Gillfillan v Australian Securities and Investments Commission

This matter concerned an appeal by seven non-executive directors of a listed corporation against declarations of contravention of section 180(1) of the *Corporations Act 2001* (Cth) and the penalties imposed by the primary judge. The contraventions related to the approval of an announcement by the corporation at a Board meeting. While the declarations of contravention were not in dispute following an appeal to the High Court, the directors challenged the disqualification for five years and the pecuniary penalties of $30,000 imposed on each of them. Two of the directors, referred to as the "US Directors," had attended the relevant meeting by telephone from the United States and had neither seen nor requested to see the Draft Announcement.

The central legal issues before the Court of Appeal were whether the penalties imposed by the primary judge involved error, specifically concerning the application of the parity principle and the assessment of factors relevant to penalty. The court was also required to determine whether the US Directors should be relieved from liability under sections 1317S(2) or 1318(1) of the *Corporations Act*, and whether the circumstances justified imposing different penalties on them compared to the other directors. The significance of the "de facto" period of disqualification pending the High Court appeal, the absence of findings of dishonesty, and the materiality of testimonial evidence were also relevant considerations.

The Court of Appeal found that the primary judge had erred in applying the parity principle, which dictates that where directors are found to have engaged in the same contravention, they should generally receive the same penalty unless there are relevant distinctions. The court held that the primary judge had not adequately considered the differences in the circumstances of the US Directors, particularly their physical absence from the meeting and their lack of access to the Draft Announcement, when assessing penalties. While acknowledging the seriousness of the contraventions, the court considered that these factors warranted a departure from the penalties imposed on the other directors. The court also noted that the absence of dishonesty was a relevant factor in assessing the appropriate penalty.

The Court of Appeal varied the penalties imposed. It set aside the disqualification orders and pecuniary penalties against the US Directors and remitted the assessment of penalties for those directors to the primary judge. For the remaining five directors, the court upheld the declarations of contravention but varied the penalties, reducing the period of disqualification and the pecuniary penalties.