FEDERAL COURT OF AUSTRALIA

Australian Securities and Investments Commission v Pattenden (Liability – Jones) [2026] FCA 1617

ORDERS

THE COURT ORDERS THAT:

1.    The proceeding be listed for case management on a date to be advised.

THE COURT DECLARES THAT:

2.    In his capacity as a director or officer of ACBF 2, ACBF Plans and ACBF Community between 5 October 2017 and 30 November 2018, the fourth defendant contravened ss 180(1) and 181(1) of the Corporations Act 2001 (Cth).

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

KENNETT J:

INTRODUCTION

1    By its originating process filed on 30 August 2023 the plaintiff (ASIC) seeks declarations, the imposition of pecuniary penalties, and disqualification orders under (respectively) s 1317E(1), s 1317G(1) and s 206C(1)(a)(i) and/or s 206E(1)(a)(ii) of the Corporations Act 2001 (Cth) (the Corporations Act) against each of the five defendants. These remedies are sought for contraventions of ss 180(1), 181(1) and 182(1) of the Corporations Act.

2    ASIC reached agreements on liability and relief with the first defendant (Mr Pattenden), the second defendant (Mr Law), the third defendant (Mr Wilson) and the fifth defendant (Mr Clayton). No agreement was reached between ASIC and the fourth defendant (Mr Jones). These reasons deal with the issue of liability in respect of Mr Jones, which was the subject of a hearing on 9, 12-13 and 16-18 February 2026.

3    The activities which are alleged to have contravened ss 180(1), 181(1) and 182(1) occurred between 5 October 2017 and 30 November 2018 (the relevant period) and concern Mr Jones’s positions as CEO and subsequently also director of a number of companies which operated various funds providing funeral benefits to nominated persons on the death of a fund member or nominee. The group of companies relevantly included the following (together, the ACBF Entities):

(a)    Aboriginal Community Benefit Fund No 2 Pty Ltd (ACBF 2), which was the trustee and operator of Fund 2 — a fund marketed to, and only available to, Indigenous Australians;

(b)    ACBF Funeral Plans Pty Ltd (ACBF Plans), the operator of Fund 3 which was a contributory funeral benefit business under the Funeral Funds Act 1979 (NSW) (the Funeral Funds Act); and

(c)    Community Funeral Plans Pty Ltd (ACBF Community), the operator of Fund 4 which was also a registered contributory funeral benefit business under the Funeral Funds Act.

Factual overview

4    The broader organisational structure in which the ACBF Entities sat is relevant to ASIC’s case against Mr Jones, including because the relationship between the ACBF Entities and each of Mr Pattenden, Mr Law and Crown Insurance Services Limited (Crown) is material to the pleaded allegations of misconduct. It is therefore appropriate to set out the history of the ACBF Entities in some detail.

5    Mr Pattenden founded “The Aboriginal Community Benefit Fund” in 1992. Prior to the relevant period, the business was expanded by Mr Pattenden to include a number of subsidiary companies, including the ACBF Entities, owned in Australia by ACBF Group Holdings Pty Ltd (ACBF Group Holdings). These subsidiary companies, including the ACBF Entities, operated together under ACBF Group Holdings as a single business with four funeral funds. The ACBF Entities provided what was described as “funeral cover” to consumers. ACBF 2 and ACBF Plans were targeted exclusively at Australians with Indigenous ancestry.

6    ACBF Group Holdings, and therefore the ACBF Entities, were from around 2005 to 2010 owned by Mr Pattenden. From 2010, ACBF Group Holdings was majority owned by Mr Pattenden together with Mr Law through Just Solutions Limited (Just Solutions), a company registered and operated by Mr Pattenden and Mr Law in Vanuatu. The shareholders in Just Solutions were two companies owned by Mr Pattenden and Mr Law.

7    Just Solutions was also the parent company of Crown, which was an insurance business established by Mr Pattenden for the purpose of providing insurance underwriting services to the ACBF Entities.

8    Mr Pattenden and Mr Law were directors of the ACBF Entities, ACBF Group Holdings, Crown and Just Solutions prior to and during the relevant period.

9    Mr Jones commenced employment with the ACBF business on 11 September 2017. From 5 October 2017 and throughout the remainder of the relevant period, Mr Jones was the Chief Executive Officer (CEO) of ACBF Group Holdings and the ACBF Entities. During the relevant period he was also appointed to the following positions, each of which he held for the remainder of the relevant period:

    director and secretary of ACBF 2 from on or about 18 December 2017;

    director and secretary of ACBF Plans from on or about 18 December 2017; and

    director of ACBF Community from on or about 23 October 2017.

10    Mr Clayton was appointed as Chief Operating Officer and financial controller of the ACBF business on 5 October 2017.

11    Mr Wilson was the secretary and a director of ACBF Community until 23 October 2017. He ceased to hold these offices on that day. He ceased to be the secretary and a director of ACBF Plans on 19 December 2017 and formally ceased to be employed by the ACBF business on 7 February 2018 (having ceased to perform the duties of his role around October or November 2017).

12    On 30 November 2018 (the last day of the relevant period), Just Solutions and ACBF Consultants Pty Ltd sold their shares in ACBF Group Holdings to Elah Valley Pty Ltd, a company controlled by Mr Jones and Mr Clayton. Mr Pattenden and Mr Law ceased to be directors of the ACBF Entities on that day.

13    Each of the ACBF Entities was bound by the applicable trust deed or plan rules to maintain an insurance policy that underwrote the lives of its fund members. Prior to and during the relevant period, each of the ACBF Entities maintained an insurance policy with Crown.

14    These insurance arrangements required each of the ACBF Entities to pay premiums to Crown, with Crown having the power to vary the premium upon three months’ written notice to the ACBF Entities. The ACBF Entities were able to terminate the arrangement by giving three months’ notice.

15    Having been registered in Vanuatu and operated its business from Vanuatu, Crown was not subject to Australian prudential or other regulatory requirements. As noted above, Mr Pattenden and Mr Law were the ultimate owners, and also directors, of Crown.

16    On 4 September 2017 Mr Law, in his capacity as a director of Crown, wrote to Mr Wilson requesting that ACBF 2 increase the premiums payable to Crown by 100% effective from 1 August 2017 (the premium increase).

17    In their roles as directors of the ACBF Entities, Mr Pattenden, Mr Law and Mr Wilson agreed to ACBF 2 doubling the premium paid to Crown.

18    During the relevant period there were 13 occasions on which ACBF 2 paid insurance premiums at the increased rate to Crown. Neither ACBF Plans nor ACBF Community was subject to premium increases during the relevant period.

ASIC’s case in broad outline

19    ASIC alleges that Mr Jones ought to have known the effect of the premium increase on ACBF 2 and the vulnerability of ACBF Plans and ACBF Community to similar premium increases by Crown. ASIC alleges that Mr Jones failed to consider: (i) the effect of the Crown arrangements on the financial position of each of the ACBF Entities; (ii) whether the insurance arrangements with Crown were in the best interests of each of the ACBF Entities; and (iii) the availability of alternatives to insuring with Crown.

20    ASIC contends that by failing to consider these matters and by causing the ACBF Entities to maintain the insurance arrangements with Crown, Mr Jones preferred Mr Pattenden’s, Mr Law’s and Crown’s financial interests over the interests of the ACBF Entities and their respective fund members. Further, it is alleged that Mr Jones obtained an advantage for Mr Pattenden, Mr Law and Crown or, in the alternative, caused a detriment to ACBF 2, ACBF Plans and ACBF Community.

21    ASIC alleges that this had the effect of materially prejudicing the financial interests of the ACBF Entities and their members, in circumstances where such harm was reasonably foreseeable and Mr Jones knew or ought to have known that Mr Pattenden and Mr Law benefited financially from the Crown arrangements.

