FEDERAL COURT OF AUSTRALIA

Australian Securities and Investments Commission v Vocation Limited

(In Liquidation) (No 2) [2019] FCA 1783

ORDERS

THE COURT DECLARES THAT:

1.    Pursuant to section 1317E(l) of the Corporations Act 2001 (Cth), the second defendant contravened sub-section 180(1) of the Act in that he failed to discharge his duties to the first defendant (“Vocation”) with the degree of care and diligence that a reasonable person would exercise, if he or she were the Group Chief Executive Officer and Managing Director of a corporation in Vocation's circumstances and occupied the office held by the second defendant, and had the same responsibilities within the corporation, in causing or otherwise permitting Vocation to contravene:

(a)    sub-section 1041H(l) of the Act in making each of the following representations, in an announcement to the ASX on 25 August 2014:

(i)    the No Suspension Representation, as defined in paragraph 7a of the Consolidated Concise Statement;

(ii)    the Reasonable Grounds Representation, as defined in paragraph 7b of the Consolidated Concise Statement;

(iii)    the Continuing Representation, as defined in paragraph 7c of the Consolidated Concise Statement;

(b)    sub-section 1041H(l) of the Act in making each of the following representations in a Due Diligence Questionnaire signed by him and provided to UBS on 10 September 2014 in its capacity as the underwriter of an approximately $74 million placement by Vocation to institutional investors:

(i)    the School Leavers Representation, as defined in paragraph 14a of the Consolidated Concise Statement;

(ii)    the Offsetting Representation, as defined in paragraph 14b of the Consolidated Concise Statement;

(iii)    the Expedited Payment Representation, as defined in paragraph 14c of the Consolidated Concise Statement;

(c)    sub-section 674(2) of the Act by not notifying the ASX of the existence of the Withholding and Suspension Information, as defined and particularised in paragraph 11 of the Consolidated Concise Statement, in the period between 28 August and 18 September 2014.

2.    Pursuant to section 1317E(l) of the Corporations Act 2001 (Cth), the third defendant contravened sub-section 180(1) of the Act in that he failed to discharge his duties to the first defendant (“Vocation”) with the degree of care and diligence that a reasonable person would exercise, if he or she were a non­executive director and Chair of the Board of a corporation in Vocation’s circumstances and occupied the office held by the third defendant, and had the same responsibilities within the corporation, in causing or otherwise permitting Vocation to contravene sub-section 674(2) of the Act by not notifying the ASX of the existence of the Withholding and Suspension Information, as defined and particularised in paragraph 11 of the Consolidated Concise Statement, in the period between 28 August and 18 September 2014.

3.    Pursuant to section 1317E(1) of the Corporations Act 2001 (Cth), the fourth defendant contravened sub-section 180(1) of the Act in that he failed to discharge his duties to the first defendant (“Vocation”) with the degree of care and diligence that a reasonable person would exercise, if he or she were the Company Secretary of a corporation in Vocation's circumstances and occupied the office held by the fourth defendant, and had the same responsibilities within the corporation, in causing or otherwise permitting Vocation to contravene sub­section 1041H(l) of the Act in making each of the following representations in a Due Diligence Questionnaire signed by him and provided to UBS on 10 September 2014 in its capacity as the underwriter of an approximately $74 million placement by Vocation to institutional investors:

(i)    the School Leavers Representation, as defined in paragraph 14a of the Consolidated Concise Statement;

(ii)    the Offsetting Representation, as defined in paragraph 14b of the Consolidated Concise Statement;

(iii)    the Expedited Payment Representation, as defined in paragraph 14c of the Consolidated Concise Statement.

THE COURT ORDERS THAT:

The Second Defendant

4.    Pursuant to section 206C of the Corporations Act 2001 (Cth) the second defendant be disqualified from managing corporations for a period of six years.

5.    Pursuant to section 1317G of the Corporations Act 2001 (Cth) the second defendant pay a pecuniary penalty in the amount of $70,000.

The Third Defendant

6.    Pursuant to section 206C of the Corporations Act 2001 (Cth) the third defendant be disqualified from managing corporations for a period of two years.

7.    Pursuant to section 1317G of the Corporations Act 2001 (Cth) the third defendant pay a pecuniary penalty in the amount of $25,000.

The Fourth Defendant

8.    Pursuant to section 206C of the Corporations Act 2001 (Cth) the fourth defendant be disqualified from managing corporations for a period of three years.

9.    Pursuant to section 1317G of the Corporations Act 2001 (Cth) the fourth defendant pay a pecuniary penalty in the amount of $30,000.00

Costs

10.    The second, third and fourth defendants pay 90% of the plaintiff’s costs of this proceeding as assessed or agreed in the following proportions:

(a)    the second defendant – 50%

(b)    the third defendant – 25%

(c)    the fourth defendant – 25%

Suspension of Orders

11.    The operation of orders 4, 6 and 8 above be suspended for a period of 14 days.

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

ORDERS

THE COURT DECLARES THAT:

1.    The first defendant (“Vocation”) contravened:

(a)    sub-section 1041H(l) of the Act in making each of the following representations, in an announcement to the ASX on 25 August 2014:

(i)    the No Suspension Representation, as defined in paragraph 7a of the Consolidated Concise Statement;

(ii)    the Reasonable Grounds Representation, as defined in paragraph 7b of the Consolidated Concise Statement;

(iii)    the Continuing Representation, as defined in paragraph 7c of the Consolidated Concise Statement;

(b)    sub-section 1041H(l) of the Act in making each of the following representations in a Due Diligence Questionnaire provided to UBS on 10 September 2014 in its capacity as the underwriter of an approximately $74 million placement by Vocation to institutional investors:

(i)    the School Leavers Representation, as defined in paragraph 14a of the Consolidated Concise Statement;

(ii)    the Offsetting Representation, as defined in paragraph 14b of the Consolidated Concise Statement;

(iii)    the Expedited Payment Representation, as defined in paragraph 14c of the Consolidated Concise Statement;

(c)    sub-section 674(2) of the Act by not notifying the ASX of the existence of the Withholding and Suspension Information, as defined and particularised in paragraph 11 of the Consolidated Concise Statement, in the period between 28 August and 18 September 2014.

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

REASONS FOR JUDGMENT

NICHOLAS J:

Background

1    I previously published reasons for judgment in this proceeding (“the principal judgment”) in which I made findings that the defendants had contravened various provisions of the Corporations Act 2001 (Cth) (“the Act”): see Australian Securities and Investments Commission v Vocation Limited (In Liquidation) [2019] FCA 807. These reasons should be read in conjunction with the principal judgment. The definitions used in the principal judgment are also used in this judgment. The questions that remain to be considered are as follows:

    Should Mr Dawkins be excused under s 1317S and s 1318 of the Act (the excuse provisions)?

    What disqualification order (if any) should be made in respect of Mr Dawkins in the event that he is not excused?

    What pecuniary penalty (if any) should be imposed on Mr Dawkins in the event that he is not excused?

    What disqualification orders should be made in respect of Mr Hutchinson and Mr Gréwal?

    What pecuniary penalties should be imposed on Mr Hutchinson and Mr Gréwal?

    What costs orders should be made?

2    Neither Mr Hutchinson nor Mr Gréwal press for any relief under the excuse provisions.

Declaratory relief

3    The Court has found that Vocation contravened the following provisions of the Act:

    Section 1041H, by reason of the publication of misleading or deceptive representations in an ASX announcement dated 25 August 2014 concerning the status of the contracts by which the Victorian Department of Education and Early Childhood (DEECD) provided funding to Vocation (ASX Announcement Contravention);

    Section 674(2), by reason of its failure to disclose the Withholding and Suspension Information to the market in the period 28 August 2014 to 18 September 2014 (Continuous Disclosure Contravention); and

    Section 1041H, by reason of the provision of misleading and deceptive answers in a due diligence questionnaire to UBS in connection with a $74 million underwriting of a placement of shares to institutional investors by Vocation (DDQ Contravention).

