Australian Securities and Investments Commission v Avestra Asset Management Limited (In Liquidation) [2017] FCA 497

Australian Securities and Investments Commission v Avestra Asset Management Limited (In Liquidation) [2017] FCA 497

Avestra, as responsible entity/trustee, and Rowles and Dempsey, as directors, failed to obtain scheme member approval for related party transactions and repeatedly subordinated scheme members’ interests to their own; failed to manage or disclose conflicts; failed to act with the required care, diligence, and honesty; and failed to give timely or adequate disclosure to scheme members or ASIC, in contravention of multiple provisions of the Act. Injunctive orders and disqualification for ten years were appropriate for the protection of the public and for deterrence, in light of the egregious and persistent nature of the breaches.

Parties
Plaintiff: Australian Securities and Investments Commission; First Defendant: Avestra Asset Management Ltd (In Liquidation); Second Defendant: Paul John Rowles; Third Defendant: Clayton Dempsey
Jurisdiction
Australia
Judgment Date
12 May 2017
Procedural Posture
Enforcement Proceeding Under Corporations Act 2001 (cth) / Final Judgment After Hearing and Admissions, Orders and Declarations Made
Outcome
Application granted
Legal Topics
Related Party Transactions, Conflict of Interest, Disclosure Obligations, Takeover Provisions, Director's Duties, AFSL Obligations, Scheme Property Investments, Substantial Shareholder Notices, Scheme Member Rights, Care and Diligence by Responsible Entity, Disqualification of Directors
Corporations Law Managed Investment Schemes Financial Services Regulation Related Party Transactions Conflict of Interest Disclosure Obligations Takeover Provisions Director's Duties +6 more

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Parties

Australian Securities and Investments Commission

Plaintiff

Avestra Asset Management Ltd (In Liquidation)

First Defendant

Paul John Rowles

Second Defendant

Clayton Dempsey

Third Defendant

Procedural Posture

Enforcement Proceeding Under Corporations Act 2001 (cth) / Final Judgment After Hearing and Admissions, Orders and Declarations Made

Legal Issues

  1. 1 Whether Avestra and its directors breached statutory duties including related party transaction approval, conflicts management, best interests obligations, disclosure, and efficient and honest provision of financial services
  2. 2 Whether Rowles and Dempsey were involved in contraventions and failed to take reasonable steps to prevent breaches by Avestra
  3. 3 Whether orders for injunctions and disqualification should be made

Ratio Decidendi

Avestra, as responsible entity/trustee, and Rowles and Dempsey, as directors, failed to obtain scheme member approval for related party transactions and repeatedly subordinated scheme members’ interests to their own; failed to manage or disclose conflicts; failed to act with the required care, diligence, and honesty; and failed to give timely or adequate disclosure to scheme members or ASIC, in contravention of multiple provisions of the Act. Injunctive orders and disqualification for ten years were appropriate for the protection of the public and for deterrence, in light of the egregious and persistent nature of the breaches.

Court Disposition

Application granted

Orders

  • Declarations of contravention made against Avestra, Rowles and Dempsey for breaches of ss 208, 601FC, 912A, 1017B and other provisions of the Corporations Act 2001 (Cth)
  • Rowles and Dempsey each restrained for ten years from: carrying on a business related to, concerning or directed to financial products or financial services, providing financial product advice, or dealing in financial products (s 1324(1))