Business and Corporate Law: ASIC v Australian Property Custodian

This report provides an in-depth analysis of the ASIC v Australian Property Custodian Holdings Limited (NO 3) [2013] FCA 1342 case, focusing on the breaches of the Corporations Act 2001 (Cth) by the defendants. The case involves allegations against Australian Property Custodian Holdings Limited and its former directors regarding their responsibilities as the Responsible Entity of a Managed Investment Scheme. The report details the responsibilities breached, including those related to the lodgment resolution, the payment of listing fees, and the failure to act in the best interest of the members of the trust. The analysis examines the contraventions of sections within the Corporations Act, such as 601FC, 601FD, and 208, and the court's orders, including disqualifications and pecuniary penalties. The report also provides a brief overview of the factual background of the case and its relevance to the development of Australian corporate law.

Running head: BUSINESS AND CORPORATE LAW
Business and Corporate Law
Name of the Student
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Author Note

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Table of Contents
Introduction......................................................................................................................................2
The Responsibilities or Duties Breached.........................................................................................2
Analysis of the case.........................................................................................................................5
The relevance of the decision to the development of Australian Corporation Law........................8
Reference.......................................................................................................................................10

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ASIC v Australian Property Custodian Holdings Limited (NO 3)[2013]FCA 1342
Introduction
ASIC v Australian Property Custodian Holdings Limited (NO 3)[2013] is one of the
significant cases of the Federal Court of Australia where the organization has been breached the
terms of the Corporation Act 2001(Cth). Australian Securities and Investments Commission
(ASIC) is the plaintiff in this case and defendants are Australian Property Custodian Holdings
Limited (ACN 095 474 436), Dr. Michael Richard Lewis Wooldridge, Mr. Mark Frederick
Butler, Mr. William Lionel Lewski, Mr. Kim Jaques, and Mr. Peter Clarke.
ASIC has claimed several allegations against the six defendants that they have been
breached the CA. The ASIC has been mentioned that the defendant has contravened their
responsibilities towards the managed investment scheme under the Part 5C of the act according
to the section 601FC. According to the section 601FB, the directors of the company are bound to
exercise their duties as officers of the responsible entity. This section has been helped to prevent
the related party transaction for the responsible entity where the members get their approval in
against of the section 208 of CA. However, due to such issues, ASIC has been complained
against the five former directors and court has been ordered pecuniary penalties for such offences
in the managing corporation.
The Responsibilities or Duties Breached
The fact of the case is Australian property custodian Holdings Limited (Receivers and
managers in Liquidation Controllers) who is the first defendant has been found with the
Responsible Entity of the Managed Investment Scheme in the Aged Care property and Trust or

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Prime Retirement or Prime Trust or the Trust. In this case, the rest of the defendants are the
former directors of the organization who are fount to contravene the relation with the company
which inclusive in its capacity of Responsible Entity of the Prime Trust.
In the case proceeding, APCHAL has not found to take participation actively in the
preceding and effectively submitted to the Judgment. Here, ASCIC has been seeking damages
against the company and other five defendants who are the former directors of the company are
found in relation of conduct of the breach of the duties. Now, according to the consequences of
the case, ASIC has been pleaded the contravention process in three groups.
The first group of Contravention has been focused about the meeting which was held on
22nd August 2006. In this meeting board has been tried to resolve to lodge with ASIC. This
contravention is includes:
 A consolidate constitution which has been incorporated with the amendments so that it
will work effectively as per the section 601GC (2)
 While passing the lodgment resolution, the organization has been tried to prevent the
section 601FC (5) which has been breached their diligence and duty of care under
section 601FC (I) (b).
 The company has been dissatisfied the terms where they can work for the best interest of
the members of the trust according to the section 601FC (I) (c).
 They have also highlighted that according to the section of 601FC (I) (m) it is the duty of
the organization must comply with their duties which have been imposed on it by the
constitution. It should not ready or attempt to vary in favor of any benefit to the
organization itself (Langford 2016).

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According to the fact of the case, ASIC has been also mentioned about the participation
of the five former directors of the company. Those are:
 As per the section 601FD (3), when the vote has been provided in favor of the company
or otherwise, it has been sent into the lodgment resolution, where the directors are owned
their duties towards the company.
 The 601FB (I) (b)of CA has been legislated that the directors must acted with their duty
of care and diligence
 The section 601FD (1) (e) was contravened for not using properly of the position as an
officer of the RE of the Trust to provide advantage to APCHL.
 According to the section 601FD (1) (f), they must take all steps for being the director of
the company to ensure that the organization must complied with the constitution and the
act.
 Therefore ASIC has been declared the contravention pursuant to the section 1317 with
these breaches.
The Second group contravention has identified by ASIC where they have been alleged that
while paying the Listing Fee of the Organization, company has breached the section 208. It also
included the associated entities of Mr. Lewis. Therefore, in this part he payment can be
prohibited which is related with the party without the approval. However, according to the
section the RE might be paid by their own fees from the Scheme Property which was provided as
per the constitution of the company. It is only operated before court has mentioned that the
constitution has been operated for privates APCHL from the formation of the amendments which
are formed outside of the power. In the section 601GC (1) (b), the amendment of statutory power
was involved with board as the organization has not been provided any consideration to the

