FEDERAL COURT OF AUSTRALIA

Registrar of Aboriginal and Torres Strait Islander Corporations v Taylor (No 2) [2018] FCA 1234

ORDERS

THE COURT DECLARES THAT:

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

1.    Between 1 July 2011 and 18 November 2014, the second respondent contravened:

(a)    section 265-1 of the CATSI Act, by failing to exercise his powers and discharge his duties as an officer of Murchison Region Aboriginal Corporation ICN 500 (Corporation) with the degree of care and diligence that a reasonable person would exercise if that reasonable person:

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

(ii)    occupied the office held by, and had the same responsibilities within that corporation as the second respondent; and

(b)    section 265-5 of the CATSI Act, by failing to exercise his powers and discharge his duties as an officer of the Corporation:

(i)    in good faith in the best interests of the Corporation; and

(ii)    for a proper purpose; and

(c)    section 265-10 of the CATSI Act, as an officer and/or employee of the Corporation, by improperly using his position to:

(i)    gain an advantage for himself or someone else; or

(ii)    cause detriment to the Corporation,

by causing the Corporation to pay him money in circumstances where:

(a)    the payments did not advance the objects of the Corporation;

(b)    the payments were not approved by the directors of the Corporation at a directors’ meeting or by members of the Corporation at a general meeting;

(c)    the second respondent treated the payments as unsecured and interest free loans, repayable to the Corporation by 30 June of each financial year that the amounts were paid to the second respondent;

(d)    the amounts paid to the second respondent were not accurately and properly documented in the Corporation’s written financial records; and

(e)    from at least 22 June 2013, the second respondent was aware that the Department of Housing proposed to and did in fact discontinue funding to the Corporation on and from 1 July 2014.

THE COURT ORDERS THAT:

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

2.    Pursuant to s 386-15(1) of the CATSI Act, the second respondent pay to the Corporation an amount of $207,956.75 by way of compensation.

3.    Pursuant to s 386-10(1) of the CATSI Act, the second respondent pay a pecuniary penalty in the amount of $100,000.

4.    Pursuant to s 581-20(2) of the CATSI Act, the second respondent pay the applicant’s costs of the proceeding.

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

REASONS FOR JUDGMENT

BARKER J:

1    The Registrar of Aboriginal and Torres Strait Island Corporations alleges that Mr Abul Fazad Mohammed Abdus Shahid, the second respondent, contravened a number of provisions of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) (CATSI Act) when an officer of Murchison Region Aboriginal Corporation ICN 500 (Aboriginal corporation) in the period July 2011 to November 2014.

2    The Registrar now seeks declarations of contraventions and consequential orders against Mr Shahid.

3    Mr Shahid admits the contraventions alleged and that the Registrar is entitled to seek orders in the terms referred to below.

4    The parties have, in consequence of the admissions made by Mr Shahid, filed a minute of consent orders in the proceeding.

5    By the minute of consent orders, filed 11 June 2018, the Registrar and Mr Shahid agree that the Court should make the following declarations and orders:

THE COURT DECLARES THAT:

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

1.     Between 1 July 2011 and 18 November 2014, the Second Respondent contravened:

(a)     s 265-1 of the CATSI Act, by failing to exercise his powers and discharge his duties as an officer of Murchison Region Aboriginal Corporation ICN 500 (Corporation) with the degree of care and diligence that a reasonable person would exercise if that reasonable person:

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

(ii)     occupied the office held by, and had the same responsibilities within that corporation as the Second Respondent; and

(b)     s 265-5 of the CATSI Act, by failing to exercise his powers and discharge his duties as an officer of the Corporation:

(i)     in good faith in the best interests of the Corporation; and

(ii)     for a proper purpose; and

(c)     s 265-10 of the CATSI Act, as an officer and/or employee of the Corporation, by improperly using his position to:

(i)    gain an advantage for himself or someone else; or

(ii)     cause detriment to the Corporation,

by causing the Corporation to pay him money in circumstances where:

(a)     the payments did not advance the objects of the Corporation;

(b)     the payments were not approved by the directors of the Corporation at a directors’ meeting or by members of the Corporation at a general meeting;

(c)     the Second Respondent treated the payments as unsecured and interest free loans, repayable to the Corporation by 30 June of each financial year that the amounts were paid to the Second Respondent;

(d)     the amounts paid to the Second Respondent were not accurately and properly documented in the Corporation’s written financial records; and

(e)     from at least 22 June 2013, the Second Respondent was aware that the Department of Housing proposed to and did in fact discontinue funding to the Corporation on and from 1 July 2014.

