Prime Trust directors found to have breached duties

The Federal Court in Melbourne has found five former directors of Australian Property Custodian Holdings Ltd (APCHL) liable for breaching their duties as officers of APCHL. Findings were also made in relation to the conduct of APCHL.

APCHL was the responsible entity of the Prime Retirement and Aged Care Property Trust (Prime Trust), a managed investment scheme which owned retirement villages in Queensland, NSW and Victoria. APCHL collapsed in 2010 when administrators were appointed owing investors approximately $550 million.

ASIC Commissioner Greg Tanzer said the judgment was a reminder that responsible entities have to put the interests of their unit holders first.

‘This is a significant outcome for investors,” he said. “Directors are important gatekeepers who must discharge their duties with the appropriate care and diligence. This has not happened here. The conduct of the APCHL Board was unacceptable and today’s judgment reflects that.”

ASIC sought a declaration that APCHL breached its duties in exercising its powers and carrying out its duties as the responsible entity of Prime Trust, and that APCHL and its directors failed to act in the best interests of the members.

Justice Murphy found that each of the directors had breached various duties, including the responsibility to act in the best interests of scheme members; APCHL had breached similar duties under the Corporations Act 2001 (the Corporations Act; amendments to the constitution of Prime Trust were not permitted to be made without approval of a special resolution of the unitholders, and the directors breached the law in paying a ‘listing fee’ to APCHL as a result of it becoming listed on the ASX.

ASIC is seeking from the court pecuniary penalties as well as orders banning the following directors from managing companies: Dr Michael Wooldridge, Peter Clarke, William Lionel Lewski, Mark Frederick Butler and Kim Jaques.

The penalty hearing will begin early next year.