This case indicates that courts (at least in Victoria at this stage) will not simply ‘rubber stamp’ agreed penalties. Parties wishing to make submissions on penalties should submit a range of agreed penalties (rather than precise agreed penalties) and ensure that their statement of agreed facts is sufficiently accurate and comprehensive so as to form a sound basis on which the court can assess penalties. The case also illustrates the unwillingness of courts to accept the “demands of the job” as an excuse for serious breaches of duties by holders of important offices.
This case arose out of proceedings by ASIC for breaches of section 180(1) of the Corporations Act 2001 (Cth) by Mr Ingleby who was the CFO of AWB Limited (AWB) during the period in which AWB was involved in supplying Iraq with wheat in contravention of UN sanctions. Mr Ingleby negotiated a settlement with ASIC, supported by a statement of agreed facts, of a pecuniary penalty of $40,000 and an order disqualifying him from managing corporations for 15 months. After reviewing the statement of agreed facts, the trial judge found Mr Ingleby’s culpability to be minimal and imposed a reduced pecuniary penalty of $10,000 and a disqualification order of around four and a half months.
ASIC appealed the trial judge’s decision. The Court of Appeal recognised the practice in Australia (supported by the Full Court of the Federal Court in NW Frozen Foods v ACCC and Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd) for courts to endorse agreed penalties in cases involving regulators where the penalties are broadly within the permissible range in all the circumstances. While recognising the benefits of agreed penalties (such as predictability and avoiding lengthy and costly litigation), the Court found NW Frozen Foods to represent bad law and criticised it on the following basis:
- it may be difficult for a court to determine whether the agreed penalty is within the range that the court would fix;
- decisions that sanction agreed penalties may not be an appropriate measure by which to gauge appropriate penalties in later cases;
- the lack of transparency in agreed penalties may reinforce a perception that agreed penalties are not adequately grounded in fact and legal principle;
- agreed penalties can be inappropriately low;
- there may be concerns around the accuracy and sufficiency of a statement of agreed facts, as a basis on which to sanction an agreed penalty; and
- sentencing is an exercise of judicial power and it is not the role of courts to simply ‘rubber stamp’ agreed penalties.
In this case, the Court found that the statement of agreed facts was a ‘watered-down’ version of Mr Ingleby’s true level of culpability and was impossible to reconcile with evidence of his central role within AWB. The Court of Appeal did not therefore consider that the statement of agreed facts placed it in a position from which it could properly discharge its constitutional responsibilities and found that the trial judge should have requested further information before considering appropriate penalties.
Weinberg J also endorsed an approach whereby parties put forward a suggested range of penalties, rather than precise agreed penalties. While such range would not be binding on a court, at least the proffering of a range recognises the breadth of the discretion vested in the court to synthesise the various factors in the sentencing process.
Ultimately the Court imposed the agreed penalties although it made clear that but for the facts that ASIC had not asked the Court to impose penalties higher than the agreed penalties and Mr Ingleby did not participate in the appeal, it would have imposed a higher penalty. The Court noted that Mr Ingleby had committed a very serious breach of section 180(1) and questioned whether ASIC should have further alleged wilful blindness by Mr Ingleby. The Court was also unimpressed with the argument that Mr Ingleby’s failure to see what he ought to have seen was a consequence of the demands placed on him by his job, noting that proper corporate and professional behaviour depends on acceptance of responsibilities that go with important offices.
See the case.