ASIC has commenced civil penalty proceedings in the Federal Court against Paul Ryan, director of Dixon Advisory & Superannuation Services for alleged breaches of directors’ duties.
The commission alleges Ryan “…breached his duties as a director by his involvement in decisions ASIC alleges were to the advantage of Dixon Advisory’s holding company, E&P Operations, and by failing to properly consider the interests of Dixon Advisory’s creditors.”
Ryan was also a director of E&P Operations.
ASIC Deputy Chair Sarah Court says directors have responsibilities under the law “…to act in the best interests of their company, and this includes considering the interests of creditors when the company is facing insolvency.”
She says the creditors “…included thousands of financial advice clients who had invested in the US Masters Residential Property Fund and financial products operated by entities related to Dixon Advisory. These creditors suffered significant losses.”
ASIC alleges that Ryan was involved in:
- Amending the constitution of Dixon Advisory on 22 December 2021 to expressly authorise its directors to act in the interest of E&P Operations
- Executing a deed of acknowledgement of debt (Deed) on 24 December 2021 between Dixon Advisory and E&P Operations to the advantage of E&P Operations and to the detriment of Dixon Advisory
ASIC further alleges that at the time the Deed was entered:
- E&P Operations owed Dixon Advisory over $19 million
- Dixon Advisory was approaching insolvency and therefore its directors were obligated to consider the interests of creditors
- The Deed imposed conditions which adversely affected Dixon Advisory’s right to recover this $19 million debt
Court notes that these proceedings “…underline our commitment to ensure directors meet their governance obligations, including where they serve on the boards of multiple companies in a corporate group.”
Background
As background, ASIC says both Dixon Advisory and E&P Operations were wholly owned subsidiaries of E&P Financial Group.
ASIC says in the period from 2020, Dixon Advisory faced claims arising from the provision of financial advice to clients who were advised to invest in the US Masters Residential Property Fund (URF) and URF-related products, which were issued and operated by related companies to Dixon Advisory. These included:
- A proceeding issued by ASIC in the Federal Court which resulted in orders for Dixon Advisory to pay a $7.2 million penalty and $1 million towards ASIC’s costs
- Complaints made to the Australian Financial Complaints Authority
- Three court proceedings in the Federal Court, including two class action proceedings
ASIC says that on 16 December 2022, a deed of company arrangement (DOCA) was passed by Dixon Advisory’s creditors, which among other things required E&P Operations to pay an amount of $17,662,489 to Dixon Advisory less a settlement adjustment for expenses incurred by E&P Operations during the administration period.
In an ASX announcement E&P Financial Group says that ASIC has informed an officer of E&P that it has commenced legal proceedings against him. It says E&P and its subsidiaries are not parties to the proceedings.
The announcement says that E&P has been informed that Ryan “…denies any wrongdoing and intends to vigorously defend the proceedings. E&P considers that Ryan has always acted with integrity in his role as a director of DASS, including in the weeks leading up to the appointment of the voluntary administrators of DASS.” Ryan will continue in his current roles at E&P.
