The Queensland Court of Appeal has today published reasons for judgment dismissing the appeals of Craig Robert White and Guy Hutchings, who were officers of MFS Investment Management Limited (MFSIM), the former responsible entity of the Premium Income Fund (PIF). An appeal by Marilyn Anne Watts, a former funds manager of PIF, was also dismissed.
White, Hutchings and Watts were ordered to pay ASIC’s costs of their appeals.
In a separate appeal brought by Michael Christodoulou King, the court partially allowed the appeal finding that King had not contravened the Corporations Act as an 'officer' of MFSIM at the relevant time. The court found that his contraventions were limited to his being knowingly concerned in MFSIM's contravention by the misapplication of $130 million of PIF's money.
The court has given further directions to King and ASIC in relation to the finalisation of his appeal.
Court of Appeal judgment summary
Background
The proceedings relate to breaches committed in connection with the misappropriation of $147.5 million of funds that had been held by the PIF on behalf of unitholders. The misappropriated funds were used to pay debts owed by other entities in the MFS Group (also known as Octaviar) and false documents were created, some backdated and used to purportedly justify the use of the funds. The MFS Group collapsed in 2008 owing approximately $2.5 billion.
In May 2016, the court found that King, White, Anderson, Hutchings and Watts had collectively committed 217 contraventions of the Corporations Act (16-158MR). The court found that King, White, Anderson and Hutchings had breached their duties as officers of MFSIM to act honestly and in the best interests of members of PIF. Watts was found to have been involved in MFSIM’s breach of its duty to act honestly and in the best interests of members of the fund.
Download decision on liability
In May 2017, after more than 70 days of hearings, excluding interlocutory hearings and appeals, Justice Douglas made orders, imposing substantial disqualifications from managing corporations, pecuniary penalties and other relief in relation to the officers and the funds manager (17-157MR).
In June 2017, King, White, Anderson, Hutchings and Watts each appealed from the decision of the court at first instance
Anderson filed a notice of discontinuance of his appeal in September 2017, agreeing that his appeal be discontinued and that he pay ASIC’s costs of his appeal.
The remaining appeals were heard over 11 days in June 2018.
Editor's note 1:
On 15 January 2019, ASIC filed an application in the High Court of Australia seeking special leave to appeal from part of the judgment delivered by the Queensland Court of Appeal in King & Ors v Australian Securities and Investments Commission [2018] QCA 352 on 18 December 2018, whereby the Court of Appeal allowed part of an appeal by Michael Christodoulou King (Appeal No. 6320 of 2017), upholding his appeal from declarations that he had breached duties owed as an officer of a responsible entity in contravention of s 601FD(1)(a), (c), (e) and (f) of the Corporations Act.
Application for Special Leave to Appeal.
Editor's note 2:
On 17 May 2019, the High Court of Australia (Bell and Keane JJ) granted ASIC leave to appeal from the decision of the Court of Appeal in relation to Michael Christodoulou King. The appeal will be heard on a date that is yet to be fixed after 6 September 2019.
Editor's note 3:
On 29 May 2019, ASIC filed its notice of appeal (B29 of 2019) from the judgment the Court of Appeal of the Supreme Court of Queensland given on 18 December 2018 in the High Court of Australia.
Editor's note 4:
On 18 June 2019, the Queensland Court of Appeal handed down its decision on whether the penalties awarded against Mr King by the primary judge should be altered because it concluded that Mr King was not an 'officer' of MFSIM. The court did not disturb the 20-year disqualification from managing a corporation that was made by the court in the first instance, but varied the pecuniary penalty imposed upon Mr King from $300,000 to $270,000. An order varying Mr King’s liability to pay ASIC’s cost at trial from 60% to 50% was also made. Mr King was ordered to pay 75% of ASIC’s costs of the appeal. Download COA decision of penalty. https://www.sclqld.org.au/caselaw/QCA/2019/121
ASIC’s appeal to the High Court from the decision that Mr King was not an 'officer' of MFSIM is to be heard on a date yet to be fixed.
Editor's note 5:
On 9 October 2019, the High Court of Australia (Kiefel CJ, Gageler, Keane, Nettle and Gordon JJ) heard ASIC’s appeal on the question whether Mr King was “officer” of MFSIM: the Court’s judgment has been reserved. Prior to hearing argument on ASIC’s appeal, the High Court dealt with two procedural applications: 1) granting ASIC special leave to appeal from the Queensland Court of Appeal’s judgment dated 18 June 2019 (as to consequential penalty and costs orders); and 2) refusing an application by Mr King for an extension of time to apply for special leave to cross-appeal.