4    The Court further found that Messrs Hutchinson, Dawkins and Gréwal (the individual defendants) contravened section 180(1) of the Act by breaching their duty to exercise care and diligence in the following respects:

    in the case of Mr Hutchinson, by causing or permitting each of the ASX Announcement Contravention, the Continuous Disclosure Contravention and the DDQ Contravention;

    in the case of Mr Dawkins, by causing or permitting the Continuous Disclosure Contravention; and

    in the case of Mr Gréwal, by causing or permitting the DDQ Contravention.

5    Each of the individual defendants accepted that it is appropriate for the Court to make declaratory relief in terms which are agreed. The form of agreed declarations are as follows:

1.    For Vocation:

The Court declares that Vocation contravened:

(a)    sub-section 1041H(l) of the Act in making each of the following representations, in an announcement to the ASX on 25 August 2014:

(i)    the No Suspension Representation, as defined in paragraph 7a of the Consolidated Concise Statement;

(ii)    the Reasonable Grounds Representation, as defined in paragraph 7b of the Consolidated Concise Statement;

(iii)    the Continuing Representation, as defined in paragraph 7c of the Consolidated Concise Statement;

(b)    sub-section 1041H(l) of the Act in making each of the following representations in a Due Diligence Questionnaire provided to UBS on 10 September 2014 in its capacity as the underwriter of an approximately $74 million placement by Vocation to institutional investors:

(i)    the School Leavers Representation, as defined in paragraph 14a of the Consolidated Concise Statement;

(ii)    the Offsetting Representation, as defined in paragraph 14b of the Consolidated Concise Statement;

(iii)    the Expedited Payment Representation, as defined in paragraph 14c of the Consolidated Concise Statement;

(c)    sub-section 674(2) of the Act by not notifying the ASX of the existence of the Withholding and Suspension Information, as defined and particularised in paragraph 11 of the Consolidated Concise Statement, in the period between 28 August and 18 September 2014.

2.    For Mr Hutchinson:

The Court declares that pursuant to section 1317E(1) of the Corporations Act, Mr Hutchinson contravened sub-section 180(1) of the Act in that he failed to discharge his duties to Vocation Limited with the degree of care and diligence that a reasonable person would exercise, if he or she were the Group Chief Executive Officer and Managing Director of a corporation in Vocation’s circumstances and occupied the office held by Mr Hutchinson, and had the same responsibilities within the corporation, in causing or otherwise permitting Vocation to contravene:

(a)    sub-section 1041H(1) of the Act in making each of the following representations, in an announcement to the ASX on 25 August 2014:

(i)    the No Suspension Representation, as defined in paragraph 7a of the Consolidated Concise Statement;

(ii)    the Reasonable Grounds Representation, as defined in paragraph 7b of the Consolidated Concise Statement;

(iii)    the Continuing Representation, as defined in paragraph 7c of the Consolidated Concise Statement;

(b)    sub-section 1041H(l) of the Act in making each of the following representations in a Due Diligence Questionnaire signed by him and provided to UBS on 10 September 2014 in its capacity as the underwriter of an approximately $74 million placement by Vocation to institutional investors:

(i)    the School Leavers Representation, as defined in paragraph 14a of the Consolidated Concise Statement;

(ii)    the Offsetting Representation, as defined in paragraph 14b of the Consolidated Concise Statement;

(iii)    the Expedited Payment Representation, as defined in paragraph 14c of the Consolidated Concise Statement;

(c)    sub-section 674(2) of the Act by not notifying the ASX of the existence of the Withholding and Suspension Information, as defined and particularised in paragraph 11 of the Consolidated Concise Statement, in the period between 28 August and 18 September 2014.

3.    For Mr Dawkins:

The Court declares that pursuant to section 1317E(l) of the Corporations Act, Mr Dawkins contravened sub-section 180(1) of the Act in that he failed to discharge his duties to Vocation Limited with the degree of care and diligence that a reasonable person would exercise, if he or she were a non­executive director and Chair of the Board of a corporation in Vocation’s circumstances and occupied the office held by Mr Dawkins, and had the same responsibilities within the corporation, in causing or otherwise permitting Vocation to contravene sub-section 674(2) of the Act by not notifying the ASX of the existence of the Withholding and Suspension Information, as defined and particularised in paragraph 11 of the Consolidated Concise Statement, in the period between 28 August and 18 September 2014.

4.    For Mr Gréwal:

The Court declares that pursuant to section 1317E(1) of the Corporations Act, Mr Gréwal contravened sub-section 180(1) of the Act in that he failed to discharge his duties to Vocation Limited with the degree of care and diligence that a reasonable person would exercise, if he or she were the Company Secretary of a corporation in Vocation’s circumstances and occupied the office held by Mr Gréwal, and had the same responsibilities within the corporation, in causing or otherwise permitting Vocation to contravene sub­ section 1041H(l) of the Act in making each of the following representations in a Due Diligence Questionnaire signed by him and provided to UBS on 10 September 2014 in its capacity as the underwriter of an approximately $74 million placement by Vocation to institutional investors:

(i)    the School Leavers Representation, as defined in paragraph 14a of the Consolidated Concise Statement;

(ii)    the Offsetting Representation, as defined in paragraph 14b of the Consolidated Concise Statement;

(iii)    the Expedited Payment Representation, as defined in paragraph 14c of the Consolidated Concise Statement.

6    I have considered the form of the declarations and am satisfied that they adequately reflect the findings made in the principal judgment.

ASIC’s proposed penalties

7    ASIC contends that Mr Hutchinson should be disqualified from managing corporations for a period of eight years and that he should also be required to pay a pecuniary penalty of $150,000. The way in which ASIC arrives at $150,000 is as follows. ASIC says that $50,000 would be an appropriate penalty in respect of Mr Hutchinson’s breach of duty with respect to the ASX Announcement Contravention, that $75,000 would be an appropriate penalty in respect of is breach of duty with respect to the Continuous Disclosure Contravention, and that $75,000 would be an appropriate penalty in respect of Mr Hutchinson’s breach of duty in relation to the DDQ Contravention. These amounts total $200,000 which, according to ASIC, produce an aggregate penalty of $150,000 once discounted for totality (ie. by approximately 25%), which ASIC contends would be an appropriate pecuniary penalty in Mr Hutchinson’s case.

8    In the case of Mr Dawkins, ASIC contends that he should be disqualified from managing corporations for a period of five years in respect of his breach of duty with respect to the Continuous Disclosure Contravention and that he should also be required to pay a pecuniary penalty of $75,000.

9    Mr Gréwal has reached an agreed position with ASIC which, if adopted by the Court, would prohibit Mr Gréwal from managing corporations for a period of five years and require him to pay a pecuniary penalty of $50,000. ASIC contends that a pecuniary penalty of $50,000 for Mr Gréwal’s breach of duty in respect of the DDQ Contravention (reflecting a reduction from a penalty of $75,000 that it says it would otherwise have sought consistently with the parity principle) gives Mr Gréwal credit for what is said to be contrition displayed by him since delivery of the principal judgment by not pressing his previous submission seeking relief under the excuse provisions and putting to the Court an agreed position in relation to matters of penalty.

10    Mr Halley SC (who appeared for ASIC) accepted the Court was not bound to adopt the penalty agreed between ASIC and Mr Gréwal. For reasons I will explain, I do not proposed to adopt the agreed penalty essentially because it would, in my opinion, not be appropriate given what I regard as an appropriate penalty in the case of Mr Hutchinson.