BY CONSENT THE COURT ORDERS THAT:

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

2.     Pursuant to s 386-15(1) of the CATSI Act, the Second Respondent pay to the Corporation an amount of $207,956.75 by way of compensation.

3.     Pursuant to s 386-10(1) of the CATSI Act, the Second Respondent pay a pecuniary penalty in the amount of $100,000.

4.     Pursuant to s 581-20(2) of the CATSI Act, the Second Respondent pay the Applicant’s costs of the proceeding.

6    The parties understand that their agreement is subject to the Court exercising judgement as to the appropriateness of such relief, having regard to the facts and circumstances of the case and, in particular, the gravity of the contravening conduct of Mr Shahid.

7    The terms of this judgment below have regard to that relevant conduct. I conclude that in all the circumstances the declarations and orders proposed are appropriate and should be made.

Agreed facts

8    By a statement of agreed facts filed by the parties on 11 June 2018, the Registrar and Mr Shahid agree that the following facts are relevant to the contravening conduct.

The Registrar

1.     The Applicant, the Registrar of Aboriginal and Torres Strait Islander Corporations (Registrar), was appointed pursuant to s 653-1 of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) (CATSI Act).

2.     The Registrar is entitled to commence these proceedings and seek relief pursuant to ss 279-15, 386-1, 386-10, 386-15 and 386-20 of the CATSI Act.

The Corporation

3.     Murchison Region Aboriginal Corporation ICN 500 (Corporation) was incorporated on 20 November 1986 and is registered under the CATSI Act.

4.     On 20 January 2017, the Corporation was certified as being registered under the CATSI Act.

5.     At all times during the period from 1 July 2011 until 18 November 2014 (Relevant Period), the Corporation:

(a)     operated as a not-for-profit entity in Geraldton, Western Australia; and

(b)     was registered as a charity (public benevolent institution).

The Corporation’s rules

6.     During the Relevant Period, the Corporation had a rule book (Rule Book) that established the internal governance, rules and objectives of the Corporation.

The First Respondent

7.     From 25 November 2002 until his resignation on 18 November 2014, the First Respondent was employed by the Corporation as the executive officer and received an annual salary from the Corporation.

8.     In addition to his salary, the First Respondent resided in a property owned by the Corporation, being the property situated at 259 Eighth Street, Wonthella (Geraldton), which the First Respondent is now aware was rent free from 24 June 2005 until 28 January 2015.

9.     The First Respondent was one of the individuals authorised by the Corporation to sign cheques on behalf of the Corporation.

10.     The First Respondent was an officer of the Corporation within the meaning of s 683-1(3)(b) of the CATSI Act during the Relevant Period.

The Second Respondent

11.    From 11 December 2002 until his resignation effective on 18 November 2014, the Second Respondent was employed by the Corporation as the finance officer and received an annual salary from the Corporation.

12.    The Second Respondent reported to the First Respondent.

13.    The duties of the Second Respondent included keeping written financial records of the Corporation that correctly recorded and explained its transactions and financial position and performance, and enabled true and fair financial reports to be prepared and audited.

14.    The Second Respondent was authorised by the Corporation to process all internet payments on behalf of the Corporation.

15.    The Second Respondent:

(a)    was the only person at the Corporation with full access to the Corporation’s bank accounts though CommBiz, the Commonwealth Bank of Australia’s online banking platform; and

(b)    held the only internet token, which was required to process payments through CommBiz.

16.    In addition to his salary, the Second Respondent resided in a property owned by the Corporation, being the property situated at 2 Paula Maslen Place, Mount Tarcoola (Geraldton), rent free from 26 June 2006 until 18 November 2014.

