The Federal Court today delivered its penalty judgment against 5 former directors of Australian Property Custodian Holdings Ltd (APCHL) who breached their directors鈥� duties by making an illegal related party payment of more than $30 million.
The judgment follows an ob体育 investigation into the directors鈥� role in amending Prime Trust鈥檚 constitution so a $33 million fee could be paid to the trust鈥檚 founder and one of its directors, Bill Lewski. ob体育 launched its civil penalty proceedings in 2012 and the Federal Court found in December 2013 the directors breached their corporate duties by failing to act in members鈥� best interest [This media release was amended on 4 January 2024 in accordance with ob体育 policy - see INFO 152 Public comment on ob体育's regulatory activities.].
Today鈥檚 judgment in the Federal Court in Melbourne saw Justice Murphy deliver the following disqualifications and penalties:
William Lionel Lewski 鈥� disqualified for managing a company for 15 years and fined $230,000
Mark Frederick Butler 鈥� disqualified for managing a company for 4 years and fined $20,000
Kim Jaques 鈥� disqualified for managing a company for 4 years and fined $20,000
Dr Michael Wooldridge 鈥� disqualified for managing a company for 2 years, 3 months and fined $20,000
Peter Clarke 鈥� was not disqualified from managing a company but fined $20,000
The Court also ordered that the defendant directors pay the costs of ob体育鈥檚 proceeding.
ob体育 Commissioner Greg Tanzer said, 鈥楾hese individuals, through their actions, showed a complete disregard for the unit holders of Prime Trust to which they owed important obligations.鈥�
In delivering his judgment, Justice Murphy stated that Mr Lewski鈥檚 conduct was 鈥榗entral in Prime Trust鈥檚 suffering a substantial loss鈥� and that he had failed to demonstrate any real understanding of the seriousness of the breaches. He also found that there was a risk of re-offending by Mr Lewski and that 鈥榯he lengthy disqualification and significant pecuniary penalty attempt to put a price on his contraventions that will show him that the game is not worth the candle鈥�.
In regards to the other defendant directors, Justice Murphy found that 鈥榬ather than acting in the best interests of the Members鈥� Mr Wooldridge, Mr Butler and Mr Jaques had 鈥榗apitulated to the interests of Mr Lewski鈥�.
In relation to Mr Clarke, Justice Murphy said, 鈥榟e sat passively鈥� and 鈥榤erely waved through a resolution which allowed a $33 million breach of trust鈥�.
Declarations of contravention were also made against APCHL, the first defendant. APCHL did not participate in the proceeding and the only relief sought by ob体育 against it was declaratory relief.
A stay of the orders in respect of Mr Lewski and Dr Wooldridge was granted until 23 December 2014.
The defendants have 21 days within which to lodge an appeal to the Full Court of the Federal Court.
Background
One of APCHL鈥檚 receivers and managers is conducting separate civil proceedings in relation to the fee in the Supreme Court of Victoria. The Supreme Court proceedings were adjourned pending the conclusion of the exoneration and penalty phase of the ob体育 proceedings. Investors and unit holders should check our dedicated Prime Trust webpage for further information.
Editor's Note 1:
On 3 December 2014 an order was made staying the declarations and orders in relation to Mr Butler, Mr Jaques and Mr Clarke until 4.00 pm on 23 December 2014.
Editor's Note 2:
On 12 December 2014, Dr Wooldridge and Mr Lewski each filed an appeal of the Federal Court's decision. The appeals have been listed for a callover in the Federal Court on 5 February 2015.
Editor鈥檚 Note 3:
On 15 December 2014, Dr Wooldridge filed an application to further stay the Federal Court鈥檚 declarations and orders made on 2 December 2014 until the hearing and determination of his appeal. On the same day Dr Wooldridge also filed an application for an order granting him leave to manage certain corporations, either until the hearing and determination of his appeal or generally. Both applications have been set down for hearing on 18 December 2014.
Editor鈥檚 Note 4:
On 18 December 2014, the Federal Court adjourned the hearing of Dr Wooldridge's applications for a stay and for leave to manage corporations until 30 January 2015.聽
The Court further stayed the orders made by Justice Murphy on 2 December 2014 in relation to Dr Wooldridge until 4.00 pm on 30 January 2015.聽
The Court also ordered that the callovers in relation to Dr Wooldridge's and Mr Lewski's appeals will now be heard on 30 January 2015.
Editor鈥檚 Note 5:
On 23 December 2014, Mr Butler, Mr Jaques and Mr Clarke each filed an appeal of the Federal Court's decision. The appeals have been listed for a callover in the Federal Court on 30 January 2015.
