [140] and [157] to [169] below.

33    The substance of the revised statement of agreed facts is set out below in [37] to [169].

34    The Registrar was appointed pursuant to s 653-1 of the CATSI Act.

35    The Registrar is entitled to commence these proceedings and seek relief pursuant to ss 279-15, 386-1 and 386-20 of the CATSI Act.

36    The Registrar is assisted in undertaking his or her functions under the CATSI Act by staff of the Office of the Registrar of Aboriginal and Torres Strait Islander Corporations (ORIC) pursuant to s 1-30 of the CATSI Act.

Southside Housing Aboriginal Corporation

37    At all times during the period from 25 March 2009 to 18 December 2013 the Corporation was registered on 5 May 1995 under the ACA Act and was allocated Indigenous Corporation Number (ICN) 2379.

38    The Corporation transitioned to registration under the CATSI Act on 1 July 2007, pursuant to Sch 3, item 1(1) of the Corporations (Aboriginal and Torres Strait Islander) Consequential, Transitional and Other Measures Act 2006 (Cth).

39    The Corporation was a small not-for-profit corporation owned and controlled by Aboriginal people in the Australian Capital Territory (ACT). It was established to provide affordable housing to Aboriginal people in the ACT.

40    The Corporation was deregistered on 7 April 2015 (I interpolate that it was subsequently reregistered).

The Corporation's rules

41    At all relevant times the Corporation had a rule book or constitution which contained its internal governance rules and objectives.

42    On 5 May 1995, the Corporation's first rule book was registered by the then Registrar of Aboriginal Corporations under the ACA Act (the First Rule Book).

43    On 31 August 1997, a second rule book was registered by the then Registrar of Aboriginal Corporations under the ACA Act (the Second Rule Book).

44    The Corporation's Second Rule Book states (at 6) that the objects for which the (then) Association was established are:

… to provide affordable alternative housing for Aboriginals within the Canberra and Australian Capital Territory area.

45    The Corporation's Second Rule Book also states (at 9.(13)) that:

The Committee shall manage and control the affairs of the Association in accordance with these rules and with the Act and for that purpose may exercise the powers of the Association as if they had been expressly conferred on the Committee by a general meeting of the Association.

46    The Corporation's Second Rule Book also states (at 10.(1)) that:

Any person on the Committee must disclose any interest in a contract or arrangement, or proposed contract or arrangement with the Association at a meeting of the Committee and a record of such disclosure shall be made in the minutes of that meeting,

and further (at 10.(2)) that:

A person on the Committee who has disclosed an interest may not vote on the Committee on any motion relating to the contract or proposed contract or arrangement.

47    The Corporation's Second Rule Book states (at 11) that:

Each person who is on the governing committee:

(a)    has a duty to act in that position with honesty, diligence and reasonable care, and

(b)    shall not make improper use of information or opportunities received through that position.

48    On 22 June 2009, a Registrar initiated rule book for the Corporation was registered (the Registrar Initiated Rule Book). A 'Registrar initiated rule book' is a generic set of rules registered for a corporation by the Registrar under the CATSI Act, where that corporation had failed to draft and register its own within two years of the commencement of the CATSI Act on 1 July 2007.

49    The Corporation's Registrar Initiated Rule Book states the duties of directors at cl 5.11 as:

(a)    a duty of care and diligence;

(b)    a duty of good faith;

(c)    a duty to disclose a conflict of interest (material personal interest);

(d)    a duty not to improperly use position or information; and

(e)    a duty not to trade while insolvent.

50    Clause 5.11 further states that: “[t]he business of the corporation is to be managed by or under the direction of directors.”

51    Clause 5.12 details the actions required of a director who has a material personal interest in a matter:

5.12 Conflict of interest (Material personal interest)

A director who has a material personal interest in a corporation matter must tell the other directors.

This notice must give details of what the interest is and how it relates to the corporation. It must be given at a directors' meeting as soon as possible, and it must be recorded in the minutes of the meeting.

A director who has a material personal interest must not:

•    Be present at the directors' meeting while the matter in question is being considered;

•    Vote on the matter in question

unless allowed to do so under the CATSI Act.

52    Clause 14.4 requires the Corporation to keep written financial records that correctly record and explain its transactions, financial position and performance.

Purchase of the Properties

53    Between 27 July 1999 and May 2001, the Corporation was allocated funds by the Aboriginal and Torres Strait Islander Commission (ATSIC) under the Community Housing & Infrastructure Program. It purchased seven residential properties in the southern area of Canberra, being the properties situated at the following addresses in the ACT:

(a)    7 Leakey Place, Richardson;

(b)    1 Lamb Place, Chifley;

(c)    8 Bosworth Circuit, Kambah;

(d)    26 Degraves Street, Wanniassa;

(e)    118 Chippindall Circuit, Theodore;

(f)    6 MacQueen Place, Charnwood; and

(g)    6 Rolph Place, Gilmore,

(together, the Properties).

54    The ATSIC funding was provided under a purposes agreement for each of the Properties. ATSIC registered caveats on the titles of the Properties that prevented them from being sold.

55    In 2005 ATSIC was abolished and its functions, assets and obligations were assumed by the Commonwealth agency with responsibility for Indigenous affairs. In late 2013 departmental responsibility for Indigenous affairs, including the purposes agreements with the Corporation and the caveats lodged on the titles of the Properties, was transferred to the Department of Prime Minister and Cabinet as a result of machinery of government changes.

Renting the Properties

56    The Corporation rented the Properties to Aboriginal people.

57    Each of the respondents occupied one or more of the Properties for the following periods:

(a)    Mr Monaghan, at various times lived in the premises at 6 MacQueen Place, Charnwood and/or 7 Leakey Place, Richardson;

(b)    from at least around 2000 Ms Monaghan was, and remains, a tenant of the property situated at 7 Leakey Place, Richardson; and

(c)    Ms Peters was a tenant of the property situated at 6 Rolph Place, Gilmore, from around 2000 until March 2011 but continued to pay rent until October 2012.

58    The Corporation's only source of income was rental payments made by the tenants of the Properties.

59    The rental payable in respect of each of the Properties was:

(a)    in 2008, $270.00 per fortnight; and

(b)    from at least 22 June 2010, $320.00 per fortnight.

60    As at 30 January 2013 tenants of the Properties were responsible for paying for excess water and sewerage charges incurred in respect of the Properties.

Laurrie Scheele Real Estate

61    In 1999 Laurrie Scheele Real Estate (LSRE) took on the management of the Properties.

62    LSRE had no role in the selection of tenants for the Properties, and the names of tenants would be provided to LSRE by the Corporation.

63    LSRE provided monthly statements of rental income which commonly showed some rentals to be unpaid, leaving very little money for the maintenance of the Properties.

64    LSRE advised the Corporation about any maintenance works required, but there were seldom funds available for maintenance. Over time, the wear and tear created a greater demand for maintenance and the difference between rental payments and costs and capital required for maintenance expanded.

65    The Corporation did not terminate tenancies for non-payment of rent or for property damage by tenants.

The First Examination

66    In July and August 2004, the Corporation was examined under the ACA Act by examiners from ORIC's predecessor agency (the First Examination).

67    On 14 September 2004, following the First Examination, an examiner's report was prepared.

68    The examiner's report, amongst other things, reported that the Corporation had contravened the ACA Act and its own rules by failing to:

    have a duly elected governing committee in place since 2000;

    file mandatory annual returns for each of the financial years ending 30 June 2000, 2001, 2002 and 2003;

    maintain a current list of members;

    conduct an annual general meeting since 30 June 2000;

    maintain accounting records;

    take out insurance cover for the Properties prior to 7 September 2004; and

    produce financial records sufficient to establish its financial position.

69    On 21 September 2004, pursuant to s 71 of the ACA Act, the Corporation was asked to show cause why it should not be placed under administration.

70    On 30 September 2004, Mr Monaghan sent an email to ORIC stating that the Corporation's “governing committee” had resolved at a meeting on 7 September 2004 to accept the appointment of an administrator. The email listed the members of the “governing committee” present as: Mr Monaghan, Wayne Williams, Neville Williams, Ms Monaghan, Ernie Johnson, Alice Conners (sic), Ray Barrett, Nada Drazevich and Enid Freeman.

The First Administration

71    On 15 November 2004, Frank Lo Pilato (Mr Lo Pilato) of RSM Bird Cameron was appointed as special administrator of the Corporation by the then Registrar. The administration was for an initial period of 3 months, but was subsequently extended until 20 January 2006, after which control of the Corporation was returned to its members (the First Administration).

72    During the course of the First Administration, Mr Lo Pilato ascertained that the Corporation had not prepared any of the required financial statements since the 1998-99 financial year.

73    Mr Lo Pilato also found minimal information to show the Corporation had in place internal controls regarding expenditure relating to and the management of the Properties.

74    The Corporation had not been preparing and lodging Business Activity Statements (BAS) with the Australian Tax Office (ATO), and had accrued outstanding tax liabilities of $42,000.

75    The following persons were living in the Properties at the time of the First Administration, and all were up to date with rental payments:

76    Mr Lo Pilato took the following actions during the course of the First Administration:

(a)    advised members by letter that for the Corporation to function effectively it must have a pro-active membership base that is willing to participate in and contribute to the Corporation, and a motivated and participative governing committee dedicated to the success of the Corporation and the achievement of its objectives;

(b)    held negotiations with parties interested in taking over the Corporation's Properties;

(c)    completed and submitted BASs on a monthly basis to quantify the Corporation's ATO debt;

(d)    considered options for the repayment of the ATO debt, including the possibility of selling a house;

(e)    liaised with ATO staff in relation to the repayment of its ATO debt, and arranged for the Corporation to enter a payment arrangement and secure the remission of interest charges; and

(f)    held a special general meeting of members on 15 December 2005 to elect a new governing committee and provide an update on the progress of the special administration, including the payment proposal entered into with the ATO.

77    The members of the Corporation's governing committee elected on 15 December 2005 were:

(a)    Ms Peters (Chairperson);

(b)    Brendan Richards (Secretary);

(c)    Coral King (Public Officer);

(d)    Kristie Peters (Treasurer); and

(e)    Ms Monaghan.

78    At the completion of the First Administration, Mr Lo Pilato reported in relation to the Corporation that:

(a)    its trust account balance was $4,112.88;

(b)    its property at Chifley required repairs estimated to cost $8,125.70;

(c)    its property at Wanniassa required repairs estimated to cost $6,364;

(d)    its BAS for December 2005 had been submitted; and

(e)    it had reached an agreement with the ATO to repay the outstanding liability of $42,000.

LSRE communications with directors regarding rental arrears and maintenance

79    Between February 2008 and January 2010, LSRE sent a number of letters to the Corporation via Ms Peters and Ms Monaghan, informing the Corporation that:

(a)    there were significant rental arrears for tenants of a number of the Properties;

(b)    there was excessive water consumption at all of the Properties and the usual practice was that tenants were responsible for excess water rates;

(c)    there were issues with the condition of the properties situated at 6 MacQueen Place, Charnwood and 1 Lamb Place, Chifley, ACT, and a fire had caused damage to another one of the Properties;

(d)    internal inspections could not be conducted in respect of the properties situated at 1 Lamb Place, Chifley and 26 Degraves Street, Wanniassa, ACT but that a drive by assessment suggested that those properties were in “… a very poor state”; and

(e)    several letters had been received from the Tenants’ Union relating to the condition of 8 Bosworth Circuit, Kambah, ACT.

80    Laurrie Scheele, the principal of LSRE, states that LSRE undertook the management of the Properties for a period of time largely on a pro bono basis. However, throughout the period of LSRE's management of the Properties, the Corporation did not follow LSRE's recommendations in relation to dealing with rental arrears, maintenance and water charges in respect of the Properties.

81    On 5 January 2010, LSRE sent to members of the Corporation a proposed agenda for the annual general meeting of the Corporation scheduled for 28 January 2010. The agenda items listed included “Rent Arrears”, “Water Consumption”, “Rental Increases”, “Maintenance done by tenants” and “SHAC to self-manage the properties”.

82    On 21 January 2010, LSRE wrote to Ms Monaghan and Ms Peters informing them that LSRE would no longer manage the Properties for the reasons set out in that letter.

Proposed deregistration

83    On 9 April 2010, the Registrar published in the Commonwealth of Australia Gazette a notice of proposed deregistration for the Corporation, as the Corporation had failed to lodge a general report with the Registrar as required under the CATSI Act.

84    On 8 June 2010, the Corporation lodged its general report for the 2008-09 financial year. The general report was signed by Ms Monaghan as contact person for the Corporation, and listed the directors as:

(a)    Ms Enid Freeman of Chippedale (sic) Circuit, Theodore, ACT 2905;

(b)    Mr Fred Monaghan of 6 McQueen Street, Charnwood, ACT 2615;

(c)    Ms Alice Connors of 8 Bosworth Circuit, Kambah, ACT 2902; and

(d)    Ms Teresa Monaghan of 7 Leakey Place, Richardson, ACT 2905.

85    The general report also stated that the Corporation's income was $36,000, its expenditure was $32,000 and the value of its non-current assets was $1,163,000. The general report was accepted for lodgement by the Registrar and the proposed deregistration did not proceed.

Payment of water and sewerage accounts (2010-11)

86    On 10 February 2011, the Corporation paid water and sewerage accounts for the Properties totalling $13,192.

Engagement of consultant

87    On 25 September 2012, the Corporation entered into a service agreement with Patrick Lock (Mr Lock), who had experience with Indigenous housing co-operatives and had been a Director of Aboriginal Housing New South Wales. Mr Lock worked as a consultant for the Corporation for 2 to 3 months.

88    Mr Lock is related to Mr Monaghan, Ms Monaghan and Alice Connors. He realised that the composition of the Corporation's Board presented potential conflicts of interest and he told the directors that there should be an independent committee running the Corporation.

89    When he commenced working for the Corporation, Mr Lock was provided with very limited books and records relating to the affairs of the Corporation. He could not locate any of the following documents among the Corporation's books and records:

(a)    the rule book;

(b)    a members list;

(c)    leases for the Properties;

(d)    a record of the names of the tenants and details of rental payments;

(e)    a waiting list of people requiring houses; or

(f)    insurance documents in respect of Properties.

90    Mr Lock also noted that there was no central place to receive the Corporation's mail, and suspected that mail was going missing as a result.

91    In December 2012, Mr Lock was elected chairperson of the Corporation at a members' meeting.

Payment of water and sewerage accounts (2011-12)

92    Mr Lock became aware that there were bad leaks in the plumbing for most, if not all of the Properties, which resulted in high water rates. In June 2012, the Corporation paid $16,096 in water rates for the Properties.

