Collapsed company board 'ignored conflict of interest'

A public examination into the collapse in the Supreme Court yesterday also heard from lawyer Lorna Gelbert, an adviser to Prime Trust, who sits on the board of the Baillieu government's urban renewal authority Places Victoria.

In separate proceedings, the corporate regulator is attempting to ban from being company directors Dr Wooldridge and Places Victoria chairman Peter Clarke, a close political ally of Mr Baillieu, who has stepped aside from his government role while the court case is going.

Dr Wooldridge was the chairman of the company that ran Prime Trust, Australian Property Custodian Holdings, which put at risk $550 million of investors' money when it collapsed in October 2010.

He told the court APCH's board was aware of a conflict in the role of chief executive Bill Lewski in running the trust and the fact Mr Lewski's personal companies were paid to manage 12 of Prime Trust's retirement villages at the same time.

He said that Mr Lewski was not always asked to leave the room when the issue came up during board meetings.

"On every occasion it was asked if Mr Lewski should leave, but as he was CEO on some occasions he had a body of technical knowledge the board wished to avail itself of," he said.

Dr Wooldridge said some management fees charged by companies associated with Mr Lewski were higher than market rate, but said this was "balanced" by others that were lower.

"I didn't see Mr Lewski's figures, I wasn't involved with his companies, I didn't know if he was making a profit or a loss," he said.

Asked by Jonathan Moore, counsel for APCH receivers KordaMentha, how Mr Lewski could possibly be making a loss given the generous terms of the deal, Dr Wooldridge said: "You assume the management rights had some value."

Mr Lewski received the management rights from APCH for nothing and in September 2007 sold them to investment bank Babcock & Brown, reaping himself more than $60 million.

News of the sale came as a surprise to Dr Wooldridge, he told the court.

Earlier, Mr Moore asked Ms Gelbert if she herself had a conflict of interest by "giving advice to the trust on one hand and Mr Lewski on the other", but Associate Justice Rodney Randall refused to allow her to answer the question, saying it was disrespectful.

Ms Gelbert denied Mr Lewski had acted inappropriately over the management rights.

"If he were in a position of conflict, it would have been dealt with by the board and Mr Lewski," she said.