Supreme Court finds former MFS directors breached their duties

FORMER directors of Gold Coast finance empire MFS had breached their duties as officers and directors after misappropriating member funds in 2007 and 2008, a court has found.

Former MFS boss Michael King.

FORMER directors of Gold Coast finance empire MFS had breached their duties as officers and directors after misappropriating member funds in 2007 and 2008, a court has found.

The Supreme Court of Queensland on Monday found former executives and managers of then publicly listed MFS, Michael King (pictured), Craig White, David Anderson, Guy Hutchings and Marilyn Anne Watts, liable for breaching their directors’ and officers’ duties after they used $142.5 million of members money to repay the company’s debts.

The money was lent to the group by the Royal Bank of Scotland on the condition it be used for a fund overseen by MFS Investment Management, which was part of MFS, the judgment shows.

The court has not yet imposed a penalty on the former executives and managers but is expected to make a declaration of contravention on June 24 and give further directions in relation to penalty – which could be up to $200,000 for each party.

MFS, later relabelled as Octaviar, collapsed in 2008 owing $2.5 billion. ASIC launched civil action in 2009.

The court also found documents had been falsified to justify the transactions.

In his judgment, Justice James Douglas said the five defendants “were the people closely and relevantly connected with the company and its actions”.

He found each of them had acted dishonestly in their roles as officers of MFSIM.

“When all is said and done ... this remains a sorry tale of the misuse of other people’s money by those who should have known better,” Justice Douglas said.

“All the defendants knew that the money belonged to the investors in (the fund) and that it should have been used for their purposes.

“The ‘false documents’ were just another part of this sorry tale. They were ineffective to do what they purported to do and were prepared in haste in a transparent attempt to hide the previous misappropriations ...”

ASIC Commissioner John Price said those involved neglected their “duty to act in the interest of their investors”.

“Company officers, including directors, play a very important role as gatekeepers in Australia’s fin-ancial system,” he said.