Appeals dismissed over convictions following MFS Group collapse

The big fines and directorship bans on Octaviar executives over the dishonest use of investors’ funds have been upheld by an appeals court.

The Queensland Court of Appeal has published reasons for judgment dismissing the appeals of Craig Robert White and Guy Hutchings, who were officers of MFS Investment Management Limited (MFSIM), the former responsible entity of the Premium Income Fund (PIF). 

An appeal by Marilyn Anne Watts, a former funds manager of PIF, was also dismissed. 

White, Hutchings and Watts were ordered to pay ASIC’s costs of their appeals.

In a separate appeal brought by Michael Christodoulou King, the court partially allowed the appeal finding that King had not contravened the Corporations Act as an ‘officer’ of MFSIM at the relevant time. The court found that his contraventions were limited to his being knowingly concerned in MFSIM’s contravention by the misapplication of $130 million of PIF’s money.

The court has given further directions to King and ASIC in relation to the finalisation of his appeal.

The proceedings relate to breaches committed in connection with the misappropriation of $147.5 million of funds that had been held by the PIF on behalf of unitholders.  The misappropriated funds were used to pay debts owed by other entities in the MFS Group (also known as Octaviar) and false documents were created, some backdated and used to purportedly justify the use of the funds. The MFS Group collapsed in 2008 owing approximately $2.5 billion.

In May 2016, the court found that King, White, Anderson, Hutchings and Watts had collectively committed 217 contraventions of the Corporations Act (16-158MR).  The court found that King, White, Anderson and Hutchings had breached their duties as officers of MFSIM to act honestly and in the best interests of members of PIF.  Watts was found to have been involved in MFSIM’s breach of its duty to act honestly and in the best interests of members of the fund.

In May 2017, after more than 70 days of hearings, excluding interlocutory hearings and appeals, Justice Douglas made orders, imposing substantial disqualifications from managing corporations, pecuniary penalties and other relief in relation to the officers and the funds manager.

In June 2017, King, White, Anderson, Hutchings and Watts each appealed from the decision of the court at first instance

Anderson filed a notice of discontinuance of his appeal in September 2017, agreeing that his appeal be discontinued and that he pay ASIC’s costs of his appeal.

The remaining appeals were heard over 11 days in June 2018.