22    ASIC’s contention was that by reason of this conduct Mr Jones:

(a)    failed to discharge his duties to ACBF 2, ACBF Plans and/or ACBF Community with the degree of care and diligence that a reasonable person would exercise, if they were a director or officer of the relevant corporation in its circumstances, occupied the offices held by Mr Jones and had the same responsibilities within the corporation in breach of s 180(1) of the Corporations Act;

(b)    failed to exercise his powers and duties in good faith in the best interests of ACBF 2, ACBF Plans and/or ACBF Community, and for a proper purpose in contravention of s 181(1) of the Corporations Act; and, further or alternatively,

(c)    used his position contrary to and in contravention of s 182(1) of the Corporations Act.

23    ASIC contends that Mr Jones’s contraventions of ss 180(1), 181(1) and 182(1) of the Corporations Act materially prejudiced the financial interests of the ACBF Entities and their members, materially prejudiced the ability of the ACBF Entities to pay their creditors and were serious.

Mr Jones’s case

24    Through his solicitors, Mr Jones filed a defence on 19 March 2024. He generally admitted the allegations in ASIC’s statement of claim in so far as they related to him. In respect of the premium increase his pleading was as follows.

32.    With respect to paragraph 43, does not know, and cannot admit the allegations in this paragraph but admits that on 4 September 2017 Mr Law requested that Fund 2 increase its premiums by 100%.

33.    With respect to paragraph 44:

a.    admits that in 2017 and 2018 ACBF 2 paid Crown premiums that were in excess of the amount of the premium that had been paid in the previous year;

b.    says that these payments were processed automatically through the fund’s computer system and once the Fourth Defendant became aware of the payments he took prompt action which included:

i.    obtaining a credit note from Crown in December 2018 for the benefit of ACBF 2 in respect of the amounts it paid to Crown that were in excess of the premium amounts that had been paid since September 2017; and

ii.    making enquiries into alternative insurance providers.

25    ASIC filed an amended statement of claim on 5 June 2024. It filed a further amended statement of claim on 7 February 2025 as a result of some paragraphs being struck out on the application of other defendants. Mr Jones did not file defences to these later iterations of the statement of claim, but nothing presently turns on this.

26    Mr Jones’s solicitors filed a notice of intention to cease to act on 28 April 2025. While no notice of ceasing to act has been filed, Mr Jones has conducted the proceedings since that date without legal representation.

THE EVIDENCE

ASIC’s case

27    ASIC relied on affidavits deposed by two lay witnesses and an expert witness, none of whom was cross-examined.

28    Tracey Niemiec, an ASIC staff member, described the course of ASIC’s investigation into the ACBF Entities and the documents obtained. Ms Niemiec’s affidavit also annexed various tables and documents containing financial and actuarial information extracted from the documents obtained by ASIC.

29    Jody Marshall, a lawyer employed by the Australian Government Solicitor, described searches that she had performed on the documents obtained by ASIC in order to obtain documents for the purpose of briefing ASIC’s expert witness, Alan Merten.

30    Mr Merten, an actuary, provided a report and a supplementary report. He was asked to opine on the following questions.

1.    During the Relevant Period, were there other insurers offering insurance with similar cover to Crown on terms that might have been more advantageous to the ACBF Entities, either on a group or individual entity basis?

2.    Having regard to the whole period of the arrangement between the ACBF Entities and Crown, at the commencement of the Relevant Period on 4 September 2017:

a.    what percentage increase on the previous amount of premium being paid by ACBF 2 to Crown would ACBF 2 have been able to pay and remain solvent?

b.    what percentage increase on the amount of premium being paid would ACBF Plans and ACBF Community have been able to pay and remain solvent?

3.    Both before and after the premiums were doubled for Fund 2 on 4 September 2017, should the directors have formed the view that there was an unacceptable risk that one or more of the ACBF Entities would become insolvent if they persisted with the Crown insurance arrangements? If so, what steps do you consider the directors could reasonably have taken to protect the best interests of the Funds and their members?

In answering this question, please include consideration of solvency on the basis of the assumptions made by the actuary of Funds 2 to 4.

4.    Once the premiums had doubled for Fund 2, would it have been more advantageous to the ACBF Entities if, rather than continuing with Crown, one or each of them had established new self-insurance arrangements? In answering this question, assume that the ACBF Entities do not source additional capital or debt funding.

5.    If the ACBF Entities had switched from Crown to self-insurance at any point during the Relevant Period, what Steps or combination of Steps (defined below) would have been needed to reasonably ensure that the Funds were able to meet member claims into the foreseeable future?

Steps means actions involving:

a.    mortality expectations;

b.    capital reserves;

c.    revenue;

d.    expenses;

e.    insurance cover.

6.    Having regard to your answers to Questions 3 to 5 above, at each of 4 September 2017, 30 June 2018 and 30 November 2018 (being, respectively, the commencement of the Relevant Period, end of the financial year during the Relevant Period, and end of the Relevant Period):

a.    if the directors of the ACBF Entities wanted to bring any of Funds 2, 3 or 4 to an end, for each Fund, what would have been the process? In particular:

i.    what amounts would have been available to be distributed to creditors or fund members of the ACBF Entities?

ii.    what amounts would have been available to be paid as cancellation benefits to eligible fund members of ACBF 2?

b.    if all fund members of ACBF 2 who were eligible for payment of a cancellation benefit validly cancelled their memberships:

i.    would ACBF 2 have had sufficient funds to pay those benefits?

ii.    would ACBF 2 have been left with any funds from which it could satisfy remaining fund members' claims (in lieu of payment from Crown)? In answering this question, please consider any options that could have been considered by the directors of ACBF 2 in order to pay those claims (such as decreasing expenses or increasing revenue).

7.    Having regard to your answers to Questions 1-6 above, during the Relevant Period, what do you consider were the options available to the directors of the ACBF Entities in respect of each of Funds 2, 3 and 4, whether including, or not including, a wind-up of any of those Funds? Please include the advantages and disadvantages of each option.

31    Mr Merten’s answers to these questions will be touched on later in these reasons to the extent that they bear on the issues in dispute between ASIC and Mr Jones.

32    ASIC also tendered selected documents from a larger court book that had been prepared for the proceeding in relation to all defendants. These documents included material such as financial statements, actuarial reports, emails, the trust deeds and rules for the various funds and training and procedural manuals. Over 1,000 documents were tendered, but a significant proportion of them were tendered only to establish the material upon which Mr Merten had based the opinions in his reports.

Mr Jones’s case

33    Mr Jones tendered 16 documents. He did not give evidence or call any witnesses.

34    Relying on Master Wealth Control Pty Ltd v Australian Competition and Consumer Commission [2024] FCAFC 171; 306 FCR 462 at [38] (Sarah C Derrington, Halley and Shariff JJ) (Master Wealth), ASIC submitted that a Jones v Dunkel inference arose from Mr Jones’s failure to give evidence. Jones v Dunkel (1959) 101 CLR 298 at 308 (Kitto J), 312 (Menzies J), 320-321 (Windeyer J) is the most commonly cited authority for the proposition that an unexplained failure by a party to call a witness may lead to an inference that the witness’s evidence would not have assisted the party’s case, which may in turn make it easier for the Court to draw inferences adverse to the party if those inferences are otherwise available. Master Wealth confirms that a respondent in civil penalty proceedings is not immune from the drawing of such inferences (see also Construction, Forestry, Mining and Energy Union v Australian Building and Construction Commissioner [2017] FCAFC 77; 251 FCR 528 at [54] (Flick J, North and Besanko JJ agreeing)). Where issues arise concerning Mr Jones’s knowledge or understanding during the relevant time or whether he saw particular documents, he was clearly the person best placed to give evidence about those issues. On such issues, if the documentary evidence provides a basis for drawing an inference adverse to Mr Jones, his decision not to give evidence may therefore allow that inference to be drawn with greater confidence.

LEGISLATIVE FRAMEWORK – DIRECTORS’ AND OFFICERS’ DUTIES

Sections 180, 181 and 182

35    Sections 180, 181 and 182 relevantly provide as follows.

180 Care and diligence—civil obligation only

Care and diligence—directors and other officers

(1)    A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they:

(a)    were a director or officer of a corporation in the corporation’s circumstances; and

(b)    occupied the office held by, and had the same responsibilities within the corporation as, the director or officer.

Note: This subsection is a civil penalty provision (see section 1317E).