93    Mr Lock also became aware that the Corporation had a shortfall in funds to pay for maintenance in respect of the Properties. Mr Lock made priorities of keeping the water and sewerage connected, and finding money for urgent maintenance.

94    On 14 September 2013, Mr Lock resigned from the Corporation.

ACT Civil and Administrative Tribunal proceedings against the Corporation

95    In August 2011, Alice Connors (a tenant of the property situated at 8 Bosworth Circuit, Kambah (the Kambah property) and the Corporation's secretary) asked her niece, Kia Connors, if she would like to rent the Kambah property. Alice Connors moved out of the Kambah property shortly afterwards, and Kia Connors, her partner and five children moved in.

96    After moving into the Kambah property Kia Connors approached a director of the Corporation, Ms Monaghan, and asked for the Corporation to undertake repairs and maintenance to the Kambah property.

97    Between August 2011 and June 2012, Kia Connors made repeated requests to Ms Monaghan for the Corporation to undertake repairs and maintenance to the Kambah property.

98    In 2012, Kia Connors obtained assistance through the Welfare Rights and Legal Centre Limited. On 6 June 2012, the Welfare Rights and Legal Centre Limited sent to the Corporation a notice to remedy defects at the Kambah property.

99    By March 2013, the Corporation had not complied with the notice to remedy and Kia Connors obtained legal representation from Ashurst lawyers. On 12 March 2013, Ashurst sent a further notice to remedy to the Corporation.

100    In August 2013, Kia Connors commenced an action against the Corporation in the ACT Civil and Administrative Tribunal (ACAT).

101    On 9 December 2013, Kia Connors obtained judgement in ACAT against the Corporation in the amount of $16,000.

Request for assistance to FaHCSIA and ACT Housing and Community Services Division)

102    On 17 January 2013, Darren Williams (Mr Williams) sent an email to an adviser to the ACT Minister for Housing, Shane Rattenbury, expressing his concern about the condition of the Corporation's Properties. Minister Rattenbury asked his department, the ACT’s Department of Housing and Community Services (HACS) to inquire into the condition of the Properties.

103    In early 2013, Mr Williams attended a series of informal meetings with HACS staff. One meeting was attended by a person identified as a board member (director) of the Corporation.

104    On 8 March 2013, Mr Williams sent an email to the Executive Director of the ACT Community Services Directorate advising that he had taken on the role of public officer for the Corporation. Mr Williams further stated that he and the Corporation's chairman had approached FaHCSIA (the former Commonwealth Department of Families, Housing, Community Services and Indigenous Affairs, which is now part of the Department of Prime Minister and Cabinet) requesting urgent funding to repair the Properties, but the request had been declined.

105    On 14 May 2013, staff from FaHCSIA's Indigenous Housing Delivery Branch met with Mr Lock, Mr Monaghan, Ms Monaghan and Dezi Connors to see if FaHCSIA could assist with financing the costs of maintaining the Properties. While FaHCSIA provided some information about managing the Properties, it did not provide any financial assistance to the Corporation to meet the costs of undertaking urgent maintenance works in respect of the Properties.

Inspections and urgent repairs by Housing ACT

106    On 15 March 2013, the ACT’s Department of Disability, Housing and Community Services (Housing ACT) conducted an inspection of the Corporation's property situated at 1 Lamb Place, Chifley, ACT (the Chifley property) and prepared a report.

107    On 18 March 2013, Housing ACT carried out urgent works costing $5,720.69 to make the Chifley property safe. The urgent works included electrical works, securing doors, isolation of a stove which would not turn off, replacement of tap washers, the clean-up of surface raw sewerage and the jet cleaning of sewer lines.

108    In the following week, Housing ACT carried out inspections of the remaining Properties and prepared condition reports.

109    Mr Williams also provided ACT Housing with an estimation of the cost of urgent repairs to the remaining Properties, which totalled $326,400.

110    On 18 June 2013, Housing ACT relocated the family occupying the Kambah property to ACT Government public housing because the Kambah property was considered uninhabitable.

The Second Examination

111    On 18 June 2013, the Registrar authorised an examination of the Corporation under s 453-1 of the CATSI Act (the Second Examination).

112    On 24 June 2013, Mr Williams delivered the Corporation's books and records to the ORIC office in Woden. The books and records were contained in a cardboard box.

113    Due to the state of the Corporation's books and records, the examiners had to reconstruct its financial records using bank statements.

114    The examiners identified that rent had not been paid by all of the tenants of the Properties.

115    The examiners reported that the Corporation had breached the CATSI Act and its Registrar Initiated Rule Book, by:

    not maintaining membership records, in particular a register of members and former members;

    not maintaining accurate, signed minutes of meetings;

    failing to provide supporting documentation for financial expenditures;

    making financial reimbursements to members and tenants without supporting documentation;

    providing benefits to related parties without following the proper approval process;

    not reporting officer changes to the Registrar within 28 days of the changes;

    not appointing the contact person by resolution at a directors' meeting; and

    the directors not declaring material personal interests.

116    In addition, the examiners reported that they could not determine that:

    an annual general meeting had been held in each financial year since 1 July 2011;

    regular directors' meetings had been held since 1 July 2011;

    all Corporation payments had been authorised by resolution at a directors' meeting;

    proper financial and administrative records had been maintained by the Corporation; or

    the Corporation had maintained financial and administrative records for the past seven years.

117    On 26 June 2013, the examiners held an exit meeting with Mr Lock, Mr Monaghan (a director of the Corporation whom Mr Lock introduced as the “Chairperson”), and Mr Williams. The meeting was held at the Corporation's registered document access address in Queanbeyan. Mr Monaghan provided no responses to any matters raised during the exit meeting of the examination and no other directors of the Corporation attended the exit meeting of the examination.

118    On 13 August 2013, the Corporation and its directors were served with a compliance notice under s 439-20 of the CATSI Act (the Compliance Notice) by the Registrar, listing irregularities in the affairs of the Corporation as reported by the examiners. The Compliance Notice listed actions that the Corporation and its directors needed to take to rectify the irregularities and a timeframe to complete the actions.

119    On 26 September 2013, the directors requested, via an email from Mr Lock, an extension of time to comply with the Compliance Notice. Mr Lock also advised that he had resigned from the Corporation, and that a subsequent directors' meeting had appointed Mr Monaghan as Chairperson of the Corporation.

120    In October 2013, the Corporation was granted an extension of time but failed to address the actions in the timeframes listed in the letter granting an extension of time to comply with the Compliance Notice.

121    On 28 November 2013, the Registrar issued to the Corporation and its directors a notice under s 487-10 of the CATSI Act to show cause (the Show Cause Notice) by 13 December 2013 as to why the Corporation should not be placed under special administration. The Corporation did not respond to the Show Cause Notice.

122    On 29 November 2013, Mr Williams advised the Registrar by email that he had resigned as contact person for the Corporation. The email stated that Mr Monaghan was the Corporation's Chairperson.

The Second Administration

123    The Corporation was placed into special administration by the Registrar effective from 18 December 2013. Mr Lo Pilato and Tony Grieves (Mr Grieves) were appointed as joint and several special administrators (special administrators).

124    Following their appointment, the special administrators had various conversations with Mr Monaghan, Ms Monaghan and Alice Connors, who informed the special administrators that they were the only active directors.

125    On 20 December 2013, Mr Lo Pilato reported to the Registrar that, despite urgent requests, the directors of the Corporation had informed the special administrators that they were unavailable to meet with them until 6 January 2014.

126    In January 2014, the special administrators engaged Colin McIntyre (Mr McIntyre) of Ray White Real Estate Tuggeranong (Ray White). Mr McIntyre conducted external appraisals of the Properties and assessed them to be in poor to average condition, with most requiring repairs, renovations or cleaning up.

127    Mr McIntyre completed written condition reports and sales appraisals for each of the Properties.

128    The special administrators independently confirmed the persons living at the Properties as at the time of their appointment as follows:

129    The special administrators noted that Mr Monaghan, Ms Monaghan and Ms Connors were all directors of the Corporation.

130    Mr Lo Pilato confirmed that only five of the seven Properties were habitable, and as of 26 February 2014 an amount of $26,050 in rental arrears was owed in relation to two of the Properties, being the properties situated at 6 Rolph Place, Gilmore and the 6 MacQueen Place, Charnwood.

131    The special administrators' staff inspected the property situated at 6 MacQueen Street, Charnwood, and concluded that it too was in need of urgent repairs and maintenance.

132    The special administrators received two quotes from Housing ACT to bring the Properties up to a standard acceptable to Housing ACT. One quote was in the amount of $326,400 and the other quote was in the amount of $420,051.56.

133    In April 2014, the special administrators released their first report to members of the Corporation, which outlined the following:

(a)    the Corporation was not in a good financial position;

(b)    it was estimated that the Corporation was owed at least $26,050 in outstanding rent; and

(c)    the Corporation had $42,052 in outstanding liabilities for:

    water rates ($22,176);

    ACT government rates ($3,746); and

    damages awarded against the Corporation resulting from legal proceedings commenced against it by a tenant (the ACAT proceedings).

134    On 1 May 2014, at the request of the special administrators, Ray White provided written sales proposals for the Kambah property and the Chifley property.

135    On 15 May 2014, the special administrators listed the Chifley property for sale.

136    Ray White subsequently conducted a full inspection of the Chifley property and reported that "the condition of the house was one of the worst I have seen in my career" and "the property was not habitable".

137    On 23 August 2014, the Chifley property was sold at auction for an amount of $528,000. In December 2014, the special administrators released their final report to the members of the Corporation, which informed members that:

(a)    the Corporation was no longer viable;

(b)    the remaining properties of the Corporation had been transferred to Housing ACT on 17 December 2014;

(c)    the residual of funds from the sale of the Chifley property had been transferred to Housing ACT to pay for the costs of repairs to the remaining Properties;

(d)    the special administration would end on 23 January 2015; and

(e)    the administrators would recommend to the Registrar that the Corporation be deregistered.

The Respondents

Directors and/or officers of the Corporation

138    Mr Monaghan was a director and/or officer of the Corporation for the period 2005 until 2009, then for the period 2012 to 2013.

139    Ms Monaghan was a director and/or officer of the Corporation for the period 2005 until 28 January 2014.

140    Consistent with s 252-1 of the CATSI Act and cl 5.13 of the Registrar Initiated Rule Book, Mr Monaghan, Ms Monaghan and Ms Peters’ did not receive any remuneration from the Corporation as directors and/or officers of the Corporation and performed those roles on a voluntary basis.

141    Ms Peters was a director and/or officer of the Corporation for the period 15 December 2005 to early 2012 (see [2(c)] above).

142    General Reports lodged by the Corporation in each of the last four completed financial years (2010, 2011, 2012, and 2013) list Mr Monaghan, Ms Monaghan, Ms Peters and Alice Connors as being directors of the Corporation, and list each of their residential addresses as being one of the Properties.

Respondents’ Occupation and Tenancy of the Corporation’s Properties - rental and other charges

143    Mr Monaghan, at various times, lived in the following premises with the tenant of:

(a)    6 MacQueen Place, Charnwood; and/or

(b)    7 Leakey Place, Richardson.

144    From at least 22 June 2010 until at least 26 September 2013, Mr Monaghan, whilst not a tenant or obliged to pay rent, did contribute towards payment of rent for either the property situated at 6 MacQueen Place, Charnwood or the property situated at 7 Leakey Place, Richardson.

145    The total water and sewerage charges incurred in respect of those properties for the period 31 March 2007 to 7 March 2014 were:

(a)    6 MacQueen Place, Charnwood - $3,938.44 (charges); $1,517.92 (usage); $81.51 (interest); and

(b)    7 Leakey Place, Richardson - $3,573.49 (charges); $14,714.15 (usage); $371.16 (interest).

146    Mr Monaghan did not pay any amount, to the Corporation as payment for water and/or sewerage charges incurred in respect of the property situated at 7 Leakey Place, Richardson, or the property situated at 6 MacQueen Place, Charnwood.

147    During the Relevant Period Mr Monaghan:

(a)    was employed full-time as a youth worker with Gugan Gulwan Youth Aboriginal Corporation; and

(b)    was a member of a number of ACT Government committees and boards, including the ACT Aboriginal and Torres Strait Islander Elected Body.

148    Ms Monaghan was a tenant, licensee to occupy or resident of the property situated at 7 Leakey Place, Richardson from at least around 2000 and is currently a tenant at the property.

149    From at least 22 June 2010 until at least 26 September 2013, Ms Monaghan paid the following amounts for rental in respect of the property situated at 7 Leakey Place, Richardson, on or about the following dates:

(a)    4 May 2012 - $299.01;

(b)    18 May 2012 - $299.01;

(c)    10 August 2012 - $299.01;

(d)    7 September 2012 - $299.01;

(e)    5 October 2012 - $299.01;

(f)    19 October 2012 - $299.01;

(g)    14 December 2012 - $299.01;

(h)    5 April 2013 - $299.01;

(i)    3 May 2013 - $299.01;

(j)    17 May 2013 - $299.01;

(k)    31 May 2013 - $299.01;

(l)    14 June 2013 - $299.01;

(m)    28 June 2013 - $299.01;

(n)    26 July 2013 - $299.01;

(o)    9 August 2013 - $299.01;

(p)    6 September 2013 - $299.01; and

(q)    20 September 2013 - $299.01.

150    The total water and sewerage charges incurred in respect of the property situated at 7 Leakey Place, Richardson for the period 31 March 2007 to 7 March 2014 were $3,573.49 (charges); $14,714.15 (usage); $371.16 (interest).

151    Ms Monaghan did not pay any amount, to the Corporation or any other party, as payment for water and/or sewerage charges incurred in respect of the property situated at 7 Leakey Place, Richardson.

152    Ms Peters was a tenant of the property situated at 6 Rolph Place, Gilmore, from around 2000 until 17 October 2012.

153    From at least 22 June 2010 until at least 26 September 2013, Ms Peters paid the following amounts only for rental in respect of the property situated at 6 Rolph Place, Gilmore, on or about the following dates:

(a)    22 June 2010 - $320;

(b)    6 July 2010 - $320;

(c)    19 July 2010 - $320;

(d)    2 August 2010 - $320;

(e)    17 August 2010 - $320;

(f)    31 August 2010 - $320;

(g)    14 September 2010 - $320;

(h)    27 September 2010 - $320;

(i)    11 October 2010 - $320;

(j)    25 October 2010 - $320;

(k)    8 November 2010 - $320;

(l)    23 November 2010 - $320;

(m)    7 December 2010 - $320;

(n)    17 January 2011 - $320;

(o)    31 January 2011 - $320;

(p)    14 February 201 - $320;

(q)    1 March 2011 - $320;

(r)    11 March 2011 - $320;

(s)    4 April 2011 - $320;

(t)    14 April 2011 - $320;

(u)    27 April 2011 - $320;

(v)    9 May 2011 - $320;

(w)    23 May 2011 - $320;

(x)    2 November 2011 - $319.01;

(y)    30 November 2011 - $319.01;

(z)    11 January 2012 - $319.01;

(aa)    25 January 2012 - $319.01;

(ab)    8 February 2012 - $319.01;

(ac)    22 February 2012 - $319.01;

(ad)    7 March 2012 - $319.01;

(ae)    21 March 2012 - $319.01;

(af)    4 April 2012 - $319.01;

(ag)    2 May 2012 - $319.01;

(ah)    16 May 2012 - $319.01;

(ai)    8 August 2012 - $319.01;

(aj)    5 September 2012 - $319.01;

(ak)    3 October 2012 - $319.01; and

(al)    17 October 2012 - $319.01.

