Update on Australian Property Custodian Holdings Ltd (ACN 095 474 436) (In Liquidation) (Receivers and Managers Appointed)(Controllers Appointed) in its capacity as responsible entity for The Prime Retirement and Aged Care Property Trust (ARSN 097 514 746)
Updated 18 June 2014
Background to ASIC's investigation
Following reports and concerns regarding the collapse of Australian Property Custodian Holdings Ltd (ACN 095 474 436) (In Liquidation) (Receivers and Managers Appointed) (Controllers Appointed)(APCHL) and The Prime Retirement and Aged Care Property Trust (ARSN 097 514 746) (the Prime Trust) ASIC commenced an investigation into the conduct of the responsible entity, APCHL and the management of the Prime Trust.
Current status of ASIC's proceedings against APCHL and former directors
In a judgment delivered on 12 December 2013 his Honour Justice Murphy of the Federal Court found that five former directors of APCHL had breached their duties as officers of APCHL. APCHL was also found to have breached its duties as Responsible Entity.
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;
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.
The matter will now proceed to a hearing on exoneration and penalty. The hearing has been listed to commence on 28 July 2014 for four days.
Summary of ASIC's proceedings
On 21 August 2012 ASIC commenced civil penalty proceedings in the Federal Court of Australia against six defendants:
Mr William Lionel Lewski, a former director and company secretary;
Mr Mark Frederick Butler, a former director;
Mr Kim Jaques, a former director;
Mr Michael Richard Lewis Wooldridge, a former non-executive director; and
Mr Peter Clarke, a former director.
ASIC is seeking declarations that the former directors, in their capacity as officers of APCHL (as the responsible entity of Prime Trust) breached their duties owed to members of Prime Trust.
The Court can order a maximum pecuniary penalty of $200,000 to be paid by each director in respect of each contravention, and can disqualify the former directors from managing corporations for specified periods.
ASIC is also seeking declarations that APCHL breached its duties under the Corporations Act 2001 in exercising its powers and carrying out its duties as the responsible entity of Prime Trust.
The liability stage of the trial was conducted from 1 May 2013 to 27 May 2013 before his Honour Justice Murphy. ASIC alleged, amongst other things, that APCHL and its directors failed to act in the best interests of the members of the Prime Trust by:
purporting to amend the Prime Trust constitution in August 2006 (without unit holder approval) to provide for the payment to APCHL of a fee in the event that the units in the Prime Trust were listed on the Australian Securities Exchange (ASX); and
directing APCHL to pay a listing fee of approximately $33 million out of scheme assets subsequent to the listing of Prime Trust on the ASX in August 2007.
Central to ASIC’s action is the duty of officers of responsible entities to act in the best interests of the members of the scheme and to refrain from making improper use of their position as an officer to cause detriment to the members of the scheme.
Liquidation and Receivership of APCHL
At the second meeting of creditors held on 23 November 2011, the creditors of APCHL voted to place the company and Prime Trust into liquidation. Stirling Horne and Mr Petr Vrsecky of PKF Lawler (formerly Lawler Draper Dillon) were appointed liquidators.
On 5 March 2012, the liquidators commenced proceedings in the Supreme Court of Victoria in relation to the payment of a listing fee in the amount of $32,939,947 by APCHL in its capacity as responsible entity of the Prime Trust to entities associated with William Lewski in 2008 (the Listing Fee Proceeding). One of the receivers and managers of APCHL is conducting the Listing Fee Proceeding. The defendants to the Listing Fee Proceeding include several former directors of APCHL, associated entities of William Lewski and legal and corporate advisors of APCHL. The Listing Fee Proceeding has been adjourned pending conclusion of the penalty phase of ASIC's civil penalty proceedings.
On 19 March 2013, one of the receivers and managers of APCHL commenced proceedings on behalf of APCHL in the Supreme Court of Victoria in relation to dealings in the management rights of Prime Trust (the Management Rights Proceeding). On 19 March 2014, the liquidators took over the carriage of the Management Rights Proceeding from the receivers and managers. The defendants to the Management Rights Proceeding include several former directors of APCHL, associated entities of William Lewski and advisors of APCHL. The liquidators have until 30 June 2014 to serve the proceeding on the defendants.
Public examinations of relevant parties connected with APCHL were conducted by one of the receivers and managers of APCHL in the Supreme Court of Victoria on 22 to 24 August 2011 and on 16 to 31 October 2012.
Information to assist investors
Investors in the Prime Trust seeking information about the affairs of APCHL and the Prime Trust should contact the liquidators, PKF Lawler, directly.
Investors can access PKF Lawler's website at www.pkflawler.com.au. The offices of PKF Lawler are situated at level 12, 440 Collins Street, Melbourne Victoria, 3000.
As APCHL is currently in liquidation, it is the role of the liquidators to investigate and report to creditors about the company's affairs, realise the company's assets, enquire into the failure of the company and possible offences by people involved with the company and report them to ASIC and to distribute proceeds of any realisation of the company's assets in accordance with the priorities under the Corporations Act 2001. ASIC will monitor the liquidation process but will generally not become involved in matters of commercial judgment by a liquidator.
ASIC's guide on the process of liquidation may also assist investors and is accessible at: Information Sheet 45 Liquidation: a guide for creditors (INFO 45). Investors can also access additional information at www.asic.gov.au/insolvency-investors.