The Excuse Provisions

11    Mr Dawkins seeks to be relieved pursuant to s 1317S and s 1318 of the Act from liability for any disqualification order or pecuniary penalty that might otherwise be imposed in the absence of orders made under those provisions.

12    Sections 1317S and 1318 were considered by Middleton J in Australian Securities and Investments Commission v Healey (No 2) (2011) 196 FCR 430 (Healey No 2) and I gratefully draw on his Honour’s summary of the relevant principles. As his Honour explained at [83]-[91]:

[83]    Sections 1317S and 1318 make substantially identical provision for the relief of persons who have or may have contravened a civil penalty provision (s 1317S) or who are or may be liable in respect of negligence, default, breach of trust or breach of duty in the capacity of, amongst others, an officer of the corporation (s 1318).

[84]    Both ss 1317S and 1318 involve three stages of inquiry:

(a)    whether the applicant for relief has acted honestly;

(b)    whether having regard to all the circumstances the applicant ought fairly to be excused; and

(c)    whether the applicant be relieved from liability wholly or in part, and if partly, to what extent.

[85]    As I have said, s 1317S is substantially similar to, and is derived from s 1318. Chief Justice Spigelman in Deputy Commissioner of Taxation v Dick (2007) 242 ALR 152 at [44]-[45], stated that:

[44]    Plainly, with respect to the power to impose pecuniary penalties, and probably also with respect to the power to make a disqualification order, parliament proceeded on the basis that the interpretation of s 1318 either required a clear extension of the reference to “civil proceedings” in s 1318 itself or a new parallel provision. Parliament chose the latter course. In so doing parliament proceeded on the assumption that s 1318 would not, of its own force, apply to proceedings for a penalty even if, by statute, any such “penalty” was recoverable by civil proceedings.

[45]    No doubt this choice was made, in part, as a matter of convenience in order to have all of the civil penalty provisions together in Pt 9.4B of the Act. The separate provision, now found in s 1317S, which operates in parallel with s 1318, may reflect the objective of establishing a regime involving a clear pyramid of enforcement containing a hierarchy of sanctions, increasing in seriousness from civil liability to civil penalty liability to criminal liability. The legislation was based on this regulatory philosophy as expounded by the Senate Standing Committee on Legal and Constitutional Affairs Report, Company Directors Duties: Report on the Social and Fiduciary Duties and Obligations of Company Directors 1989 (called the “Cooney Committee Report”) ...

[86]    Neither s 1317S nor s 1318 operate to remove the breach, rather they operate as a dispensing power to excuse the contravener …

[87]    The first requirement is that the court must be positively satisfied that the applicant has acted honestly. A mere absence of dishonesty will not satisfy the requirements of the provisions.

[88]    For the purposes of this proceeding, I accept that a person acts honestly, in the ordinary meaning of the term, if the person’s conduct is without moral turpitude, that is:

(a)    without deceit or conscious impropriety;

(b)    without intent to gain an improper benefit or advantage; and

(c)    without carelessness or imprudence that negates the performance of the duty in question.

[89]    If the person is found to have acted honestly, then an evaluative judgment needs to be made as to whether the applicant ought fairly to be excused, and then the exercise of the subsequent discretion to grant relief if this is appropriate. Relevant considerations at both stages include the degree to which the person’s conduct fell short of the statutory standard of care and diligence, the seriousness of the contravention and its potential or actual consequences, impropriety such as deceptiveness or personal gain, and contrition.

[90]    In breach of duty cases, where there is an element of ‘unreasonableness’, the ‘degree of unreasonableness’ (the extent of departure from the required norm) remains a relevant matter for consideration in considering all the circumstance in making the evaluative judgement and exercising the residual discretion …

[91]    I do not regard the issue of general deterrence as a factor at the evaluative stage, but it is a factor at the stage of the exercise of the discretion in considering whether to grant relief from liability at all or in part. Undoubtedly, the making of the order imposing liability is discretionary and the court may take into account a wide range of factors. Logically then, if a matter is relevant to be considered by the court in deciding on the orders it will make following a contravention, that matter is relevant to be considered by the court in deciding whether to grant relief from liability in whole or in part.

(some citations omitted)

Mr Dawkins’ application for relief under the excuse provisions

13    The essential findings made against Mr Dawkins, as summarised in written submissions filed on his behalf, were as follows:

(a)    Mr Dawkins honestly believed that the Withholding and Suspension Information was not material in the relevant sense and that Vocation was not required to disclose any of it;

(b)    until 26 August 2014, Mr Dawkins was highly reliant on information provided to him by Mr Hutchinson and other members of management for the purpose of deciding whether Vocation was required to disclose the Withholding and Suspension Information;

(c)    the quality of that information was very poor - it was inaccurate, inapt, misleading and unreliable on matters of importance, including characterization of the dispute with the DEECD as a “debtor timing issue”, and led the non-executive directors (including Mr Dawkins) to believe there was a routine delay in obtaining payment of withheld funds;

(d)    when the letter of 26 August 2014 was received and considered, and by the time the Board met on 26 August 2014, it would have been clear to a person in Mr Dawkins’ position exercising reasonable care and diligence that management’s advice and characterization of the dispute with DEECD was inaccurate and unreliable;

(e)    Mr Dawkins assumed direct responsibility for negotiations with DEECD from 26 August 2014 and made diligent efforts to engage with management and DEECD for the purpose of securing a release of funds and relaxation of the enrolment suspensions;

(f)    a person in Mr Dawkins’ position exercising reasonable care and diligence would have evaluated information from management relevant to Vocation’s dispute with DEECD relatively critical, especially when based on unsupported generalized statements;

(g)    however, from 26 August 2014 through to 18 September 2014, Mr Dawkins accepted what he was told by management much too uncritically and without challenging the correctness of the advice or the assumptions on which that advice was based;

(h)    Mr Dawkins’ failings in that regard were:

(i)    his failure to properly turn his mind to the correctness of the assumptions underlying Mr Langtree’s 27 August 2014 analysis;

(ii)    his reliance on assertions from management as to the limits of BAWM’s and Aspin’s financial exposure where these were not supported by legal advice as to the scope of obligations under the Funding Contracts;

(iii)    his failure from 28 August 2014 to undertake his own analysis as to the RTOs’ compliance with the Funding Contracts in light of Vocation’s correspondence with DEECD to come to a reliable view as to the extent of funding that would be repaid; and

(iv)    his reliance on management’s vague indications that enrolments had been, or would be, made up (which by 28 August 2014 were known to be suspended in all BAWM and Aspin courses);

(i)    Mr Dawkins had a reasonable basis to believe that, subject to the outcome of the proposed trial and review, DEECD may eventually remove suspension of enrolments, but that outcome was uncertain and there was no reasonable basis to believe it was likely, given Vocation’s concessions in its correspondence to DEECD and that DEECD would be entitled to maintain the suspensions following the review if there was non-compliance.

14    I accept that this summary accurately records key findings made in relation to Mr Dawkins which are of particular relevance to his application for relief under the excuse provisions and penalty more generally.

15    The evidence before me includes an affidavit made by Mr Dawkins which provides an outline of his career and an account of the impact that this proceeding and related publicity has had on him. In his affidavit Mr Dawkins:

    describes media coverage of this proceeding including a number of articles that drew upon an ASIC press release that incorrectly suggested that the Court had found that Mr Dawkins had made misleading statements to the market in relation to Vocation;

    explains that he resigned from all public company directorships following the commencement of this proceeding;

    deposes that from late 2014 his working life and, to some extent, his personal life, has been substantially affected by the difficulties faced by Vocation and its ultimate liquidation, this proceeding, a related class action, and the associated publicity.