181 Good faith—civil obligations

Good faith—directors and other officers

(1)    A director or other officer of a corporation must exercise their powers and discharge their duties:

(a)    in good faith in the best interests of the corporation; and

(b)    for a proper purpose.

Note 1: This subsection is a civil penalty provision (see section 1317E).

Note 2: Section 187 deals with the situation of directors of wholly‑owned subsidiaries.

(2)    A person who is involved in a contravention of subsection (1) contravenes this subsection.

Note 1: Section 79 defines involved.

Note 2: This subsection is a civil penalty provision (see section 1317E).

182 Use of position—civil obligations

Use of position—directors, other officers and employees

(1)    A director, secretary, other officer or employee of a corporation must not improperly use their position to:

(a)    gain an advantage for themselves or someone else; or

(b)    cause detriment to the corporation.

Note: This subsection is a civil penalty provision (see section 1317E).

(2)    A person who is involved in a contravention of subsection (1) contravenes this subsection.

Note 1: Section 79 defines involved.

Note 2: This subsection is a civil penalty provision (see section 1317E).

Director or officer

36    As noted above at paragraph [9], for each of the ACBF Entities there was a period during the relevant period in which Mr Jones was the CEO of the entity but not a director. It is necessary to consider whether Mr Jones was nonetheless a director or officer for the purposes of ss 180-182 of the Corporations Act during that period.

37    At the time, the definitions of “director” and “officer” found in s 9 of the Corporations Act were as follows.

director of a company or other body means:

(a)    a person who:

(i)    is appointed to the position of a director; or

(ii)    is appointed to the position of an alternate director and is acting in that capacity;

regardless of the name that is given to their position; and

(b)    unless the contrary intention appears, a person who is not validly appointed as a director if:

(i)    they act in the position of a director; or

(ii)    the directors of the company or body are accustomed to act in accordance with the person’s instructions or wishes.

Subparagraph (b)(ii) does not apply merely because the directors act on advice given by the person in the proper performance of functions attaching to the person’s professional capacity, or the person’s business relationship with the directors or the company or body.

Note:    Paragraph (b)—Contrary intention—Examples of provisions for which a person referred to in paragraph (b) would not be included in the term “director” are:

•    section 249C (power to call meetings of a company’s members)

•    subsection 251A(3) (signing minutes of meetings)

•    section 205B (notice to ASIC of change of address).

officer of a corporation means:

(a)    a director or secretary of the corporation; or

(b)    a person:

(i)    who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or

(ii)    who has the capacity to affect significantly the corporation’s financial standing; or

(iii)    in accordance with whose instructions or wishes the directors of the corporation are accustomed to act (excluding advice given by the person in the proper performance of functions attaching to the person’s professional capacity or their business relationship with the directors or the corporation); or

…

Note:    Section 201B contains rules about who is a director of a corporation.

(Emphasis in original.)

38    ASIC submits that, in his capacity as CEO of the ACBF Entities prior to his appointment as a director, Mr Jones acted in the position of a director within the meaning of s 9(1) and further, or alternatively, made or participated in making decisions that affected the whole or a substantial part of the ACBF Entities as an officer within the meaning of s 9(1).

39    Mr Jones’s position as CEO was confirmed via an email from David Hughes of the law firm Small Myers Hughes (solicitor for the ACBF Entities) to Mr Jones on 6 October 2017, confirming the outcome of a discussion the previous day. The email was copied to all of the other defendants. The “new executive management team” was listed as follows.

Bryn [Jones] – Chief Executive Officer. Bryn will have ultimate responsibility to the board and shareholders and on a day to day basis will focus on efficiencies in the admin and more generally using his IT skills and entrepreneurial ideas

Geoff [Clayton] – Chief Operating Officer. Geoff will have primary responsibility for sales and compliance, with the support of Sandy (sales) and Courtney (compliance).

Michael [Wilson] – Chief Financial Officer. Michael will be the group internal accountant and will have responsibility for reporting weekly, monthly and quarterly information to the executive team, and the board of directors (which will include Michael).

40    Mr Jones replied to this email on the same day and said that he and Mr Clayton would “get together and flesh out the areas of responsibilities”. An email that Mr Jones sent to Mr Wilson (and copied to the other defendants) on 12 October 2017 attached an organisation chart, which showed lines of reporting that all led to Mr Jones (described as CEO).

41    Mr Jones denies that by reason of his positions as secretary of ACBF 2 and ACBF Plans and CEO of the ACBF Entities he met the definition of a director or an officer (or both) in s 9(1). Mr Jones did not make any written or oral submission in response to ASIC’s allegation, beyond noting that he was not officially appointed as a director, he had only been in the CEO role for a short time as at the start of the relevant period and he was previously only a part-time employee.

42    ASIC’s submissions acknowledge that it appears Mr Jones “ultimately reported to and acted in accordance with Mr Pattenden’s instructions in relation to any significant decision in relation to the ACBF Entities and the broader ACBF business”. However, it is clear that from the beginning of the relevant period Mr Jones was assuming functions consistent with the role of a CEO such as familiarising himself with the ACBF Entities’ processes and procedures and preparing a new business plan. He was described as CEO by Mr Hughes, and described himself as such, apparently without attracting any comment from any of the directors or senior officers of the ACBF business. I am satisfied that Mr Jones was an “officer” of each of the ACBF Entities from the commencement of the relevant period until his appointment as a director, and was therefore subject to duties under ss 180-182 for the whole of the relevant period.

THE ACBF BUSINESS

The funds

Fund 2

43    ACBF 2 was trustee of Fund 2, which operated pursuant to a trust. Fund 2 had operated from 1993, for the purpose of providing funeral benefits to nominated persons on the death of a fund member. It was marketed, and only available, to Indigenous Australians. Fund 2 was closed to new members from 2004.

44    Each fund member was required to make fortnightly payments as contribution amounts, which increased according to the fund member’s age. The contribution amounts were held on trust by ACBF 2 and were to be applied in accordance with the provisions of the trust deed.

45    On the death of a fund member who had made at least two payments, and following the making of a claim, ACBF 2 would pay $6,000 to a nominated person (an amount which could be increased on application by the member after paying contribution amounts for at least one year).

46    Where a fund member wrote to ACBF 2 to cancel their membership, they would receive a payment on cancellation (subject to having made 26 or more payments and having not increased the amount payable by ACBF 2) in an amount equal to one third of their total membership payments from the 26th payment onwards.

47    If Fund 2 was wound up and there were surplus funds following the payment of its liabilities, fund members would be entitled to be repaid an amount up to the maximum amount of their cancellation benefit.

48    The trust deed for Fund 2 required Fund 2 to maintain an insurance policy to underwrite the lives of its fund members. From 2002, ACBF 2 obtained that insurance cover from Crown.

49    ACBF 2 entered liquidation in March 2022 (after the relevant period).

Funds 3 and 4

50    Funds 3 and 4 were subject to plan rules and each was registered as a contributory funeral benefit business under the Funeral Funds Act.

51    ACBF Plans operated Fund 3 from 2005 for the purpose of providing funeral benefits to nominated persons on the death of a fund member. Fund 3 was marketed to, and until September 2017 was only available to, Indigenous Australians.

52    ACBF Community operated Fund 4 from 2005 for the purpose of providing funeral benefits to nominated persons on the death of a fund member. Membership of the fund was open to “any person”.

53    In both of Funds 3 and 4, fund members were required to make regular (usually fortnightly) payments as contribution amounts. Those amounts were calculated in accordance with the application form signed by the member, determined by the fund member’s age and chosen benefit amount and a corresponding health classification based on information provided as part of the application process.

54    On the death of a nominated person (including a fund member) and following the making of a claim, ACBF Plans or ACBF Community would pay an amount comprising reimbursement for incurred funeral-related expenses (up to the nominated benefit amount) to or as directed by the nominated payee. The rules and application form did not provide for any payment in the event that a membership was cancelled.

55    The plan rules for Funds 3 and 4 required that each of ACBF Plans and ACBF Community must at all times maintain an insurance policy that underwrote the amounts required to be paid following a claim on the death of a member. ACBF Plans and ACBF Community both maintained insurance policies with Crown for this purpose.

