Wooldridge, Prime Trust directors 'breached duties'
Justice Bernard Murphy ruled on Thursday that Dr Wooldridge and four other directors, including former Places Victoria chairman Peter Clarke, failed to act in members' best interest by approving the fee to founder and director Bill Lewski.
Prime Trust collapsed in 2010 owing $550 million to investors. The managed investment scheme owned retirement villages in Queensland, NSW and Victoria.
The Australian Securities and Investments Commission has asked the court to disqualify the five men from being company directors and order them to pay a penalty.
The case relates to the fee paid to Mr Lewski in 2007 as payment to list on the stock exchange. It was paid to the trust's responsible entity, Australian Property Custodian Holdings, and then to entities associated with Mr Lewski.
The corporate regulator has challenged the lawfulness of a decision by the board in 2006 to change the constitution of Prime Trust to allow the fees to be paid.
Justice Murphy said the directors, by amending the constitution and allowing the fee, gave "no consideration to the deleterious effects" of their actions on investors.
"A reasonable director in each of their positions would have questioned whether the listing fee should be paid," he said.
He said none of the directors, including Dr Wooldridge, claimed they were aware of their conflicts of interest. "In paying the listing fee, APCH had given a benefit to itself and to a related party."
Dr Wooldridge is a director on a number of company boards, including Aspen Medical, Oral Health Australia and Australian Pharmaceutical Industries, owner of Priceline.
Penalty hearings for the directors will begin early next year.They face fines of up to $200,000 and bans from company boards.
The Supreme Court of Victoria is hearing separate civil proceedings against the directors and others from the receiver seeking compensation and damages.
ASIC Commissioner Greg Tanzer said the Federal Court's decision was a significant outcome for investors. "The conduct of the APCHL board was unacceptable and today's judgment reflects that," he said.
Frequently Asked Questions about this Article…
The Federal Court found that the directors of Prime Trust, including former federal health minister Michael Wooldridge, breached their corporate duties by approving a $33 million fee to the trust's founder, Bill Lewski.
Prime Trust collapsed in 2010, owing $550 million to investors. The collapse was partly due to the directors' failure to act in the best interest of the members, as highlighted by the court ruling.
ASIC has asked the court to disqualify the five directors from being company directors and to order them to pay a penalty for their actions.
The controversial $33 million fee was paid to Bill Lewski as payment for listing on the stock exchange. It was paid to the trust's responsible entity, Australian Property Custodian Holdings, and then to entities associated with Mr. Lewski.
The directors breached their duties by amending the constitution of Prime Trust to allow the fee to be paid without considering the negative effects on investors.
The directors face fines of up to $200,000 and potential bans from serving on company boards. Penalty hearings are set to begin early next year.
Separate civil proceedings are being heard by the Supreme Court of Victoria, where the receiver is seeking compensation and damages from the directors and others involved.
ASIC Commissioner Greg Tanzer stated that the Federal Court's decision was a significant outcome for investors and reflected the unacceptable conduct of the APCHL board.
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