The former directors of failed retirement village owner Prime Trust directors – including company founder Bill Lewski and former federal health minister Michael Wooldridge – are appealing a Federal Court finding that they breached their duties.
The court found they breached their duties as directors when they made a $33 million payment to Mr Lewski ahead of the group's 2006 listing.
Last year, the Federal Court found Mr Lewski, Dr Wooldridge and co-directors former Places Victoria boss and Liberal Party elder Peter Clarke, Mark Butler and Kim Jaques had breached the Corporations Act when granting the payment of a $33m listing fee to Mr Lewski.
The court found that even "Blind Freddy" ought to have recognised the conflicts in making the payment to Mr Lewski.
Lawyers for Mr Lewski told the Full Federal Court on Monday that the case brought against them by the Australian Securities and Investments Commission was launched one month after the six-year statute of limitations had lapsed.
Dr Wooldridge's appeal also rests on the claim that the contraventions alleged by ASIC occurred at a board meeting on July 19, 2006 rather than at a board meeting a month later on August 22, 2006, as determined by Federal Court judge Bernard Murphy. ASIC launched its case against the directors on August 21, 2012.
On Monday Judge John Middleton, who is hearing the matter with Judge Andrew Greenwood and Judge Lindsay Foster questioned the basis for the claim that the decision to pay Mr Lewski was made at the July 19 meeting.
Judge Middleton said the "Blind Freddy" test could also be applied to the meeting on August 22 because they "had a chance to stop it [the approval of the payment to Mr Lewski]."
Judge Foster noted that there was no evidence in the original case about what exactly had been discussed at the August 22 meeting, just that a vote had taken place, adding: "Nobody could remember anything – extraordinary."
The Australian Securities and Investments Commission is also appealing the penalties handed out to the directors – in the case of Mr Lewski, a 15-year ban and $230,000 fine, and in the case of Dr Wooldridge, a two-year, three-month ban and a $20,000 fine – asking the court to increase the disqualification orders against both men.
Mr Butler, Mr Jaques and Mr Clarke are also appealing the Federal Court decision that they breached the Corporations Act in granting the payment to Mr Lewski.
Mr Bulter and Mr Jacques were banned from acting as a company director for four years and fined $20,000 each.
Mr Clarke was not banned as a company director, but was slapped with a $20,000 fine is appealing the findings of contravention against him.
On Monday, Mr Clarke's lawyers told Judge Middleton, Judge Andrew Greenwood and Judge Graeme Foster the court had erred in finding that Mr Clarke's decision to not vote on the decision to award the payment to Mr Lewski was akin to an approval.
"He wasn't well prepared for the meeting and didn't feel comfortable voting," Daryl Williams, QC, for Mr Clarke said.
The $560m trust collapsed in 2010, affecting about 8000 investors.
Mr Lewski and his fellow directors face further legal action over the board granting Mr Lewski management rights for the trust's aged care homes for nothing. Mr Lewski later sold the rights to Babcock & Brown for $60m.
ASIC will deliver its submissions on Tuesday. The case continues.
