The Federal Court of Australia has today delivered judgment in ASIC’s civil penalty proceedings against Vocation Ltd (In Liquidation) and its officers, Mark Hutchinson (former CEO), John Dawkins (former Chairman), and Manvinder Gréwal (former CFO).

The proceedings relate to various statements made to the Australian Securities Exchange (ASX) and in documents relating to a fully underwritten placement to institutional and sophisticated investors in September 2014 and a review undertaken by the Victorian Department of Education and Early Childhood Development (DEECD) into two of Vocation's main registered training organisations (RTOs).

The Court found Vocation Ltd contravened:

• section 1041H(1) of the Corporations Act by making misleading and deceptive statements to the ASX and UBS AG Australia in a 25 August ASX announcement and in a due diligence questionnaire (DDQ) the latter formed the basis for a placement in September 2014 which raised approximately $74m from investors (the September 2014 Placement), and
• its continuous disclosure obligations under section 674(2) by not disclosing to the market the actions taken by the former DEECD in July and August 2014 when it suspended all payments to Vocation.

Further the Court found that

• Mr Hutchinson and Mr Dawkins contravened section 180 of the Act by causing or permitting Vocation’s contravention of section 674(2) of the Act. 

• Mr Hutchinson contravened section 180 of the Act by causing or permitting Vocation’s contravention of section 1041H in relation to the 25 August Announcement and the DDQ.

• Mr Gréwal contravened section 180 of the Act by causing or permitting Vocation’s contravention of section 1041H in relation to the DDQ.

The matter has been stood over to 6 June 2019 for a case management hearing to appoint a date for hearing of all remaining questions, including those arising under sections 1317S and 1318 of the Act (relief from penalty); the form of any declaratory relief; all questions of penalty and all questions of costs.

ASIC Commissioner Cathie Armour said: 'ASIC regards statements that mislead or withhold material information as risking serious damage to the integrity and operation of the Australian market. As such, timely and accurate market disclosures will continue to be a key focus of ASIC’s market supervision and enforcement.'

The Court will hear further submissions as to penalty on a date to be fixed. ASIC will be seeking pecuniary penalties against the officers, disqualification orders and costs.

Background

Vocation Limited provided vocational education, training and assessment activities leading to accredited outcomes offered by RTOs.

On 25 August 2014, Vocation in response to press speculation regarding its Victorian funding contracts issued an ASX announcement which included the following statement: 'Vocation’s funding contracts with the DEECD have not been suspended and are continuing'.

On 10 September 2014, Vocation issued an ASX announcement of 'a fully underwritten placement to institutional and sophisticated investors to raise approximately $74 million'. On 27 October 2014, Vocation announced the completion of a review by the DEECD into Vocation's two main RTOs - BAWM Pty Ltd and Aspin Pty Ltd.

Under the terms of the settlement reached between Vocation and DEECD, Vocation lost almost $20 million in government funding and the two main RTOs (BAWM and Aspin) relinquished their funding contracts.

The adverse review findings triggered a significant fall in Vocation's share price, its earnings and market value. In the lead-up to the announcement of the review findings, Vocation had maintained that the review was part of normal business activities and that neither the review nor its anticipated outcomes were material to Vocation.

Editor's note 1:

The title of this media release was edited on 5 June 2019.

On 31 May 2019 ASIC published a statement with the headline “Federal Court finds Vocation Ltd (In Liquidation) and its officers made misleading statements to market”. Mr John Dawkins, Mr Mark Hutchinson and Mr Manvinder Grewal were identified as the officers of Vocation in the first paragraph of the statement. That headline, read in conjunction with the first paragraph, if read in isolation from the balance of the statement, may have incorrectly conveyed to a reader that the former officers of Vocation were found to have made misleading statements to the market in contravention of s1041H of the Corporations Act (Act). No such findings were made by the Court. The findings that were made by the Court against Mr Dawkins, Mr Hutchinson and Mr Grewal as set out in the original media release were:

• Mr Hutchinson and Mr Dawkins contravened s 180 of the Act by causing or permitting Vocation’s contravention of s 674(2) of the Act.
• Mr Hutchinson contravened s 180 of the Act by causing or permitting Vocation’s contravention of s 1041H in relation to the 25 August Announcement and the DDQ.
• Mr Grewal contravened s 180 of the Act by causing or permitting Vocation’s contravention of s1041H in relation to the DDQ.

Specifically, ASIC notes that a contravention alleged by ASIC that Mr John Dawkins had contravened section 180 of the Corporations Act by causing or permitting Vocation’s contravention of s1041H in relation to the content of an announcement made by Vocation to the market on 25 August 2014 was found by the Court not to have been established.

Editor's note 2:

On 6 June 2019 further orders were made for the hearing on 31 July 2019 of s1317S and s1318 matters, declaratory relief and costs.

Editor's note 3:

The hearing on final orders and penalties was heard on 31 July 2019 before Nicholas J and the decision was reserved.