17.    The Second Respondent was an officer of the Corporation within the meaning of s 683-1(3)(b) of the CATSI Act during the Relevant Period.

Respondents’ conduct during the Relevant Period

Funds borrowed by the Second Respondent

18.     In the 2011/2012 financial year, the Second Respondent caused the Corporation to pay him money on at least 24 occasions, which totalled $268,639.31.

19.     In the 2012/2013 financial year, the Second Respondent caused the Corporation to pay him money on at least 40 occasions, which totalled $399,012.39.

20.     In the 2013/2014 financial year, the Second Respondent caused the Corporation to pay him money on at least 36 occasions, which totalled $445,575.64.

21.     In the 2014/2015 financial year, the Second Respondent caused the Corporation to pay him money on at least 17 occasions, which totalled $258,186.21.

22.     The Second Respondent caused the Corporation to pay the amounts pleaded above in circumstances where:

(a)     the payments did not advance the objects of the Corporation;

(b)     the payments were not approved by the directors of the Corporation at a directors’ meeting or by members of the Corporation at a general meeting;

(c)     the Second Respondent treated the payments as unsecured and interest free loans, repayable to the Corporation by 30 June of each financial year that the amounts were paid to the Second Respondent;

(d)     the amounts paid to the Second Respondent were not accurately and properly documented in the Corporation’s written financial records; and

(e)     from at least 22 June 2013, the Second Respondent was aware that the Department of Housing proposed to and did in fact discontinue funding to the Corporation on and from 1 July 2014.

23.     Throughout the Relevant Period, the Second Respondent made repayments to the Corporation in the total amount of $1,159,902.25, comprising:

(a)     $1,130,817.25 of funds transfers; and

(b)     $29,085.00 being payments by way of deduction from his wages.

24.     As at 18 November 2014, the Corporation owed the Second Respondent an amount of $3,554.55 in respect of various employee entitlements, calculated as follows:

(a)     payment in lieu of two weeks’ notice - $2,232.15 (credit);

(b)     payment of pro rata long service leave - $2,204.15 (credit); and

(c)     annual leave liability (excess annual leave paid to the Second Respondent and repayable to the Corporation) - $881.75 (debit).

25.     By reason of the matters pleaded above, the Second Respondent owes to the Corporation an amount of $207,956.75, being the total of the moneys paid to him in the amount of $1,371,413.55 less repayments of $1,159,902.25 and less employee entitlements of $3,554.55.

26.     The amount of $207,956.75 owing by the Second Respondent remains outstanding and is due and payable to the Corporation.

Detriment to the Corporation

27.    The loans pleaded at paragraphs 18 to 21 above, together with the Second Respondent’s failure to repay the balances owing pleaded at paragraph above caused detriment to the Corporation in that, as determined by the auditor of the Corporation and the external examiner appointed by the Applicant on 3 November 2014 to undertake a review of the books of the Corporation:

(a)    almost all available cash of the Corporation was being depleted by the First and Second Respondents by way of their staff loans, and this resulted in significant cash flow issues for the Corporation;

(b)    the Corporation’s ability to fulfil its objectives, including to provide improved or more housing to the Aboriginal people of the region was compromised in that the Corporation did not have the funds available to purchase more housing or improve its existing housing assets; and

(c)    in the financial year ended 30 June 2014, the Corporation suffered a net loss of approximately $18,695, and for the period ended 31 October 2014 the Corporation suffered a net loss of approximately $195,483.

Contraventions of the CATSI Act

28.    As an officer of the Corporation, the Second Respondent owed duties to the Corporation, including:

(a)    pursuant to s 265-1 of the CATSI Act, being to exercise his powers and discharge his duties with the degree of care and diligence that a reasonable person would exercise if that reasonable person:

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

(ii)    occupied the office held by, and had the same responsibilities within the Corporation as, the Second respondent; and

(b)    pursuant to s 265-5 of the CATSI Act, being to exercise his powers and discharge his duties:

(i)    in good faith in the best interests of the Corporation; and

(ii)    for a proper purpose; and

(c)    pursuant to s 265-10 of the CATSI Act, being not to improperly use his position to:

(i)    gain an advantage for himself or someone else; or

(ii)    cause detriment to the Corporation.