56    ACBF Plans and ACBF Community also entered liquidation in March 2022.

Other aspects of the business

57    As noted earlier, from 2010 until the end of the relevant period, the ultimate holding company of the group through which the ACBF business operated was Just Solutions (which was registered in Vanuatu). Just Solutions owned the majority of the shares in ACBF Group Holdings, which was the Australian company that ultimately owned the companies in the ACBF business. ACBF Group Holdings earned revenue by way of dividends from ACBF Administration Pty Ltd (ACBF Administration) and in turn paid dividends to Just Solutions. In the financial years from 2015 to 2018, the dividends that it paid matched the value of the dividends that it earned.

58    ACBF Administration provided various services to the ACBF Entities for a fee. That fee was not based on the cost of the services to ACBF. Instead, the fees at relevant times were as follows.

(a)    For Fund 2: an annual fee totalling $300,000 (excluding GST) and a weekly fee of $2.80 per member (excluding GST);

(b)    For Fund 3: an annual fee totalling $100,000 (excluding GST) and (during the relevant period) a weekly fee of $2.80 per member (excluding GST). Actuarial reports provided each year for Fund 3 included “assumptions” about the maximum weekly member fee payable to ACBF Administration, which the actuary noted would be “negotiated”.

(c)    For Fund 4: an annual fee totalling $10,000 (excluding GST) and (during the relevant period) a weekly fee of $0.90 per member (excluding GST). The actuarial reports provided each year for Fund 4 also noted that the member fee would be “negotiated” between Fund 4 and ACBF Administration.

59    ACBF Administration paid dividends to ACBF Group Holdings each year. Its profits and dividends for the 2015 to 2018 financial years were as follows.

Insurance with Crown

60    Crown, as noted earlier, was registered in Vanuatu. It provided insurance to ACBF 2 from 2002 and to ACBF Plans and ACBF Community from 2005. These arrangements continued through and beyond the relevant period. The ACBF Entities were the only entities insured by Crown.

61    Each of the insurance policies maintained with Crown had the following features.

(a)    On the death of a fund member or other nominee, Crown was required to pay a defined amount to the relevant ACBF Entity.

(b)    Crown had the power to vary the premium payable by giving three months’ written notice.

(c)    If a premium was not paid within 14 days after the due date, Crown could give three months’ notice of termination, after which the policy (and the cover provided) would lapse.

(d)    The policies were renewable annually, but there was no obligation on Crown to renew a policy.

62    There was a profit-sharing arrangement between Crown and each of the ACBF Entities, the details of which need not be rehearsed here. In almost every financial year after the establishment of the policies, an amount of “profit share” was paid to each ACBF Entity by Crown.

63    ASIC’s submissions set out in tabular form the cash flows between each of the Funds and Crown for each financial year from 2002 to 2018 and for the period from 1 July 2018 to the end of the relevant period, extracted from the relevant financial statements. Although Mr Jones was not involved in the ACBF business until September 2017, it is useful to set that information out in order to illustrate the trends in the amounts received by Crown.

THE PREMIUM INCREASE

Mr Jones’s knowledge of the premium increase

64    Mr Jones pleads in answer to the allegation that he knew or ought to have known about the increased premium that he did not know of the increased premium because the insurance payments were processed automatically by ACBF 2 to Crown via Fund 2’s computer system. Mr Jones denies that ACBF 2 agreed to or accepted or paid the premium increase.

65    Mr Jones’s position is that he only became aware of the increased premium after the relevant period, at some time between 10 and 14 December 2018. Mr Jones relies on an email he sent to Adrian Edwards on 21 December 2018 which states:

I refer to our recent conversation regarding Mr Pattenden’s conduct, and as to the overpayments to Crown Insurance from Fund 2.

I confirm that this email is being sent on behalf of the current directors of the Aboriginal Community Benefit Fund No. 2 Pty Ltd (ACBF).

We confirm that, as we have just purchased ACBF, we have been conducting reviews and finalising the company accounts in terms of the purchase agreement, and it has come to our attention that there is a variance with the account for Fund Two. This assessment was only conducted due to us receiving an email from Crown Insurance, on behalf of their auditors, pointing out that there was an issue with the accounts.

From our investigation, it appears that the premiums paid by Fund 2 to Crown Insurance were doubled in August/September 2017 and that Fund 2 has been paying a higher premium to Crown due to this increase. When this variance was discovered, we requested our IT team and accountants to complete a review and provide us with an answer as to why the premium has been doubled. They have instructed, that there is no apparent reason why this has occurred.

Our Chief Operating Officer, Geoff Clayton, contacted Crown Insurance and informed them of the variation, copy of email is attached. As advised earlier, Mr Pattenden has requested that a written retraction be provided and has stated that Crown does not owe money to Fund 2. In his response, he has not provided clarification as to why this increase in payment occurred but rather ACBF should compel Mr Clayton to retract such statement.

We now instruct you to prepare a written response from Fund 2 to Mr Pattenden, highlighting the following:

1.    That we will not be providing a redaction of the email from Mr Clayton;

2.    That the directors agree with the comments made by Mr Clayton;

3.    That Ron Pattenden, as a director of the Fund 2 had the duty to act in good faith and in the best interests of the company and its members;

4.    As the current new directors, we also have the duty to prevent the company trading whilst insolvent and if we do not follow up on this inquiry, our inaction can place the company and its members into a situation where it is unable to pay its debts as and when they fall due and personally liable;

5.    As of June 2018, the surplus amount that Crown Insurance has received from Fund 2 would be $8,172,801.39 (as per attached spreadsheet); and

6.    We require an explanation from Mr Pattenden as to why this increase to premium occurred.

We also require an explanation as to why Fund 2 has never been registered with Fair Trading NSW. This should be provided by Ron and SMH.

Please provide the response to us, so that we can review it prior it being sent to Mr Pattenden.

If you wish to discuss this matter further please contact me.

66    However, ASIC identifies a number of documents which, it contends, demonstrate Mr Jones’s awareness of the premium having doubled by no later than 1 November 2017. This includes the following materials.

67    First, on 13 October 2017 Mr Jones asked Mr Wilson and a staff member named Helen to provide him with information about the last 20 claims for “both companies”. That request indicates that Mr Jones was taking an interest in the operations of the ACBF Entities including their outgoings. He received a reply from Mr Wilson later that day attaching a spreadsheet described by Mr Wilson as “the Funeral Plan claims and Fund 2 claims which has a lot of info in there”. One of the things the spreadsheet showed fairly prominently was the “premiums to be sent to Crown” for each of the last several months for Fund 2, which included amounts of $79,918.00 (September), $88,733.80 (August), $38,935 (July) and $44,714.80 (June). This spreadsheet comprised monthly reports going back in time to the early 2000s which, had Mr Jones scrolled through them, would have shown him that the premium paid by Fund 2 was gradually declining (consistently with the Fund having been closed to new members) before roughly doubling in August 2017.

68    The material provided to Mr Jones on 13 October 2017 was a collection of monthly reports, which appear to have been generated within the ACBF business in relation to each of the funds. These reports continued to be produced during the relevant period and were (usually if not always) sent to Mr Jones. Each such report showed a significant amount being paid to Crown by way of premium. However, it was the aggregation of previous reports provided on 13 October 2017 – when Mr Jones was (or at least should have been) seeking to learn about the ACBF business – that made the sudden change in premium amounts between July and August 2017 obvious.

69    Secondly, on 30 October 2017, Mr Wilson sent an email to Mr Clayton attaching the 4 September 2017 letter from Mr Law conveying the doubling of premiums payable by Fund 2 to Crown. The evidence does not show that email having been forwarded to Mr Jones. However, the inference is available that Mr Clayton would have shown this document to Mr Jones or discussed it with him soon after receiving it from Mr Wilson. This is likely to have occurred for the following reasons.

