ASIC was today successful in obtaining orders from the Supreme Court of Victoria disqualifying two directors from managing corporations for life. Significantly, this is the first time that the Court has taken such action. The Court also permanently restrained those directors from carrying on business or dealing in superannuation interests, financial services or financial products.

Mr Justice Kym Hargrave of the Supreme Court of Victoria today made orders that Mr Shaun Oliver White and Ms Nicole Elaine White, formerly of Eltham in Victoria, be disqualified from managing corporations for life. His Honour also made orders banning Mr Damian Tolson, of South Melbourne, Victoria, from managing corporations for seven years. The court found that Mr Tolson had acted in good faith but that his conduct was such as to amount to gross negligence.

The conduct of the three former directors relates to their role as directors of a number of companies involved in the Personalised Finance Services group (PFS Group). ASIC alleged that the actions of the PFS Group and the directors was to set up self-managed superannuation funds (SMSFs) and then either induce or misappropriate funds from the SMSFs for property development projects involving the directors.

The Court also made declarations that Mr White and Ms White had engaged in conduct that was false and misleading in relation to the carrying on of a financial services business, and that they, together with Mr Tolson had acted in contravention of other provisions of the Corporations Act relating to directors’ duties.

Today’s outcome follow orders made on 8 December 2005 by the Court winding up 11 companies that were controlled by the now disqualified directors. Further, on 1 June 2006, the Court made eight declarations of contravention of the Corporations Act and ASIC Act against Mr White and Ms White, and seven declarations of contravention against Mr Tolson.

These declarations relate to findings by the Court on 29 May 2006 that each of the directors had, amongst other things:

• misled or deceived, or acted in way that was likely to mislead and deceive members of the public in relation to financial products or services;
• made improper use of each director’s position to gain an advantage for him or herself;
• failed to exercise his or her powers as a director with a reasonable degree of care or due diligence; and
• carried on a financial services business without a licence.

‘This is a very serious case. The court has banned these directors from managing a company and from being involved, in any way, with the financial services industry for life. This is the first time this has occurred and it shows how seriously the court views such conduct. This should send a very strong message to those involved in the management of companies, and in particular, the financial services industry’, ASIC’s Executive Director of Enforcement, Ms Jan Redfern said.

‘ASIC has successfully obtained orders today using provisions in the Corporations Act that enable the Courts to permanently ban individuals from being involved in any way with superannuation and the financial services industry. Where appropriate circumstances dictate it, and this is definitely such a case, ASIC will not hesitate to seek orders under those provisions.’

‘The introduction of super choice means that more consumers can now make decisions to establish their own superannuation fund. It’s strongly advisable that consumers considering setting up a self-managed superannuation fund satisfy themselves that they deal with reputable people, and that they have sufficient funds available to enable the fund to be cost effective.’

‘ASIC’s allegations in this proceeding emphasise the serious issues that face consumers who are considering transferring their superannuation to a self-managed superannuation fund, commonly referred to as a ‘SMSF’ or ‘DIY Fund’, Ms Redfern said.

ASIC’s investigation is continuing.

Background

This application follows ASIC’s earlier success in obtaining orders appointing a provisional liquidator to PFS Business Development Group Pty Ltd and ten other companies, as well as restraining Mr White, Mrs White and Mr Tolson from carrying on business relating to superannuation. ASIC had successfully applied for orders on 5 August 2005, restraining each of the following parties (the PFS Group) from carrying on a financial services business without holding an Australian Financial Services Licence (AFSL) or from carrying on a business related to superannuation interests (without holding an AFSL):

• PFS Business Development Group Pty Ltd
• PFS Construction Consulting Group Pty Ltd
• PFS Construction Consulting Group (Ashridge Lane A) Pty Ltd
• PFS Construction Consulting Group (Ashridge Lane B) Pty Ltd
• PFS Construction Consulting Group (Ashridge Lane C) Pty Ltd
• Kaluski White & Associates (Black Gully Road) Limited
• Meridian Event Management Pty Ltd
• Nycam Werd Pty Ltd
• Kaluski White &Associates Pty Ltd (In Administration)
• Shaun Oliver White
• Nicole White
• Damian Tolson.

ASIC alleged, amongst other things, that the PFS Group misled investors and acted unconscionably, leading investors to roll over approximately $800,000 of existing superannuation funds into self-managed superannuation funds (SMSFs) that the PFS Group established for them, while also persuading investors to invest a further $700,000 into joint venture investments with the PFS Group.

The obligations of financial advisers and trustees of SMSFs are set out in ‘Meeting Your Obligations’, a booklet recently published by ASIC and the ATO. It also details the approach ASIC and the ATO will take to ensure people comply with their obligations.

Consumers are encouraged to call ASIC’s Info Line on 1300 300 630 for a copy of the booklet, or for further information.