29.    The Second Respondent has contravened:

(a)    s 265-1 of the CATSI Act by failing to exercise his powers and discharge his duties as an officer of the Corporation with the degree of care and diligence that a reasonable person would exercise if that reasonable person:

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

(ii)    occupied the office held by, and had the same responsibilities within that corporation as the Second Respondent; and

(b)    s 265-5 of the CATSI Act by failing to exercise his powers and discharge his duties as an officer of the Corporation:

(i)    in good faith in the best interests of the Corporation; and

(ii)    for a proper purpose; and

(c)    s 265-10 of the CATSI Act, as an officer and/or employee of the Corporation, by improperly using his position to:

(i)    gain an advantage for himself or someone else; or

(ii)    cause detriment to the Corporation,

by causing the Corporation to pay him money in circumstances where:

(a)    the payments did not advance the objects of the Corporation;

(b)    the payments were not approved by the directors of the Corporation at a directors’ meeting or by members of the Corporation at a general meeting;

(c)    the Second Respondent treated the payments as unsecured and interest free loans, repayable to the Corporation by 30 June of each financial year that the amounts were paid to the Second Respondent;

(d)    the amounts paid to the Second Respondent were not accurately and properly documented in the Corporation’s written financial records; and

(e)    from at least 22 June 2013, the Second Respondent was aware that the Department of Housing proposed to and did in fact discontinue funding to the Corporation on and from 1 July 2014.

30.     The contraventions pleaded in paragraph 29:

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

(b)     materially prejudiced the ability of the Corporation to pay creditors, meet expenses and compromised its cash resources;

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

(d)     have caused damage to the Corporation.

Penalties - Second Respondent

30.    The Applicant and the Second Respondent submit that it is appropriate for this Honourable Court to make the declarations of the contraventions in respect of the Second Respondent as set out … above pursuant to s 386-1(1) of the CATSI Act.

31.    The Applicant and the Second Respondent further submit that the following orders in respect of the Second Respondent are appropriate and justified in all of the relevant circumstances:

(a)    pursuant to s 279-15(1) of the CATSI Act, an order disqualifying the Second Respondent from managing Aboriginal and Torres Strait Islander corporations for a period of seven (7) years;

(b)    pursuant to s 386-15(1) of the CATSI Act, an order that the Second Respondent pay to the Corporation an amount of $20,7956.75 plus interest by way of compensation;

(c)    pursuant to s 386-10(1) of the CATSI Act, an order that the Second Respondent pay a pecuniary penalty in the amount of $100,000; and

(d)    pursuant to s 581-20(2) of the CATSI Act, an order that the Second Respondent pay the Applicant’s costs of the proceeding.

The parties’ submissions

Care and diligence – contravention of s 265-1 of the CATSI Act

9    Section 265-1 of the CATSI Act (equivalent to s 180 of the Corporations Act 2001 (Cth)) requires a director or other officer of an Aboriginal and Torres Strait Islander corporation 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 Aboriginal corporation’s circumstances and occupied the office held by, and had the same responsibilities within the Aboriginal corporation as, the director or officer.

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

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

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

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

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

11    The Registrar submits that, in the circumstances of this case, Mr Shahid did not exercise his powers and discharge his duties with the degree of care and diligence that a reasonable person would exercise if that reasonable person were in his position. Substantial sums of money were paid to Mr Shahid on an unsecured and interest free basis, which were not accurately and properly documented in the Aboriginal corporation’s written financial records. Mr Shahid could not have rationally believed that the exercise of judgement with regard to these payments was in the best interests of the Aboriginal corporation.

12    The Registrar says that Mr Shahid’s conduct only benefitted himself. The Aboriginal corporation received no benefit from the unsecured and interest free staff loans, which were made to its detriment. There was no commercial upside for the Aboriginal corporation taking on the considerable risk that staff loans would not be repaid. The adverse consequences of non-repayment to the Aboriginal corporation were more acute after the Department of Housing’s decision to discontinue funding to the Aboriginal corporation on and from 1 July 2014 (a fact known to Mr Shahid from at least 22 June 2013).

