ASIC has commenced civil penalty proceedings in the Federal Court against Paul Ryan, director of Dixon Advisory & Superannuation Services Pty Limited, for alleged breaches of directors’ duties.
ASIC alleges Mr Ryan breached his duties as a director by his involvement in decisions ASIC alleges were to the advantage of Dixon Advisory’s holding company, E&P Operations Pty Ltd, and by failing to properly consider the interests of Dixon Advisory’s creditors. Mr Ryan was also a director of E&P Operations.
ASIC Deputy Chair Sarah Court said: ‘Directors have responsibilities under the law to act in the best interests of their company, and this includes considering the interests of creditors when the company is facing insolvency.
‘The creditors included thousands of financial advice clients who had invested in the US Masters Residential Property Fund and financial products operated by entities related to Dixon Advisory. These creditors suffered significant losses.’
ASIC alleges that Mr Ryan was involved in:
- amending the constitution of Dixon Advisory on 22 December 2021 to expressly authorise its directors to act in the interest of E&P Operations; and
- executing a deed of acknowledgement of debt (Deed) on 24 December 2021 between Dixon Advisory and E&P Operations to the advantage of E&P Operations and to the detriment of Dixon Advisory.
ASIC further alleges that at the time the Deed was entered:
- E&P Operations owed Dixon Advisory over $19 million;
- Dixon Advisory was approaching insolvency and therefore its directors were obligated to consider the interests of creditors;
- the Deed imposed conditions which adversely affected Dixon Advisory’s right to recover this $19 million debt.
‘These proceedings underline our commitment to ensure directors meet their governance obligations, including where they serve on the boards of multiple companies in a corporate group,’ concluded Ms Court.
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Background
Both Dixon Advisory and E&P Operations were wholly owned subsidiaries of E&P Financial Group Limited.
Dixon Advisory previously held an Australian Financial Services licence and operated a financial advice business focused on providing financial advice, investment advice, portfolio management and superannuation administration services to retail clients.
In the period from 2020, Dixon Advisory faced claims arising from the provision of financial advice to clients who were advised to invest in the US Masters Residential Property Fund (URF) and URF-related products, which were issued and operated by related companies to Dixon Advisory. These included:
- a proceeding issued by ASIC in the Federal Court which resulted in orders for Dixon Advisory to pay a $7.2 million penalty and $1 million towards ASIC’s costs (22-256MR).
- complaints made to the Australian Financial Complaints Authority; and
- three court proceedings in the Federal Court, including two class action proceedings.
On 19 January 2022, after Dixon Advisory amended its Constitution and entered into the Deed with E&P Operations, the directors of Dixon Advisory resolved to appoint voluntary administrators to DASS.
On 8 April 2022, the AFS licence held by DASS was suspended by ASIC and subsequently cancelled, effective 5 April 2023 (22-094MR).
On 16 December 2022, a deed of company arrangement (DOCA) was passed by Dixon Advisory’s creditors, which among other things required E&P Operations to pay an amount of $17,662,489 to Dixon Advisory less a settlement adjustment for expenses incurred by E&P Operations during the administration period. Further details regarding the DOCA can be found on the administrators’ website.
Editor's note:
The matter has been listed for a case management hearing on 27 October 2023.
Editor's note 2:
On 27 October 2023, the Federal Court listed the matter for a further case management hearing on 1 December 2023.
Editor's note 3:
On 1 December, the matter was listed for further case management conference on 28 February 2024. The court has also ordered that the trial be listed in May 2024 on dates to be fixed.