Penalty orders re-imposed in proceedings against former Prime Trust directors

The Full Court of the Federal Court of Australia has made disqualification and pecuniary penalty orders against William Lewski, Mark Butler, Kim Jaques and Michael Wooldridge, former directors of Australian Property Custodian Holdings Limited (APCHL).

The effect of the orders is to reinstate the original pecuniary penalties and periods of disqualification imposed by the trial judge, Justice Murphy, in December 2014 (14-323MR). The matter was heard by the Full Court following ASIC’s largely successful appeal to the High Court of Australia (18-377).

APCHL was the responsible entity of the Prime Retirement and Aged Care Property Trust (Prime Trust), a managed investment scheme which owned retirement villages in Queensland, NSW and Victoria. The directors contravened the Corporations Act 2001 (Cth) by voting to lodge an invalidly amended scheme constitution and subsequently voting for payment of fees out of trust funds.

Except in the case of Dr Wooldridge, ASIC and the former directors made joint submissions to the Court that the effective reimposition of the original penalties would address the need for deterrence in respect of the misconduct, and that it was in the public interest for the proceedings to be finalised as quickly as possible.

The reinstated penalties are:

  • Mr Lewski – disqualified from managing a company for 13 years 134 days (original period 15 years, less time already served) and fined $230,000;
  • Mr Butler – disqualified from managing a company for 2 years 134 days (original period 4 years, less time already served) and fined $20,000; and
  • Mr Jaques – disqualified from managing a company for 2 years 134 days (original period 4 years, less time already served) and fined $20,000.

As to the remaining former director, Dr Wooldridge, after a contested hearing on 13 August 2019, the Full Court made orders that he be disqualified from managing a company for a further 263 days (original period 2 years and 3 months, less time already served) and that he be fined $20,000.

This ruling, in respect of Dr Woolridge, also effectively reinstates the penalties imposed by Justice Murphy in December 2014.

Following the orders of the Full Court, the disqualification period for Messrs Lewski, Butler and Jaques commenced on 11 October 2019, and, after an initial stay, the disqualification period for Dr Wooldridge commenced when that stay lapsed on 23 October 2019.

The Full Court further ordered that the four directors pay ASIC’s costs of, and incidental to each of their appeals to the Full Federal Court in 2015 (with the exception of the costs of those appeals that the High Court ordered that ASIC should pay).

Dr Wooldridge has applied to the Federal Court for leave to manage four corporations. This matter is listed for hearing on 31 October 2019 before Anderson J.

Background

ASIC commenced its proceeding on 22 August 2012 (12-208MR), when it challenged the lawfulness of a decision by APCHL’s Board in 2006 to amend the constitution of the Prime Trust to introduce and or amend various fees payable to APCHL. The amendments resulted in a fee of approximately $33 million being paid to APCHL (an entity owned by interests associated with Mr Lewski) subsequent to the listing of Prime Trust on the ASX in August 2007 (13-339MR).

Although ASIC was successful in the Federal Court, resulting in disqualifications and fines (14-323MR), an appeal by the directors to the Full Court overturned this decision (16-225MR).

ASIC then applied to the High Court of Australia for special leave to appeal, which was granted.

On 13 December 2018, the High Court of Australia (Keifel CJ, Bell, Gageler, Keane and Edelman JJ) handed down its decision, unanimously allowing ASIC’s appeals in part and ordering the proceedings to be remitted to the Full Court for determination of what effect, if any, its decision was to have on the penalties and disqualification orders made against the directors (other than Mr Clarke) (18-377MR).

A link to the High Court’s judgment can be found here: http://eresources.hcourt.gov.au/showCase/2018/HCA/63

For further information on ASIC’s action regarding Prime Trust, see our dedicated Prime Trust Key Matters page.

Download:

Sealed orders of the Full Court – Michael Wooldridge – 23 October 2019

Sealed orders of the Full Court – Michael Wooldridge – 11 October 2019

Sealed orders of the Full Court – William Lewski – 11 October 2019

Sealed orders of the Full Court – Mark Butler – 11 October 2019

Sealed orders of the Full Court – Kim Jaques – 11 October 2019

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