Updated 5 December 2017
Background to ASIC's investigation
Following reports and concerns regarding the collapse of Australian Property Custodian Holdings Ltd (ACN 095 474 436) (In Liquidation) (Receivers and Managers Appointed) (Controllers Appointed) (APCHL) and The Prime Retirement and Aged Care Property Trust (ARSN 097 514 746) (the Prime Trust) ASIC commenced an investigation into the conduct of the responsible entity, APCHL and the management of the Prime Trust.
Current status of ASIC's proceedings against APCHL and former directors
The Full Court of the Federal Court of Australia delivered its judgment on 14 July 2016 on appeals instituted by the former directors of APCHL against findings that they had breached the Corporations Act. The Court allowed the appeals and set aside the orders of Justice Murphy on 2 December 2014. As a result, the previous disqualifications and pecuniary penalties imposed on Mr Lewski, Dr Wooldridge, Mr Butler, Mr Jaques and Mr Clarke will be set aside.
After the reasons of the Full Court were handed down on 14 July 2016, the parties were invited to make submissions by 25 July 2016 in relation to the final orders to be made in the appeals. Subsequently, on 15 August 2016, Justice Middleton made timetabling orders in relation to finalising the form of final orders in the appeals (including the filing of further submissions by the parties). You can view the orders of Justice Middleton dated 15 August 2016 here.
As an interim step, and until final orders in the appeals are made, the Full Court has stayed the orders made by Justice Murphy against each of the directors. You can view the orders of the Full Court dated 10 August 2016 here.
On 22 September 2016, the Court made orders that the appeals be set down for a further hearing on 12 and 13 December 2016.
The further hearing in the appeals was held on 12 and 13 December 2016 before the Full Court of the Federal Court of Australia. The Full Court has reserved its decision.
On 1 November 2017, the Full Federal Court of Australia made final orders allowing the appeals of the former directors of Australian Property Custodian Holdings Ltd, the responsible entity of The Prime Retirement and Aged Care Property Trust and setting aside the declarations of contravention and orders made by the trial judge against the directors and APCHL.
On 29 and 30 November 2017 ASIC applied to the High Court of Australia for special leave to appeal from the orders made by the Full Court on 1 November 2017. APCHL has been joined as a respondent in all applications.
In relation to Mr Lewski, Dr Wooldridge, Mr Butler and Mr Jaques, if special leave is granted ASIC will seek to set aside all orders made by the Full Court insofar as they relate to those individuals and APCHL and restore the orders made by the trial judge (Justice Murphy) in December 2014.
In relation to Mr Clarke, if special leave is granted ASIC will not seek to appeal against the Full Court’s decision setting aside the orders that Justice Murphy made against Mr Clarke personally. Its proposed appeal relates only to those parts of the Full Court’s orders made in Mr Clarke's case that apply to the other directors and APCHL.
ASIC's application to the High Court for special leave to appeal was heard on 18 May 2018 in Sydney. On this date, ASIC was granted leave to appeal to the High Court. A date for the High Court appeal hearing is yet to be fixed.
Summary of ASIC's proceedings
On 21 August 2012 ASIC commenced civil penalty proceedings in the Federal Court of Australia against six defendants:
- Mr William Lionel Lewski, a former director and company secretary
- Mr Mark Frederick Butler, a former director
- Mr Kim Jaques, a former director
- Mr Michael Richard Lewis Wooldridge, a former non-executive director, and
- Mr Peter Clarke, a former director.
ASIC sought declarations that the five former directors (directors), in their capacity as officers of APCHL (as the responsible entity of Prime Trust) breached their duties owed to members of Prime Trust.
The Court can order a maximum pecuniary penalty of $200,000 to be paid by each director in respect of each contravention, and can disqualify the former directors from managing corporations for specified periods.
ASIC also sought declarations that APCHL breached its duties under the Corporations Act 2001 in exercising its powers and carrying out its duties as the responsible entity of Prime Trust.
The liability stage of the trial was conducted from 1 May 2013 to 27 May 2013 before his Honour Justice Murphy. Central to ASIC commencing this proceeding is the duty of officers of responsible entities to act in the best interests of the members of the scheme and to refrain from making improper use of their position as an officer to cause detriment to the members of the scheme.
In his judgment on liability delivered on 12 December 2013 Justice Murphy found that the directors had breached their duties as officers of APCHL. APCHL was also found to have breached its duties as Responsible Entity. For further information, please see ASIC Media Release 13-339MR Prime Trust directors found to have breached duties.
Following the judgment on liability, a hearing on exoneration and penalty took place before Justice Murphy from 28-31 July 2014. At the hearing, each of the directors submitted that he should be relieved from liability for the breaches of duty found by Justice Murphy. In the judgment delivered 2 December 2014, Justice Murphy did not exonerate any director from liability. The following penalties were awarded by the Court:
- 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 – He was not disqualified for managing a company but fined $20,000
The Court also made declarations of contravention against APCHL, the first defendant. APCHL did not participate in the proceeding and the only relief sought by ASIC against it was declaratory relief. For further information please see ASIC Media Release 14-323MR Prime Trust directors disqualified and fined.
From 25-27 May 2015 the Full Court of the Federal Court of Australia heard the appeals and cross-appeals. Judgment was delivered on 14 July 2016, with the Full Court allowing the appeals and setting aside the orders of Justice Murphy on 2 December 2014. In light of the decision, the Full Court considered that it was unnecessary to make findings on ASIC's cross-appeal.
Information to assist investors
At the second meeting of creditors held on 23 November 2011, the creditors of APCHL voted to place the company and Prime Trust into liquidation. Stirling Horne and Mr Petr Vrsecky of PKF Melbourne (formerly Lawler Draper Dillon) were appointed liquidators.
Investors in the Prime Trust seeking information about the affairs of APCHL and the Prime Trust, including any court proceedings being conducted, should contact the liquidators, PKF Melbourne, directly.
Investors can access PKF Melbourne's website at www.pkf.com.au. The offices of PKF Melbourne are situated at Level 12, 440 Collins Street, Melbourne Victoria, 3000.
As APCHL is currently in liquidation, it is the role of the liquidators to investigate and report to creditors about the company's affairs, realise the company's assets, enquire into the failure of the company and possible offences by people involved with the company and report them to ASIC and to distribute proceeds of any realisation of the company's assets in accordance with the priorities under the Corporations Act 2001. ASIC will monitor the liquidation process but will generally not become involved in matters of commercial judgment by a liquidator.
ASIC's guide on the process of liquidation may also assist investors and is accessible at: Information Sheet 45 Liquidation: a guide for creditors (INFO 45). Investors can also access additional information at www.asic.gov.au/insolvency-investors.
General information on investing
ASIC has published information on investing in managed funds and other investments. You can find this information at www.moneysmart.gov.au/investing.