The Federal Court of Australia today ordered that Patrick John Godfrey, the former managing director of Banksia Securities Limited (In Liquidation) (Receivers and Managers Appointed) (Banksia), pay a pecuniary penalty of $25,000 and be disqualified from managing corporations for a period of five years.聽聽聽
The Court was satisfied on an agreed statement of facts between ob体育 and Mr Godfrey, and declared, that Mr聽Godfrey contravened section 344(1) of the Corporations Act, in that:
- Banksia鈥檚 financial reports for the financial years ending 30聽June聽2011 and 30聽June聽2012, and its half-year financial report for the half year ending 31聽December聽2011, did not comply with the relevant accounting standards, nor did they give a true and fair view of the financial position and performance of Banksia given the amount disclosed for the provision of bad and doubtful debts was inadequate.
- Mr聽Godfrey聽failed to have or obtain a sufficient understanding of the requirements of the relevant accounting standard, 础础厂叠听139 Financial Instruments: Recognition and Measurement (础础厂叠听139) for the recognition and assessment of the impairment of mortgage investments made by Banksia.
- Mr聽Godfrey's recommendations as to the appropriate amount of provision for bad and doubtful debts resulted in Banksia鈥檚 financial reports failing to give a true and fair view of Banksia鈥檚 financial position.
- Mr Godfrey failed to take all reasonable steps to secure compliance by Banksia with 础础厂叠听139.
In imposing the disqualification order (which is not to commence until 1 February 2018 at 4:30pm) and the penalty, Justice Moshinsky found the penalty and disqualification order that ob体育 and Mr Godfrey had jointly submitted were appropriate and should be made.
ob体育 Commissioner John Price said, 鈥楾he importance of ensuring that the financial accounts of a company are reported in accordance with the law by complying with聽 the correct accounting standards聽 is essential to provide assurance and market confidence.聽 Mr Godfrey fell short of the standards required of him in this case.鈥�
Background
Banksia was a Kyabram-based unlisted public company involved in raising money from the public by issuing debentures and lending the funds raised to borrowers for property investment and development purposes. As at October 2012, Banksia had raised approximately $663 million from 15,622 investors.
On 25聽October聽2012, Tony McGrath, Joseph Hayes, Matthew Caddy and Robert Kirman of McGrathNicol were appointed as receivers and managers to Banksia by The Trust Company (Nominees) Limited, the trustee for debenture holders.
On 11聽June聽2014, ob体育 accepted an enforceable undertaking from Mr聽Warren聽John聽Sinnott, the former auditor of Banksia, under which he is prevented from practising as a registered auditor until 10聽June聽2019 (refer: 聽).
On 24聽June聽2014, John Lindholm and Peter McCluskey of Ferrier Hodgson were appointed as Official Liquidators to Banksia by an order of the Supreme Court of Victoria.
On 23 June 2017, ob体育 commenced civil penalty proceedings in the Federal Court against Mr Godfrey (refer: ).
Editor's note
On 1 February 2018 the Federal Court ordered that Mr Godfrey have leave to manage P&M Godfrey Holdings Pty Ltd, on the condition that P&M Godfrey Holdings Pty Ltd not engage in activities other than as trustee of the P&M Godfrey Superannuation Fund for the duration of his disqualification.