The Queensland Court of Appeal has dismissed an appeal against orders appointing liquidators to Gognos Holdings Ltd (Gognos) and Dynamic Agri Tech Ltd (DAT) (companies).

In dismissing the appeal, the Court referred to the companies’ ‘lamentable history of mismanagement of and misconduct’.  The Court of Appeal endorsed the trial judge’s conclusion that:

‘… there is a well-founded and justified lack of confidence in the conduct and  management of the companies’ affairs, such as to give rise to a real risk to the public interest that warrants protection – to protect existing and the prospect of any future investors, the public, and creditors, where the companies have not carried on their business candidly and in a straightforward manner with the public, and have been mismanaged, as well as to prevent and condemn the repeated and continuing breaches of the [Corporations Act 2001]. … It is inappropriate that the respondents be allowed to continue on the basis of what could be put no higher than an “unknowable” prospect of potential commercial success which may result in a return to investors, in the face of past and continuing non-compliance with obligations, mismanagement of the affairs of the companies, and misleading representations to investors, and where those now presenting as the “new management” are not “new” at all, but have long term associations with the companies and the principal offender in terms of the misleading conduct of the past, Mr Manasseh, who remains in the shadows of these companies.’

In particular, the Court noted that the trial judge was correct to consider the protection of future investors.

The companies were ordered to pay ASIC’s costs of the appeal.

The liquidators of the companies, Mr Michael Hill and Mr William Harris, of McGrathNicol, will now proceed with their appointment.

A copy of the Court of Appeal’s judgment is here.

Background

On 25 September 2017, ASIC obtained orders appointing Mr Michael Hill and Mr William Harris, of McGrathNicol, as joint and several liquidators of the companies. The liquidators’ appointment was stayed by the court pending an appeal by the companies, which was filed on 9 October 2017 (refer: 17-323MR).

Gognos' sole business activity was raising funds from members of the public through the issue of its shares. Those funds were on-lent to Dynamic and related entities to fund their business operations, which included the development of technology to manufacture animal fodder in container modules.

Gognos raised approximately $7.7 million from more than 100 shareholders since 2008. ASIC filed its application to wind up the companies on 21 September 2016 (refer. 16-360MR).