154    The total water and sewerage charges incurred in respect of the property situated at 6 Rolph Place, Gilmore for the period 31 March 2007 to 30 September 2012 were $978.22 (charges); $1,892.05 (usage); $92.45 (interest).

155    Ms Peters did not pay any amount, to the Corporation or any other party, as payment for water and/or sewerage charges incurred in respect of the property situated at 6 Rolph Place, Gilmore.

156    From at least February 2010 until June 2011 Ms Peters was employed full-time with Lowana Youth Services Incorporated.

The First and Second Respondents’ duties

157    As directors and/or officers of the Corporation, Mr and Ms Monaghan owed duties to the Corporation, including:

(a)    to exercise their powers and to discharge their duties as a director and/or officer in accordance with ss 265-1 and 265-10 of the CATSI Act and, until 22 June 2009, cl 11 of the Second Rule Book, and from 22 June 2009, cl 5.11 of the Registrar Initiated Rule Book; and

(b)    to take all reasonable steps to comply with the record keeping and reporting requirements set out in Pts 7-2 and 7-3 of the CATSI Act in accordance with s 363-1 of the CATSI Act and, until 22 June 2009, cl 21 of the Second Rule Book, and from 22 June 2009, cl 7 of the Registrar Initiated Rule Book.

158    The Registrar maintains that Ms Peters owed the same duties to the Corporation as set out at [157]; however, Ms Peters has not admitted this.

Conduct of the First and Second Respondents

159    During the Relevant Period, for the periods Mr and Ms Monaghan were directors and/or officers of the Corporation, they:

(a)    were aware that rental from the properties owned by the Corporation was the only income stream for the Corporation, and therefore the only source of funds available to meet repairs and other costs of the Properties;

(b)    allowed tenants of the Properties, including at times Ms Monaghan and Ms Peters, to fall into significant rental arrears, and during the Relevant Period the Corporation was owed at least $26,050 in outstanding rent;

(c)    did not take adequate steps to cause unpaid rent, including rent owed by each of Ms Monaghan and Ms Peters, to be recovered;

(d)    caused the Corporation to pay for expenses, such as excess water charges and damage to the Properties caused by tenants, which tenants of the Properties were in fact responsible for, or should have been made responsible for;

(e)    failed to cause the Corporation to manage its Properties and finances appropriately such that the Corporation was unable to meet its obligation to maintain the Properties in a reasonable state of repair;

(f)    attended directors' meetings and discussed and voted on issues in which they had a direct and material personal interest, namely increasing rent, recovering unpaid rental arrears and/or authorising payment of expenses relating to the Properties (which tenants were in fact responsible for), without formally disclosing in accordance with the requirements of the CATSI Act or Rule Book that they had a material personal interest in those matters;

(g)    failed to adequately manage the day-to-day activities of the Corporation;

(h)    failed to implement adequate internal management controls of the Corporation;

(i)    failed to cause the Corporation to keep and maintain financial records which would enable correctly recorded and explained its transactions and financial position and performance, and would enable true and fair financial reports to be prepared and audited;

(j)    failed to cause the Corporation to hold an AGM in each of the calendar years ended 2009 and 2012 and/or for any AGM of the Corporation that was held in 2009 or 2012, the Mr and Ms Monaghan failed to keep or cause to be kept a record of the AGM or minutes of the AGM; and

(k)    otherwise failed to ensure that the Corporation complied with the requirements of the CATSI Act and its Rule Book.

160    The Registrar maintains that Ms Peters conducted herself in the same way as set out at [159]; however, Ms Peters has not admitted this.

Duty of care and diligence

161    By their conduct as set out in [159] above, Mr and Ms Monaghan:

(a)    acted in a manner that was inconsistent with how a reasonable person would exercise his or her duties as a director and/or officer of the Corporation; and

(b)    had a material personal interest in the subject matter to which their conduct relates.

162    The Registrar maintains that Ms Peters owed the same duty to the Corporation as set at [161]; however, Ms Peters has not admitted this.

Duty not to improperly use position

163    By their conduct as set out in [159] above, in particular [159(e)], Mr and Ms Monaghan caused detriment to the Corporation, in that:

(a)    as at 18 December 2013, the Corporation was owed approximately $26,050 in unpaid rent in respect of the Properties and did not have sufficient funds to pay its liabilities, including the costs of repairing the Properties, without selling one or more of the Properties;

(b)    HACS:

(i)    assessed two of the Properties as being unfit for habitation and requiring significant repairs totalling hundreds of thousands of dollars; and

(ii)    as a result, found alternative housing for the residents of those Properties;

(c)    the Corporation sold the Chifley property and the proceeds of sale were used to pay outstanding debts and to pay Housing ACT to meet the costs of repairs required to be undertaken in respect of the remaining Properties; and

(d)    the Corporation transferred ownership of the remaining Properties to Housing ACT.

164    Further, by their conduct as set out in [159] above, in particular [159(c)] and [159(d)], Mr and Ms Monaghan gained an advantage for each of themselves in that:

(a)    they did not take adequate steps to recover unpaid rental from Ms Monaghan or other persons that resided at the Properties;

(b)    they caused the Corporation to pay for expenses, such as excess water charges and damage to the Properties caused by tenants, which tenants of the Properties were in fact responsible for; and/or

(c)    Mr and Ms Monaghan did not take adequate steps to ensure that tenants or occupants of the Properties, including themselves, paid or contributed towards water or other charges incurred by them as tenants or occupants of the Properties.

165    The Registrar maintains that Ms Peters owed the same duty to the Corporation as set at [163] and [164]; however, Ms Peters has not admitted this.

Duty to comply with Pts 7-2 and 7-3 of the CATSI Act

166    By their conduct as set out in [159] above, in particular [159(i)], Mr and Ms Monaghan failed to take all reasonable steps to comply with, or to secure compliance with, the record keeping and reporting requirements in Pts 7-2 and 7-3 of the CATSI Act.

167    The Registrar maintains that Ms Peters owed the same duty to the Corporation as set at [166]; however, Ms Peters has not admitted this.

Admissions - contraventions of civil penalty provisions

168    Mr and Ms Monaghan admit that the conduct as set out in [159] above:

(a)    contravened ss 265-1, 265-10 and 363-1 of the CATSI Act;

(b)    materially prejudiced the interests of the Corporation or the interests of its members;

(c)    materially prejudiced the ability of the Corporation to pay its creditors and effect repairs and maintenance to the Properties; and

(d)    is serious within the meaning of s 386-10(1)(b)(iii) of the CATSI Act.

169    The Registrar maintains that Ms Peters has committed the same contraventions as set out at [168]; however, Ms Peters has not admitted this.

THE REGISTRAR’S EVIDENCE SUMMARISED

170    Mr Beven’s affidavit evidence is summarised in [27] to [30] above. Mr Beven was not required for cross-examination, however, with the Court’s leave he gave further oral evidence in chief and explained why he had decided to proceed only against the three respondents and not the other directors of the Corporation (including Mr Lock). It is unnecessary to set out that evidence. I accept Mr Beven’s explanation for having limited the proceeding to the three respondents.

171    The Registrar relied upon affidavits sworn by Mr Peter Armstrong (a senior officer in ORIC); Mr Lock (who, as noted above, was initially a consultant and then subsequently a director of the Corporation); Mr Michael Strecker (a member of the Regulation Section of ORIC who conducted a statutory examination of various Corporation directors); Mr Gregory Jepsen (a retired officer in the Regulation Section of ORIC who conducted examinations in the first administration); Mr Lo Pilato (an accountant who was appointed special administrator in both the first administration and the second administration); Mr Laurrie Scheele (real estate agent); Ms Jennifer Scheele (who carried out voluntary bookkeeping for the Corporation in the period January 2011 to 25 June 2012); Mr Duncan Wallace (an investigating officer with ORIC); Mr Michael Ramalli (a Commonwealth Public Servant with the Department of Prime Minister and Cabinet); Mr David Collett (an ACT Government Public Servant who gave evidence on behalf of Housing ACT) and Mr Graham Pert (an investigating officer from ORIC).

172    It is unnecessary to summarise the evidence in chief of many of these witnesses which, I accept, provides a sufficient evidentiary foundation for the contents of the agreed statement of facts and the revised agreed statement of facts.

173    It should be noted that some, but not all, of the Registrar’s witnesses were cross-examined. To the extent that the cross-examination of those witnesses is relevant to the remaining issues in the proceeding, which primarily relate to Ms Peters, the following summary should suffice.

174    Mr Peter Armstrong gave evidence that copies of all rule books of CATSI corporations were available online from the ORIC website. He also said in cross-examination that his role was a corporate regulator and not about training. He added, however, that at the end of the first administration one of his staff made an offer to send the Corporation some training material about how to run a directors’ meeting and also, offered a training program for the directors. Mr Armstrong was unable to say what happened thereafter.

175    Mr Lock confirmed in cross-examination that he had received from Ms Peters in mid-2012 a shopping trolley sized bag of the Corporation’s documents.

176    Mr Lock explained how the Corporation was ineligible for Commonwealth funding which might have been used to assist with repairs and maintenance because it owned only seven houses and not the required ten.

177    Mr Lock gave evidence of his attempts to collect outstanding rent and the difficulties he encountered with the failure of the Corporation’s tenants to attend meetings.

178    Mr Lock confirmed in cross-examination that he was concerned in 2013 that the then directors of the Corporation did not have any experience or training. Mr Lock gave the following important evidence, including in relation to Ms Peters’ role:

What training do you believe they should have had? Excuse me. I – I’m under the impression that ORIC would supply governance training over a period of time that where in – is that the organisation then can go ahead and operate more – more efficiently and more professionally, and that it should be reviewed at different stages to make sure that they’re on track, particularly when an organisation just comes out of administration and then goes back into it again. It needs, you know – there is – there is an issue with the structure. I’m not actually blaming ORIC itself. I’m blaming the Act for it. Is that as I’ve always said that they should have a three to five year business plan, and that’s how all funding and all arrangements should be made in order to get the organisations – get the proper training that is needed and get the proper support that is needed.

Can I take those things a bit at a time. You said there is an issue with the structure? Yes.

What do you mean by that, sir? Well, unfortunately for poor Kim, she was struggling to get people to come to the meetings. I mean, everybody was at this – you know, everybody wants to be there, everybody wants to have their two bobs, but nobody would come to the meeting. So when I took over, I put a free feed on and I got them all there so – and I took it away from the house. I mean, Kim was a one – one horse band basically, trying very hard to – to run the organisation, to try and keep it going, to keep it on its tracks. You know what I mean. She was very – my relationship with Kim is a long, long – it goes back many, many years in other areas, and we’ve been associated with organisations before. So I knew what she was trying to do. I understood her. But that was – unfortunately, that was the problem with SHAC. There was no internal structure, if you might say. I would – forced to accept one person’s voice.

You just said you knew what Kim was trying to do. What do you believe she was trying to do? I believe that Kim was – Kim was trying to put it on – on a level footing, on level ground so that it was open and available for everybody. That’s her thing. I mean, but – and then I – you know, it’s – it’s hard allowing people. I’ve got to be very careful here because, unfortunately, my family is involved. Okay. So, yes, I’ve got a cultural issue.

Thank you, sir. Also a little while ago you said – you said there should be governance training? Yes.

Do you have a view as to what that governance training should cover? Well, I’ve gone through governance training on three different accounts. I’m currently the chairperson of an organisation. I’m deputy chair in New South Wales Indigenous Fishing Council. I was a former ASTEC chair to Sydney – Sydney regional council before Howard shut us down. And in all these processes we followed a protocol of training and information that gave us – and this is even at the highest level. But the training that should have been coming more importantly to the organisation is account management, make sure the leases are all in order, insurance is all in order and, most importantly, the rent is in order and the collection of rent. I mean, this is the sort of stuff that was missing. This is the primary structure of any organisation. And so that’s simply, in a nice word, nice bookkeeping.

To your knowledge, was such governance training ever provided to my client? No.

Was it ever provided, as far as you’re aware, to any director of SHAC? No.

You also said, sir, that there should have been “proper support”, that was your phrase. What did you mean by proper support? Well, it’s not just a matter of getting money and to run to the houses and build houses. See, where SHAC was in a problem, where it had a danger, is that it had seven houses. Okay. And in those seven houses that restricted them from going to the – to the remote program funding that would help with the maintenance of the houses. They couldn’t apply for that. Now, proper support would have been where they would have been able to acquire the three required houses, or get an exemption to be able to apply for this in order to do the maintenance. But then that comes back to the tenants for the rents. So there’s a – you know, it’s a two-way street here. We’re not dealing with one. Okay.

179    Mr Lock impressed me as a credible, impartial and truthful witness, whose evidence I accept without reservation. He strongly supported the efforts which Ms Peters had taken while she was a director to address the issues confronting the Corporation, even though these efforts were unsuccessful. As is evident from the extracts above, in giving his evidence, Mr Lock felt constrained by his kinship with the Monaghans.

180    Mr Lo Pilato was asked various questions concerning his involvement in both the First and Second Administrations. He was unable to recall some matters of detail, particularly with regard to the first administration. This is understandable given the effluxion of time. He was asked whether he arranged any training for Ms Peters in accordance with cl 12.7 of a Policy Statement to which he made reference in his affidavit. The effect of that provision was that the special administrator would take all necessary steps to restore good operational order to a corporation, including arranging training for members and prospective directors in corporation governance, if needed. Mr Lo Pilato’s evidence as to his knowledge of any such training given to Ms Peters was as follows:

Great. You didn’t arrange for any training for Ms Peters, did you? I recollect where we got Peter Armstrong or the department or the organisation to come in. The – the plan was to organise future training for the – the members in the new committee.

And as far as you’re aware, that training didn’t occur, did it? I’m not sure whether it did but it was talked about in my administration.

It was talked about during your period of administration? Yes.

Thank you? That – that was required.

HIS HONOUR: And now are you – is that answer directed to the first administration or the second administration? The first administration, the first administration.