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rights of the members for having the scheme which was administered for the fees provided in the
existing constitution. However, the amendments were found invalid. The directors of the
company were also fount to contravene the section 209 due to engaged with APCHL fort the
breach of section 208.
In the third group of contravention, ASIC has been mentioned about the terms of breaches of
the duties while paying for the listing rules. Those terms are:
 The company has been breached the section 601FC (5) of CA
 According to the section 601FC (I) (C) of CA, the company was failed to satisfy to act
with their best interest and provided priority to the interest of the members of the Trust
over the interest of APCHL.
 According to the section 601FC (I) (K) of CA, the company has been failed to ensure
about their payments within their scheme property which are all have been made in
accordance with the Constitution.
 The file directors of the company are found to breach the terms to acted with their best
interest and accept all the necessary steps for compliance with the CA according to the
section 601FD (3).
Analysis of the case
APCHL was formed by Mr. Lewski in the year 2000 and become Managing director and
resigned on 27th June, 2008. After the formation of the organization, the other directors are also
incorporated with the organization. After giving the resignation, the advisor of APCHL has been
moved for controlling the management system to Kidder Williams Limited where they received

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their payment of the unpaid balance of the Listing Rule. However, rest of the responsibilities
have been taken by the other directors between the years of 2004 to 2006.
In 2000, the obligation of towards the Trust’s assets helps to get benefits by the members
where it has been provided by the organization as a trustee and manager of the Prime Trust. It
helps to manages to get benefits and provided for the Specific assets class of the Retirement
Villages and Aged Care Facilities. The registration, of the organization has been consolidated by
the Trust Deed with ASIC where it has been stated the constitution of the Prime Trust which was
controlled on the investment scheme upon registration.
In the year 2006, APCHL has been transferred for listing the Trust on the ASX. However, the
company was transferred prudently and systemically towards the listing of the trust for
maximizing the benefits and returned to the uniteholders. The gross amount of 2.5% has been
calculated in the Listing Fee which sets the gross assets value of the Trust. In the payable to the
organization and the members of the company are bound for such entitlement which was listed
for the quotation on the ASX. The Listing Fee is payable along with the Removal Fee which was
calculated 5% of the gross assets value of the Trust payable. The organization was removed the
RE for the instigation of the members or ASIC while it has been transferred and not proven as
fraud or cancellation or negligence of the financial service licenses of APCHL.
The organization has been passed a resolution in the date of 26th June of 2007 for paying the
Listing Fee in tranches. The organization has been tried to resolve the Prime Trust on the ASX in
the general meeting. The directors of the company have been resolved the approval of the
Unithlders or the payment. It was payable to APCHL of a fee which will be provided through the
units in the Prime Trust and listed under the Australian Securities Exchange. The organization

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was directed to pay their listing fee of $33 million out of their scheme assets which h\as been
subsequent to the listing of Prime Trust on the ASX in August 2007. However, the directors Mr
Lewski and Mr Jaques have been found to abstain in the voting process where the resolution has
become remain silent and the votes have been provided in favor of the resolution. According to
the terms of CA, the directors are entitled to show and express their opportunities according to
their view on resolution.
Application of the Law
According to the related facts the court has been rejected and cancelled every submission of the
directors. The board has been passed the Lodgment Resolution on the meeting which was held
on 22 August 2006 and conducted according to the vote by the directors. However, the Deed of
Varioation no. 7 was not effectively works on the resolution and no pre-existing obligations
which has been to lodge the Amendments. The five former directors are breached their position
of director due to in relation with the conflict of interest and failed to exercise the standard of
care take a cautious approach. In such matter the court has found that by APCHL, the sections
601FC (1) and 601FC (5) have been breached while passing the resolution. The other
defendants which are five former directors of the company are also found to contravened the
sections 601FD (1) and 601FD (3) of CA. They have been found to take benefits of the Listing
Fee from APCHL which is against of the section 208 of CA. the directors are also breached the
sections 209(2) and 208 for the relation with the organization. While in the decision making
process to pay the Listing Fee, the organization was also contravened the sections 601FC (1) and
601FC (5). The directors are also breached the sections 601FD (1) and 601FD (3). Therefore, the
court has been made the following orders:

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 Mr. Lewski has been disqualified and failed to control and manage the corporation for
last 15 years and ordered to pay the pecuniary penalty amount of $230,000
 Mr. Butler has been disqualified and failed to control and manage the corporation for four
years and ordered to pay a pecuniary penalty amount of $20,000
 Mr. Jaques has been disqualified and to control and manage the corporation for four years
and ordered to pay a pecuniary penalty amount of $20,000
 Dr. Wooldridge has been disqualified and to control and manage the corporation for two
years and three months and ordered to pay a pecuniary penalty amount of $20,000 and
 Mr. Clarke has been ordered to pay a pecuniary penalty amount of $20,000.

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Reference
ASIC v Australian Property Custodian Holdings Limited (NO 3)[2013]FCA 1342
Baxt, R., Wockner, T. and Janson, S., 2017. ANNUAL REVIEW OF CORPORATIONS LAW.
Corkery, J., Mikalsen, M. and Allan, K., 2017. Corporate social responsibility: The good
corporation. Centre for Commercial Law.
Corporation Act 2001 (Cth)
Donald, M.S., Ormiston, J. and Charlton, K., 2014. The potential for superannuation funds to
make investments with a social impact. Company and Securities Law Journal, 32(8), pp.540-551.
Langford, R.T. and Ramsay, I., 2014. Conflicted directors: What is required to avoid a breach of
duty?.
Langford, R.T., 2016. Managed Investment Schemes: Liability of Directors of Responsible
Entities Where the Responsible Entity Breaches the Law.