Mr Dawkins also says that at 72 years of age, there is no real prospect of him being invited onto any public company board in the future.

16    Another affidavit made by Mr Dawkins provides some details of his remuneration during the period in which he acted as non-executive chairman of Vocation. In its written submissions in chief, ASIC submitted that Mr Dawkins was paid a total of $857,697 in the seven months to 30 June 2014. In fact, leaving aside performance rights that were converted to ordinary shares (which ultimately yielded a relatively modest return) Mr Dawkins was paid $98,580 in cash and $9,117 in superannuation during that period.

17    In the principal judgment I included a brief description of Mr Dawkins’ career as a parliamentarian, government minister and, following his retirement from politics, as a consultant and a company director. ASIC did not dispute that Mr Dawkins has had a distinguished career and that he enjoys a well-deserved reputation as a person who has made a substantial contribution to public life in Australia. I accept these are matters that it is proper to take into account both in relation to Mr Dawkins’ application for relief under the excuse provisions and questions of penalty more generally. This is also true of the other matters referred to in Mr Dawkins’ affidavit. I have taken all such matters into account.

18    I was also referred to written references provided by the former Prime Minister, the Honourable Paul J Keating, the former Governor General, the Honourable Bill Hayden AC, and the former Premier of Victoria, the Honourable Steve Bracks AC. These references refer in detail to Mr Dawkins’ record of public service.

19    Mr Keating’s reference emphasises the importance of Mr Dawkins’ work as a government minister including Mr Dawkins’ tireless work as a member of the Expenditure Review Committee of Cabinet. It is clear that Mr Keating regarded Mr Dawkins as one of his most diligent and conscientious Ministers.

20    Mr Hayden’s reference also refers to Mr Dawkins’ tireless work as a member of the Federal Parliament and Shadow Minister for Education and, subsequently, Shadow Minister for Industry and Commerce, during the period in which Mr Hayden was Leader of the Opposition. Mr Hayden states that he regarded Mr Dawkins a most persuasive voice in Canberra in the areas of fiscal and economic policy generally as well as trade policy and education. Mr Hayden makes particular mention of Mr Dawkins’ attention to detail, his hard work and reliability. He says he has never doubted Mr Dawkins’ integrity, character or thoroughness.

21    Mr Bracks’ reference describes Mr Dawkins’ work in the period May 2012 until June 2017 as an independent director of United Super Pty Ltd, the trustee of CBUS Superannuation Fund and as a member of its Investment Committee. Mr Bracks describes Mr Dawkins as a diligent and exemplary director and trustee who performed his duties to a high standard.

22    The starting point in my consideration of Mr Dawkins’ application for relief is ASIC’s acceptance that at all relevant times Mr Dawkins acted honestly. In the circumstances, I proceed on the basis that the conduct of Mr Dawkins that gave rise to his contravention of s 180 of the Act was honest in the relevant sense: see Healey No 2 at [88].

23    Mr Pesman SC (who appeared for Mr Dawkins) placed emphasis upon Mr Dawkins’ distinguished record of public service as a parliamentarian and a government minister including as Minister for Finance, Minister for Employment, Education and Training, and Treasurer. These are matters that I have taken into account.

24    In his submissions, Mr Pesman SC also focused on the specific findings made in relation Mr Dawkins and, in particular, what was said to be the undesirability of an outcome in which Mr Dawkins suffers a penalty because he took on additional responsibilities which resulted in him becoming more involved after 25 August 2014 in Vocation’s dealing with DEECD. He submitted that Mr Dawkins assumed a level of involvement after 25 August 2014 that went well beyond what would normally be expected of the non-executive chairman of a public company and that it would be an unfortunate outcome, and contrary to the public interest, if non-executive company directors who took on additional responsibilities, were discouraged from doing so because it might expose them to additional legal responsibilities.

25    I accept that at times Mr Dawkins may have been acting beyond the usual scope of his responsibilities as chairman of Vocation and that this is a relevant consideration in determining whether or not to grant him relief under the excuse provisions. In particular, I accept that assuming primary responsibility for Vocation’s negotiations with DEECD was not something within the scope of Mr Dawkins’ usual responsibilities as chairman. However, as should be clear from the principal judgment, the findings made against Mr Dawkins were not that he failed to exercise care and skill in the conduct of negotiations with DEECD, but that he became aware that important decisions made by the board in relation to the materiality of the Withholding and Suspension Information had been made on the basis of inaccurate and incomplete information provided to the board by management. In spite of this, Mr Dawkins continued to accept and act upon information provided to the board by Mr Hutchinson uncritically, without making any sufficient attempt to analyse or evaluate that information in light of new information that became available from 25 August 2014.

26    In my view this is not a case in which Mr Dawkins was found liable for breach of duty based on a lack of care and diligence associated with the performance of additional work outside the scope of his usual responsibilities. In the result, I do not think that the submission made by Mr Pesman SC concerning the public interest issue that he identified is a relevant factor in this case.

27    Mr Pesman SC also submitted that while Mr Dawkins had considerable experience working in the field of education when in government, his experience was very much focused on education policy and not the intricacies of operating a large business conducted by a listed public company with many moving parts. He submitted that Mr Dawkins did not have any experience in the management of a business of the kind conducted by Vocation.

28    I accept both of these submissions. In particular, I accept that Mr Dawkins, by the time he took up his appointment as chairman of Vocation, had no experience in managing a business similar to that carried on by Vocation or its subsidiaries.

29    I also recognise that, on the basis of the findings made in my principal judgment, Mr Hutchinson must carry a much greater share of responsibility for what occurred than Mr Dawkins. Mr Hutchinson permitted Vocation to breach its non-disclosure obligations by providing to the board inaccurate and incomplete information regarding the materiality of the Withholding and Suspension Information. Mr Dawkins’ breach of duty stemmed from his failure to properly scrutinise that information from 25 August 2014, after which date he should have appreciated that Mr Hutchinson could not be relied upon to provide the board with information of the quality necessary to make informed decisions with respect to the materiality of the Withholding and Suspension Information.

30    Mr Pesman SC submitted that, in essence, Mr Dawkins was found to have breached his duty by failing to adequately question the information he was receiving from management, and that his breach of duty should not be viewed as being at the extreme end of the range of seriousness of cases involving non-dishonest conduct. Although I consider Mr Dawkins’ breach of duty to be serious, I accept that it is not at the extreme end of the range of cases involving non-dishonest conduct.

31    Mr Pesman SC also submitted that the excuse provisions may be applied in cases involving what might be characterised as a serious contravention of the law. I accept that submission. Nevertheless, the seriousness of the contravention is a matter that is relevant to the exercise of the discretion to grant relief under the excuse provisions. All other things being equal, the more serious the contravention, the more difficult it will be for a defendant to satisfy the Court that he or she should be granted relief under the excuse provisions.

32    Mr Pesman SC also placed considerable reliance on the advice received from JWS in relation to Vocation’s disclosure obligations. As I explained in the principal judgment, the evidence did not show that JWS ever provided advice in relation to BAWM’s and Aspin’s contractual arrangements or dispute with DEECD, the validity of the actions taken by DEECD under the Funding Contracts or BAWM’s or Aspin’s financial exposure to DEECD arising out of any suspected or actual breach by either of them of the Funding Contracts. Further, the advice provided by JWS was dependent on the information provided to JWS by management and was based upon a number of important assumptions that JWS was asked to make in relation to the financial impact of the Withholding and Suspension Information on Vocation. Mr Dawkins was aware, or at least ought to have been aware, of the inherent limitations of JWS’s advice and that JWS was dependent on management to provide it with accurate and reliable information concerning the potential impact of the Withholding and Suspension Information on Vocation’s forecast earnings.