THE RESPONDENTS’ EVIDENCE SUMMARISED

181    It is convenient to now outline the evidence filed on behalf of each of the respondents. As will be developed, this evidence is relevant to the relief sought by the Registrar, whether the Court should accept the proposed orders for relief in relation to the Monaghans and to Ms Peters’ non-admission or rejection of some of the Registrar’s claims against her. It should be noted that, in light of the revised statement of agreed facts and the agreement reached between the Registrar and Mr and Ms Monaghan, neither Mr or Ms Monaghan was cross-examined.

Mr Monaghan

182    Mr Monaghan swore an affidavit dated 27 July 2015.

183    Mr Monaghan described himself as a pensioner. He gave evidence that, during the Relevant Period, all of the Properties were in a state of disrepair and maintenance costs were escalating into tens of thousands of dollars but the Corporation did not have sufficient funds to meet these costs. He said that rent was the only source of income and was insufficient to cover the costs of repairs. He also said that meetings were not attended by many members and that most of the tenants were often not paying rent, however, it was not the case that all tenants never paid rent.

184    Mr Monaghan emphasised that he had no business experience or training in managing a corporation. He also deposed that his capacity to discharge his duties during the Relevant Period was affected by issues of serious ill health, including kidney failure requiring dialysis from about 2012 and a heart attack in October 2013.

185    Mr Monaghan also gave evidence of the Corporation retaining LSRE to assist it in the management of the Properties, including drafting the letters written to all tenants on behalf of the Corporation about unpaid rent, maintenance issues and poor attendance at meetings. He said that after LSRE stopped providing assistance in 2010, the Corporation held meetings, made telephone calls and called on tenants at the Properties about rental arrears, maintenance and water charges. He said that in around 2011 he personally visited the properties at Chifley, Kambah and Richardson to ascertain maintenance issues and that the Corporation then arranged for a maintenance person to inspect all the Properties, but that the person did not complete the task. Mr Monaghan said that the Corporation then obtained a quote from a Queanbeyan tradesperson concerning the hole in the bathroom floor at the Kambah property but that the quote was beyond the Corporation’s means. Mr Monaghan gave evidence as to the steps he took to obtain outstanding rent from a tenant at the Theodore property, who left and moved to Tumut. He said he made about 20 telephone calls to the tenant. He also gave evidence about a meeting concerning the Theodore property, which he did not personally attend because of illness. Mr Monaghan said that he was told by Ms Monaghan that they had discussed Kia Connors’ wish to move into the Kambah property and that she was told about the problem with the bathroom floor and the lack of Corporation money to fix it.

186    Mr Monaghan also gave evidence of Ms Monaghan and him attending the Gilmore property in 2011 when the issue of unpaid rent was raised. He said that he was told by the tenant that he was having a few problems at work and would make up the rent the following week but the rent remained unpaid several weeks later. He said that the tenant then told him that there were ongoing work problems but he promised to make up the rent soon.

187    Mr Monaghan gave similar evidence about the steps he took in respect of unpaid rent at other properties, including the property at Charnwood. He said that in about September 2012 the Corporation engaged Mr Lock as a consultant to help manage the Properties and address the issues of financial records and general management. He described how Mr Lock managed to sign up all the tenants to current leases except for the tenants in the properties at Kambah and Charnwood.

188    Mr Monaghan deposed that the Corporation did consider evicting tenants and that this was raised with tenants. He said that his personal consideration of the issue was made not only in the context of his role as a director of the Corporation, but also in the context of the issue of housing for Aboriginal and Torres Strait Islander people and his role as an Aboriginal elder in the ACT community. He said that many of the tenants were unemployed and were looking after families with children and that evicting them would have caused them to be homeless. He explained how, as a youth worker, he had witnessed and worked with Aboriginal children who had been removed from their parents because of homelessness. He said that the decision to evict tenants was “confronting and difficult with serious consequences and I wasn’t prepared to take the action of eviction”.

189    Mr Monaghan also gave evidence regarding him living on and off at the Richardson property with Ms Monaghan and at the Charnwood property with his aunt Bertha and cousin Ernie. He said that he was not a tenant at either place but he contributed financially to the households when he stayed there.

190    Mr Monaghan stated that he was diagnosed with a kidney disease in 1984 and that he required dialysis from about mid-2012. He said he suffered a heart attack in about October 2013 and that, from that time, he was primarily living at the Richardson property with his estranged wife who was helping him because of his health problems. Mr Monaghan was adamant that he was never a tenant or on the lease at any of the Corporation’s Properties. He added that all the Corporation’s directors were aware of his living arrangements and he did not consider it necessary to declare them as a conflict of interest because of that knowledge.

191    On the subject of his character and work in the ACT community, Mr Monaghan said that he was recognised as an Aboriginal elder and that he had been actively working for Aboriginal and Torres Strait Islander people for more than 25 years, holding positions such as:

(a)    youth worker for Street Link and ACT Government youth programs;

(b)    truancy officer for ACT Government public schools;

(c)    youth and drug and alcohol worker for Gugan Gulwan Youth Aboriginal Corporation;

(d)    a member of the ACT Aboriginal and Torres Strait Islander Elected Body; and

(e)    a member of numerous ACT Government committees and advisory boards dealing with indigenous issues.

He also gave detailed evidence of his personal involvement over many years with social problems affecting Indigenous people.

192    As to his current financial circumstances, Mr Monaghan deposed that he was in receipt of a Commonwealth New Start Allowance and that this was his only source of income. That allowance amounts to a net payment of $509.23 per fortnight. He said he was awaiting a decision from Centrelink about transferring to a Disability Support Pension, which might provide slightly more income for him.

193    Mr Monaghan stated that he owned a 2003 Commodore car but had no other assets other than his New Start Allowance and an ACT Government payment which he did not quantify.

194    He said that because of his health issues he required kidney dialysis three times a week and did not expect ever to be able to work again.

Ms Monaghan

195    Ms Monaghan swore an affidavit dated 27 July 2015. She described her occupation as pensioner.

196    Ms Monaghan gave similar evidence to that of Mr Monaghan regarding the Corporation’s management of the Properties during the Relevant Period, including the problems created by unpaid rent and her lack of business experience or training in managing a corporation. She said that she attended Corporation meetings while Mr Monaghan was ill but she had no business experience or training, which affected her ability to make decisions. She said that she often felt like she was “in over my head and I didn’t understand the situation that I was in as a director”.

197    Ms Monaghan also deposed that her capacity to discharge her duties as a director were diminished because of health problems created by her spinal arthritis.

198    Ms Monaghan gave similar evidence to that of Mr Monaghan regarding the steps taken by the Corporation to deal with the outstanding rent issues. She also gave similar evidence to him regarding the sensitivity of the issues confronting her as an Aboriginal elder in evicting Aboriginal tenants. She deposed that she had worked with women living in refuges who had faced the real possibility of losing their children if they became homeless and that she had seen women in her community lose their children because of homelessness and cramped living conditions.

199    Ms Monaghan deposed that Mr Monaghan stayed with her at times in Richardson because he was very ill and needed help. She said that they were separated but living under the same roof and he was never a tenant.

200    Ms Monaghan admitted that during the period from about May 2010 until December 2012 she lived at the Richardson property and did not pay rent because at that time she had little or no income. She stated that her Commonwealth Disability Support Pension was suspended in May 2010 and was reduced from about $700 per fortnight to about $23 per fortnight as a result of Centrelink’s decision that she and Mr Monaghan were living together as a couple. She described the steps she took to challenge that decision and how it was not until March 2012 that her full Disability Support Pension of about $700 per fortnight was restored.

201    As to her character and work in the ACT community, Ms Monaghan stated that she was recognised as an Aboriginal elder and was involved in community work for Indigenous people, including working with ACT Corrective Services to visit Aboriginal and Torres Strait Islander people in prison, as well as assisting women in refuges.

202    Ms Monaghan described her current financial circumstances as receiving a Commonwealth Disability Support Pension in the net amount of $782.20 per fortnight and a supplement payment of $63.90 per fortnight. She said that her 14 year old granddaughter lived with her and that she received a Family Tax Benefit of $233.94 per fortnight plus another allowance of $106.82 per fortnight.

203    Ms Monaghan deposed that she owned a 2009 Ford Territory vehicle, but otherwise had no other assets or source of income other than her welfare payments.

204    Ms Monaghan said that she was in ill health with spinal arthritis, as well as arthritis in her shoulders and both legs and that she did not anticipate ever being able to work again.

Ms Peters

205    Ms Peters swore an affidavit dated 24 July 2015 and was cross-examined.

206    Ms Peters said that she is now 54 years old. She said that in September 2001 she suffered a stroke and that this affects her memory. She said that she suffers from rheumatoid arthritis and that the medication she takes makes her “quite vague”.

207    Ms Peters stated that shortly after she moved to Canberra in the late 1990s she was asked by the then executive director of the Corporation to become a member. She said that in February 2000 she entered into a lease with the Corporation and became a tenant at its Rolph Place property in Gilmore. She said that when LSRE ceased being the managing agent for the Corporation, her rent was paid up to 14 April 2010 and that she had no rent arrears. Ms Peters annexed material which indicated that her rent was deducted directly from her remuneration during the period 1 February 2010 to 29 June 2011. She said that it was only recently that she appreciated that she was in default of paying rent for two four week periods’ (i.e. from 12 March 2010 to 12 April 2010 and 16 December 2010 to 13 January 2011 respectively). She said that she had not lived at Rolph Place since March 2011 and that she had resigned from her employment in mid-2011. She said that she had to wait from late June 2011 until October 2011 before she was eligible to receive any Centrelink payment and she was unable to pay rent during that period of 13 weeks. She gave an undertaking to pay the unpaid rent for a period totalling approximately five months.

208    Ms Peters became a director of the Corporation in December 2005. She deposed that at no time between becoming a tenant at Rolph Place and becoming a director was she provided with a copy of the water bill for the premises, nor asked at any time during this five year period to pay any water bill for those premises. She said she first became aware of the Corporation having paid water bills for the Properties when she became a director in December 2005.

209    Ms Peters deposed that, whilst she recalled discussions about the cost of water for the Properties, she could not recall any decision during her time as a director to change the Corporation’s practice of paying water bills. She had no recollection of a decision recorded in the Corporation minutes of 21 February 2011 regarding water payments.

210    Ms Peters said that she was asked by Mr Lo Pilato towards the end of 2005 to become a director of the Corporation. She said she decided to accept the invitation even though she was inexperienced and was still experiencing health problems after her stroke in 2001. She said that despite the help from people from LSRE she found the role of director to be “very difficult and frustrating”. She said that she was concerned that tenants were not paying rent and that there was dissatisfaction about the state of the Properties. She also deposed that, after becoming aware of the Corporation’s debt to the ATO in the amount of $40,000, she was involved in ensuring that it was paid in instalments of $1000 per month.

211    Ms Peters deposed that she found the Corporation’s tenants were reluctant to attend Corporation meetings or become involved with the Corporation. In order to encourage them to attend so that issues of rent and property maintenance could be addressed, she tried to change the venue of Corporation meetings to accommodate the convenience of tenants. Despite this, and also advertising the meetings, she said that it remained difficult to have the tenants attend meetings.

212    Ms Peters gave evidence as to various things she did with a view to finding ways for the Corporation to have sufficient income, including meeting with ACT Government representatives, encouraging and facilitating tenants to pay rents and discussing the possibility of selling a property to obtain funds.

213    Ms Peters described how frustrated she felt in 2010 about the way the Corporation was run and how, at that time, she had care of two of her grandchildren aged nine and five, who lived with her at Rolph Place. She said that she moved out of that property in early 2011 and asked Mr Brendan Richards to move in and “house sit” for her. She said that it was not until mid-2012 that she decided she would not return.

214    Ms Peters said that she thought she had resigned as a director of the Corporation in early 2011. She acknowledged that LSRE gave her the Corporation’s records in mid-2012. She also recalled giving those records to Mr Lock in mid-2012, including a shopping trolley sized bag full of documents. Ms Peters said that she recalled writing a resignation letter as a director of the Corporation, which she gave to Mr Lock at about the same time she gave him the Corporation records in the trolley bag. Ms Peters acknowledged that a copy of her letter of resignation was not available. Ms Peters also accepted that she was reconstructing events because of her memory difficulties, but that she believed that she had probably resigned from the Corporation in mid-2012, which was about the time she decided she would not return to live at Rolph Place. (As noted above, it was an agreed fact that Ms Peters ceased to be a director in early 2012). In response to the Registrar’s claims regarding her conflict of interest, Ms Peters said that it never occurred to her to make any disclosure of her tenancy at Rolph Place because all the other directors knew that she was a tenant there.

215    In response to the Registrar’s claims regarding the Corporation’s deficient record keeping, Ms Peters said that after she became a director of the Corporation in 2005 she was given copies of paperwork and documents relating to the Corporation in a standard sized archive box, which was kept at the Monaghans’ home in Richardson.

216    Ms Peters recalled arrangements being made for the Corporation to hold annual general meetings. To the best of her recollection, she believed that directors’ meetings were called monthly but that, due to the lack of attendees, such meetings were held quarterly during the period 2009 to 2012. She further deposed that, to the best of her recollection, while LSRE was working with the Corporation, a representative of LSRE took notes and kept records of the meetings.

217    In response to the Registrar’s claims that she failed to ensure payments for accounts were approved at directors’ meetings, failed to keep a register of members and former members, and generally failed to keep other relevant records, Ms Peters accepted that she had “a level of responsibility that was not precisely met”, but she could not remember whether she did all these things or not. She said that she thought she had done those things, “but it was a long time ago and my memory fails me”.

Ms Peters’ cross-examination summarised

218    In cross-examination, Ms Peters said that while she was a director of the Corporation, her primary contact at LSRE was probably Ms Fleur Scheele. She said that she was advised by LSRE on three or four occasions that the Corporation should take steps to terminate tenancies if a tenant failed to pay rent or caused property damage. Ms Peters explained that this advice was not implemented by her because the Corporation lacked the money to litigate the matter if the tenant resisted. She also said that when the issue was raised with tenants who were in default of their rent she was told in effect to take the matter up with Mr or Ms Monaghan. Ms Peters said that there were “family connections”. She said that she had received abusive phone calls from tenants and their partners about their non-payment of rent and her attempts to have the rent paid, which included giving the tenants Centrelink forms to fill out so that rent could be automatically deducted. She said she was becoming frustrated because the tenants did not turn up to the Corporation meetings, yet they expected to remain as tenants and have their properties repaired by the Corporation. Ms Peters said that Ms Monaghan told her to ignore the abusive phone calls. She said these matters occurred shortly after she became a director in December 2005, but that the tenants’ resistance and abusive phone calls continued up until she resigned as a director.

