King v Australian Securities and Investments Commission

The Australian Securities and Investments Commission (ASIC) filed a civil penalty case against a company and various directors and officers, including the appellant, the CEO of the group of companies, for breaches of the Corporations Act 2001 (Cth). The primary judge found that the company had misused funds of an investment fund for which it was a custodian. The primary judge also found that the appellant was knowingly concerned in the company’s contraventions of the Corporations Act and was an officer of the company. The primary judge disqualified the appellant from managing any corporation for 20 years and ordered him to pay a pecuniary penalty of $300,000. The Court of Appeal upheld the finding of being knowingly concerned but found that the appellant was not an officer of the company.

The appeal raised issues concerning the appropriateness of the penalty imposed by the primary judge. The appellant argued that a lesser penalty should be imposed, considering authorities in non-officer cases, the parity principle in respect of the penalty imposed by the primary judge on another non-director, and the totality principle in respect of a compensation order. The appeal court found that the penalty was appropriate, but the pecuniary penalty was reduced from $300,000 to $270,000, and the appellant was ordered to pay 50 per cent of ASIC’s costs of the trial. The appellant was also ordered to pay 75 per cent of ASIC’s costs of the appeal, and no order for costs was made on the respondent’s cross-appeal.

In summary, the Court of Appeal found that the primary judge’s assessment of the period of disqualification and the pecuniary penalty was appropriate, but the pecuniary penalty was reduced. The appellant was ordered to pay 50 per cent of ASIC’s costs of the trial and 75 per cent of ASIC’s costs of the appeal. No order for costs was made on the respondent’s cross-appeal.

The final orders were to vary the order made in paragraph 30 of the orders made on 26 May 2017 by substituting a pecuniary penalty of $270,000 for the sum of $300,000. The order made in paragraph 32 of those orders was varied by ordering that the appellant pay 50 per cent of the respondent’s costs of and incidental to the proceeding in the trial division on the standard basis. The appellant was ordered to pay 75 per cent of the respondent’s costs of the appeal and there be no order for costs on the respondent’s cross-appeal.