On 7 March 2018, Justice Perram of the Federal Court delivered his decision on Mr Michael Roger O'Sullivan's appeal of the Administrative Appeals Tribunal's (AAT) decision (refer: 17-131MR and 15-033MR).
The appeal was allowed on one ground in relation to which ASIC accepted that the AAT had made an error of law by failing to respond to articulated arguments concerning a further statement of agreed facts and related submissions filed after the conclusion of the AAT hearing. The Court found that the effect of the error was that the AAT had denied Mr O'Sullivan procedural fairness and on that basis, allowed the appeal.
However, the Federal Court found in favour of ASIC and dismissed Mr O'Sullivan's challenge to the jurisdiction of the AAT and ASIC to disqualify Mr O'Sullivan from managing corporations under s 206F of the Corporations Act.
The Federal Court ordered that the AAT's decision of 2 May 2017 be set aside and the matter remitted to the AAT to be re-determined according to law. Mr O'Sullivan was ordered to pay ASIC's costs from 25 January 2018, including its costs of the hearing, with ASIC to pay Mr O'Sullivan's costs from the date of the application to 24 January 2018.
Mr O'Sullivan has 21 days to appeal the decision to the Full Court of the Federal Court.
A copy of the Federal Court's decision can be found here.
Background
The five year period for which Mr O’Sullivan was banned from managing corporations is the maximum period of disqualification that ASIC can impose under section 206F of the Corporations Act.
Provident Capital issued debentures to retail investors through their Fixed Term Investment Portfolio and advanced the debenture funds to third party borrowers, including property developers, on a first mortgage basis.
Provident Capital also operated a mortgage fund under a wholesale facility with Bendigo and Adelaide Bank and two managed investment schemes.
On 29 June 2012, on an application by the Australian Executor Trustees Limited, the trustee for Provident debenture holders, the Federal Court ordered that receivers be appointed to Provident. ASIC appeared as a ‘friend of the court’ in these proceedings.
When Provident Capital went into liquidation on 24 October 2012 over 3,000 Provident debenture holders were owed approximately $130 million.
Provident’s receivers (PPB Advisory) have estimated that the likely return to debenture holders will be in the range of $0.17 to $0.19 in the dollar.
ASIC action against other Provident directors
Malcolm Philip Bersten
On 19 April 2016, ASIC banned former executive director and in-house legal counsel of Provident Capital, Mr Malcolm Philip Bersten of Turramurra NSW, from managing corporations and providing financial services for five years (refer: 16-175MR).
On 25 May 2016, Mr Bersten was granted permission to manage the trustee of his family trust and self managed superannuation fund (Caldabra Investments Pty Ltd ACN 003 958 423), as well as his incorporated legal practice (Bersten Legal Pty Ltd ACN 098 743 483).
On 17 June 2016, Mr Bersten sought a review of ASIC's decision in the AAT. ASIC has settled the proceedings brought by Mr Bersten in the AAT for a review of ASIC's decision dated 19 April 2016. Subsequently, the AAT has amended ASIC's decision by varying Mr Bersten's period of disqualification from managing corporations from five years to four years (to expire on 31 May 2020) and varying the period of Mr Bersten's banning from providing financial services from five years to three years and nine months (to expire on 29 February 2020).
John Patrick Sweeney
On 1 July 2015, ASIC banned former non-executive director of Provident Capital, Mr John Patrick Sweeney of Sydney, from providing financial services for two years (refer: 15-173MR).
ASIC found that Mr Sweeney failed to comply with financial services laws (refer: 15-173MR). Mr Sweeney also sought a review of ASIC's decision in the AAT. The hearing concluded on 14 February 2017. On 8 November 2017, the AAT affirmed ASIC’s decision of 29 June 2015 to ban Mr Sweeney from providing financial services for two years.
Trevor John Seymour
On 28 July 2015, ASIC banned former non-executive director of Provident Capital, Mr Trevor John Seymour, from managing corporations for three years and providing financial services for three years (refer: 15-199MR). ASIC found Mr Seymour breached his duties as a director and failed to comply with financial services laws. Mr Sweeney and Mr Seymour also sought a review of ASIC's decision in the AAT. The hearing of the review of Mr Sweeney's and Mr Seymour's decisions concluded on 14 February 2017.
On 24 November 2017, the AAT affirmed ASIC's decision of 17 July 2015 to ban Mr Trevor John Seymour from providing financial services for three years but set aside ASIC's decision to disqualify Mr Seymour from managing corporations for three years (refer: 17-455MR).