219    As best as she could recollect, Ms Peters confirmed that she probably resigned her directorship in mid-2012, at about the same time as she decided not to return to her rented premises at Rolph Place. When she was asked why she did not resign her directorship earlier given the frustrations she experienced she said that she wanted to help the Corporation and its members and obtain Government funding. She described the meetings she had with FaHCSIA where they discussed the possibility of selling one of the Properties to pay for maintenance. She said that Commonwealth funding was not forthcoming because the Corporation owned only seven houses. Ms Peters also described her attempts to obtain funding from a women’s refuge to pay for repairs to the bathroom at the Bosworth Circuit property.

220    Ms Peters said several times that the timing of her resignation as a director was not because of any fear of retribution or that she would lose her own tenancy. She later seemed to suggest that she was concerned that she may become homeless if she resigned, but she was adamant that her view was that her entitlement to rent a Corporation property was not because she was a director but rather because she was Aboriginal.

221    Ms Peters was asked about some of the steps she took to deal with the problems of rent arrears and damage to property. She said that in the case of two tenants, who were relatives of Mr and Ms Monaghan, she had wanted formal letters sent to them confirming the risk of their eviction for non-payment of rent, but this did not happen. She inferred that this was because the tenants were related to Mr and Ms Monaghan, and these were the “family connections” she had mentioned.

222    Ms Peters stated that there was a waiting list for prospective tenants which was held by Mr and Ms Monaghan and that she thought that there were “probably” about 30 names on it. She believed that the list was included in the materials which were returned by LSRE when that firm ceased being involved with the Corporation.

223    Ms Peters was also asked about her own rent arrears. She said that she had thought she had repaid all the outstanding rent arrears but that this changed when she was shown documents in the course of the proceedings. She confirmed that she was willing to give an undertaking to pay back any outstanding rent.

224    Ms Peters confirmed that she never approached the Registrar about her obtaining training or assistance in the discharge of her duties as a director. When asked why she had not done so she said that this was because of “fear”. Ms Peters said that she saw “ORIC in the same light as what I see care and protection; you don’t contact them. You know, from my perspective”. She explained that she had this view because of “fear” and that it was “all fear-based”. I understood this to be a reference to the anxiety or apprehension which many Indigenous people experience in dealing with government agencies, a matter as to which judicial notice can be taken.

225    Ms Peters confirmed that she has eight adult children and that three of her grandchildren currently live with her. As one of those grandchildren has some personal issues, she explained that she has currently taken 12 months leave from her employment and is dependent upon Centrelink payments. She confirmed that she had resigned both her other directorships with CATSI Act corporations.

226    Ms Peters impressed me as an honest and responsive witness. It was evident that she found the experience of giving evidence quite challenging, but she gave her evidence truthfully and without prevarication. She was candid in her evidence and made admissions against interest on several occasions. She candidly admitted that, because of her health, she had difficulty recollecting precise events in detail. There is no reason to doubt the honesty with which her evidence was given in relation to the matters which she could recall and I accept it.

Ms Peters’ reliance on the evidence of Mr McEwan and Mr Richards

227    Ms Peters relied upon evidence given in her case by Mr Kevin McEwan (Mr McEwan) and Mr Brendon Richards (Mr Richards). Mr McEwan gave evidence that in about March 2011 he agreed to Ms Peters and her two young granddaughters coming to stay with him until such time as Ms Peters decided to “let go of Rolph Place”. Mr McEwan said that Ms Peters and her granddaughters remained at his place until about May 2014. He also gave evidence of Ms Peters having told him after she moved in with him that she was not happy at the Corporation and wanted to get out of it.

228    Mr Richards said that he had been a friend of Ms Peters for the last 15 years. He said that during 2010 when he was at risk of becoming homeless an offer was made for him to live at Ms Peters’ rented premises Rolph Place in Gilmore free of charge and that he moved into those premises in early 2011. He said that he lived rent free there until mid-2012 and Ms Peters paid the rent to the Corporation. He said that Ms Peters told him in 2012 that she would not be returning to Rolph Place and had told the Corporation that she was moving out. Mr Richards said that he agreed to remain as a tenant at Rolph Place and to take over the financial responsibilities from about October 2012. He said that he stopped being a tenant there in May 2015.

THE REGISTRAR’S SUBMISSIONS SUMMARISED

229    The Registrar’s outline of written submissions totalled 76 pages. It was filed before either the first or revised statement of agreed facts were finalised. So as to avoid adding unduly to these already lengthy reasons for judgment, I will highlight what I consider to be the Registrar’s primary submissions.

230    The Registrar contended that, as well as regulating corporations registered under the CATSI Act, his role is to build the capacity of corporations and their directors through a number of unique statutory support functions, such as education programs, dispute resolution, research and policy.

231    The Registrar contended that, although the CATSI Act is in many respects modelled upon the Corporations Act, CATSI Act corporations have a number of distinctive features, both by law and in practice. These include the following:

(a)    They are established by Aboriginal and Torres Strait Islander people for Aboriginal and Torres Strait Islander people. The CATSI Act requires that a majority of the members and directors of such corporations be Aboriginal and Torres Strait Islander people, but non-Aboriginal and Torres Strait Islander people may be appointed as directors. The rule books can also take into account Aboriginal and Torres Strait Islander customs and traditional governance.

(b)    They are typically established to provide important services to Aboriginal and Torres Strait Islander communities such as housing (as was the case with the Corporation), health and medical services, education, building and infrastructure programs, art centres, training and support in relation to lore, heritage and culture, employment and stores where such services may otherwise be unavailable. As many such communities are remote and disadvantaged, these services may, at a practical level, be indispensable.

(c)    They frequently rely on public funding for their programs, operate on a not-for-profit basis and are registered as charities (as was the case with the Corporation).

(d)    By comparison with corporations established under the Corporations Act, Aboriginal and Torres Strait Islander corporations typically have distinctive vulnerabilities and serve important public and community purposes. When orders are made by the Court under the CATSI Act these characteristics mean that attention should be given to the need to protect such corporations, their members and the people who rely upon them. Accordingly, while the case law developed under the Corporations Act and its predecessors is instructive, the need for protection and deterrence assumes even greater significance given the distinctive vulnerabilities of corporations registered under the CATSI Act, so submitted the Registrar.

Duty of care and diligence – s 265-1(1)

232    The Registrar emphasised that the duty of care of diligence imposed by s 265-1 of the CATSI Act involved a duty on a director to 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 were a director or officer 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, the director or officer.

233    Pursuant to s 265-1(2) an officer is taken to meet the standard if he or she:

(a)    makes the relevant judgment in good faith for a proper purpose;

(b)    does not have a material personal interest in the subject matter of the judgment;

(c)    informs himself or herself about the subject matter of the judgment to the extent he or she reasonably believes to be appropriate; and

(d)    rationally believes that the judgment is in the best interests of the corporation.

234    The Registrar contended that, on no view, could the respondents’ conduct be said to be conduct which a reasonable person in the position of each of the respondents would have undertaken, exercising care and diligence, in the interests of the Corporation.

235    The Registrar contended that the respondents rejected, ignored or otherwise disregarded the advice of independent and external professional advisers, consultants and special administrators (including, LSRE, Mr Williams, Mr Lock, Ms Jennifer Scheele, Mr Lo Pilato, Mr Tony Grieves (the joint and several special administrator with Mr Lo Pilato in the Second Administration) and Mr McIntyre) to the detriment of the Corporation.

236    The conduct of each of the respondents is a clear example of conduct in breach of s 265-1 of the CATSI Act, so the Registrar submitted.

Improper use of position – s 256-10

237    The Registrar submitted that the word “improper”, as it is used in s 265-10 of the CATSI Act, is not a term of art: it is to be understood in its commercial context to refer to conduct which is inconsistent with the “proper” discharge of the duties, obligations and responsibilities of the officer concerned: Grove v Flavel (1986) 43 SASR 410 at 420 per Jacobs J and R v Byrnes [1995] HCA 1; 183 CLR 501 at 560 per Brennan, Deane and Toohey JJ.

238    The objective nature of the inquiry means that there can be a breach without dishonesty or even consciousness of impropriety.

239    The Registrar submitted that the respondents improperly used their position to gain an advantage for themselves (and in the case of the Mr and Ms Monaghan, also their relatives as tenants of the Properties). In so doing, the respondents:

(a)    caused detriment to the Corporation and materially prejudiced the interests of the Corporation and/or the interests of its members and the ability of the Corporation to pay its creditors and effect necessary and urgent repairs and maintenance to the Properties; and

(b)    materially prejudiced the ability of the Corporation to fulfil its object and purpose to provide suitable housing to disadvantaged Aboriginal and Torres Strait Islander people in the inner south Canberra region, to the detriment of the Corporation and its members.

240    The Registrar submitted that breaches of s 265-10 were made out by the respondents’ conduct in:

(a)    causing the Corporation to charge rent for the Properties in a sum which was insufficient to meet the costs and expenses associated with the Properties, including but not limited to the costs of maintaining the Properties, especially in circumstances where the respondents knew that rent was the Corporation’s only source of income;

(b)    failing to cause the Corporation to take steps to recover rental arrears and failing to cause the Corporation to put in place arrangements to address excessive water and sewerage charges being incurred by all tenants;

(c)    failing to adequately maintain the Properties to a habitable standard;

(d)    failing to cause the Corporation to take steps to require tenants to repair or pay for damage caused to the Properties; and

(e)    failing to declare their conflicts of interest.

Failure to keep proper records – s 363-1

241    The Registrar submitted that a contravention of s 363-1 is plainly made out in that the respondents failed to take all reasonable steps to secure compliance by the Corporation with its obligations under Pts 7-2 and 7-3 of the CATSI Act, by not causing the Corporation to maintain any proper written financial records.

Relevant principles concerning relief

242    It is unnecessary to summarise all the Registrar’s detailed submissions concerning the relevant legal principles concerning the grant of relief in cases such as these. As is apparent from my analysis of the relevant principles below, I substantially agree with the Registrar’s position, however, there may be differences in the emphasis placed on some of those principles.

243    The Registrar provided a schedule of cases in Sch B to his written outline of submissions which contained comparative examples of cases where a range of penalties were imposed pursuant to s 279-15 of the CATSI Act or ss 203C or 206E of the Corporations Act.

244    In cases in which the period of disqualification ranged from 7-12 years, the factors which supported mid-range disqualification periods included:

(a)    serious incompetence and irresponsibility;

(b)    substantial loss;

(c)    deliberate courses of conduct designed to enrich the defendants at others' expense, but with lesser degrees of dishonesty;

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

(e)    lack of contrition or acceptance of responsibility, but as against that, the prospect that the individual may reform.

245    The factors leading to the shortest disqualifications, that is disqualification for up to three years, were:

(a)    although the defendants had personally gained from the conduct, they had endeavoured to repay or partially repay the amounts misappropriated;

(b)    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;

(c)    the defendants acted on the advice of professionals; and

(d)    had not contested the proceedings.

Periods of disqualification

Ms Monaghan and Mr Monaghan

246    Relying on the following matters, the Registrar initially submitted that a disqualification order in relation to both Ms Monaghan and Mr Monaghan for a period of seven years (i.e. within Santow J’s middle range of 7-12 in Re HIH Insurance (in prov liq); ASIC v Adler [2002] NSWSC 483; 42 ACSR 80 at [56]) is appropriate. (This was subsequently reduced to five years as part of the agreement reached between the Registrar and the Monaghans). The Registrar submitted that:

(a)    Their conduct was incompetent and irresponsible. It was deliberate with the aim and effect of benefitting themselves and/or their relatives to the detriment of the Corporation and its members. They failed to declare and/or act on their conflicts of interest as directors and/or officers of the Corporation and as tenants of the Properties.

(b)    Their conduct resulted in a substantial loss to the Corporation, including but not limited to:

(i)    significant degradation of the Properties, which were publicly funded assets, as Ms Monaghan and Mr Monaghan failed to manage and maintain the Properties by taking steps to ensure that the Properties were maintained to an adequate standard and the Corporation had sufficient funds to meet all of the costs and expenses in relation to the proper maintenance of the Properties;

(ii)    the ACAT decision against the Corporation;

(iii)    the loss of rental income, which Ms Monaghan and Mr Monaghan knew was the Corporation’s only source of income yet they failed to take adequate steps to recover the payment of rent or rental arrears by tenants of the Properties, including rental arrears of a relative,

(iv)    impacting the Corporation's ability to operate and pay its creditors such that:

(i)    the Corporation was required to sell one of its properties; and

(ii)    the balance of the Properties were transferred to the control of Housing ACT, thereby losing community control of the Properties;

(v)    significant excess water and sewerage charges being incurred by the Corporation because no action was taken to undertake maintenance, such as fixing leaking taps, or to put in place arrangements to address excessive water and sewerage charges being incurred by all tenants of the Properties;

(vi)    poor record keeping and no organised system of maintaining business records, which prevented others (subsequent directors or the special administrator, Mr Lo Pilato) from determining monies properly owing by or to the Corporation or recovering unpaid rent or compensation for damage by tenants to the Properties; and

(vii)    the eventual ceasing of trading by the Corporation preventing it from delivering its charitable objectives of providing affordable housing to disadvantaged Aboriginal and Torres Strait Islander people in the south of Canberra.

(c)    Their conduct occurred over an extended period of a number of years being the Relevant Period as defined above.

247    Although Ms Monaghan and Mr Monaghan had limited commercial experience, they acted contrary to or ignored professional advice or assistance from a number of sources such as Mr Lo Pilato, LSRE, Mr Lock, Mr Williams and Ms Jennifer Scheele. Nor did they resign when they were unable to manage the affairs of the Corporation themselves.

248    The Registrar submitted that the Monaghans:

(a)    have engaged in such conduct to maintain the personal benefits accruing to themselves and/or their relatives;

(b)    have made no attempt to repay to the Corporation any monies owed to the Corporation, such as unpaid rent; and

(c)    have shown no contrition and have contested the proceedings (up until the agreement was reached shortly before the commencement of the hearing).

249    The Registrar acknowledged that the personal circumstances of Ms Monaghan and Mr Monaghan were relevant. In particular:

(a)    both Ms Monaghan and Mr Monaghan have made important contributions as Aboriginal elders to the ACT community over a number of years;

(b)    Ms Monaghan was born on 6 May 1953 and is currently 63 years of age;

(c)    Mr Monaghan is approximately 62 years of age; and

(d)    given their age and circumstances there are good prospects that Ms Monaghan and Mr Monaghan will reform and not be involved in similar conduct.

250    The Registrar contended that a lengthy period of disqualification will serve to provide specific and general deterrence to protect Aboriginal and Torres Strait Islander corporations (as well as corporations generally). The need for general deterrence has greater significance, particularly, as in this case, where the conduct relates to the management of public funded assets of a not-for-profit charitable corporation delivering essential services to a disadvantaged group of people.