(a)    The Crown premiums were a significant expense for each of the ACBF Entities, and the fact that they had (at least purportedly) recently been doubled by Crown for Fund 2 was something that Mr Clayton was likely to wish to discuss with Mr Jones (not least because it raised a question as to whether Crown might seek to impose further premium increases on the ACBF Entities);

(b)    The email from Mr Wilson contained no text (it simply forwarded Mr Law’s email of 4 September 2017), which strongly indicates that there had been some earlier communications between Mr Clayton and Mr Wilson in which the existence of the letter had been mentioned. The only plausible explanation for this is that Mr Clayton was seeking an explanation for the premiums being paid by Fund 2. Again, that is likely to have been a topic of discussion between Mr Clayton and Mr Jones.

(c)    Mr Jones and Mr Clayton had a shared interest in the financial health of the ACBF business. They had had a meeting with Mr Pattenden and Mr Hughes on 5 October 2017 where one of the topics discussed was the prospect that they might in due course acquire the business from Mr Pattenden.

70    Thirdly, on 1 November 2017 Mr Pattenden sent Mr Jones an Excel spreadsheet entitled “October Takes 05-17” (the “October Takes” document), in which he said that Mr Jones would “see down from 300 to 160k”. Mr Pattenden clarified by email early the next morning that “those figures are total premiums that were sent to Crown”. The spreadsheet showed the premium paid by Fund 2 in October of each year declining from a high point in 2006 down to $48,798 in 2016 and then jumping to $79,315 in 2017. As noted earlier, Fund 2 had been closed to new members for some time and its membership was shrinking, so that a substantial increase in the premium being paid to Crown was likely to have been of interest to Mr Jones.

71    As noted earlier, Mr Jones was the person best placed to give evidence about the state of his own knowledge during the relevant period. The material referred to in the preceding paragraphs provides a strong basis for an inference that he knew, by early November 2017, that Crown had doubled the premiums payable in respect of Fund 2 with effect from the previous August and that ACBF 2 was paying premiums at the increased rate. The absence of evidence from Mr Jones allows that inference to be drawn more confidently. I find, therefore, that Mr Jones was aware early in the relevant period that the premium increase had occurred.

72    If that finding is incorrect, Mr Jones was at least put in a position to become aware of the premium increase. Part of his duty as CEO and subsequently as a director of ACBF 2 was to familiarise himself with the fundamentals of its business (see eg Australian Securities and Investments Commission v Healey [2011] FCA 717; 196 FCR 291 at [13]-[24] (Middleton J) (Healey)), including the main recurring expenses that it faced.

73    Some aspects of the context, to which Mr Jones pointed in his submissions, should be noted.

74    When he commenced as CEO, Mr Jones was familiarising himself with a business that had been in operation for more than 20 years. By 1 November 2017 he had identified, and was continuing to uncover, a number of systemic deficiencies which he described as requiring “immediate and pertinent actions”. Mr Jones submitted at the hearing that “there was a huge lacking” and that “as problems arose, [he and Mr Clayton] did [their] best to address them by way of consultation with experts within the company, the staff within the company, and the regulatory bodies where possible.” One issue highlighted in Mr Jones’s “120 Day Company Report”, which he completed in February 2018, was inaccuracies in the reporting system used to record and report on sales figures and arrears information. Another was inadequate or inaccurate reporting, including in respect of the Crown premiums. It was asserted that Crowe Horvath, the auditors of the ACBF Entities:

Have failed to deliver and report on several issues, including miss reporting of Crown payments, incorrect allocations of significant extraordinary items (legal fees).

75    The 120 Day Company Report should be treated with caution, because Mr Jones and Mr Clayton were potential purchasers of the ACBF Entities and had an incentive to talk the price down. Be that as it may, the understanding that premiums paid to Crown were not being properly recorded or reported on was a reason to give more rather than less attention to understanding the risk to the business that arose out of the relationship with Crown.

76    Mr Jones also referred in his submissions to a letter dated 1 November 2017 from Crown to ACBF Group Holdings (the Crown letter). That letter, signed by Mr Pattenden, said

This is to inform you that [Crown] has been made aware and understands from ACBF management that there has been a computer error with respect of paying correct premiums to Crown in relation to claims from the period 1st March 2013 up to 31st October 2017.

It is agreed by Crown and the undertaken [sic] is given to ACBF that Crown will forever forgo the shortfalls and has now been made aware that the “glitch” has now been rectified.

Crown acknowledges going forward the correct amount of premiums will be forthcoming.

77    There does appear to have been a real issue about the correctness of the amounts paid to Crown as premiums. The Crown letter undertook not to pursue the ACBF Entities for arrears, while also suggesting that the monthly premiums were likely to be larger than they had previously been. On 21 November 2017, Caroline Tyler of Crowe Horvath sent an email to Mr Clayton and Mr Jones about the progress of audits of the ACBF Entities, in which she said:

The main concern [sic] for the auditors are the crown premium underpayments and the possible going concern of the entities given the reduction of members and cashflow shrinkage.

78    It is not clear whether this was the same issue as that which Mr Jones was referring to later in the 120 Day Company Report. However, again, it was a reason to pay more attention rather than less to the amounts that were being paid to Crown, including whether the correct amounts were being paid and what risks for the ACBF Entities arose from their relationship with Crown. If Mr Jones looked at the documents referred to above (which I consider that he probably did), he could not help but notice that the monthly premium paid by ACBF 2 had roughly doubled from August 2017. This remains the case even though neither the Crown letter nor the communications from Crowe Horvath expressly mentioned that event: those communications were a prompt, if one was needed, for Mr Jones to look carefully at the other information he had been given about the premiums and make inquiries.

The effect of the premium increase

ACBF 2

79    A simple measure of the effect of the premium increase is that ACBF 2 made an operating loss of $198,779 for the 2018 financial year. According to Mr Merten’s evidence, which was not challenged, ACBF 2 would have made a small operating profit in that year if the premium increase had not occurred.

80    ACBF 2 had been closed to new members in 2004 and could not as a practical matter increase its revenue (an increase in contributions from existing members would have required an amendment to the trust deed, which was very unlikely to be agreed). ACBF 2 did not retain cash reserves for the purpose of paying members’ claims; it relied on the policy with Crown for this purpose. Mr Merten’s analysis indicates that, prior to the premium increase, ACBF 2’s cash position would have been projected to remain positive indefinitely; however, after the Crown premium was doubled, it would have been projected to decline to zero within four years.

81    Accordingly, in the aftermath of the premium increase (including when, I am satisfied, Mr Jones became aware of the increase), there was a substantial risk that ACBF 2 would become insolvent within about four years and would have to be wound up as a consequence of the increase. That would leave the fund’s members without the funeral cover for which they had contracted and paid contributions.

ACBF Plans and ACBF Community

82    Prior to and during the relevant period, Crown did not demand increased premiums from these entities. However, ASIC submits, and I accept, that the premium increase highlighted vulnerabilities of these entities arising from their relationship with Crown.

83    Crown also had a right to increase the premiums payable by ACBF Plans and ACBF Community pursuant to the insurance policies that they held, and to cancel those policies if premiums at the level that it set were not paid.

84    Mr Merten’s report indicates that ACBF Plans and ACBF Community were not accumulating amounts from which to pay claims to fund members. Instead, they were relying on making claims under their insurance policies with Crown in order to make those payments. A doubling (or indeed any significant increase) in the premiums payable to Crown would have put these entities into substantial difficulty: Mr Merten’s opinion is that they would have become insolvent.

CONTRAVENTION: SECTION 180

85    Section 180 requires directors and officers to act with the skill and diligence which ordinary prudence requires in the circumstances. It imposes an objective standard, the application of which requires attention to the circumstances of the corporation and the position and responsibilities of the relevant director or officer: Shafron v Australian Securities and Investments Commission [2012] HCA 18; 247 CLR 465 at [18]-[19] (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ). The Court must consider “what an ordinary person, with the knowledge and experience of the defendant, must be expected to have done in the circumstances if he or she was acting on his or her own behalf”: Australian Securities and Investments Commission v Green County Pty Ltd [2025] FCA 367 at [374] (Shariff J) and the cases cited there.

86    Part of the ordinary prudence required by s 180 is that directors and officers must take reasonable steps to place themselves in a position to guide and monitor the management of the company. To that end, a director or officer should become (and ensure that they remain) familiar with the fundamentals of the business in which the corporation is engaged and the activities of the corporation (see Healey at [16]-[17] (Middleton J)).