13    Mr Shahid’s conduct materially prejudiced the interests of the Aboriginal corporation and/or the interests of its members, being the depletion of available cash resources. It also materially prejudiced the ability of the Aboriginal corporation to fulfil its object and purpose, being to provide suitable housing to disadvantaged Aboriginal and Torres Strait Islander people in the Wards of Gascoyne, Geraldton, Meekatharra, Mullewa or Murchison.

14    The conduct of Mr Shahid is a breach of s 265-1 of the CATSI Act.

15    Mr Shahid accepts that his conduct in receiving loans from the Aboriginal corporation contravenes s 265-1 of the CATSI Act as it failed to meet the standard in s 265-1(2) of the CATSI Act. The conduct personally benefitted him with no benefit to the Aboriginal corporation and it could not be said that he discharged his duties with the degree of care and diligence of a reasonable person.

Good faith – contravention of s 265-5 of the CATSI Act

16    The principles applicable to determining whether officers have acted for an improper purpose were summarised by Ipp J in Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187 at 218, where his Honour said:

    fiduciary powers granted to directors are to be exercised for the purpose for which they were given, not for collateral purposes;

    it must be shown that the substantial purpose of the directors was improper or collateral to their duties as directors. The issue is not whether business decisions were good or bad; it is whether directors acted in breach of their fiduciary duties;

    honest or altruistic behaviour does not prevent a finding of improper conduct; whether acts were performed for the benefit of the corporation is to be objectively determined; and

    the Court must determine whether, but for the improper or collateral purpose, the directors would have performed the act in dispute.

17    The Registrar submits that, on no view could the conduct of Mr Shahid referred to in the declarations of contravention particularised above be an exercise of his powers in good faith for a proper purpose. The payments did not advance the objects of the Aboriginal corporation who received no benefit from the unsecured and interest free staff loans to Mr Shahid. Mr Shahid exercised his powers solely to advance his personal interests in circumstances where those interests directly conflicted with the Aboriginal corporations’ interests. The conduct was a breach of s 265-5 of the CATSI Act.

18    Mr Shahid accepts that his conduct in receiving loans from the Aboriginal corporation contravenes section 265-5 of the CATSI Act. His conduct was not in good faith for a proper purpose upon the proper application of the principles in Wheeler. His conduct advanced his own personal interests in conflict with the interests of the Aboriginal corporation.

Improper use of position – contravention of s 265-10 of the CATSI Act

19    The word “improper” as it is used in s 265-10 of the CATSI Act (equivalent to s 182 of the Corporations Act) is not a term of art, and 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, see    Grove v Flavel (1986) 43 SASR 410 at 420.

20    In Chew v The Queen (1992) 173 CLR 626; [1992] HCA 18, Dawson J said that “improper use” creates an objective standard of impropriety and that a director may act improperly with no intention of acting dishonestly or otherwise than in the best interests of the corporation as a whole. Justice Toohey agreed that the question of “improper purpose” is to be assessed objectively. The observations of Dawson and Toohey JJ were expressly approved by Brennan, Deane, Toohey and Gaudron JJ in The Queen v Byrnes (1995) 183 CLR 501; [1995] HCA 1.

21    The objective nature of the inquiry means that it is not correct to require, for a breach of s 265-10 “dishonest and improper intent” by officers “consciously in breach of their duties”. See Robins and Others v Incentive Dynamics Pty Ltd (in liq) and Another (2003) 175 FLR 286 at [55]; [2003] NSWCA 71.

22    The Registrar submits that Mr Shahid improperly used his position to gain an advantage for himself, namely the granting and taking of staff loans, which caused detriment to the Aboriginal corporation. The staff loans resulted in significant cash flow issues for the Aboriginal corporation, and materially prejudiced the ability of the Aboriginal corporation to fulfil its objectives.

23    The Registrar says that the conduct of Mr Shahid was not a proper discharge of his duties, obligations and responsibilities as an officer of the Aboriginal corporation, resulted in an advantage to him and placed the Aboriginal corporation’s financial position at risk. The conduct was in breach of s 265-10 of the CATSI Act.

