Padbury Mining directors Gary Stokes and Terry Quinn have each been fined $25,000 and banned from being company directors for three years after the Federal Court found their announcement of a $6 billion funding deal for the Oakajee port and rail project was misleading and deceptive.
Padbury Mining directors Gary Stokes and Terence Quinn have each been fined $25,000 and banned from being company directors for three years after the Federal Court found their announcement of a $6 billion funding deal for the Oakajee port and rail project was misleading and deceptive.
Today’s court orders came three weeks after Padbury and its two directors entered into a settlement deed with the Australian Securities and Investments Commission.
ASIC commenced legal action in June 2015, in respect of the $6 billion finding announcement in April 2014.
That announcement led to a spike in the company’s share price from 2 cents to 5.2 cents, before Padbury entered a trading halt four hours later.
As well as the $25,000 fines, the court has ordered Messrs Stokes and Quinn to pay $200,000 towards ASIC's costs in conducting the proceedings.
Justice Siopis said the conduct of the two directors was a serious departure from the standards expected of directors of a public company, and that they had recognised this.
He said a three-year disqualification was appropriate, taking into account personal mitigating circumstances such as the directors' cooperation with ASIC at an early stage of the proceedings.
“It is crucial to the maintenance of confidence in the Australian market that company directors ensure announcements made by their companies are not misleading, and contain all material information relevant to investors' assessment of deals being announced,” ASIC commissioner John Price said.
“In this case the omission of significant conditions precedent and the identity of the funder were held to constitute breaches of the laws applying to listed companies.”
Today’s court orders were made with the parties' consent.
The court ruled that Padbury's announcement on April 11 2014, that it had secured $6 billion in funding for the Oakajee port and rail project in Western Australia, was misleading and deceptive.
The judgment was handed down after the parties submitted an agreed statement of facts, along with submissions as to appropriate penalties in the circumstances of the case.
The Court's findings included that:
- In breach of section 1041H of the Corporations Act 2001 (Cth) (the Act), Padbury made a misleading and deceptive representation in the announcement titled 'Oakajee Funding Secured' that Padbury had secured $6 billion in funding to construct a deep water port and associated rail network at Oakajee.
- Padbury directors Stokes and Quinn caused or permitted the representation to be made.
- Padbury breached its continuous disclosure obligations by failing to disclose to the market the existence of conditions precedent which would determine whether Padbury was entitled to receive the funding, and which conditions Padbury was not in a position to satisfy at the time of the Announcement. It also breached its obligations by failing to disclose the identity of the party which had promised to provide the funding, (Superkite Pty Ltd, since placed into liquidation).
- By authorising or otherwise approving the release of the Announcement, Stokes and Quinn failed to carry out their duties as directors of the company with the degree of care and diligence reasonably expected of them, contravening section 180(1) of the Act.