The Supreme Court of New South Wales has handed down its decision in relation to civil proceedings brought by the Australian Securities and Investments Commission (ASIC) against two of the former directors of Australian Investors Forum Pty Limited (AIF), Mr Dennis Ralph Anthony and Mr Martin Lloyd-Cocks, and the two companies associated with them respectively, Metrobank Pty Limited and Sacvere Pty Limited

The Court found that Mr Anthony, of Wollongong and also a resident of the Philippines, and Mr Lloyd-Cocks of Darling Point, New South Wales, contravened numerous provisions of the Corporations Act 2001 (the Act), relating to their roles as directors of AIF and related companies.

AIF was a licensed securities dealer, which ran an investment club offering members placements in new company floats.

ASIC commenced proceedings against AIF and related companies in October 2001, following concerns that AIF had offered securities without a disclosure document and that its directors had breached their duties to AIF, and to the related companies.

The Court found that Mr Anthony had breached the Act 41 times, including various provisions in relation to his role as a director of AIF and five related companies. In particular, the Court found that Mr Anthony:

• failed in his duty to exercise care and diligence;
• failed in his duty to exercise good faith; and
• improperly used his position.

The Court further found that Mr Anthony had illegally engaged in the management of AIF and related companies, whilst he was an undischarged bankrupt, and therefore, prohibited from managing corporations.

In relation to Mr Lloyd-Cocks, the Court found that he contravened the Act 28 times in relation to his role as director of AIF and two related companies. In particular, the Court found that Mr Lloyd-Cocks:

• failed in his duty to exercise care and diligence;
• failed in his duty to exercise good faith; and
• improperly used his position.

The Court also found that AIF offered securities without a disclosure document, and that Mr Lloyd-Cocks was knowingly involved in that contravention.

The Court further found that Sage Global Fund Limited (now Praetorian Capital Limited), a public company, failed to obtain approval from its shareholders relating to payments made to related companies in contravention of section 208(1), and that both Mr Anthony and Mr Lloyd-Cocks were knowingly involved in that contravention.

Finally, the Court found that AIF contravened a condition of its dealers’ licence by holding clients’ money on trust, and that Mr Lloyd-Cocks was knowingly involved in that contravention.

ASIC is seeking banning and compensation orders against Mr Anthony and Mr Lloyd-Cocks. This matter has been stood over for further directions on Monday 11 April 2005.

ASIC has previously settled its action against Mr Dominic Luvara, Mr Peter Victor Topperwien, two of the former directors of AIF. ASIC also settled its action against Mr Bud Shaheen, an AIF former employee and nominal director of various companies in the AIF group.

Background

AIF was a licensed securities dealer and ran an investment club offering members placements in new company floats. As part of its business, AIF received subscription fees from investment club members, fees and shares in companies which were the subject of initial public offerings (IPOs) and subscription money for its own float.

AIF was placed into liquidation in August 2002 and four of its related companies were placed into liquidation in November 2002.

Between the commencement of AIF’s business in May 1999 and its collapse in October 2001, AIF received approximately $7.8 million in ‘membership fees’, corporate finance fees or subscription for its own shares or shares in IPOs. Of that sum, a total of approximately $3.2 million was paid to companies controlled by Mr Anthony, Mr Lloyd-Cocks, and Mr Luvara. Included in this sum were amounts totalling $2.708 million, paid to a company controlled by Mr Anthony.

AIF never listed and only two of the six IPOs achieved listing on the Australian Stock Exchange.

AIF was wound up by the Court in August 2002, and Mr Alex MacIntosh was appointed liquidator. Twelve other related companies were subsequently wound up or deregistered.

ASIC settled its proceedings against Mr Shaheen, Mr Topperwien and Mr Luvara, with each providing undertakings to the Court not to manage corporations for two, two and ten years respectively. Mr Topperwien and Mr Luvara also undertook to pay $50,000 and $230,000 respectively to the liquidators of AIF. Mr Luvara has also agreed to pay $70,000 to the Trustee of AIF Strategic Trust.