24    Mr Shahid accepts that his conduct in receiving loans from the Aboriginal corporation was not a proper discharge of his duties and contravenes s 265-10 of the CATSI Act.

Consideration

25    In the related case of Registrar of Aboriginal and Torres Strait Islander Corporations v Taylor [2018] FCA 900, I considered in some detail, the question of relief and the basis for granting it in relation to admitted contraventions of similar provisions of the CATSI Act by the first respondent, Mr Taylor.

26    I refer to and adopt what I said there about such relief and the principles guiding the exercise of judgement in imposing pecuniary penalties and granting the other forms of relief sought here.

27    Specifically, I accept that the following declarations and orders are appropriate:

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

(2)    disqualification orders under s 279-15(1) of the CATSI Act;

(3)    pecuniary penalty orders under s 386-10(1) of the CATSI Act; and

(4)    compensation orders under s 386-15(1) of the CATSI Act.

28    I accept that relief in these terms responds to the contraventions in the following appropriate ways:

(1)    The declarations send a clear message as to exactly what the contraventions in this case are.

(2)    The disqualification orders operate as protective measures to protect Aboriginal corporations from future harm.

(3)    The pecuniary penalties provide a measure of both general and specific deterrence so that others who might be in a similar position of employment to that of Mr Shahid are deterred from engaging in such conduct in the future.

(4)    The compensation order suggests to some extent the significant harm suffered by the Aboriginal corporation in this instance.

29    It is important that all persons subject to the obligation imposed by the CATSI Act in the management and operation of Aboriginal corporations are fully aware of their responsibilities and are not under any misapprehension that the revenue, assets and property of the corporations are, in effect, at their private control.

30    As I say, I have no doubt that the declarations proposed are appropriate.

31    I also consider the period of disqualification for a period of seven years is appropriate, for the following reasons advanced by the Registrar:

(1)    The conduct was deliberate, self-interested, and not as a result of negligence or oversight, and occurred over an extended period of a number of years.

(2)    Mr Shahid was in a position of trust and responsibility and was responsible for keeping written financial records of the Aboriginal corporation. His actions were an abuse of the trust placed in him by the board of directors of the Aboriginal corporation. He held a senior executive position in the Aboriginal corporation with a commensurate salary, and received rent-free accommodation.

(3)    The payments were not approved by the directors of the Aboriginal corporation at a directors’ meeting or by members of the Aboriginal corporation at a general meeting.

(4)    Mr Shahid made the payments in circumstances where he knew, or ought to have known, that:

(a)    the amounts borrowed were large sums and interest free;

(b)    the Aboriginal corporation lost opportunities to invest those funds, such as via a term deposit;

(c)    the Aboriginal corporation could not acquire further housing assets and there was a waiting list for its houses; and

(d)    from at least 22 June 2013, Mr Shahid was aware that the Department of Housing proposed to and did in fact discontinue funding to the Aboriginal corporation on and from 1 July 2014.

32    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).

33    In relation to the question of what pecuniary penalty should be imposed, the parties understand that a statutory maximum penalty of $200,000 applies to each contravention. They also understand that when considering the maximum penalty for the course of conduct it is important to bear in mind that the statutory maximum for one contravention is not converted into a maximum for an entire course of conduct.

34    Rather, the maximum continues to apply to each so that the final total of the penalties imposed may exceed the statutory maximum.

35    Nonetheless, the statutory penalty imposition regimes are designed to ensure that justice is done so far as the total gravity of offending conduct is concerned.

36    As the Registrar points out, these proceedings relate to many separate acts undertaken over a period of almost four years. Accordingly, the proper assessment of appropriate penalties requires consideration of three well-recognised principles regarding the treatment of multiple contraventions:

(1)    If multiple provisions are simultaneously breached by the same wrongful act it is appropriate to penalise that act by reference to the most serious provision breached (but it should not attract separate and additional penalties for the other provisions which were also breached).

(2)    Separate contraventions arising from separate acts should ordinarily attract separate penalties. However, in some cases it may be appropriate to treat the contraventions as forming part of a “course of conduct” when they are closely interrelated.

