The Federal Court has ruled against ASIC in its proceedings against former Dixon Advisory director Paul Ryan over concerns he acted in the interests of parent company Evans and Partners rather than the failed vertically-integrated firm’s creditors.
The federal court ruled against ASIC in all sixteen findings in the case and will be required to cover Ryan’s legal costs.
ASIC had alleged Ryan was involved in amending the constitution of Dixon to authorise its directors to act in the interest of E&P and executed a deed of acknowledgement of debt (DOAD) on 24 December 2021, just a month before Dixon went into voluntary administration.
ASIC alleged that at the time the deed was entered, E&P owed Dixon Advisory over $19 million and was adversely affected from being able to recover those funds.
Ryan gave evidence in his sworn affidavit that he took into account the interests of Dixon Advisory’s creditors when resolving to amend the constitution, and the judgment found there was “no reason not to accept the evidence” and declined to rule in the regulator’s favour.
In a media statement on Wednesday afternoon, ASIC said it was considering the judgment.
“We took this case because 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,” ASIC deputy chair Sarah Court said.
“ASIC remains committed to taking enforcement action where appropriate and expects directors to meet their governance obligations, including where they serve on the boards of multiple companies in a corporate group.”
The ruling against ASIC is yet another example of the regulator’s struggle to hold Dixon or parent company E&P legally responsible for its collapse.
In June, the regulator admitted it had no legal avenue to hold E&P responsible for the failings of Dixon during a Senate Economics Committee hearing and that it also had declined to hold individual advisers responsible.
The advice sector has heavily criticised the regulator for failing to hold anybody legally accountable for the failings of Dixon Advisory so far, particularly given it’s on the hook for remediating victims via the Compensation Scheme of Last Resort.
ASIC had secured a $7.2 million penalty against Dixon in court for its failure to act in the best interests of clients, although this pales in comparison to the estimated hundreds of millions due to be paid by advisers through the CSLR.
On September 17, the Senate Economic Committee announced it will launch an inquiry into Dixon that will focus on the cause of its collapse, the actions of the regulator and the impact of the administration and insolvency issues.
E&P voted to delist from the ASX last week, having submitted its request shortly after the inquiry was announced.