Ms Peters

251    The Registrar relied on the submissions above relating to the conduct of Ms Monaghan and Mr Monaghan and submitted that Ms Peters’ conduct was analogous but not to the same degree. The Registrar also submitted that although Ms Peters had made a contribution to the ACT community over a number of years, it was not to the same extent as Ms Monaghan and Mr Monaghan.

252    The Registrar submitted that a disqualification order of three years was appropriate in Ms Peters’ circumstances. He submitted that this was because Ms Peters was a director of the Corporation for a shorter period of time, played a lesser role in the governance of the Corporation and paid more rent while a tenant.

Pecuniary penalty

253    The Registrar made detailed submissions regarding:

(a)    the legal principles that guide the assessment of penalties for multiple contraventions;

(b)    the legal principles that guide the assessment of an appropriate penalty, including the central object of securing deterrence; and

(c)    the appropriate penalty amounts.

(a) Principles in relation to multiple contraventions

254    The Registrar submitted that these proceedings relate to many separate acts, which contravene a number of provisions of the CATSI Act, which extend over the Relevant Period. Accordingly, the proper assessment of appropriate penalties requires consideration of the following three well-recognised principles regarding the treatment of multiple contraventions:

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

(b)    While separate contraventions arising from separate acts should ordinarily attract separate penalties, where separate acts giving rise to separate contraventions are inextricably interrelated, it may be appropriate to treat the contraventions as part of a single multi-faceted “course of conduct”.

(c)    A “final check” of the cumulative effect of the proposed penalties must be conducted to ensure the total is not unjust or disproportionate to the circumstances of the case. If it is unjust or out of proportion, the penalty is to be moderated in accordance with the totality principle. Consideration of totality will not necessarily result in a reduction. However, in cases where the Court considers that the total penalties to be imposed are inappropriate the Court should alter 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 individual contravention and then reduce those amounts for reasons of totality, rather than point to a single global total penalty (or to identify a global total and then divide it among the individual contraventions in order to derive separate penalties).

Application of the course of conduct principle to all three respondents

255    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 had sufficiently overlapping legal and factual elements to be grouped into the following three episodes of conduct.

First episode

256    The respondents failed to manage and maintain the Properties by not taking steps to ensure that:

(a)    the Properties were maintained to an adequate standard of living; and

(b)    the Corporation had sufficient funds to meet all of the costs and expenses in relation to the proper maintenance of the Properties.

257    The respondents failed to ensure that the Corporation took steps or had systems to comply with the practices required by its rule book and/or the CATSI Act and by failing to ensure proper practices were implemented for the management of the Corporation by not taking steps to:

(a)    cause an annual general meeting (AGM) to be held by the Corporation (in each of the calendar years ended 2009 and 2012);

(b)    for any AGM of the Corporation that was held in 2009 or 2012, cause to be kept a record of the AGM or minutes of the AGM;

(c)    cause the Corporation to hold directors' meetings at least once every three months in each of 2009, 2010, 2012 and 2013 calendar years (as required by the Corporation’s rule book);

(d)    for any directors' meetings that were held in each of the 2009, 2010, 2012 and 2013 calendar years, cause to be kept a record of the meeting or minutes of the meetings;

(e)    ensure that the payment of all accounts was approved at directors' meetings; and

(f)    cause the Corporation to maintain, or keep at its documents access address, a register of members and former members.

258    The respondents failed to declare their conflicts of interest at directors' meetings:

(a)    in respect of Mr Monaghan, held on 23 May 2011, 11 July 2011, 17 October 2011 and 27 February 2012, at which the:

(i)    (i)non-payment of rent or rental arrears by tenants of the Properties, and/or the non-payment of rent or rental arrears by a relative; and

(ii)    the debt owing to ACTEW Corporation (ACTEW) incurred for excess water usage by tenants of the Properties,

were discussed;

(b)    in respect of Ms Monaghan, held on 23 May 2011, 11 July 2011, 17 October 2011 and 27 February 2012, at which the non-payment of rent, rental arrears, and/or the non-payment of rent or rental arrears by a relative were discussed;

(c)    in respect of Ms Monaghan, held on 23 May 2011, 11 July 2011, 17 October 2011, 19 December 2011 and 27 February 2012, at which the debt owing to ACTEW incurred for excess water usage by tenants of the Properties were discussed;

(d)    in respect of Ms Peters, held on 23 May 2011 and 11 July 2011, at which the non-payment of rent or rental arrears by tenants of the Properties were discussed; and

(e)    in respect of Ms Peters, held on 23 May 2011 and 27 February 2012, at which the debt owing to ACTEW incurred for excess water usage by tenants of the Properties were discussed,

in contravention of s 265-1(1) of the CATSI Act.

Second episode

259    The respondents improperly used their positions as directors and/or officers of the Corporation to gain an advantage for themselves and others and cause a detriment to the Corporation by:

(a)    causing the Corporation to charge rent for the Properties which was insufficient to meet the costs and expenses associated with the Properties, including but not limited to maintaining the Properties;

(b)    failing to cause the Corporation to take steps to recover rental arrears and excess water consumption charges;

(c)    failing to cause the Corporation to take steps to require tenants of the Properties to repair or pay for damage caused to the Properties; and

(d)    failing to declare conflicts of interest,

in contravention of s 265-10 of the CATSI Act.

Third episode

260    The respondents failed to take steps to ensure that the Corporation took steps to comply with its record keeping and reporting requirements under Pts 7-2 and 7-3 of the CATSI Act by failing to:

(a)    create and keep, or cause the Corporation to create or did not cause the Corporation to keep for seven years, adequate written financial records of books of account and source records;

(b)    ensure that an organised system of maintaining source business records was used;

(c)    ensure that an organised system of recording all transactions was used, such as registers;

(d)    ensure that bank reconciliations were completed by the Corporation to verify the accuracy of the records kept; and

(e)    ensure that written financial records correctly recorded the Corporation's transactions and financial position and performance, and would enable true and fair financial reports to be prepared and audited,

in contravention of s 363-1 of the CATSI Act.

(b) Principles in relation to determining an appropriate penalty for each contravention

261    The Registrar submitted that the following principles guide the determination of an appropriate penalty for each separate contravention (or contravening course of conduct as the case may be).

Consideration of statutory maximum penalties

262    A statutory maximum penalty of $200,000 applies to each contravention: s 386-10(1).

263    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.

264    When considering the maximum penalty for a course of conduct, it is important to bear in mind that the statutory maximum for one contravention is not converted into a maximum for the entire course of conduct. The maximum of $200,000 continues to apply to each contravention that forms part of the course of conduct. Accordingly, if appropriate, penalties can be imposed for the course of conduct that exceed, and perhaps even greatly exceed, the statutory maximum for a single contravention.

Centrality of deterrence

265    It is well established, including in the context of the CATSI Act pecuniary penalty regime, that the principal purpose of imposing a pecuniary penalty is to act as a personal deterrent, and as a general deterrent to others, against engaging in the type of conduct that is the subject of the contravention.

266    The centrality of the role of deterrence was recognised by French J in Trade Practices Commission v CSR Ltd (1991) ATPR 41-076 (at 52-152), who observed that the principal object of penalties imposed under the Trade Practices Act 1974 (Cth) (TPA) was to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravener and others who may be tempted to contravene the legislation. This approach has been adopted and applied in many subsequent cases, concluding by the Full Court in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission [1996] FCA 1134; 71 FCR 285 at 293-295.

267    Deterrence, both general and specific, is therefore not merely 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.

268    Nevertheless, the role of deterrence in determining the amount of a pecuniary penalty is subject to an overriding qualification — the amount of the penalty should be no greater than is necessary to achieve the objective of deterrence. Severity beyond such a figure would be oppressive and it is therefore necessary to strike an appropriate balance so as to avoid oppression.

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

269    Section 386-10 does not prescribe a statutory set of factors to be taken into account in assessing a penalty of appropriate deterrent value (and nor does its analogue in s 1317G of the Corporations Act).

270    In Matcham, 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 TPA and commonly applied in relation to a variety of civil penalty regimes (see, Trade Practices Commission v CSR Ltd (1991) ATPR 41-076, 52-152 per French J). However, the ‘French factors’ may require modification and should not be treated as a rigid catalogue.

271    All relevant factors must be considered as part of the process of “instinctive synthesis”, which requires them to be weighed in a transparent and reasoned way, rather than starting from a predetermined penalty figure and making incremental additions or subtractions for each separate factor.

272    The ‘French factors’ include:

(a)    the nature and extent of the act or omission;

(b)    any loss or damage suffered as a result of the act or omission;

(c)    the circumstances in which the act or omission took place;

(d)    the size of the contravener;

(e)    the deliberateness of the contravention and the period over which it extended;

(f)    whether the contravention arose out of the conduct of senior management of the contravener or at a lower level;

(g)    whether the contravener has a corporate culture conducive to compliance with the TPA, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention; and

(h)    whether the contravener has shown a disposition to cooperate with authorities responsible for the enforcement of the TPA in relation to the contraventions.

273    Other relevant matters identified by Heerey J (at first instance) in Australian Competition and Consumer Commission v NW Frozen Foods Pty Ltd (1996) ATPR 41-515, to which a Court is to have regard when assessing a penalty of appropriate deterrent value, are as follows:

(a)    whether the contravener has engaged in similar conduct in the past; and

(b)    the financial position of the contravener; and

(c)    whether the contravening conduct was systematic, deliberate or covert.

274    In Matcham, the consequences of an associated disqualification order was also a relevant consideration.

275    The Registrar made detailed submissions concerning the application of these matters to the particular circumstances here.

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

General deterrence

276    The Registrar drew attention to Matcham, where the Court referred to a number of reasons why the particular contraventions of the CATSI Act there under consideration should attract penalties that would act as a strong deterrent to others. They included the following:

(a)    As noted above, the review of the ACA Act that resulted in the enactment of the civil penalty provisions of the CATSI Act emphasised the need to protect members of corporations registered under the CATSI Act from the actions of “rogue” directors and officers. As also noted above, the CATSI Act is a special measure for Aboriginal and Torres Strait Islander peoples.

(b)    The effectiveness of the operation of Aboriginal and Torres Strait Islander corporations relies heavily upon voluntary compliance with the CATSI 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.

(c)    Non-compliance with the CATSI Act may not be readily detected. This is illustrated in the present case, which involves contraventions that occurred over a number of years prior to detection.

277    The Registrar submitted that the imposition of 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 by them, but will also give them a more 'astute' eye to non-compliant conduct and thus enable the more ready detection of other contravening conduct.

Specific deterrence

278    Unless disqualification orders are made, the Registrar submitted that each of the respondents is in a position to hold a directorship in a corporation in the future.

279    The Registrar submitted that in the present case, as in Matcham, specific deterrence is sufficiently accommodated by the making of the proposed disqualification orders.

(c) Assessing penalties: Quantum

280    By undertaking the instinctive synthesis of all relevant factors, the Registrar submitted that penalties in the following amounts and ranges are of appropriate deterrent value.

Mr Monaghan

281    For:

(a)    the contravention of s 265-1(1) relating to the failure to manage and maintain the Properties, to comply with practices required by the Corporation’s rule book and the CATSI Act for the management of the Corporation and declare conflicts of interest, a penalty of $25,000;

(b)    the contravention of s 265-10(1) relating to the improper use of position to gain an advantage and cause detriment to the Corporation, a penalty of $25,000; and

(c)    the contravention of ss 363-1(1) relating to the failure to comply with record keeping requirements under the CATSI Act, a penalty of $5,000.

Ms Monaghan

282    For:

(a)    the contravention of s 265-1(1) relating to the failure to manage and maintain the Properties, to comply with practices required by the Corporation’s rule book and the CATSI Act for the management of the Corporation and declare conflicts of interest, a penalty of $25,000;

(b)    the contravention of s 265-10(1) relating to the improper use of position to gain an advantage and cause detriment to the Corporation, a penalty of $25,000; and

(c)    the contravention of ss 363-1(1) relating to the failure to comply with record keeping requirements under the CATSI Act, a penalty of $5,000.

Ms Peters

283    For:

(a)    the contravention of s 265-1(1) relating to the failure to manage and maintain the Properties, to comply with practices required by the Corporation’s rule book and the CATSI Act for the management of the Corporation and declare conflicts of interest, a penalty of $12,000;

(b)    the contravention of s 265-10(1) relating to the improper use of position to gain an advantage and cause detriment to the Corporation, a penalty of $12,000; and

(c)    the contravention of ss 363-1(1) relating to the failure to comply with record keeping requirements under the CATSI Act, a penalty of $2,500.

284    The Registrar explained that the pecuniary penalties sought in relation to Ms Peters’ conduct are lower than those sought in relation to Mr Monaghan and Ms Monaghan because Ms Peters’ period of directorship was shorter than those of Mr Monaghan and Ms Monaghan.

Application of the totality principle

285    Finally, as there are three separate penalties proposed for each respondent, as well as disqualification orders and compensation orders, the Registrar acknowledged that it was necessary to conduct a ‘final check’ required for totality purposes.

286    The Registrar submitted the cumulative total of all of the starting point figures is:

(a)    for Mr Monaghan, a total of $55,000;

(b)    for Ms Monaghan, a penalty of $55,000; and

(c)    for Ms Peters, a penalty of $26,500.

287    The first question is what, if any, reduction in these figures is appropriate having regard to the additional effects of the disqualification order and compensation order discussed below.

288    As to the disqualification order, the Registrar accepted that such orders can in some cases have serious, deleterious financial and other consequences, such that a lower pecuniary penalty is appropriate. In other cases, where the person is no longer involved in managing corporations and there is no evidence that they are likely to do so in the future, the prohibition will not have significant consequences for that individual — in such cases the disqualification will be “only marginally relevant in relation to penalty”. Here, there is evidence that Ms Monaghan and Ms Peters currently act as a director of one or more corporations registered under the CATSI Act. However, it is unclear whether their inability to continue to act in these positions would have any serious and deleterious consequences.

289    As to the compensation order sought against each of the respondents, the Registrar submitted that it is appropriate that some reduction to any pecuniary penalties ordered against the respondents be made in the event that a compensation order is also made. The losses caused to the Corporation for which compensation is sought are attributable to the respondents' conduct. The payment by the respondents of the compensation sought would go some way to serving the purpose of ensuring that they did not benefit in any way from their wrongdoing.

290    The Registrar submitted that it is not appropriate to reduce the pecuniary penalty by the full amount of the compensation order. The Registrar submitted that at least two matters point away from this:

(a)    The deterrent purpose of a penalty is quite different from the compensatory purpose of the compensation order. It requires assessment of wrongdoing against a statutory maximum penalty and all of the other factors discussed above. The compensation order is, of course, focussed on redressing loss. They should not be treated as, in effect, alternatives to the same end.