33    Further, as I noted in the principal judgment, there was no evidence to establish precisely what advice was given by JWS to the board as to the materiality of the Withholding and Suspension Information during the relevant period except by way of reiteration of advice given on 22 August 2014 which did not take into account the effect of the suspension of enrolments and commencements.

34    It is apparent that there is much to be said in favour of Mr Dawkins’ application for relief. First, there is no suggestion that Mr Dawkins acted dishonestly or for an improper purpose or personal gain. Secondly, Mr Dawkins enjoys a reputation as a person of impeccable character and integrity with a penchant for hard work, largely as a result of his service as a government minister. Thirdly, Mr Dawkins was to a large extent a victim of Mr Hutchinson’s breaches of duty and the related failings of other members of management (including Ms Bonnici and Mr Langtree).

35    However, there are other matters that must also be taken into account that weigh against the grant of relief under the excuse provisions.

36    First, Mr Dawkins’ contravention was in my view serious in the sense that it involved a significant departure from the standard of care that would ordinarily be expected of a chairman of a listed public company. It was not the result of what might fairly be characterised as a momentary lapse in attention or judgment but was the product of a continuing failure to exercise care and diligence throughout the relevant period during which the dispute between Vocation and DEECD escalated considerably from where matters stood as at 25 August 2014.

37    Secondly, a very large number of Vocation shares were publicly traded during the relevant period in circumstances where the market was not properly informed as to the extent or significance of Vocation’s dispute with DEECD or, in particular, the potential impact of the Withholding and Suspension Information on Vocation’s forecast earnings. The total value of the shares traded in the relevant period was approximately $97.0 million.

38    Thirdly, the board meetings held during the relevant period included those held on 7 and 8 September 2014, at which the board resolved to undertake an equity capital raising involving the placement of shares for approximately $74.0 million. The decision to undertake the equity capital raising without disclosing to the market the Withholding and Suspension Information was one which, if made on the basis of incorrect or inaccurate information, could have profound consequences for Vocation. It was a decision made at a time when a person in Mr Dawkins’ position, exercising reasonable care and diligence, ought to have been highly sensitive to the need for the board to be provided with accurate and reliable information relating to the question of whether any further disclosure to the market was required. As explained in the principal judgment at [838]:

There was no material provided to the board after 26 August 2014 that would have led a person in Mr Dawkins’ position exercising reasonable care and diligence to conclude that the estimate of the revenue that would be lost as a result of the imposition of the suspensions on enrolments and commencements was likely to be any less than what it had been estimated to be at the board meeting held on 19 August 2014 (an estimate based on the mistaken assumption as to the scope of the suspensions). Vague indications by management that those enrolments had been, or would be, made up, did not provide a sound basis for a person in Mr Dawkins’ position exercising due care and diligence to conclude that the effect of the suspensions on enrolments and commencements (which by 28 August 2014 were known to extend to all of BAWM and Aspin’s courses) were unlikely to materially impact Vocation’s earnings and cash flow.

Those observations apply with particular force to the board meeting held on Sunday 7 September 2014 and the advice concerning the impact of the suspension on enrolments that was provided to the board by Mr Hutchinson at that meeting.

39    Fourthly, I do not consider that any reliance placed by Mr Dawkins on advice received from JWS either before or during the relevant period, whether considered alone or together with the other matters relied upon by Mr Pesman SC, provide a sufficient basis to justify my granting relief to Mr Dawkins under the excuse provisions. I refer to what I said on the topic of the JWS advice earlier in these reasons.

40    Fifthly, the consequences of allowing shares in Vocation to trade on the ASX and Chi-X during the relevant period when the market was not adequately informed of the Withholding and Suspension Information and permitting Vocation to undertake the equity capital raising without disclosing such information to the market exposed Vocation to a very significant risk of serious harm. I am not able to say on the evidence before me whether Vocation’s failure to comply with its disclosure obligations was a cause of its subsequent collapse. Nevertheless, none of the individual defendants suggested that Vocation’s breach of its disclosure obligations was unrelated to Vocation’s collapse, or the subsequent class action proceeding, or that it would be inappropriate for me to infer that Vocation’s breach of its non-disclosure obligations was extremely damaging to Vocation’s shareholders particularly those who acquired shares during the relevant period.

41    All things considered, I do not think this is an appropriate case to grant relief under the excuse provisions. That said, I accept that many of the matters referred to by Mr Pesman SC in support of Mr Dawkins’ application for relief under the excuse provisions are relevant to my consideration of penalty generally.

Penalties

42    The principles relevant to the imposition of penalties was also considered by Middleton J in Healey (No 2). His Honour’s reasons include a detailed review of the relevant authorities concerned with both pecuniary penalties and the making of orders disqualifying a person from managing a corporation. His Honour said at [104]-[109]:

[104]    Although there has been a considerable number of cases which have set out the principles, propositions and circumstances which should be taken into account in determining whether, and for what period, an order should be made disqualifying a person from managing a corporation, in Rich v Australian Securities and Investments Commission (2004) 220 CLR 129 at [48] McHugh J stated that Santow J’s judgment in Re HIH Insurance Ltd (in prov liq); Australian Securities and Investments Commission v Adler (2002) 42 ACSR 80 was the leading authority on the reasons for a court exercising its power under s 206C or s 206E of the Act. It has been referred to and followed in most cases dealing with the subject.

[105]    The propositions expounded by Santow J in ASIC v Adler must, however, be considered in the light of the decision of the High Court in Rich v ASIC. Justice Santow’s propositions, which followed from his analysis of the cases up to that time, were as follows:

[56]    The cases on disqualification gave orders ranging from life disqualification to 3 years. The propositions that may be derived from these cases include:

(i)    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;

(ii)    The banning order is 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;

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

(iv)    The banning order is protective against present and future misuse of the corporate structure;

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

(vi)    The objects of general deterrence are also sought to be achieved;

(vii)    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;

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

(ix)    In assessing an 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;

(x)    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;

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

(xii)    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 have been influential. It was held that in making such an order it is necessary to assess:

    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;

(xiii)    Factors which lead to the imposition of the longest periods of disqualification (that is disqualifications 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 such as in management and financial consultancy;

    lack of contrition or remorse;

    disregard for law and compliance with corporate regulations;

    dishonesty and intent to defraud;

    previous convictions and contraventions for similar activities;

(xiv)    In cases in which the period of disqualification ranged from 7-12 years, the factors evident and which lead to the conclusion that these cases were serious though not “worst cases”, 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;

    lack of contrition or acceptance of responsibility, but as against that, the prospect that the individual may reform;

    …

(xv)    The factors leading to the shortest disqualifications, that is disqualifications for up to 3 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;

    in Donovan’s case, the respondent had expressed remorse and contrition, acted on advice of professionals and had not contested the proceedings.

[Citations omitted]

[106]    In Elliott v Australian Securities and Investments Commission (2004) 10 VR 369 the Victorian Court of Appeal likened many of the items in Santow J’s list to sentencing principles, observing that matters going to aggravation and mitigation need to be considered and accorded proper weight, but above all else, protection of the public and deterrence, specific and general, must also be given appropriate consideration.

[107]    In Rich v ASIC at [52] McHugh J said that both Santow J’s list and the comments of the Victorian Court of Appeal indicated that factors taken into account in the criminal jurisdiction — retribution, deterrence, reformation, contrition and protection of the public — were also central to determining whether a disqualification order should be made and, if so, the appropriate period of disqualification.