87    In Australian Securities and Investments Commission v Mariner Corporation Limited [2015] FCA 589; 241 FCR 502 at [449] Beach J observed that, for an act or omission by a director to constitute a contravention of s 180, “there must be reasonably foreseeable harm to the interests of the company caused thereby”. However, in the light of (for example) Australian Securities and Investments Commission v Noumi Limited (No 4) [2024] FCA 1192 at [26]-[27] (Jackman J) and the authorities cited there, this should be taken to mean that it is necessary to demonstrate exposure of the company to the risk of harm to its interests (rather than the actual infliction of harm).

ACBF 2

88    Analysis undertaken by Mr Merten indicates that, had Mr Jones commissioned a proper study of the position of ACBF 2 when he commenced as its CEO, he would have found the following:

(a)    ACBF 2 could have withstood a 33% premium increase by Crown and remained solvent for 15 years.

(b)    ACBF 2 could have accepted the Crown premium increase and remained solvent considerably longer with administration fee reductions and contribution increases.

(c)    ACBF 2 could have self-insured and remained solvent for seven years, and for considerably longer with administration fee reductions and contribution increases.

(d)    if ACBF 2 had been wound up, it would have had sufficient funds to pay out:

(i)    all cancellation benefits, and pay a further amount (approximately $64 to $160) to all members; or

(ii)    an amount to all members.

89    Against that background – and probably even without commissioning a study of the kind envisaged in the previous paragraph – the following options presented themselves in respect of ACBF 2:

(a)    accepting the increased premium rates demanded by Crown but mitigating their effect, eg by negotiating lower administration fees with ACBF Administration or by seeking to increase contribution rates;

(b)    negotiating alternative terms with Crown;

(c)    finding an alternative insurer;

(d)    moving to a self-insurance arrangement; or

(e)    winding up Fund 2 at a point where it had sufficient resources to pay some amount to members.

90    It can be accepted that each of these courses of action presented challenges. In particular, as Mr Jones suggested in submissions and Mr Merten’s report effectively accepted, there might well have been a lack of insurers willing to quote on insurance in the light of conditions at that time (including increased regulatory attention in the aftermath of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry). ASIC’s submission, however, is that Mr Jones did not consider any of them properly or at all.

91    Mr Jones’s written submissions on s 180 took the position (which I have rejected above) that he did not have knowledge of the premium increase during the relevant period and therefore effectively accepted that he had not taken any particular steps to address the issue. In connection with other aspects of the case he referred to documents which he said showed steps being taken to put in issue Crown’s right to make the premium increase and to adopt a new structure for the ACBF business that did not involve Crown; however, these things occurred after the relevant period.

92    I therefore accept ASIC’s submission that Mr Jones, in his capacity as CEO and later director of ACBF 2, did not give any proper consideration to the steps that ACBF 2 could or should take in order to deal with the effect of the premium increase. Indeed, on the available evidence, he did not undertake or ask for any analysis of the impact of the premium increase on ACBF 2’s financial position.

93    This was a contravention of s 180(1).

(a)    The monthly premiums payable to Crown constituted a major proportion of ACBF 2’s regular outgoings which, to Mr Jones’s knowledge, had doubled shortly before he took over as CEO. On any view, that represented a threat to the interests of the company. Ordinary prudence required some investigation of the things that could be done to avoid or mitigate that threat.

(b)    It is not to the point that (as Mr Jones emphasised in his submissions) the ACBF business faced a number of other challenges during the relevant period. ASIC did not attempt to prove (and did not need to prove) that Mr Jones’s failure to address the premium increase played any particular causative role in ACBF 2’s eventual failure.

(c)    If (contrary to my conclusion above) Mr Jones did not know that the premiums had doubled, that was a failure to make himself familiar with a fundamental element of ACBF 2’s business and a source of exposure to significant risk. The failure is particularly clear because the doubling of premiums was staring Mr Jones in the face when he opened the attachment to the email Mr Wilson sent him on 13 October 2017.

ACBF Plans and ACBF Community

94    ASIC identifies the steps that might have been considered by ACBF Plans and ACBF Community, to protect themselves against the adverse effects of an increase in the premiums payable to Crown, as including:

(a)    negotiating and agreeing alternative terms with Crown;

(b)    finding an alternative insurer;

(c)    moving to a self-insurance arrangement;

(d)    negotiating lower administration fees;

(e)    attempting to increase contribution rates; and

(f)    winding up.

95    Again, Mr Jones contends that he did not know of the premium increase and therefore does not suggest that he took any particular action in response to it. There is no evidence that he did so during the relevant period. Each of the courses of action suggested by ASIC might well have encountered obstacles. However, the risks to ACBF Plans and ACBF Community arising from remaining tied to Crown were obvious in the light of the premium increase.

96    Each of ACBF Plans and ACBF Community, like ACBF 2, was in the business of receiving contributions from members and paying out claims on a fund. Each was required to maintain insurance cover and each insured with Crown (the same insurer as ACBF 2). The relationship with Crown and the terms of the relevant policies (which empowered Crown to vary premiums in its discretion) were clear sources of risk to the interests of ACBF Plans and ACBF Community which a reasonably prudent CEO or director would have identified and looked to mitigate. The doubling of the premiums payable by ACBF 2 (which I am satisfied Mr Jones knew about by early November 2017) made that risk even more obvious. A reasonable director or officer in Mr Jones’s position would have sought to ensure that all available steps to eliminate or moderate that risk were taken. Mr Jones’s failure to do anything in this regard during the relevant period constituted a contravention of s 180.

97    In the case of ACBF Plans and ACBF Community, my conclusion would be different had I not been satisfied that Mr Jones was aware of the premium increase during the relevant period. I am not persuaded that Mr Jones’s duty to familiarise himself with the business of each of these companies extended to investigating and understanding the affairs of another parallel business in the same corporate group.

CONTRAVENTION: SECTIONS 181 AND 182

98    Many cases have considered the concepts of acting “in good faith” and “for a proper purpose” in s 181(1) and competing views have been expressed as to whether the application of this provision involves a “subjective” or “objective” test. In Sunnya Pty Ltd v He [2025] NSWCA 79 (Sunnya) Basten AJA (with whom Bell CJ and Leeming JA agreed) said at [24]:

This provision imposes an affirmative obligation on company directors and other officers. To act in good faith must be understood as to act in honest pursuit of those best interests. Usually, the “proper purpose” will also involve pursuit of the best interests of the company, but will be subject to constraints imposed on fiduciaries, such as avoidance of conflicts of interest. Both par (a) and par (b) have a subjective element, namely either acting honestly, or the existence of a purpose being pursued by the director. 

(Footnote omitted.)

99    Basten AJA continued at [29]:

When s 181(1) is read with s 184 it is clear that dishonesty is distinct from an absence of good faith; and an additional element is required for an affirmative finding of dishonesty. Understood in this context, the use of the labels “subjective” and “objective” in relation to s 181 is unhelpful and distracting. The repeated references in judgments to an unresolved issue suggests that the labels suppose a false dichotomy. The statutory language does not use them.

(Footnote omitted.)

100    Jackman J took up this theme in Special Gold Pty Ltd (in liq) v Dyldam Developments Pty Limited (subject to a Deed of Company Arrangement) (No 2) [2025] FCA 825 at [77]-[87] (Special Gold), seeking to identify the elements of the concept of good faith by reference to its antecedents in the equitable principles relating to fiduciary obligations. His Honour concluded at [87]:

Accordingly, in my view, the duty of directors under s 181(1)(a) of the Act to exercise their powers and discharge their duties in good faith in the best interests of the corporation is satisfied if the directors honestly and rationally believe that their conduct is in the best interests of the corporation, with the word “rationally” meaning that the decision must be one which a reasonable director in the position of the directors of the particular corporation could have made.

101    This, in my view, is a sensible approach to understanding what s 181(1)(a) requires.

102    Contravention of s 182(1) (as noted in, for example, Australian Securities and Investments Commission v Bettles [2023] FCA 975 at [442] (Markovic J)) involves:

(a)    “use” of a position by a director or officer;

(b)    that is “improper”; and

(c)    is for the purpose of gaining “an advantage” for the director or officer or someone else.

