Australian Securities and Investments Commission v Austal Ltd

• Jurisdiction: Australia Federal only
• Judgment Date: 10 October 2022
• Neutral Citation: [2022] FCA 1231
• Date: 10 October 2022
• Court: Federal Court

Federal Court of Australia

Australian Securities and Investments Commission v Austal Ltd [2022] FCA 1231

File number:	VID 307 of 2021
Judgment of:	O'BRYAN J
Date of judgment:	10 October 2022
Date of publication of reasons:	14 October 2022
Catchwords:	CORPORATIONS – admitted contraventions of ss 674(2) and (2A) of the Corporations Act 2001 (Cth) – declarations and pecuniary penalties sought by plaintiff not opposed by defendants – whether form of declarations appropriate – whether quantum of penalties appropriate
Legislation:	Corporations Act 2001 (Cth) ss 674(2)-(2A), 676, 677, 1317E, 1317G(1A) Federal Court of Australia Act 1976 (Cth) s 21 ASX Listing Rules rr 3.1, 19.12
Cases cited:	Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2017) 254 FCR 68 Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157 Australian Building and Construction Commissioner v Pattinson (2022) 175 ALD 383 Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2015] FCA 330; 327 ALR 540 Australian Competition and Consumer Commission v Cornerstone Investment Australia Pty Ltd (in liq) (No 5) [2019] FCA 1544 Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; 340 ALR 25 Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 Australian Securities and Investments Commission v Adler (No 5) [2002] NSWSC 483; 42 ACSR 80 Australian Securities and Investments Commission v AMP Financial Planning Pty Ltd (No 2) [2020] FCA 69; 377 ALR 55 Australian Securities and Investments Commission v Chemeq Ltd [2006] FCA 936; 234 ALR 511 Australian Securities and Investments Commission v Vocation Ltd (In Liq) [2019] FCA 807; 371 ALR 155 Australian Securities and Investments Commission v Warrenmang Ltd [2007] FCA 973; 63 ACSR 623 Australian Securities and Investments Commission v Wooldridge [2019] FCAFC 172 Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 Markarian v The Queen (2005) 228 CLR 357 Mayfair Wealth Partners Pty Ltd v Australian Securities and Investments Commission [2022] FCAFC 170 NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 Singtel Optus v Australian Competition and Consumer Commission [2012] FCAFC 20; 287 ALR 249 Trade Practices Commission v CSR Ltd [1990] FCA 762; ATPR 41-076 TPT Patrol Pty Ltd Ltd (as trustee for the Amies Superannuation Fund) v Myer Holdings Ltd [2019] FCA 1747; 140 ACSR 38
Division:	General Division
Registry:	Victoria
National Practice Area:	Commercial and Corporations
Sub-area:	Regulator and Consumer Protection
Number of paragraphs:	100
Date of hearing:	10 October 2022
Counsel for the Plaintiff:	Mr M Borsky KC with Ms V Bell
Solicitor for the Plaintiff:	MinterEllison
Counsel for the First Defendant:	Mr K Dharmananda SC
Solicitor for the First Defendant:	Corrs Chambers Westgarth
Counsel for the Second Defendant:	Mr P Collinson KC with Mr P Evans
Solicitor for the Second Defendant:	HFW Australia

ORDERS

		VID 307 of 2021
BETWEEN:	AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Plaintiff
AND:	AUSTAL LTD First Defendant ; DAVID SINGLETON Second Defendant

order made by:	O'BRYAN J
DATE OF ORDER:	10 OCTOBER 2022

THE COURT NOTES THAT:

In this order, Information means:

1. it was likely that there was a significant increase in the estimated actual cost of construction for the Littoral Combat Shipbuilding program and a reset and profit writeback of at least US$90million was required in FY2016;

2. the reset and profit writeback would generate a loss of at least US$40million in FY2016 for Austal USA LLC (a wholly-owned subsidiary of Austal Holdings Inc which was at all material times a wholly-owned subsidiary of the first defendant, and whose operations were the largest contributor to the first defendant's revenue and earnings);

3. the reset and profit writeback would generate a significant loss in FY2016 for the first defendant; and

4. the EBIT margin guidance announced to the ASX by the first defendant on 10 December 2015 was no longer reliable and should be withdrawn.

THE COURT DECLARES THAT:

1. The first defendant contravened s 674(2) of the Corporations Act 2001 (Cth) (Corporations Act) on one occasion from 16 June 2016 and continuing to 4 July 2016 by failing to notify the ASX of the Information, in circumstances where:

1. on 16 June 2016, the first defendant became aware of the Information;

2. the Information was not generally available within the meaning of s 676 of the Corporations Act and for the purposes of s 674(2)(c)(i) of the Corporations Act;

3. the Information was information that a reasonable person would have expected, if it had been generally available, to have had a material adverse effect on the price or value of the first defendant's securities, within the meaning of s 677 of the Corporations Act and for the purpose of s 674(2)(c)(ii) of the Corporations Act;

4. in the period between 16 June 2016 and 4 July 2016, the first defendant was obliged by Rule 3.1 of the listing rules of the ASX and s 674(2) of the Corporations Act to immediately notify the ASX of the Information.

2. The second defendant, in his position of Chief Executive Officer of the first defendant, contravened s 674(2A) of the Corporations Act on one occasion from 16 June 2016 continuing to 4 July 2016 by reason of being knowingly concerned in the contravention by the first defendant of s 674(2) of the Corporations Act (as set out in paragraph 1 above).

THE COURT ORDERS THAT:

3. Pursuant to s 1317G(1A) of the Corporations Act in respect of the contraventions the subject of the above declarations:

1. the first defendant pay a pecuniary penalty to the Commonwealth of Australia in the sum of $650,000; and

2. the second defendant pay a pecuniary penalty to the Commonwealth of Australia in the sum of $50,000.

4. The defendants pay a contribution to the plaintiff's costs in a lump sum of $500,000.

5. The proceedings otherwise be dismissed on the basis that, other than provided for in order 4 above, there be no order as to costs between the plaintiff and the defendants.

Note: Entry of orders is dealt with in Rule 39.32 of the ...