Friday 22 June 2007 – LAWFUEL – The Australia Law & Business Newsw…

Friday 22 June 2007 – LAWFUEL – The Australia Law & Business Newswire – The New South Wales Court of Appeal today ordered that Geoffrey William Vines, a former Chief Financial Officer of GIO Australia Holdings Ltd (GIO), pay a pecuniary penalty of $50,000 for his conduct during a takeover bid by AMP Limited (AMP) for GIO in late 1998.

In 2006, Justice Austin of the Supreme Court of New South Wales had ordered that Mr Vines be disqualified from managing a corporation for three years and pay a $100,000 pecuniary penalty.

The Court of Appeal today held that, given the seriousness of the contraventions and Mr Vines’ partially successful appeal in April this year, a $50,000 pecuniary penalty was appropriate.

The Court of Appeal also held that Mr Vines was a fit and proper person to manage a corporation and therefore, under the law that applied at the time, it declined to disqualify him and set aside Justice Austin’s disqualification order.

Section 1317EA of the Corporations Law, which dealt with the disqualification of directors at the time of Mr Vines’ conduct, was repealed with effect from 13 March 2000 and replaced by section 206C of the Corporations Act. The difference between the two provisions is that under the old law the court could not disqualify a person they considered fit and proper to manage a corporation. Under the new law the test is broader and the court can disqualify a person if they are satisfied that the disqualification is justified.

ASIC was ordered to pay Mr Vines’ costs of the appeal.

Background

ASIC commenced civil penalty proceedings against Mr Vines and two other executives, Mr Francis Robertson and Mr Timothy Fox, in 2001 in connection with a Part B Statement published by GIO during a takeover attempt which included an $80million profit forecast from GIO’s reinsurance division. The GIO reinsurance division was exposed to significant claims as a result of Hurricane Georges, which struck Puerto Rico and the United States Virgin Islands in September 1998.

Justice Austin handed down his findings on liability in August 2005 and his decision on penalty in August 2006. Mr Vines appealed against both decisions and ASIC appealed against the decision on penalty.

On 4 April 2007, the Court of Appeal upheld, in part, Justice Austin’s earlier findings. It found that Mr Vines had contravened his duty of care when he:
signed a management sign-off without taking positive steps to advise GIO’s due diligence committee of the basis of assumptions underlying an $80million profit forecast; and
informed the due diligence committee that he was comfortable with the integrity of the profit forecast; and
failed to give attention to whether the profit forecast would actually be achieved in the period after the Part B statement was issued but before the end of the takeover offer period.

The Court of Appeal overturned four other contraventions contended for by ASIC, reversing, in part, Justice Austin’s decision. The Court said that Mr Vines did not contravene his duty of care when he:
made an unqualified statement of confidence in the profit forecast on 9 November 1998; or
failed to provide information about the basis on which the profit forecast was calculated in:
– a report which was used to issue a media release on 17 November 1998 reporting on the company’s profit; or
– an email sent to the due diligence committee on 22 November 1998.

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