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In practice, where prosecutions brought by ASIC for breaches of the Corporations Act and other legislation are settled between the parties, the Court will generally approve the settlement at ASIC’s request and make the orders agreed between the parties. However, this will not always be so, as was demonstrated in the recent decision of Robson J in the Supreme Court of Victoria in ASIC v Ingleby  VSC 339.
This decision concerned ASIC’s prosecution of Paul Ingleby, who had been the Australian Wheat Board’s CFO, for Ingleby’s involvement in the AWB’s controversial supply of wheat to Iraq under the UN’s “oil-for-food” program. ASIC alleged Ingleby had breached several directors duties under the Corporations Act (among other legislation), and Ingleby had himself admitted to a breach of the duty to act with due care a diligence under s180(1) of the Corporations Act.
ASIC’s case was not that Ingleby had done anything deliberately wrong, dishonest or immoral, but that his “inaction” or failure to conduct himself in a particular way had, at times, caused him to contravene the corporations law.
Ultimately, ASIC and Ingleby reached a settlement whereby Ingleby agreed to pay a civil fine of $40,000, and would be disqualified from “managing corporations” for a period of 15 months. The Court’s endorsement of the terms of the settlement was required to make it binding upon the parties.
In considering the matter, Robson J stated that the Court could not make a declaration that the corporations law had been contravened and order penalties by consent of the parties unless the Court was first satisfied that the “statutory conditions” for making such a declaration and resulting orders had been fulfilled. Of particular concern to His Honour here was the appropriateness of the penalties agreed between the parties.
Considering precedent cases, and the facts of the case at hand, Robson J ultimately found that the penalties agreed between ASIC and Ingleby were too harsh. His Honour noted, among other things, that the background facts of the case had exposed Ingleby to years of harsh publicity and comment, and damage to his reputation, and the threat of civil and criminal prosecution had been hanging over him for some time. Robson J also noted that the risk of Ingleby re-offending was minimal.
As a result of the foregoing, Robson J ordered that the disqualification run only up to the end of 2012, and the fine was reduced to $10,000.
This decision, if allowed to stand, may potentially encourage directors accused of breaching the corporations law to pursue more favourable settlements for themselves with ASIC. It may also show, to some extent, that what the Court will deem to be an offence warranting harsher penalties will depend upon factors such as the presence or absence of clear dishonesty and deliberate wrongdoing, and the likelihood of the director in question re-offending.