[108]    As to the nature and seriousness of the contraventions, McHugh J gave examples, by reference to the decided cases, of the kinds of contraventions which have been held to justify the making of disqualification orders:

[47]    Many and varied are the contraventions of the Corporations Act that give rise to applications for the disqualification of a person from managing corporations. Those contraventions are the grounds for the exercise of the court’s discretion to order disqualification. The nature and seriousness of the contraventions are important matters to which the courts have regard when determining whether to order disqualification. Contraventions under the Corporations Act and its predecessor legislation that have been found to enliven the court’s discretion include breaches of directorial duties of honesty, good faith and due care and diligence, making improper use of the position of director to gain an advantage for that person or for others to the detriment of the company, making inappropriate use of company funds, engaging in misleading and deceptive conduct, permitting corporations to trade while insolvent, operating unregistered schemes unlawfully or carrying on a business such as a securities business or an investment advice business without a licence and failing to comply with administration obligations. In substance, the nature of these contraventions is little different from those which attract the sanctions of the criminal law.

    (Emphasis in original; citations omitted.)

43    Middleton J also accepted (at [109]) that the purpose of a disqualification order is not only protective, but also punitive. A disqualification order may be imposed by way of punishment and for general deterrence: Australian Securities and Investments Commission v Vizard (2005) 145 FCR 57 at [35].

44    In the present case the matters of particular importance to which I have had regard when considering what disqualification order to make in respect of the each of the individual defendants are the nature and seriousness of the contraventions established against each of them, the need to protect the public from further contraventions by the defendants, the need for general deterrence and mitigating factors.

45    I should also refer to two other important principles relevant to penalty in this case.

46    The first is the parity principle. As Dawson and Gaudron JJ explained in Postiglione v The Queen (1997) 189 CLR 295 at 301-302:

The parity principle upon which the argument in this Court was mainly based is an aspect of equal justice. Equal justice requires that like should be treated alike but that, if there are relevant differences, due allowance should be made for them. In the case of co-offenders, different sentences may reflect different degrees of culpability or their different circumstances. If so, the notion of equal justice is not violated. On some occasions, different sentences may indicate that one or other of them is infected with error. Ordinarily, correction of the error will result in there being a due proportion between the sentences and there will then be equal justice. However, the parity principle, as identified and expounded in Lowe v The Queen (1984) 154 CLR 606, recognises that equal justice requires that, as between co-offenders, there should not be a marked disparity which gives rise to “a justifiable sense of grievance”. If there is, the sentence in issue should be reduced, notwithstanding that it is otherwise appropriate and within the permissible range of sentencing options. Discrepancy or disparity is not simply a question of the imposition of different sentences for the same offence. Rather, it is a question of due proportion between those sentences, that being a matter to be determined having regard to the different circumstances of the co-offenders in question and their different degrees of criminality.

(some footnotes omitted).

See also McHugh J at 302 citing the Court of Criminal Appeal of South Australia in R v Tiddy [1969] SASR 575 in which the Court defined the parity principle in these terms at 577:

Where other things are equal persons concerned in the same crime should receive the same punishment; and where other things are not equal a due discrimination should be made.

47    The second principle is the totality principle which is in this case relevant only to the case of Mr Hutchinson. The totality principle holds that “where a penalty is being imposed for a number of offences, it is necessary to ensure that the penalties in aggregate are just and appropriate”: see Re HIH Insurance Ltd (in prov liq) and HIH Casualty and General Insurance Ltd (in prov liq); Australian Securities and Investments Commission v Adler and Others (2002) 42 ACSR 80 at [128]-[134] citing Finkelstein J in Australian Competition and Consumer Commission v Rural Press Ltd [2001] ATPR ¶41-833 and Mill v R (1988) 166 CLR 59 at 63.

Mr Hutchinson

Disqualification

48    Mr Studdy SC (who appeared for Mr Hutchinson) did not dispute that, in light of the findings made against Mr Hutchinson, some period of disqualification was in his case appropriate. But he contended that the eight year period of disqualification sought by ASIC was manifestly excessive and that some considerably lesser period of disqualification was appropriate.

49    Mr Hutchinson has been found liable in respect of the three contraventions previously identified.

50    It has not been shown that Mr Hutchinson acted dishonestly in the course of committing any of the proven contraventions. In particular, it was not shown that he appreciated that the 25 August Announcement was likely to mislead or deceive, or that any of the Withholding and Suspension Information was information that Vocation was required to disclose pursuant to its continuous disclosure obligations. Nor was it shown that he knew, at the time of signing the DDQ, that any of the answers provided by Vocation to UBS in that document were misleading or deceptive or likely to mislead or deceive.

51    Nevertheless, there are aspects of Mr Hutchinson’s conduct that reflect a glaring failure on his part to discharge his duties and responsibilities as Vocation’s CEO and managing director. In my opinion, Mr Hutchinson’s breaches of duty involved a persistent and continuing failure to properly turn his mind to the task of understanding the nature and scope of Vocation’s dispute with DEECD, the effect of relevant correspondence, the effect of relevant contractual provisions, and the reliability of his management team’s assessment of the extent of the potential financial impact of the Withholding and Suspension Information on Vocation.

52    I have previously found that Mr Hutchinson had no reasonable basis to believe, at the time he approved the 25 August Announcement, that the amount of funds withheld by DEECD would be permanently lost was unlikely to exceed $2.0 million. A person in Mr Hutchinson’s position exercising reasonable care and diligence would have understood that the outcome of the review was too uncertain to enable any such conclusion to be drawn with any reasonable level of confidence. Mr Hutchinson’s belief was not based on any proper analysis of the scope of Vocation’s dispute with DEECD, the parties’ contractual rights and obligations under the Funding Contracts, or the correspondence exchanged between the parties up to 25 August 2014.

53    One circumstance that I regard as particularly significant is the failure of Mr Hutchinson to provide the board with any legal advice in relation to the Funding Contracts (as he had been explicitly requested to do by the board on 29 July 2014) before the board approved the 25 August Announcement. As I explained in the principal judgment, the legal advice obtained from Mr Joyce of Landers & Rogers in relation to the contractual issues was not provided to the board until after the 25 August Announcement was approved by the board and released to the market. In this advice, which was provided to the board by email sent at around 5.45pm on 25 August 2014, Mr Joyce warned that DEECD may not release any further funds for some time if at all. As I said in the principal judgment, it is remarkable that Mr Joyce’s advice was not provided to the board for its consideration before the 25 August Announcement was approved and released to the market.

54    As to Mr Hutchinson’s involvement in Vocation’s breach of its continuous disclosure obligation, the findings previously made by me establish that Mr Hutchinson told the board on 25 August 2014 that there was no reason to believe that payment would continue to be withheld by DEECD. By that time a person in Mr Hutchinson’s position, exercising the requisite degree of care and diligence, would have understood that the position was far more uncertain and that there was a very significant risk that a large proportion of the withheld funds (perhaps all) may be permanently withheld by DEECD. That remained the position throughout the relevant period.

55    In my opinion, the conduct in which Mr Hutchinson engaged on 7 September 2014 in preparation for, and during, the board meeting that occurred on that date at which the board voted in favour of undertaking an equity capital raising is especially disturbing. As I pointed out in the principal judgment, the dispute between Vocation and DEECD had escalated considerably between 25 August 2014 and 7 September 2014. However, the information that Mr Hutchinson relied on when reporting to the board on 7 September 2014 and in support of his advice that the Withholding and Suspension Information did not need to be disclosed to the market did not provide him with any reasonable basis to provide the board with any such advice. As I noted in the principal judgment, his advice to the board reflected what appeared to me to have been an attempt by management to justify the advice previously given to the board that was not the product of any genuine attempt to objectively determine whether such advice was well-founded.