(b)    The consequences of each type of order are different. For example, liability to pay a compensation order may be affected by bankruptcy, whereas liability to pay a pecuniary penalty is not. To strip the pecuniary penalty back excessively would leave scope for it being avoided altogether, and thus undermine its deterrent value.

291    Having regard to these considerations, the Registrar submitted that it was appropriate to make some reduction to the total pecuniary penalty ordered against the respondents by way of allowance for any compensation order made and for totality purposes. The Registrar accepted that the pecuniary penalty to be imposed on the respondents could properly be reduced by 30%.

292    Allowing for all of these reductions, the Registrar submitted that it would be appropriate to impose a total penalty of:

(a)    $38,500 on Mr Monaghan;

(b)    $38,500 on Ms Monaghan; and

(c)    $18,550 on Ms Peters.

293    The Registrar drew the Court’s attention to the High Court’s decision in Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 326 ALR 476. The Registrar submitted that the High Court unanimously held there that in civil penalty proceedings, courts are not precluded from considering and, if appropriate, imposing penalties that are agreed between the parties.

294    The Registrar submitted that the effect of the High Court’s decision is to affirm the appropriateness and, in the case of regulators, the desirability of parties to civil penalty proceedings making submissions, on an agreed or separate basis, to a Court as to the appropriate pecuniary penalty amount to be imposed in a given case.

Compensation orders

295    Originally, the Registrar sought the following compensation orders from each of the respondents.

Mr Monaghan and Ms Monaghan

296    Compensation orders were originally sought jointly and severally against both Mr Monaghan and Ms Monaghan in the amount of $342,530 each, comprised of:

(a)    $326,400 - being the lower of the two quotes received by Housing ACT to bring the Properties up to a standard acceptable for social housing; and

(b)    $16,130 - being the compensation ordered by ACAT to be paid by the Corporation to Ms Kia Connors.

297    In addition, a compensation order was originally sought solely against Ms Monaghan for $22,116.83, being the difference between the rent paid by Ms Monaghan ($5,083.17) and the rent that Ms Monaghan should have paid ($27,200) during the period she was a tenant from at least 22 June 2010 until at least 26 September 2013.

298    In the events that occurred, the Registrar did not ultimately press for any compensation order against either Mr or Ms Monaghan as part of the agreement concerning proposed orders. I am content to adopt that course.

Ms Peters

299    A compensation order was sought jointly and severally against Ms Peters for $342,530 comprised of:

(a)    $326,400 - being the lower of the two quotes received by Housing ACT to bring the Properties up to a standard acceptable for social housing; and

(b)    $16,130 - being the compensation ordered to be paid by the Corporation to Ms Kia Connors by ACAT.

300    In addition, a compensation order was sought solely against Ms Peters for $7,045.74, being the difference between the rent paid by Ms Peters ($15,654.26) and the rent that Ms Peters should have paid ($27,200) during the period she was a tenant from at least 22 June 2010 until at least 26 September 2013.

Costs

301    The Registrar contended that the respondents ought to pay the Registrar's costs in accordance with the usual rule. The agreement reached between the Registrar and Mr and Ms Monaghan specified that Mr and Ms Monaghan would pay the Registrar’s costs. Thus, the only issue which remains to be determined concerning costs relates to the case against Ms Peters.

Registrar’s supplementary submissions concerning Ms Peters

302    In closing address, Mr de Jersey handed up some written supplementary submissions in respect of Ms Peters’ case. He addressed that document orally.

303    The supplementary submissions, which primarily related to Ms Peters’ oral evidence, may be summarised as follows.

304    The Registrar submitted that, for the following reasons, the Court should reject Ms Peters’ claim that, because of the steps she took as a director of the Corporation, she had discharged her duties as a director:

(a)    the steps which she took, together with those taken by LSRE, did not yield results and it was obvious to her early in her seven year period of her directorship that her actions were not producing results for the Corporation;

(b)    since she knew from an early point that her efforts to address the problems of the Corporation were ineffective and that there was nothing to suggest that the difficulties she had experienced in rectifying the problems would be overcome, it was incumbent upon her to resign as a director; and

(c)    Ms Peters could not explain why she remained as a director for as long as she did in these circumstances.

305    The Registrar submitted that the Court should find that the reason why Ms Peters did not resign earlier than she did was because “she would have risked losing access to [the Corporation’s] property in which she was residing” and that she would have to find alternative accommodation at higher commercial rates. The Registrar submitted that Ms Peters stayed on as a director because she feared losing the accommodation which was available to her while she was a director of the Corporation, which was to the disadvantage of the Corporation and precluded her property being made available to other indigenous persons in need of accommodation.

306    The Registrar characterised as “hollow” Ms Peters’ description of the ineffective steps she took in response to the problems of rent arrears, excess water charges and damage to the Properties “when the reality of [her] position was that the hopelessness which she says she felt was less important to her than her interest in seeking to remain living in accommodation for which she was paying rental at rates which were far below commercial rental”.

307    The Registrar criticised Ms Peters’ evidence because the consultants to whom she sought to delegate various responsibilities resigned after the Corporation failed to act upon their advice.

308    The Registrar reaffirmed his submission that the nature and extent of Ms Peters’ contravening conduct was serious and, in his submission, she preferred her own personal interests in that:

(a)    she remained in a secure, below market-rental property in breach of the duty she owed to the Corporation and other Indigenous people requiring low cost housing;

(b)    the loss and harm created by Ms Peters’ conduct was real because it denied the opportunity to other Indigenous persons to secure accommodation;

(c)    Ms Peters appreciated that her authority as a director was “neutered” by the Monaghans but she did not resign, which demonstrated “a high degree of carelessness and wilful blindness in her conduct”;

(d)    Ms Peters’ own personal hardship was to be measured against the fact that there were others who were also in hardship who missed out on accommodation because of her choice and failure to investigate whether she had alternative accommodation;

(e)    Ms Peters took no effective steps to rectify the harm caused by her conduct and instead persevered as a director for seven years thereby exacerbating the harm to the Corporation; and

(f)    Ms Peters has shown no contrition and has instead sought to justify her position on the basis that she claimed to have an entitlement to rent a Corporation property because she is Aboriginal.

309    The Registrar also placed particular reliance upon the following observations of Logan J (at first instance) in Registrar of Aboriginal and Torres Strait Islander Corporation v Kerkhoffs [2013] FCA 1445 (Kerkhoffs) at [9]-[11]:

9    The same applies to his institution of the present proceeding. The Registrar has a particularly difficult role to fulfil in this sense. That Parliament has made separate provision, currently by the CATSI Act, but in earlier times by the Aboriginal Councils and Associations Act, reflects a political value judgment that there is a public interest to be served for all Australians in providing for Aboriginal and Torres Strait Islander Australians to be able to have administration of their affairs. A form in which that self-administration was established was by way of corporations under the Aboriginal Councils and Associations Act and latterly under the CATSI Act.

10    A concomitant, though, of that self-administration is that those who hold office in such corporations must nonetheless observe standards of corporate governance which are akin to those who hold office as a director of a corporation established under the Corporations Act 2001 (Cth). In imposing that particular obligation, necessary as it is, particularly where public funds are deployed, the CATSI Act is pregnant with the potential of a clash between conventional expectations of appropriate corporate governance and directors' behaviours and the very real, heartfelt obligations of clan and tribe to a fellow member of a clan or tribe in the Australian Aboriginal and Torres Strait Islander community.

11    This case has, for that reason, a wider importance, given that, again as a matter of deliberate parliamentary value judgment, in addressing the challenges that were presented by the recognition in Mabo v Queensland (No 2) (1992) 175 CLR 1 of native title, the Parliament, via the Native Title Act 1993 (Cth), has in turn created a mechanism whereby native title can be held by prescribed bodies corporate also established under the CATSI Act. What I mean by that is that the behaviours that have become the subject of these proceedings carry with them, in terms of outcome, very real lessons in terms of the difficulties presented by reconciling legitimate expectations as to good corporate governance with equally worthy expectations as to the ability of Australian Aboriginals and Torres Strait Islanders, not to be the subject of paternal supervision, but instead to have a determinative say in matters touching upon their aspirations and lifestyle.

310    The Registrar submitted that Logan J’s observations were to the effect that the duties imposed on a person such as Ms Peters were akin to those imposed by the Corporations Act and, because public funds were deployed, the duties must be discharged.

submissions of the respondents summarised

Mr and Ms Monaghan

311    Mr and Ms Monaghan were represented by separate counsel. Mr Pattenden appeared for Mr Monaghan and Ms Bindon appeared for Ms Monaghan. It is unnecessary to describe the written submissions which were made on behalf of the Monaghans having regard to the agreement which was reached with the Registrar concerning relief in respect of them and the revised statement of agreed facts relating to the Registrar and Mr and Ms Monaghan.

Ms Peters

312    Ms Peters had separate legal representation. Mr Wilson of counsel appeared on her behalf. The written and oral submissions which were made on Ms Peters’ behalf are relevantly summarised in the section below relating to her personally.

consideration and determination

Mr and Ms Monaghan

313    Having regard to the contents of the revised statement of agreed facts and proposed agreed orders regarding relief against the Monaghans, it is convenient to deal with their matters separately from the case brought against Ms Peters.

314    As noted above, neither Mr nor Ms Monahan was cross-examined. Having regard to the revised statement of agreed facts and to the other relevant evidence before the Court, I am satisfied that all the proposed orders as revised, relating to Mr and Ms Monaghan, should be made.

315    I shall briefly state my reasons for that conclusion.

316    As is evident from the revised statement of agreed facts, Mr and Ms Monaghan admit that they engaged in the conduct which is set out in [159] above and that this conduct was in breach of their respective duties of care and diligence and the separate duty not to improperly use their positions (see [161] and [163] above). They further admit that, by their respective conduct, they gained an advantage for each of themselves in the manner described in [164] above. They also admit that, by that conduct, they failed in their duty to comply with Pts 7-2 and 7-3 of the CATSI Act. Finally, they both admit that their conduct as described in [159] constituted contraventions of various civil penalty provisions as specified in [168] above.

Declaratory orders

317    As noted above, the Court is obliged to make a declaration of contravention if it is satisfied that a person has contravened a civil penalty provision which includes ss 265-1(1) and 265-10(1) (see s 386-1(1)).

318    Mr and Ms Monaghan have admitted that they contravened civil penalty provisions. I am satisfied that the proposed declaratory orders meet the requirements of s 363-1(2) and are framed with sufficient precision and particularity to reflect the relevant contraventions Matcham at [26]-[31] and Murray at [140]).

319    The Court will make declarations of contravention in respect of both Mr and Ms Monaghan.

Disqualification orders

320    The Registrar and the Monaghans have reached an agreement that there should be disqualification orders which prevent them from managing a CATSI Act corporation for a period of five years. I am satisfied that such orders are appropriate in the Monaghans’ circumstances and having regard to the general principles set out above.

Pecuniary penalties

321    As noted above, the Court is empowered to impose a pecuniary penalty where a declaration of contravention of a civil penalty provision has been 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)).

322    The relevant admissions made by Mr and Ms Monaghan are summarised in [168] above. In the light of those admissions, the preconditions for the imposition of a pecuniary penalty are met.

323    None of the respondents (including Ms Peters) contested the Registrar’s summary of the relevant principles to apply as a guide in assessing the penalties for multiple contraventions and the central object of deterrence. It is desirable, however, if I express briefly my own views on the relevant principles having regard to the particular circumstances here.

324    It is well settled that principles of sentencing developed in the criminal law apply to a civil penalty regime such as that created by the CATSI Act (Matcham at [124]-[128]). As the High Court emphasised in Markarian v The Queen [2005] HCA 25; 228 CLR 357 (Markarian) at [27]-[31], [66]-[68], in exercising the discretion to impose a penalty, the Court must weigh all the relevant circumstances in determining an appropriate penalty which reflects the Court’s view of the seriousness of the offence. This is commonly described as “instinctive synthesis”, which requires account to be taken of the maximum penalty fixed by the statute so as to compare the worst possible case with that which is before the Court, while also recognising that the exercise is not a mathematical one and there is no single correct penalty.

Multiple contraventions

325    It is important to avoid an offender being punished twice for what is essentially the same conduct where there is an interrelationship between the legal and factual elements of two or more contraventions (Matcham at [199] and Murray at [146]).

326    The proceedings here relate to multiple acts and conduct which, Mr and Ms Monaghan now admit, involved contraventions of various provisions of the CATSI Act over most if not all of the Relevant Period. The following three principles concerning multiple contraventions are relevant (Matcham at [194]-[198] and Murray at [147]):

(a)    where the same wrongful conduct gives rise to the simultaneous breach of multiple provisions it is appropriate to impose a penalty for only the most serious of the multiple offences;

(b)    although separate penalties should ordinarily be imposed in respect of separate contraventions which arise from separate acts, it may be appropriate in some cases to treat the contraventions as part of a single “course of conduct”; and

(c)    the totality principle requires that there be a final check of the cumulative effect of proposed penalties to ensure that the total or aggregate is not unjust or disproportionate to the circumstances of the case and, where appropriate, the Court may alter the final penalties to ensure that they are just and appropriate. Where such an adjustment is made, in a civil penalty context, by first ascertaining the penalty that would be appropriate for each contravention and then, if necessary, reducing those amounts by reference to the principle of totality, as opposed to determining an overall penalty and then dividing it among the various contraventions (Murray at [147]).

327    It is to be noted that, although the three principles are related, they must not be conflated because they are separate and distinct (Murray at [148]). It is also essential that the principles be applied in a way which makes clear to the parties, the public, other potential contraveners and courts in future cases, how and why the penalties were imposed (Murray at [148]).

328    Significantly, in considering whether a pecuniary penalty is appropriate the Court must also have regard to any compensation and disqualification orders that are sought and granted (Murray at [149]). In assessing the appropriate amount of a pecuniary penalty it is relevant to consider the consequences of an associated disqualification order. In particular, if a disqualification order has significant consequences, this may operate as a factor in favour of a lesser penalty (see Australian Securities and Investments Commission v Beekink [2007] FCAFC 7; 238 ALR 595 (Beekink) at [116] and Kerkhoffs at [17] to [21]). The same approach should apply where the determination of a pecuniary penalty occurs in the context of the making not only a disqualification order but also an order for compensation (Murray at [149]).

Principles for determining appropriate pecuniary penalty for each contravention

329    The relevant principles were again helpfully identified and discussed by Gordon J in Murray at [154]-[167]. They may be summarised as follows.

330    First, careful attention needs to be given to the fact that there is statutory maximum penalty of $200,000 for each contravention, however, it is rarely appropriate for a Court to start with the maximum penalty and proceed by making a proportional deduction from that maximum (Markarian at [31]).

