The Federal Court today delivered its penalty judgment against 5 former directors of Australian Property Custodian Holdings Ltd (APCHL) who breached their directors’ duties by making an illegal related party payment of more than $30 million.

The judgment follows an ASIC investigation into the directors’ role in amending Prime Trust’s constitution so a $33 million fee could be paid to the trust’s founder and one of its directors, Bill Lewski. ASIC launched its civil penalty proceedings in 2012 and the Federal Court found in December 2013 the directors breached their corporate duties by failing to act in members’ best interest (refer: 13-339MR).

Today’s judgment in the Federal Court in Melbourne saw Justice Murphy deliver the following disqualifications and penalties:

William Lionel Lewski – disqualified for managing a company for 15 years and fined $230,000

Mark Frederick Butler – disqualified for managing a company for 4 years and fined $20,000

Kim Jaques – disqualified for managing a company for 4 years and fined $20,000

Dr Michael Wooldridge – disqualified for managing a company for 2 years, 3 months and fined $20,000

Peter Clarke – was not disqualified from managing a company but fined $20,000

The Court also ordered that the defendant directors pay the costs of ASIC’s proceeding.

ASIC Commissioner Greg Tanzer said, ‘These individuals, through their actions, showed a complete disregard for the unit holders of Prime Trust to which they owed important obligations.’

In delivering his judgment, Justice Murphy stated that Mr Lewski’s conduct was ‘central in Prime Trust’s suffering a substantial loss’ and that he had failed to demonstrate any real understanding of the seriousness of the breaches. He also found that there was a risk of re-offending by Mr Lewski and that ‘the lengthy disqualification and significant pecuniary penalty attempt to put a price on his contraventions that will show him that the game is not worth the candle’.

In regards to the other defendant directors, Justice Murphy found that ‘rather than acting in the best interests of the Members’ Mr Wooldridge, Mr Butler and Mr Jaques had ‘capitulated to the interests of Mr Lewski’.

In relation to Mr Clarke, Justice Murphy said, ‘he sat passively’ and ‘merely waved through a resolution which allowed a $33 million breach of trust’.

Declarations of contravention were also made against APCHL, the first defendant. APCHL did not participate in the proceeding and the only relief sought by ASIC against it was declaratory relief.

A stay of the orders in respect of Mr Lewski and Dr Wooldridge was granted until 23 December 2014.

The defendants have 21 days within which to lodge an appeal to the Full Court of the Federal Court.

Background

One of APCHL’s receivers and managers is conducting separate civil proceedings in relation to the fee in the Supreme Court of Victoria. The Supreme Court proceedings were adjourned pending the conclusion of the exoneration and penalty phase of the ASIC proceedings.

 

Source: ASIC – Prime Trust directors disqualified and fined

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