The Federal Court has now issued its penalty judgment in the high-profile Prime Trust/ Australian Property Custodian Holdings Ltd (APCHL) case. This follows the decision on liability late last year in which it subjected boardroom decision making processes to scrutiny.

The breach of duty concerned a decision by the APCHL board in 2006 to amend the constitution of the Prime Trust to introduce or amend fees payable to the APCHL, which was owned by entities associated with Mr Lewski, one of the directors.

Penalties:

  • The director who did not disclose a conflict of interest and did not abstain from voting on the relevant resolution, Mr Lewski was disqualified for 15 years and fined $230,000. ASIC had sought a lifetime ban.
  • The chairman of the flawed meetings Dr Michael Wooldridge was disqualified for two years, three months and fined $20,000.
  • Two other directors who participated were disqualified for four years and fined $20,000 each.
  • The most recently appointed director, where the meeting in question was his first meeting, Mr Clarke, was not disqualified but fined $20,000.

The directors have until 23 December 2014 to appeal, so the story may continue into 2015.

The liability decision focussed on boardroom behaviour and requires that it is possible to see from the board minutes:

"that each member, by a process of voting, actively supports the proposition before the meeting or actively opposes that proposition; or that the member refrains from both support and opposition. And it is the responsibility of an individual member to take steps to ensure that his or her will is expressed in one of those ways."

For the ASIC media release in this penalty decision, please click here or go to the ASIC Prime Trust page here...

This penalty decision reinforces the need for clear decision making and record keeping in the boardroom.

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