As both the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) signal increased use of litigation, the High Court has handed ASIC a significant technical win.
The High Court on Friday handed ASIC the win in one of its longest-running litigations – the case against Prime Trust directors, prompting it to signal its willingness to pursue future tough cases.
Australian Property Custodian Holdings Pty Ltd was the responsible entity of the Prime Retirement and Aged Care Property Trust – a managed investment scheme which owned retirement villages in Queensland, NSW and Victoria and which collapse in 2010 when administrators were appointed owing investors approximately $550 million.
The court on Friday handed down a judgement on ASIC apples against Australian Property Custodians Holdings directors, Bill Lewski, Dr Michael Wooldridge, Mr Butler and Kim Jaques.
The court unanimously allowed ASIC’s appeals in part, finding that ASIC had succeeded in two of its three grounds of the appeal.
The effect of the High Court’s decision is to set aside orders made by the Full Court of the Federal Court dismissing ASIC’s claim and to reinstate all declarations made by a Federal Court judge at first instance, other than those in relation to another former director, Mr Peter Clarke and those that related to the ground of appeal upon which ASIC did not succeed.
Commenting on the decision, ASIC commissioner, John Price said it was welcome and represented a significant win for the regulator after a number of years.
“Directors who are officers of responsible entities have an obligation to scheme members to discharge their duties with care and diligence, not improperly use their position, comply with the law and act in the interests of investors,” he said. “The matter also highlights the need for people in business to recognise they are custodians of other people’s money.”
“The High Court result provides clear guidance regarding important issues of principle that needed to be clarified for the benefit of responsible entities, their officers and investors. It is a positive outcome for investors, who need to be able to trust their representatives to act in their interests,” Price said. “This also shows that ASIC’s willingness to take hard cases and litigate them through to superior Courts when needed. ASIC has the people, the powers and the desire to hold those engaged in misconduct to account’ concluded Commissioner Price.”
