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Judgment in ASIC v Trevor Flugge

10 April 2017

Justice Robson today imposed a pecuniary penalty of $50,000 on Trevor Flugge, and issued an order disqualifying him from managing a corporation for a period of five years, for his breach of s 180 of the Corporations Act.

The Australian Securities and Investments Commission (ASIC) brought a civil proceeding against Mr Flugge under the Corporations Act 2001 (Cth) alleging that, while chairman of AWB Limited (AWB), Mr Flugge breached his duties under ss 180 and 181 of the Corporations Act, arising out of AWB’s conduct in selling wheat to Iraq under the United Nations (UN) Oil-for-Food Program (OFFP).

The Court found that Mr Flugge breached his duty under s 180 of the Corporations Act but did not breach his duty under s 181 of the Corporations Act. The full description of Mr Flugge’s breach is contained in ASIC v Flugge & Geary [2016] VSC 779 (External link).

Subsequently, ASIC sought a declaration of contravention against Mr Flugge; the maximum monetary penalty of $200,000 for the breach of s 180, and his disqualification from managing corporations for a period of 10 years. ASIC also sought that the Court order Mr Flugge to pay 70 per cent of ASIC’s costs.

In determining the appropriate penalty, Justice Robson considered relevant civil penalty provisions, penalties imposed in other cases with material common elements, and Mr Flugge’s personal circumstances.

His Honour ordered that Trevor Flugge, as the chairman and a director of AWB Ltd, contravened s 180(1) of the Corporations Act in that between 19 December 2001 and 15 March 2002, he failed to exercise his powers and discharge his duties:

Mr Flugge was informed in March 2000 that the UN was inquiring into whether AWB was making any inappropriate payments of transportation fees to Iraq. Justice Robson asserted that Mr Flugge failed to make, and continued to fail to make, any or any adequate inquiries, as to whether the UN had been fully informed by AWB of the circumstances surrounding AWB’s payment of inland transportation fees to the IGB, in the circumstances where he knew:

  • of the OFFP and the UN sanctions against Iraq
  • that AWB was making payments of inland transportation fees to the IGB under the OFFP
  • that AWB was doing so in the belief that the UN had approved the payments of the inland transportation fees even though they involved the payment of internationally traded currencies to Iraq.

ASIC’s complaint was issued on 19 December 2007. Although it was found that the breach of s 180 by Mr Flugge began earlier, because of the six year limitation period ASIC was not able to complain of any conduct that occurred prior to the 19 December 2001.

Justice Robson ordered Mr Flugge to pay the Commonwealth of Australia a penalty of $50,000, and disqualified Mr Flugge from managing corporations for a period of five years. His Honour issued no order in relation to costs.

NOTE: This summary is necessarily incomplete. It is not intended as a substitute for the Court’s reasons or to be used in any later consideration of the Court’s reasons. The only authoritative pronouncement of the Court’s reasons and conclusions is that contained in the published reasons for judgment.

Read the full judgment on Austlii (External link)

Listen to Justice Robson handing down the judgment (External link)

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