(3)    A “final check” of the cumulative effect of the proposed penalties must be conducted to ensure the total is just and appropriate. If necessary to do so, the final amount can be moderated by the totality principle.

37    It is also correct to observe that the law recognises that such an offender should be given a sentence which fairly reflects the substance of the offending conduct, rather than a purely mathematical accumulation of sentences for each separate offence which may be able to be technically “attached” to the same act, see Pearce v The Queen (1998) 194 CLR 610 at [40]-[42]; [1998] HCA 57. The same principle is well-recognised as applying to the imposition of civil penalties.

38    In this case, Mr Shahid’s conduct simultaneously breached multiple provisions (as is reflected in the declarations of contravention). In those instances, the Registrar seeks the imposition of a penalty in respect of only the most serious contravention arising from each wrongful action, namely the improper use of position to gain an advantage contrary to s 265-10. The wrongdoing encapsulated by ss 265-1 and 265-5 is, in each case, subsumed into the breach of s 265-10. As a result, for the contraventions where penalties are being imposed under s 265-10, the Court is not asked to impose penalties for the breaches of ss 265-1 and 265-5 as to do so would involve Mr Shahid being penalised twice for the same conduct. I accept that the Court should impose pecuniary penalties in this case on that understanding.

39    The question also arises as to whether and, if so, there is any course of conduct in relation to which only one penalty should be imposed.

40    The question which arises in each case is whether the contraventions should be treated as being truly a single course of conduct. This is a factual enquiry to be made having regard to all of the circumstances of the case.

41    The agreed facts show that each staff loan was separately procured by Mr Shahid; that is, each staff loan required a separate positive act on each occasion a payment was made or obtained. The unauthorised payments are not a sequence, as the time lapses between them are not uniform and the purported purposes are various. They were obtained over a period of almost four years. See Mill v The Queen (1988) 166 CLR 59 at 62-63; [1988] HCA 70; reaffirmed by the High Court in Johnson v The Queen (2004) 205 ALR 346; [2004] HCA 15.

42    However, this is not to say that the Court should ignore the similarities and possible points of overlap in the contravening conduct. It is merely to say that any allowance for those matters should be made in a different way, namely:

    by imposing penalties which have regard to the circumstances of each contravention, including its place in the context of a series of contraventions; and

    if necessary, moderating the cumulative total of such penalties through the totality principle so as to ensure an appropriate final amount.

43    When one has regard to the contravening conduct it is undoubtedly serious. The contravening benefits, being the staff loans:

(1)    were obtained on many separate occasions extending over almost four years;

(2)    were for a total amount of $1,371,413.55 (exposing the Aboriginal corporation to a significant level of risk even though Mr Shahid repaid an amount of $1,159,902.25); and

(3)    were obtained directly from the Aboriginal corporation itself, such that losses of a corresponding amount were inevitable if the staff loans were not repaid.

44    The financial consequences for the Aboriginal corporation were serious in that:

(1)    the Aboriginal corporation lost opportunities to invest those funds, such as via a term deposit;

(2)    the Aboriginal corporation could not acquire further housing assets and there was a waiting list for its houses; and

(3)    for the period ended 31 October 2014 the Aboriginal corporation suffered a net loss of approximately $195,483.

45    Mr Shahid was a senior employee of the Aboriginal corporation, reporting directly to Mr Taylor. As finance officer, and because of his education and experience as an accountant, Mr Shahid was well placed to assess and understand the impact of staff loans on the Aboriginal corporation’s financial position.

46    In his favour, Mr Shahid has consented to the declarations of contravention being made against him. In addition, he has provided instructions to his legal advisors to agree to most of the facts put forward by the Registrar (in the statement of agreed facts) avoiding the need for a contested hearing.

47    I also note Mr Shahid has repaid amounts towards his staff loans, being an amount of $1,159,902.25 (against a total amount borrowed of $1,371,413.55). However, taking into account staff entitlements owed to Mr Shahid, an amount of $207,956.75 remains outstanding.

