Court rules in Quintis founder, ASIC dispute

The Federal Court has decided Frank Wilson did not breach his director’s duties after finding the corporate watchdog could not prove its allegations against the Quintis Sandalwood founder.

The Australian Securities and Investments Commission started a legal action against Mr Wilson in 2018, alleging he had knowledge but failed to disclose that agreements between sandalwood producer Quintis and Nestle-owned Galderma were terminated.

ASIC claimed Mr Wilson, then the company’s managing director, was aware that Quintis lost the contract with Galderma since early 2017 but did not disclose it to the board until May that year.

The Federal Court yesterday found ASIC had not succeeded in establishing any of the breaches it alleged against Mr Wilson.

In his 222-page judgment, Justice Darren Jackson said it was not enough to establish that it was Mr Wilson’s responsibility to make the board aware of the agreement termination.

“What ASIC has to prove is that in order to have acted with care and diligence, the hypothetical reasonable director would have told the board immediately, so that the board was able to act,” he said.

“ASIC has not made out its case as to this because it has not established what that act might have been, or how it would have reduced or eliminated the likely harm to Quintis. 

“The duty of care and diligence cannot be defined without reference to the nature and extent of the foreseeable risk of harm … and in my view an officer cannot be said to have failed to act with care and diligence by omitting to perform an act unless it has been established that there was at least a real chance that the act would have reduced or eliminated that harm.”

ASIC said it was carefully reviewing the judgment.

“ASIC pursued this case because we were concerned that information was not properly disclosed to the Quintis board or to the market, impacting investors and their confidence in Australia’s financial markets,” ASIC deputy chair Sarah Court said.

“We will continue to work to ensure the integrity of Australia's continuous disclosure regime.”

In May 2017, Quintis announced on the ASX that the agreements over oil supply with the US-based Galderma had been terminated since December 2016.

Quintis made further announcements in June, of an asset write-off of $7.9 million relating to the Galderma agreements.

Receivers and administrators were appointed to Quintis in early 2018.

ASIC launched proceedings against Mr Wilson in the federal court for alleged breaches of the Corporations Act including continuous disclosure obligations for listed companies.

It was further alleged that Mr Wilson breached his director’s duty to act with care and diligence because he failed to inform the Quintis board that Galderma was taking steps to terminate the agreement.