103    Whether conduct is “improper” is an objective question, which turns on a breach of the standard of conduct that would be expected of a person in the director or officer’s position by a reasonable person with knowledge of the director or officer’s duties, powers and responsibilities (see eg Australian Securities and Investments Commission v Mitchell (No 2) [2020] FCA 1098; 382 ALR 425 at [1516]-[1521] (Beach J) (Mitchell)).

104    The need for an actuating purpose of benefiting somebody other than the corporation is clearly implicit in the statutory words “use their position to … gain an advantage” (see Mitchell at [1523]). This is a subjective element in that it looks to what the director or officer was seeking to do. Section 182(1) looks to the purpose of the impugned conduct rather than its effect, and can therefore be contravened even if the relevant “advantage” is not brought about (Mitchell at [1522], [1525]; Australian Securities and Investments Commission v iSignthis Limited [2024] FCA 669 at [591] (McEvoy J) and the cases cited therein).

ACBF 2

105    ASIC’s allegation in respect of ACBF 2, as set out in its written submissions at [100], is that Mr Jones preferred Mr Pattenden’s, Mr Law’s and Crown’s financial interests to those of ACBF 2 in:

(a)    causing ACBF 2 to maintain its Crown arrangements; and

(b)    causing or allowing ACBF 2 to accept or agree to pay the increased premiums (which occurred 13 times during the relevant period).

106    Later in ASIC’s submissions it is put that Mr Jones:

123.1.    caused ACBF 2 to maintain the arrangements with Crown from 5 October 2017 until 30 November 2018 without taking any or all necessary steps to consider and pursue the matters in paragraph 99.4 above;

123.2.    caused ACBF 2 to pay an increase in premium of 100% from 5 October 2017 without taking any or all necessary steps to consider and pursue the matters in paragraph 99.4 above; and

123.3.    failed to take all necessary steps to manage the conflict of interest that arose between Mr Pattenden’s and Mr Law’s duties to ACBF 2 and Mr Pattenden’s and Mr Law’s interest in Crown;

123.4.    used his position as a director or officer of ACBF 2 to:

(a)    obtain an advantage for Mr Pattenden, Mr Law and Crown; and

(b)    cause a detriment to ACBF 2.

107    It is then submitted that this conduct:

124.1.    was not in good faith in the best interests of ACBF 2;

124.2.    was done for the improper purpose of gaining an advantage for Mr Pattenden, Mr Law and Crown; and

124.3.    resulted in Mr Jones:

(a)    gaining an advantage for Mr Pattenden, Mr Law and Crown; and

(b)    causing detriment to ACBF 2.

108    Consistently with the authorities referred to above, I do not need to decide whether the conduct of Mr Jones actually gained an advantage to Mr Pattenden, Mr Law or Crown or caused detriment to ACBF 2. What is important is:

(a)    for the purposes of s 181, whether Mr Jones’s conduct in connection with the premiums payable to Crown:

(i)    was not done in good faith in the best interests of ACBF 2; or

(ii)    was done otherwise than for a “proper purpose”; and

(b)    for the purposes of s 182, whether Mr Jones’s conduct in connection with the premiums payable to Crown amounted to a use of his position that:

(i)    was improper; and

(ii)    was undertaken for the purpose of gaining an advantage for one or more of Mr Pattenden, Mr Law or Crown or to cause a detriment to ACBF 2.

Was Mr Jones aware that Mr Pattenden or Mr Law had an interest in Crown?

109    The first issue that arises is whether Mr Jones knew that either or both of Mr Pattenden and Mr Law had interests in Crown. It is not sufficient for the purposes of ss 181 and 182 that Mr Jones was on notice of their interest or ought to have known of it: he cannot be said to have maintained the arrangement with Crown in order to (or for the purpose of) advancing the interests of Mr Pattenden or Mr Law unless he had some apprehension that it would be in their interests for him to act in that way.

110    In his defence, Mr Jones expressly denied that he knew of the relationship between Crown and Mr Pattenden and Mr Law. He took the same position in submissions.

111    ASIC points to a number of documents from which, it submits, an inference arises that Mr Jones did know that at least Mr Pattenden had an interest in Crown.

(a)    In early December 2017 Mr Jones was copied in to emails by which Mr Clayton sent Mr Pattenden correspondence addressed to Crown.

(b)    Actuarial reports for the 2016 year, to which Mr Jones had access, referred to Crown having the same majority ownership as the ACBF group.

(c)    An email from a solicitor at Small Myers Hughes dated 11 December 2017 and sent to Mr Jones (as well as Mr Pattenden and Mr Clayton) noted that, on an issue concerning the forgiveness of a debt, the firm had not provided advice to Mr Pattenden “in his capacity as a shareholder of Crown”. The way this observation was framed indicates that Mr Pattenden’s shareholding in Crown was not news to any of the addressees of the email.

(d)    On 14 December 2017 Mr Jones received an email attaching the Crown letter, which was dated 1 November 2017 and signed by Mr Pattenden as a director of Crown.

(e)    On 13 April 2018, in an email reporting on the ACBF business to Mr Pattenden, Mr Jones referred to earlier discussions about the possibility of Mr Clayton and himself taking over the ACBF business and said that they had secured finance for that purpose. (Those discussions had preceded Mr Jones’s appointment as CEO. In August 2017 Mr Hughes had informed Mr Jones in an email that Mr Pattenden was “thinking of an arrangement whereby you receive the equity once the company … is profitable, and he determines that profitability will be stable”.) He said: “Obviously there would be the ongoing relationship and commitment between Crown and ACBF we’d need to sure [sic] up”. Mr Pattenden responded in positive terms on 14 April 2018. In a further email on 16 April Mr Jones outlined the key points of a proposed share sale agreement, which included “agreement between ACBF and Crown for underwriting until the balance … is repaid” (which I take to refer to the balance of a loan made by Mr Pattenden to the ACBF business) and “first right of refusal to buy Crown”. The words quoted here from Mr Jones’s emails only seem explicable on the footing that Mr Pattenden had an interest in Crown and this was a fact he and Mr Jones had discussed in the past.

(f)    On 18 April 2018, Mr Jones received a letter from Fair Trading New South Wales, in his capacity as Secretary of ACBF Plans, which expressed concern that ACBF Plans, ACBF Administration and Crown “may not be ‘at arms length’” (the Fair Trading letter). The letter referred to the concern expressed in the 2016 actuarial report and stressed that the board (of ACBF Plans) needed to remain independent and objective in its decisions.

(g)    Mr Jones referred the Fair Trading letter to the ACBF business’s actuary, Bruce Thomson, who provided a written response (headed “draft for discussion”). That response said in part:

An issue that can arise is that even if Directors are acting independently, and all decisions are the same as those that would be taken by unrelated entities, it is difficult for an outsider to be confident or prove that the independence exists. This is particularly true when common ownership exists, as within the ACBF group and Crown Insurance.

112    To this list one can add the following.

(a)    Mr Wilson sent an email to Mr Pattenden (copied to Mr Jones and others) on 1 November 2017, attaching what were described as “the Crown figures for October 2017” and noting that the “transfers have been processed this morning”. This does not appear to be a response to some inquiry Mr Pattenden had made as a director of the ACBF Entities about how much they were spending on insurance. It has the flavour of a routine report to Mr Pattenden in his capacity as one of the controlling minds of Crown.

(b)    The “October Takes” document referred to above, sent by Mr Pattenden to Mr Jones on 1 November 2017, was a document prepared from Crown’s perspective. Mr Pattenden was using it to illustrate a gradual overall decline in the income flowing to Crown from the ACBF business.

