This article is from the Australian Property Journal archive
AFTER an 11-year long legal battle, the High Court of Australia has ruled in favour of ASIC in finding that MFS Group CEO Michael King was an ‘officer’ of subsidiary.
ASIC launched civil action against the former directors of MFS, which collapsed in 2008 owing $2.5 billion to a number of large creditors including the Public Trustee of Queensland which alleged it was owed $351 million; Challenger said it was owed $140 million; the Australian Taxation Office – $56 million; the Premium Income Fund and OPI Pacific Finance Limited owed $197 million and $300 million, respectively.
The High Court allowed ASIC’s appeal from the Supreme Court of Queensland on the question of whether King, the former CEO and executive director of MFS Ltd, also known as Octaviar Ltd, was an “officer” of MFS Investment Management Pty Ltd (MFSIM), as defined in s9 of the Corporations Act.
The appeal arose from the civil penalty proceedings against officers and a fund manager of MFSIM in connection with the misappropriation of $147.5 million held by Premium Income Fund. The misappropriated funds were used to pay debts owed by other entities in the MFS Group.
The Court unanimously held that King was an “officer” as defined in the Act because the provision is not limited to those who hold or occupy a named office in a corporation or a recognised position with rights and duties attached to it. The factual findings of the primary judge that King acted as the “overall boss of the MFS Group” and assumed “overall responsibility for MFSIM” were sufficient to establish that King had the capacity to affect significantly the financial standing of MFSIM.
ASIC Commissioner John Price said the High Court decision sends a clear signal to anyone running a company – in name or in effect – that they should be responsible and held accountable for their actions.
“It provides clear guidance on who is an “officer” of a corporation and establishes that the duties and responsibilities to a company, its creditors and shareholders under the Act will apply to individuals who have the capacity to significantly affect the financial standing of a company.
“The finding that Mr King was an officer of the subsidiary MFSIM, marks the conclusion of long-running litigation which commenced in 2009 and demonstrates ASIC’s commitment to pursuing difficult, long-running actions in the public interest,” Price said.
“If the CEO of the parent company of a group of companies is allowed to act in relation to other companies in the group untrammelled by the duties that attach to officers of each of the other companies in the group, shareholders and creditors would be left exposed to an obvious risk. It would be an extraordinary state of affairs if those who actually determine the course of a company’s financial affairs could avoid responsibility for their conduct by the simple expedient of deliberately eschewing any formal designation of their responsibilities. This is especially so in the present case,… to provide protection to members of managed investment schemes by imposing duties and responsibilities on the officers of responsible entities.” Joint judgment handed down by Kiefel CJ, Gageler and Keane JJ, their Honours stated.
