In Australian Securities and Investments Commission v Australian Property Custodian Holdings Limited (Receivers and Managers appointed) (in liquidation) (Controllers appointed) (No 3) [2013] FCA 1342 Justice Murphy of the Federal Court of Australia declared that the five former directors of APCHL (as the responsible entity of Prime Trust) breached their duties owed to members of Prime Trust by firstly, resolving to lodge a resolution with ASIC 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 secondly, 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.

One of the issues at trial was whether 2 of the directors (Mr Lewski and Mr Jaques) abstained from voting on the resolutions by remaining silent or whether they should be treated as having voted in favour of the resolutions.

For each of the 2 relevant board meetings there were in fact 2 sets of board minutes signed by the Chairman as correct: a draft pre-prepared by lawyers to deal with legally related matters and minutes prepared after each meeting from notes taken in the meeting.

Justice Murphy decided that the directors’conduct amounted to assent.

He said:

736.The minutes for the 26 June 2007 meeting were pre-prepared by Madgwicks. Mr Lewski said that there was “a general murmur of assent” to each resolution but that he said nothing to amount to a “yes” vote, in accordance with his usual practice where he had a personal interest in a resolution. He did not state that he advised the other Directors that his silence meant that he was abstaining. Mr Jaques was unable to recollect whether he voted for this resolution or not but he reiterated that his usual practice was to remain silent on any matter involving Mr Lewski’s personal interests.

737.Against this, Dr Wooldridge’s evidence is that he ascertained the agreement of all Directors present at the meeting to the resolutions. I prefer Dr Wooldridge’s account of the 26 June 2006 meeting to that of Mr Lewski. I infer that Dr Wooldridge followed his usual practice of asking the Directors “those in favour” and “those against” so as to satisfy himself where each Director stood. I accept his account that Mr Lewski and Mr Jaques were in agreement that the resolutions to pay the Listing Fee be passed. Whether or not they in fact remained silent, I infer that their conduct amounted to or conveyed assent to the resolutions.

738.The minutes for the 27 July 2007 meeting were also pre-prepared by Madgwicks. Mr Lewski said that he was present in the Boardroom for this meeting. All the Directors were present, some by telephone although it is not clear who. Mr Lewski again said that he abstained from voting on these resolutions by remaining silent, but again he did not advise the other Directors that he was doing so. Against this, Dr Wooldridge’s evidence is that he ascertained the agreement of all the Directors present to the resolutions. I prefer Dr Wooldridge’s account of this meeting to that of Mr Lewski. Whether or not Mr Lewski and Mr Jaques in fact remained silent, I infer that their conduct amounted to or conveyed assent to the resolutions to pay the Listing Fee.

Clearly, it is important that individual directors be given an opportunity to express their view on resolutions and that a director indicate if they are abstaining: see James Hardie decision.

Accurate minute-taking practices and record-keeping are critical.

A hearing on exoneration and penalty for the directors subsequently took place. The judgment on exoneration and penalty will be handed down in due course.