56    Mr Hutchinson was heavily involved in the preparation of the DDQ. It was found to have conveyed three misleading representations (R1, R2 and R3). Of particular concern to me in considering penalty was the representation (R1) that DEECD’s concerns were focused on the school leavers issue. This inaccurate characterisation of DEECD’s concerns gave weight to the suggestion that because the affected student cohort was relatively small, the quantum of funding that might permanently be withheld was correspondingly small. The other representations found to have been conveyed by the DDQ and to be misleading (R2 and R3) would have contributed to the overall impression that Vocation’s dispute with DEECD involved a relatively small cohort of students and that, therefore, neither the amount of the withheld funding or the suspensions on enrolments were material.

57    Mr Hutchinson has been found to have committed three contraventions of s 180 of the Act, each of which, although not shown to have been engaged in dishonestly or for an improper nature or personal gain, must be regarded as extremely serious.

58    With regard to mitigating factors, I am satisfied that Mr Hutchinson was a relatively young and inexperienced CEO and managing director at the time he was appointed to his position within Vocation. Contrary to a submission made by Mr Halley SC, I am also satisfied that Mr Hutchinson has shown some remorse and contrition following delivery of the principal judgment. In any event, I agree with the submissions made on behalf of both Mr Hutchinson and Mr Dawkins that the matter of contrition is complicated by the existence of the class action proceeding in which each of the individual defendants is also a defendant. I do not think it would be appropriate for the Court to give any significant weight to any failure on the part of the individual defendants to publicly acknowledge their wrongdoing even at this late stage of the proceeding while the class action proceeding remains unresolved.

59    Mr Hutchinson relied on affidavit evidence from Messrs James Groom, Brian Kraft and Richard Reimann. They gave evidence of their involvement with Mr Hutchinson which in each case dates back somewhere between about 11 and 18 years. Their evidence suggests that Mr Hutchinson is a person of good character who has, since leaving Vocation, made a significant contribution to the protection of the environment both in Australia and overseas through his involvement in an international not-for-profit organisation known as WildArk. Mr Hutchinson and his wife founded WildArk in 2015. It invests in projects which aim to conserve key tracts of land and threatened species around the world. WildArk has been involved in the establishment of conservancies in South Africa, Zambia, South West Alaska, Papua New Guinea, and Northern Australia.

60    I do not think that personal deterrence is a significant consideration in Mr Hutchinson’s case and I did not understand Mr Halley SC to make any submission to the contrary. However, general deterrence is in my view a weighty factor given the seriousness of Mr Hutchinson’s three contraventions. As Robson J observed in Australian Securities and Investments Commission v Flugge (No 2) (2017) 342 ALR 478 at [118]:

… It is important, as a matter of general deterrence, to make it clear that directors occupy a position of trust which, if misplaced, in appropriate cases should disqualify them from further participation in the management of such corporations for significant periods.

See also Morley v Australian Securities and Investments Commission (No 2); Shafron v Australian Securities and Investments Commission (No 2) (2011) 83 ACSR 620 at [125]-[126].

61    In respect of each of Mr Hutchinson’s contraventions, a significant period of disqualification is warranted. In this regard, I consider each of the contraventions to be of broadly equal seriousness, with each warranting a disqualification for a period of five years or a total of 15 years in respect of all three contraventions, before allowing for mitigating factors and before discounting for totality.

62    In my view it is appropriate to reduce the overall disqualification period that would otherwise be appropriate by approximately 30% on account of the mitigating factors to which I have referred and a further 40% to take account of the totality principle. On that basis I consider a total period of disqualification of six years is appropriate.

63    As to the matter of pecuniary penalty, Mr Studdy SC submitted that the amount of $150,000 sought by ASIC was excessive, and that a pecuniary penalty within the range of $50,000-$75,0000 was appropriate.

64    I agree that $150,000 is excessive when regard is had to the period of disqualification I propose to impose and pecuniary penalties imposed in other cases. However, some significant pecuniary penalty is warranted given the seriousness of Mr Hutchinson’s contraventions. In my view an appropriate pecuniary penalty for each contravention is $50,000 before allowing for mitigating factors and the totality principle. Adopting the same approximate percentage reductions previously referred to with respect to those matters, I am satisfied that $70,000 is an appropriate pecuniary penalty in respect of Mr Hutchinson’s three contraventions.

Mr Dawkins

65    Mr Dawkins was the non-executive chairman. As I have previously explained, he was found to have contravened s 180 of the Act essentially because he relied on information provided by management with respect to the materiality of the Withholding and Suspension Information from a point in time at which it became unreasonable for him to do so. As I have also explained, Mr Dawkins was to some extent a victim of Mr Hutchinson’s breaches of duty and the failings of other members of Vocation’s senior management team. His breach of duty flowed from his uncritical acceptance of information and advice provided to the board by Mr Hutchinson and other members of that team.

66    In my opinion Mr Dawkins’ contravention of the Act was serious in that it contributed to a state of affairs in which large volumes of Vocation’s shares to the value of approximately $97.0 million were permitted to trade during the relevant period while the market was not properly informed of the Withholding and Suspension Information. During the same period, Vocation raised approximately $74.0 million of new equity.

67    As previously observed, the matter of the equity capital raising is one that I regard as particularly significant when it comes to the question of penalty. The fact that the capital raising was allowed to proceed without disclosure of the Withholding and Suspension Information to the market on the basis of the vague, incomplete and misleading information provided to the board by Mr Hutchinson on 7 and 8 September 2014 is a matter in relation to which Mr Dawkins must carry a significant measure of responsibility.

68    Of course, Mr Dawkins did not occupy an executive position within Vocation and, as I have previously noted, he was to some extent a victim of Mr Hutchinson’s breach of duty. Nonetheless, I believe Mr Dawkins’ contravention warrants both a period of disqualification and a pecuniary penalty.

69    I do not think personal deterrence is a material factor in the case of Mr Dawkins. I accept that it is most unlikely that he will ever serve on the board of a public company again. However, as I have observed, general deterrence is an important factor in this case. In assessing what is an appropriate penalty, I have taken into account the fact that Mr Dawkins’ degree of culpability is significantly less than that of Mr Hutchinson.

70    I did not understand Mr Dawkins to express any contrition for the contravention which he was found to have committed. The expression of sorrow contained in his recent affidavit for what happened to Vocation and the losses suffered by investors falls short of an acknowledgement that he should have scrutinised management’s assessment of the materiality of the Withholding and Suspension Information more carefully than he did. Nevertheless, for reasons previously explained, I do not regard lack of contrition as a significant factor when assessing an appropriate penalty in his case.

71    In my view, an appropriate period of disqualification is four years and an appropriate pecuniary penalty is $50,000 before making any allowance for mitigating factors.

72    I am satisfied that Mr Dawkins’ distinguished record of public service, his good character and the public opprobrium suffered by him as a result of the publicity surrounding this proceeding, warrant a significant reduction in the penalty that would otherwise be appropriate. The percentage reduction I propose to apply to take account of the mitigating factors to which I have referred is 50%. On that basis I propose to impose on Mr Dawkins a period of disqualification of two years and a pecuniary penalty of $25,000.

Mr Gréwal

73    The reason I will not impose on Mr Gréwal the penalty he has agreed with ASIC is that it would involve the imposition of an unjustifiably harsh penalty on Mr Gréwal in comparison to the penalty I have decided to impose on Mr Hutchinson in relation to the preparation and dissemination of the DDQ.