48    I accept the submission made by the Registrar that whilst it could be said the action of obtaining staff loans could form a course of conduct, the staff loans were obtained on many separate occasions extending over a period of four years. Given the staff loans were treated as repayable to the Aboriginal corporation by 30 June of each financial year that the amounts were paid, it would be appropriate to treat the staff loans made each financial year as a separate contravention or “bundles of separate courses of conduct” capable of incurring a pecuniary penalty, namely:

(1)    during the 2011/2012 financial year, Mr Shahid caused the Aboriginal corporation to pay him money on at least 24 occasions, which totalled $268,639.31;

(2)    during the 2012/2013 financial year, Mr Shahid caused the Aboriginal corporation to pay him money on at least 40 occasions, which totalled $399,012.39;

(3)    during the 2013/2014 financial year, Mr Shahid caused the Aboriginal corporation to pay him money on at least 36 occasions, which totalled $445,575.64; and

(4)    during the 2014/2015 financial year, Mr Shahid caused the Aboriginal corporation to pay him money on at least 17 occasions, which totalled $258,186.21.

49    I also accept that the staff loans are, in effect, a series of conduct that could be considered a series of separate contraventions such that the course of conduct contraventions should be treated more seriously than a single contravention.

50    In all of the above circumstances and taking into account the totality principle, I accept that the single pecuniary penalty which the parties subscribe namely, a pecuniary penalty of $100,000, is appropriate.

51    I note that in this regard, the pecuniary penalty sought and which I agree should be imposed, is lower than that which I imposed in respect of the first respondent, Mr Taylor. That pecuniary penalty was in the sum of $250,000.

52    I accept the Registrar’s view of the relative seriousness of the contravening conduct of each of the respondents, which takes into account Mr Taylor’s position as chief executive officer of the Aboriginal corporation. He was the most senior employee of the Aboriginal corporation to whom Mr Shahid reported. On the other hand, Mr Shahid borrowed substantially higher amounts than Mr Taylor and left an amount of $207,956.75 outstanding. Overall, I accept that in the scheme of the management and operation of the Aboriginal corporation, Mr Taylor as the chief executive, should be visited with a greater pecuniary penalty than Mr Shahid. That imposed on Mr Shahid nonetheless remains significant and is appropriate, in a proportionate sense, having regard to the relative responsibilities of the two men in the management of the Aboriginal corporation.

53    I should finally state that the compensation order sought is appropriate and necessary to compensate the Aboriginal corporation for the damage it has suffered as a result of the contravening conduct of Mr Shahid.

54    It also follows that Mr Shahid should pay the costs of the proceedings incurred by the Registrar.

55    In coming to these view that the declarations and orders proposed by the Registrar and Mr Shahid are appropriate and should be made, I have also had regard to the particular circumstances of Mr Shahid as set out by him in submissions filed 18 July 2018.

56    His personal circumstances are that he is now 55 years of age. He was born in Bangladesh and obtained tertiary qualifications in India and in Australia. He has been married for 21 years and has maintained accounting or financial/administrative positions in a number of businesses. He has no prior criminal record or prior history of contravening legislation.

57    When he commenced with the Aboriginal corporation as a finance officer in December 2002, his annual salary was approximately $40,000. When he resigned in November 2014, it was approximately $80,000.

58    I also note that Mr Shahid says that upon his commencement of employment with the Aboriginal corporation he did not receive an induction or any formal handover in relation to his position. He says he was not aware of important information such as the Aboriginal corporation’s rule book which established the internal governance, rules and objectives of the corporation, and had no previous experience in working for a corporation registered under the CATSI Act.

59    He further indicates that he did not attend the board meetings from start to finish and did not participate in any decision-making. His duties did not include applying for funding grants, making payments without authorisation from Mr Taylor, purchasing capital items, pursuing tenants for rental arrears, managing or supervising other staff members, or making decisions with respect to the Aboriginal corporation’s investment of funds and capital expenditure of more than $500.

60    I take all of those factors into account. If anything they highlight the significant need for Aboriginal corporations affected by the CATSI Act to ensure appropriate training and education of all employees, especially those having key responsibilities under the CATSI Act.

Conclusion and orders

61    For the reasons given above, the Court makes the orders proposed by and consented to by the Registrar and Mr Shahid.

Associate:

Dated:    17 August 2018