Editor's Note 6:
ob体育 has cross-appealed the disqualification and pecuniary penalty orders made against聽 Mr Lewski, and the pecuniary penalty orders made against Dr Wooldridge, Mr Butler and Mr Jaques. On 30 January 2015, at the call over, the Federal Court made procedural orders in relation to the appeals. The Federal Court has indicated that the appeals will be heard sometime in May 2015.聽
Editor's Note 7:
On 30 January 2015, Middleton J ordered that the order of Murphy J made on 2 December 2014, that Dr Michael Wooldridge be disqualified for 2 years and 3 months, be stayed until the hearing and determination of the appeal or further order only to the extent necessary to permit Dr Wooldridge to continue as a director of CRC for Mental Health Ltd (ACN 151 016 492). Dr Wooldridge remains disqualified from managing any other corporation for the disqualification period.聽
Editor's Note 8:
From 25-27 May 2015 the Full Court of the Federal Court of Australia heard the appeals and cross-appeals. The decision was reserved.
Editor's note 9:
On July 14 2016, the Full Court of the聽Federal Court of Australia upheld聽the appeals by the directors against聽the decision. (refer: 16-225MR)听
Editor's note 10:
On 10 August 2016, the Full Court stayed the orders made by Justice Murphy against each of the directors until final orders in the appeals are made. At a directions hearing on 15 August 2016, Justice Middleton made timetabling orders in relation to finalising the form of final orders in the appeals.
Editor's note 11:
On 22 September 2016, the Court made orders that the appeals be set down for a further hearing on 12 and 13 December 2016.
Editor's note 12:銆赌
The further hearing in the appeals was held on 12 and 13 December 2016 before the Full Court of the Federal Court of Australia. The Full Court has reserved its decision.
Editor's note 13:
On 1 November 2017, the Full Federal Court of Australia made final orders allowing the appeals of the former directors of Australian Property Custodian Holdings Ltd, the responsible entity of The Prime Retirement and Aged Care Property Trust and setting aside the declarations of contravention and orders made by the trial judge against the directors and APCHL.
Editor's note 14:
On 29 and 30 November 2017 ob体育 applied to the 聽High Court of Australia for special leave to appeal from the orders made by the Full Court on 1 November 2017. APCHL has been joined as a respondent in all applications.聽銆赌銆赌
In relation to Mr Lewski, Dr Wooldridge, Mr Butler and Mr Jaques, if聽special leave is granted ob体育 will聽seek to set aside all orders made by the Full Court insofar as they relate to those individuals and APCHL and restore the聽orders made by the trial judge (Justice Murphy) in December 2014.聽銆赌銆赌
In relation to Mr Clarke, if special leave is granted ob体育 聽will not seek to appeal against the Full Court鈥檚 decision聽setting aside the orders that Justice Murphy made against Mr Clarke personally. Its proposed appeal relates only聽to those parts of the Full Court鈥檚 orders made in Mr Clarke's case that apply to the other directors and APCHL.銆赌
The hearing of ob体育's application to the High Court for special leave to appeal has been listed for 18 May 2018 in Sydney.
Editor's note 15:
On 18 May 2018, ob体育 was granted leave to appeal to the High Court.聽The appeal will be heard on 17 and 18 October 2018 in the High Court in Canberra.
Editor's note 16:
The appeal was heard on 17 and 18 October 2018 in Canberra. On 13 December 2018 the High Court unanimously allowed ob体育鈥檚 appeal in part, finding that ob体育 had succeeded in two of its three grounds of appeal and ordered the remittal of the matters to the Full Court of the Federal Court (18-377MR).
Editor's note 17:
On 15 March 2019 at a case management hearing the Court said that it would list the matter for hearing on a date (to be advised) in August 2019.聽
Editor's note 18:
The appeal was heard on 17 &聽18 October 2018 in Canberra. On 13
December 2018 the High Court unanimously allowed ob体育鈥檚 appeal in part, finding that ob体育 had succeeded in two of its three grounds of appeal and ordered the remittal of the matters to the Full Court of the Federal Court (18-377MR).
Editor's note 19:
On 15 March 2019 at a case management hearing the Court said that it
would list the matter for hearing on a date (to be advised) in August 2019. .
Editor's note 20:
The remittal has been listed before the Full Federal Court for two days commencing 12 August 2019.
Editor's note 21:
The remitted hearing before the Full Court of the Federal Court concluded on 13 August.聽The court reserved its decision.
Editor's note 22:
On聽11 October 2019, the Full Court of the Federal Court of Australia made disqualification and pecuniary penalty orders against William Lewski, Mark Butler and Kim Jacques (19-290MR).
Editor's note 23:
On 29 October 2019, Dr Wooldridge discontinued his application for leave to manage four corporations.