74    What I have said in relation to Mr Hutchinson’s involvement in the DDQ also applies to Mr Gréwal. It was never part of ASIC’s case against Mr Gréwal that he acted dishonestly, for an improper purpose or for personal gain. Nevertheless, his contravention of s 180 of the Act was serious in that it was the product of a significant departure from the standard of care that was to be expected of a person in his position given the nature and significance of the transaction upon which Vocation had decided to embark and the underwriter’s obvious desire to obtain a proper understanding of the scope of Vocation’s dispute with DEECD and any threat it posed to Vocation’s future earnings and cash flow. Mr Gréwal knew that the DDQ would be relied upon by UBS for that purpose and in deciding whether to underwrite the equity capital raising.

75    As I explained in the principal judgment, Mr Gréwal did not attend the meeting with Mr Bolt on 8 September 2014. He was therefore at a disadvantage to Mr Hutchinson who not only attended that meeting but claimed also to have had the benefit of a detailed review of the relevant correspondence as part of management’s preparation for that meeting. Nevertheless, by the time that Mr Gréwal signed the DDQ, he had been provided with the terms of reference which would have indicated to a person in Mr Gréwal’s position exercising reasonable care and diligence that the particular answer drafted by Mr Hutchinson by which R1 was found to be conveyed was most likely incorrect.

76    There is also the matter of Ms King’s report of 19 August 2014 which I found Mr Gréwal would have read before it was provided to the board. I found that Ms King’s report clearly indicated that DEECD’s concerns extended beyond a small cohort of school leavers and that DEECD was focused on the quality of the pre-training reviews conducted by or on behalf of BAWM and Aspin more generally and other matters relating specifically to the duration of the dual qualification.

77    With respect to the DDQ, I do not consider Mr Gréwal to be any less culpable than Mr Hutchinson. I think each of them was well placed to recognise and understand, were they to have exercised due care and diligence, that the DDQ was likely to mislead and deceive in the three respects identified in the principal judgment. Further, Mr Gréwal, like Mr Hutchinson, understood the importance of the DDQ. The terms of the declaration made by Mr Gréwal should have brought home to him the importance of exercising due care and skill in relation to the preparation and review of that document.

78    In relation to mitigating factors, I have considered Mr Gréwal’s affidavit in which he gives an account of the impact the proceeding has had on him. He notes in his affidavit, and I accept, that the collapse of Vocation and this proceeding has generated a significant amount of adverse publicity directed at both himself and the other individual defendants. His affidavit also discloses that this adverse publicity has had a direct impact on his employment opportunities during 2016 and again in 2019.

79    Mr Gréwal is still relatively young (he is 46 years old) with a family to support. His appointment to the position of Vocation’s Chief Financial Officer was his first appointment to a CFO position and his first role at a public company. In his affidavit he expresses his regret that his actions may have resulted in adverse consequences for investors. He also states that he has enrolled in a Certificate of Governance and Risk Management course with the Governance Institute of Australia which he believes will improve his risk management and governance skills. He says that he undertakes to complete that course and I see no reason to doubt that he will.

80    In my view there are strong grounds to believe that Mr Gréwal is genuinely remorseful and that his commitment to undertake further study focused on risk management and governance skills reflect his acceptance that he may not have discharged his duty as CFO with the requisite degree of care and skill expected of a person in his circumstances. The fact that he has co-operated with ASIC since publication of the principal judgment for the purpose of agreeing a penalty is also a matter to which I have had regard.

81    I do not think there is any reason to believe that Mr Gréwal will engage in any further contravention of s 180 of the Act or any other statutory provision relevant to the duties and responsibilities associated with the management of a corporation. Still, in my view Mr Gréwal’s contravention of s 180 of the Act warrants the imposition of a significant period of disqualification and a significant pecuniary penalty.

82    Given the seriousness of Mr Gréwal’s contravention, a period of disqualification of five years is warranted before allowing for mitigating factors. In my view an appropriate discount to take account of the mitigating factors to which I have referred is approximately 30%. I therefore propose to order that Mr Gréwal be disqualified from managing a corporation for a period of three years.

83    In relation to pecuniary penalty, I am satisfied that a pecuniary penalty of $50,000 before allowing for mitigating factors is appropriate. Adopting the same approximate percentage reduction that I have applied to the disqualification period, I consider that in Mr Gréwal’s case, a pecuniary penalty of $30,000 is appropriate.

Costs

84    While the Court’s power to award costs under s 43 of the Federal Court of Australia Act 1976 (Cth) is broad and unfettered, it is to be exercised judicially and in accordance with well-established principles. As stated by French CJ, Hayne, Bell, Gageler and Keane JJ in Gray v Richards (No 2) (2014) 89 ALJR 113 at 113–114 [2]:

The disposition of costs is within the general discretion of the court. Ordinarily, that discretion will be exercised so that costs are awarded to the successful party, but other factors may have a significant claim on the discretion of the court [Stewart v Atco Controls Pty Ltd (In liq) (No 2) (2014) 252 CLR 331 at 334 [4]]. The disposition which is ultimately to be made in any case where there are competing considerations will reflect a broad evaluative judgment of what justice requires.

85    In the written submissions filed on behalf of Mr Dawkins it was submitted that he should not be required to pay any part of ASIC’s costs. That is not an outcome that I would countenance in circumstances where Mr Dawkins has been found to have engaged in a serious contravention of the Act, where his application for relief under the excuse provisions has been rejected, and where a significant penalty has been imposed on him. In his oral submissions Mr Pesman SC did not resist the proposition that Mr Dawkins should pay some proportion of ASIC’s costs.

86    Written submissions made on behalf of Mr Gréwal in relation to costs included an analysis of the total number of alleged contraventions against the individual defendants that were proven or not proven. It was submitted on his behalf that this analysis could form the basis for an appropriate apportionment of costs which should not require Mr Gréwal to pay more than 10% of ASIC’s costs. That is not an appropriate way in which to assess costs in circumstances where much of the evidence in the case as a whole was relevant to the case against each of the individual defendants including in respect of those contraventions which each of them was found to have committed. In Mr Gréwal’s case, this included a large body of evidence that was directly relevant to the question of whether the representations conveyed by the DDQ were likely to mislead or deceive.

87    In their oral submissions the individual defendants contended that the cost orders to be made should make some general allowance for the fact that there were a number of contraventions asserted against each of them that was not established. These include the claims made against Mr Hutchinson and Mr Dawkins based on s 674(2A) of the Act and the contravention of s 180 of the Act alleged against each of the individual defendants based on the Cleansing Notice. They also include the claim made against Mr Dawkins based on the 25 August Announcement.

88    It is true that ASIC sought to establish a number of contraventions of the Act against the individual defendants that it did not prove. While legal argument in relation to those matters took up some additional time during the course of the hearing and in related preparation, it was not in my view enough to justify anything more than a modest reduction in the costs that should be payable to ASIC. In my view, the costs awarded to ASIC should be reduced by 10% to take account of the time devoted to the various contraventions that were alleged and not proven against each of the individual defendants.

89    It was also submitted on behalf of each of Mr Dawkins and Mr Gréwal that Mr Hutchinson should be ordered to pay a considerably larger proportion of ASIC’s costs than them. I accept that it would not be appropriate to order that each of the individual defendants pay an equal proportion of ASIC’s costs. I say this because ASIC’s case against Mr Hutchinson was more extensive, and met with more success, than that brought against Mr Dawkins and Mr Gréwal.

90    In my view the interests of justice require that Mr Hutchinson pay a significantly greater proportion of ASIC’s costs than either Mr Dawkins or Mr Gréwal should be required to pay. In all the circumstances I think Mr Hutchinson should be required to pay 50% of ASIC’s costs and that Mr Dawkins and Mr Gréwal should each be required to pay 25% of such costs.

91    Declarations and orders accordingly.

Associate:

Dated:    1 November 2019