331    Secondly, the “single course of conduct” principle does not convert the maximum statutory penalty for one contravention into the maximum penalty for the entire course of conduct.

332    Thirdly, the principal purpose of imposing a pecuniary penalty under the CATSI Act 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. Deterrence is not simply one of several factors to be considered in determining the appropriate penalty; rather, it is the reason for having regard to such factors in the first place, which is to assess a penalty of appropriate deterrence value. Nevertheless, there is an overriding qualification concerning the role of deterrence in this context, namely that the amount of the penalty should be no greater than is necessary to achieve the objective of deterrences and oppression should be avoided.

333    Fourthly, imposing substantial penalties in a case such as the present provides a strong incentive to other directors and officers of corporations registered under the CATSI Act to take care to understand and ensure compliance with all relevant legal requirements (noting also the matters identified by Jacobson J in Matcham at [235]-[244]).

334    Fifthly, relevant to specific deterrence in this case is the extent to which the respondents have acknowledged their wrong doing and the extent of their cooperation. Also relevant is their capacity to pay and the fact that disqualification and other orders are made (Murray at [161]). In both Matcham and Murray, it was found that specific deterrence was sufficiently accommodated by the making of a disqualification order.

335    Sixthly, in circumstances where there is no prescribed set of relevant matters to be taken into account in assessing a pecuniary penalty under the CATSI Act, I accept that it is appropriate to have regard to the ‘French factors’, albeit some modification may be required to avoid them having a rigid application. It is necessary that all relevant factors be considered as part of an “instinctive synthesis”.

336    Seventhly, and in my view, significantly, the consequences of an associated disqualification order is a relevant matter (see Murray at [166]).

337    Eighthly, the Santow principles are a helpful guide to the exercise of the disqualification power under s 279-15(1) of the CATSI Act. In Murray, Gordon J described the Santow principles at [220]:

(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.

338    Having regard to all these matters, I am satisfied that the Court should make the proposed orders agreed by Mr and Ms Monaghan and the Registrar concerning pecuniary penalties.

Compensation orders

339    As noted above, the Registrar did not press his original application for compensation orders in respect of either Mr or Ms Monaghan.

Costs

340    The agreed proposed orders relating to the Monaghans included an order that they pay the applicant’s costs of the proceeding. After the matter was raised by the Court, the Registrar also agreed not to enforce any costs order without the Court’s leave.

341    I am willing to make those orders.

Ms Peters

342    As has been emphasised, Ms Peters was not a party to the amendments to the revised statement of agreed facts. As was her right and entitlement, and presumably acting on legal advice, she declined to admit many of the matters which were ultimately admitted by the Monaghans.

343    Accordingly, it is necessary to make relevant findings in respect of the matters which the Registrar claims constitute conduct on her part which contravened various provisions of the CATSI Act. It is convenient to address those matters by reference to the various contraventions alleged by the Registrar against Ms Peters.

Duty of care and diligence

344    Ms Peters acknowledged that as a director, she owed the Corporation a duty of care under both the general law and statute, but she did not admit that her conduct amounted to a breach of that duty.

345    At one point, Mr Wilson, Ms Peters’ counsel, appeared to submit that, for the purposes of s 265-1 and, in particular, the “reasonable person” aspect of that provision, Ms Peters’ personal lack of experience and knowledge concerning the role of a director should be attributed to the reasonable person. He cited [165] of Middleton J’s judgment in Australian Securities and Investments Commission v Healey [2011] FCA 717; 196 FCR 291 in support of that submission. Any such submission should be rejected. It derives no support from that judgment. Indeed, Middleton J’s reasons are to the contrary, as is reflected in the following extracts ([172] and [173]):

172    It is clear that an objective standard of care is applicable to both executive and non-executive directors.

173    This approach to the standard of care has been adopted by the case law. An example of such is found in Gamble v Hoffman (1997) 24 ACSR 369. The court refused to subjectify the standard of care to (namely, in that case) the standard of a person who “left school at the age of 14 years, has no tertiary qualifications and has spent his life … essentially as a fruit and vegetable market gardener”. The court, at [373], rejected the assertion that:

[S]ubjective considerations of that nature and extent should affect the minimum content of the duty or standard of care required of the respondents in this matter … …

…

[T]he ambit of the duty and the standard of care depend on particular circumstances. However, the test is essentially objective that is did the officer exercise the degree of care and diligence that a reasonable person in a like position in a corporation would exercise in the corporation's circumstances? I doubt whether the factors which Mr Bates advanced would justify a lower standard of care.

346    I do accept, however, Mr Wilson’s separate submission that, in assessing for the purposes of s 265-1 what a reasonable person in Ms Peters’ shoes would have done, some (but not exclusive) regard can be had to the actions of a person such as Mr Lock. In substance, Mr Lock replaced Ms Peters as a director. He became the Chairperson. Mr Lock referred to discussions which he and Ms Peters had as part of the handover. As noted above, Mr Lock has a strong background in directing and managing Aboriginal corporations. He had experience with Indigenous housing co-operatives and is a former director of Aboriginal Housing New South Wales. He is also a former Chairperson of ATSIC. Mr Lock was called as a witness for the Registrar. I found him to be an impressive witness.

347    Mr Lock took several steps while he was a director and Chairperson of the Corporation to try and address the problems which continued to confront the Corporation in 2013. Some of the steps he initiated were similar to those taken earlier by Ms Peters herself, including:

(a)    taking steps to collect outstanding rents;

(b)    actively encouraging the Corporation’s tenants to attend meetings; and

(c)    meeting with relevant public servants to explore possible funding sources and to discuss selling some of the Corporation’s Properties to pay for maintenance.

348    As noted above, Mr Lock gave evidence that Ms Peters was a “one horse band”. In his view, she tried very hard to run the organisation and “to keep it on its tracks”, but those efforts were frustrated by what Mr Lock described as a lack of “internal structure” and Ms Peters being “forced to accept one person’s voice”. I infer that Mr Lock was referring to either Mr or Ms Monaghan and to the “family connections” which created a formidable obstacle to change. In his affidavit, Mr Lock described Mr Monaghan as the prominent Indigenous elder at the Corporation. Mr Lock resigned as a director and Chairperson of the Corporation after serving in those positions for less than a year. It is evident that, during his term, Mr Lock encountered many of the same difficulties and obstacles as had Ms Peters. Mr Lock said that he resigned for personal reasons, namely health and financial reasons and that is reflected in his letter of resignation.

349    The Registrar’s submission that Ms Peters failed to implement advice from sources such as LSRE cannot be fully accepted. Ms Peters instructed LSRE to write formal letters to tenants regarding the risk of eviction for non-payment of rents (see further [355] below). These letters came to nothing, partly because of the “family connections” problem, but also because Ms Peters said that the Corporation lacked the funds to take the tenants to the relevant tribunal to have them evicted. Ms Peters was also involved in various steps which were taken to address the problems relating to maintenance of the Properties and excess water usage (see further below).

350    I do not accept any suggestion that Ms Peters’ tenure should be assessed against that of Mr Lock, who resigned after less than a year as Chairperson. As noted above, the reasons for his resignation were unrelated to any frustration he may have felt at the time with the Corporation’s operations. I reject the Registrar’s submission that Ms Peters should have resigned her directorship earlier than she did. Despite the formidable obstacles and frustrations she experienced, Ms Peters persevered as a director of the Corporation for seven years, many of those years being either Chairperson or Deputy Chairperson. I find that she did so not out of self-interest (as claimed by the Registrar), but rather because she hoped (as it turned out, in vain) that she might be able to bring about constructive change. Having regard to Ms Peters’ evidence and demeanour in the witness box, it may comfortably be inferred that part of her motivation for continuing to be a director for as long as she did was because of her desire to be a balance to the “family connections” problems with the Corporation’s operations.

351    In assessing Ms Peters’ conduct as a director against the benchmark of a reasonable person in her shoes, it is important to pay close attention to the circumstances which confronted her at the time, particularly the difficulties presented by the “family connections” to which Mr Lock alluded, as did Ms Peters herself. In particular, the matter needs to be viewed through the prism of the circumstances which existed at the relevant time and not with the benefit of hindsight. The standard imposed by s 265-1 of the CATSI Act does not capture mere mistakes or errors of judgment, as opposed to negligent or reckless conduct. The relevant principles (albeit by reference to s 180(1) of the Corporations Act, which is in similar terms to s 265-1 of the CATSI Act) were helpfully summarised by Austin J in Australian Securities and Investments Commission v Rich [2009] NSWSC 1229; 75 ACSR 1 at [7242]:

The statutory issue under s 180(1) is not whether the defendants made mistakes in the process of financial forecasting, and a fortiori, it is not whether they formed opinions different from the opinions of ASIC or even of the court. The statutory issue is whether they failed to meet the standard of care and diligence that the statute lays down. The statute requires the court to apply a standard defined in terms of the degree of care and diligence that a reasonable person would exercise, taking into account the corporation's circumstances, the offices occupied by the defendants and their responsibilities within the corporation. That requires the defendants' conduct to be assessed with close regard to the circumstances existing at the relevant time, without the benefit of hindsight, and with the distinction between negligence and mistakes or errors of judgment firmly in mind. If the impugned conduct is found to be a mere error of judgment, then the statutory standard under s 180(1) is not contravened and it is unnecessary to advert to the special business judgment rule in s 180(2). In the view that I have taken of it, explained below, s 180(2) provides a defence in a case where the impugned conduct goes beyond a mere error of judgment, and would contravene the statutory standard but for the defence (cf ASR [351-2]).

352    The Registrar asserted that Ms Peters breached her duty of care because she did not take steps to “ensure” properties were maintained to an adequate standard of living and to “ensure” that there were sufficient funds to meet all of the Corporation’s costs and expenses. In particular, the Registrar asserted that she:

(a)    failed to ensure adequate rent was charged;

(b)    did not require the tenants to pay their rent;

(c)    did not require tenants to pay for excess water consumption charges; and

(d)    did not ensure the properties were kept in a reasonable state of repair.

353    I accept Ms Peters’ submission that the relevant test for fulfilment of the duty of care and diligence imposed by s 265-1 is the standard expected of a “reasonable person”, if that reasonable person were in Ms Peters’ position and was operating in the Corporation’s circumstances. That standard does not turn on whether such a reasonable person would “ensure” that adequate rent was paid. In my view, the Registrar misconceived the relevant standard. A reasonable person acting in Ms Peters’ position would have encountered the same obstacles which confronted her in seeking to have tenants pay outstanding rent, namely the “family connections” obstacle, as well as the lack of funds available to the Corporation to bring proceedings to evict tenants.

354    When Ms Peters became a director of the Corporation in 2005, there was a history of tenants failing to pay rent, a failure on the part of the Corporation to keep the Properties in good order (largely because of a lack of funding) and a failure on the part of tenants to attend relevant meetings.

355    These problems continued after Ms Peters became a director, despite the steps she took to have these problems addressed. I accept Ms Peters’ evidence that these steps included instructing LSRE to draft letters of demand to tenants. Although it is not clear from the evidence as to who initiated the sending of letters of demand in early 2011 and early 2012, the terms of two separate letters, which were sent out by Ms Jennifer Scheele at those times, are consistent with Ms Peters’ evidence. In those letters, the tenant in default of rent at the Wanniassa property was told that if he wished to remain living there he needed to make rent payments and that this could be done via Centrelink. He was also told that the matter was urgent because non-payment badly affected other Corporation tenants. He was warned that a notice to vacate could be issued and that the Sherriff would then become involved. He was further advised that if he had to find other accommodation, this would cost him around $750 or $800 per fortnight for a similar home. Ms Peters personally called upon various tenants who were in default and provided them with Centrelink forms which would enable them to arrange for the rent to be paid automatically from Centrelink benefits. I also note that in mid-2010, when Ms Peters was a director and Chairperson of the Corporation, the rent was increased from $270.00 to $320.00 per fortnight. I accept Ms Peters’ evidence of the other steps she took to raise funds to pay for maintenance repairs, including the discussion she had with both Commonwealth and ACT officials as well as the funding she sought from the women’s refuge. I also accept her evidence of her involvement in putting in place arrangements for the Corporation to pay the debt owing to the ATO.

356    The following documentary evidence reveals the following multiple steps and actions which were taken by or at least involved Ms Peters with a view to addressing the problems confronting the Corporation, including unpaid rent and water usage charges.

(a)    At the annual general meeting held on 28 January 2010, Ms Peters is recorded as having secured on a pro bono basis Mr Lo Pilato’s services “to continue supporting the Corporation with our BAS statements”, and that Mr Lo Pilato had told Ms Peters that he would contact the ATO to enquire about the Corporation’s outstanding tax bill, which would present a saving of $1000 per month for the Corporation.

(b)    At the board meeting held on 21 February 2011, one of the items on the agenda was “What to do about non payment of rent on several SHAC houses”. Handwritten notes on the agenda paper refer to Ms Peters having sent a letter with a request for maintenance concerning an oven and a hopper bin at one of the Properties. There is another note which records all who were present agreeing that tenants should pay for water.

(c)    The minutes of the meeting held on 21 March 2011 (at which Ms Peters was present) record those present agreeing that another tenant should be found for the property at 118 Chippendale Circuit, Theodore if rent was not being paid by the tenant. The minutes further record that there was a discussion regarding rent payments and that, in view of the lack of payment by some tenants still being a problem, “it was agreed that all tenants must pay on a regular basis or move out”.

(d)    The minutes of the meeting held on 23 May 2011, at which Ms Peters is recorded as being present, there was a further discussion regarding rent payments and that the lack of payment by some tenants was an ongoing issue. The minutes record Ms Peters as advising the meeting that “due to unemployment, after June she may have a lapse in rental payments for up to 12 weeks until the centrelink [sic] payments are available to her”. The minutes also record all members who were present agreeing that future repairs on the Properties would only be paid by the Corporation “if tenants attend meetings and present the repairs in writing before any repairs are done” and that new tenancy agreements would be sent to all tenants so that they would be aware of what repair costs will be covered by the Corporation as opposed to the tenants themselves.

(e)    The minutes of the Annual General Meeting held on 23 May 2011, at which Ms Peters is recorded as being present, state that Ms Peters was appointed as the Deputy Chairperson and that Mr Lo Pilato continued to assist the Corporation on a pro bono basis.

(f)    The minutes of the meeting held on 11 July 2011 do not record Ms Peters as being present but do state that Ms Peters had given notification that she was not currently paying rent and that friends were staying with her and she would ask them to pay rent.

(g)    The minutes of the meeting held on 8 August 2011 (which were not attended by Ms Peters) record that Ms Peters had told Ms Jennifer Scheele that Ms Peters was not currently paying rent and that the two people staying with her at 6 Rolph Place were moving out and that Ms Peters expected to pay rent from September.