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"The finding that Mr King was an officer of the subsidiary MFSIM, marks the conclusion of long-running litigation which commenced in 2009 and demonstrates ASIC's commitment to pursuing difficult, long-running actions in the public interest," says ASIC Commissioner John Price.
A former MFS Group executive who tried to distance himself from a $147.5 million investor fund misappropriation controversy is now back on the hook.
The High Court has concluded former MFS Group CEO Michael Christodoulou King was in fact an "officer" of a subsidiary whose Premium Income Fund (PIF) funnelled money to pay off debts from other entities in the group.
A renaming to Octaviar and a $236 million rescue package were not enough to save MFS from falling into voluntary administration in late 2008, spelling the end for a Gold Coast company that had amassed a fortune in financial services and tourism.
By the time it collapsed the company had total debts of $2.5 billion and a legal dispute ensued, lasting more than a decade.
In May 2017 Supreme Court of Queensland found several executives including King had collectively committed 217 contraventions of the Corporations Act while they were at MFS.
This included the misappropriation of funds held by PIF through MFS Investment Management's (MFSIM), with Justice Douglas saying the "insouciant attitude" of the defendants in the misuse of money beggared belief.
One month later the same court ordered Octaviar be wound up, and executives spent the next 18 months trying to appeal their cases.
In King's case he had been disqualified for 20 years, fined $300,000 and ordered to pay $177 million to PIF as well as 80 per cent of costs borne by the Australian Securities and Investments Commission (ASIC).
Then the former CEO had a breakthrough in December 2018.
While the Queensland Court of Appeal dismissed appeals from MFSIM former CEO Guy Hutchings, former deputy CEO Craig White and former PIF funds manager Marilyn Watts, the court partially allowed an appeal finding that King had not contravened the Corporations Act.
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, and gave directions to King and ASIC to finalise his appeal.
ASIC's response was to take the matter to the High Court, and today the watchdog won.
The court unanimously held King was an "officer" as defined by the Corporations Act because this level of responsibility is not limited to those who hold or occupy a named office within a corporation.
The primary judge found King acted as the "overall boss of the MFS Group" and assumed "overall responsibility for MFSIM", and this was enough to establish he had the capacity to affect significantly the financial standing of MFSIM.
"ASIC notes today's High Court decision, which sends a clear signal to anyone running a company - in name or in effect - that they should be responsible and held accountable for their actions," says ASIC Commissioner John Price.
"It provides clear guidance on who is an "officer" of a corporation and establishes that the duties and responsibilities to a company, its creditors and shareholders under the Act will apply to individuals who have the capacity to significantly affect the financial standing of a company.
"The finding that Mr King was an officer of the subsidiary MFSIM, marks the conclusion of long-running litigation which commenced in 2009 and demonstrates ASIC's commitment to pursuing difficult, long-running actions in the public interest."
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