113    Absent evidence to the contrary, it is appropriate to infer that Mr Jones read the documents referred to in the previous paragraphs and understood what they conveyed. The fact that one of his fellow directors was a shareholder in the entity upon which the ACBF Entities relied for their insurance cover is something that was likely to have leapt out if Mr Jones was not already aware of it. Mr Jones’s decision not to give evidence increases the confidence with which this inference can be drawn. Indeed, it is almost inconceivable that Mr Jones was not briefed on the background and ownership of Crown (which, it will be recalled, had been established specifically to insure the ACBF Entities and had no other clients) when he joined the ACBF business with a view to becoming its CEO and a director. Even if these conclusions are incorrect, Mr Jones’s emails of 13 and 16 April 2018 (within the relevant period) make it clear that he knew by that time that Mr Pattenden had an interest in Crown.

114    I am therefore satisfied that Mr Jones knew, during the relevant period, that Mr Pattenden was a shareholder in Crown. He therefore knew that any action he took or refrained from taking in his capacity as a director or officer of the ACBF Entities in connection with their arrangements with Crown was apt to affect the interests of Mr Pattenden.

115    The position is somewhat less clear in relation to Mr Law. I have not been taken to any direct evidence of Mr Law’s interest in Crown having come to Mr Jones’s attention. Mr Law signed the Crown letter as “Director” and this letter was forwarded to Mr Clayton on 30 October 2017. I have found that this letter was probably discussed between Mr Clayton and Mr Jones. On that basis, and mindful of Mr Jones’s decision not to give evidence, I am prepared to find that Mr Jones also knew that Mr Law was a director of Crown. I do not think this evidence is sufficient to sustain a finding that Mr Jones knew Mr Law was also a shareholder in Crown.

Did Mr Jones act for the purpose of protecting or advancing that interest?

116    There is nothing in the evidence to indicate that Mr Jones treated the premiums paid each month during the relevant period as anything other than amounts that ACBF 2 had to pay pursuant to its contract with Crown. The doubling of the monthly premium with effect from August 2017 might have been questioned on the ground that the requisite notice had not been given, but there is no evidence of Mr Jones being advised that Crown might not be entitled to be paid premiums calculated at double the pre-August 2017 rate. To the extent that Mr Jones caused payments to be made to Crown during the relevant period that were calculated at the increased rate, I am not persuaded that this in itself was done with any particular purpose other than that of ACBF 2 meeting existing obligations.

117    The conduct of Mr Jones that requires attention is therefore his failure, during the relevant period, to do anything to change ACBF 2’s arrangements with Crown or to manage Mr Pattenden’s and Mr Law’s conflicts of interest. While I have not been directed to any authority on the point, I am satisfied that ss 181 and 182 are capable of being contravened by a director or officer refraining from taking action that would be within their power: a decision not to act is capable of being seen as an “exercise” of the director or officer’s powers or discharge of their duties for the purposes of s 181(1) or as a “use” of their position for the purposes of s 182. It also needs to be kept in mind, however, that ss 181 and 182 are directed at the “exercise” of powers, the “discharge” of duties and the “use” of a position; that is, doing or refraining from doing something by way of directing the company’s affairs. Negligently failing to inform oneself about steps that could or should be taken in the management of the company would not, to my mind, constitute a contravention of these provisions (although it might well constitute a contravention of s 180).

118    A difficulty facing the first way in which ASIC puts its case is that I have not found any evidence of Mr Jones having considered, during the relevant period, whether something could or should be done to change the ACBF Entities’ relationship with Crown in order to protect their interests. If Mr Jones wilfully turned a blind eye to the problem out of concern about what he might learn (described as “Nelsonian” knowledge in, eg, Grimaldi v Chameleon Mining NL [2012] FCAFC 6; 200 FCR 296 at [259] (Finn, Stone and Perram JJ)), it might be said that he had not discharged his duties in good faith or for proper purposes within the meaning of s 181. However, if the possibility never occurred to Mr Jones that ACBF 2 should, for example, attempt to renegotiate the premiums it was paying to Crown or approach alternative insurers, it becomes very difficult to identify any exercise of his powers, discharge of his duties or use of his position upon which ss 181 or 182 can fasten.

119    In a proceeding in which ASIC seeks to establish contraventions of a civil penalty provision, much more than conjecture is needed for the Court to be satisfied that each element of the case is made out (Evidence Act 1995 (Cth) s 140(2)(b); Roberts-Smith v Fairfax Media Publications Pty Ltd (Appeal) [2025] FCAFC 67; 310 FCR 170 at [18]-[21] (Perram, Katzmann and Kennett JJ)). I have not been taken to any evidence that concretely points to Mr Jones, during the relevant period, having considered what if anything should be done about the premiums and deciding not to do anything. I therefore reject the first way in which ASIC puts its case on ss 181 and 182.

120    The other way in which ASIC puts its case is that Mr Jones failed to take all necessary steps to manage the conflict of interest that arose between Mr Pattenden’s and Mr Law’s duties to ACBF 2 and their interests in, or duties to, Crown. For reasons outlined above, I am satisfied that Mr Jones knew of Mr Pattenden’s interest in Crown and Mr Law’s role as a director of Crown during the relevant period. He also knew that Mr Pattenden and Mr Law remained as directors of the ACBF Entities during that period. At least from the time he received the Fair Trading letter and Mr Thompson’s advice about it, Mr Jones could not help but know that it was a potential problem for the ACBF Entities to have directors who were also directors of, and had interests in, Crown.

121    Mr Thomson’s draft advice included the following observations (immediately after the passage quoted at [112(g)] above):

One method I have seen successfully adopted in similar situations is to have different Directors for the separate entities. This does not mean that no Directors serve on both entities, but rather that each Board is unique ie does not have exactly the same group of Directors as any Board with which arm’s-length transactions are required and independence has to be demonstrated. Thus, any intra-group decision will always have at least 1 Director on each side who is, and can be seen to be, acting only for 1 of the parties. Good corporate governance operating within that structure will ensure that the “seen to be independent” Directors lead the discussion and propose relevant motions.

While this suggestion is just a start, I do recommend it as a visible demonstration of the ACBF group’s commitment to independent decision-making. This signal would be to employees and the Directors themselves, as well as to members and regulators.

122    Counsel for ASIC criticised this advice in his submissions and I agree that what it suggests is probably an inadequate response to the issues raised by overlapping board memberships. However, this advice must have made it clear to Mr Jones that there were things that could and should be done by the boards of the ACBF Entities, including ACBF 2, of which he was a member.

123    ASIC’s submissions do not specify the steps that Mr Jones should have taken. He did not have any power as a director and officer of ACBF 2 to remove Mr Pattenden or Mr Law from the board or restrict their involvement in decision making at board level. Quite possibly, any attempt by Mr Jones to persuade them to leave the board of ACBF 2 or not to vote on matters in which they had an interest would have been rejected by them or had adverse consequences for Mr Jones himself. However, that is not an answer: the proper discharge of Mr Jones’s duties as a director required him to place the company’s interests ahead of his own. Proper discharge of those duties therefore required that he at least initiate a discussion with the other directors about changing the composition or the decision-making practices of the board in order to deal with the obvious conflict of interest of Mr Pattenden and Mr Law. Mr Jones did nothing.

124    Three points must be made about Mr Jones’s inaction on this issue.

(a)    In the face of the Fair Trading letter and Mr Thomson’s advice, it must be understood to have been conscious. The problem posed by Mr Pattenden and Mr Law holding office as directors of the ACBF Entities, while also holding an interest in (or owing duties to) their insurer, had been squarely brought to his attention.

(b)    It was obviously in the interests of Crown, and of Mr Pattenden and Mr Law in their capacity as the effective owners of Crown, for them to retain their ability to affect the decisions of the ACBF Entities. Mr Jones’s inaction served to protect that interest.

(c)    The only plausible explanation for Mr Jones’s inaction is that he did not want to act against the interests of Mr Pattenden.

(i)    Through Just Solutions, Mr Pattenden and Mr Law were the majority shareholders in ACBF Group Holdings and thus the entire ACBF business. Mr Pattenden had installed Mr Jones in his role as CEO and director and in many of his communications Mr Jones was reporting to Mr Pattenden.

(ii)    Upon receiving the “October Takes” document referred to earlier (which showed a gradual decline in the premiums paid to Crown by the ACBF Entities), Mr Jones’s reply was:

That’s incredible! We will turn it around and take it back to where it once was!

(iii)    Mr Jones (together with Mr Clayton) hoped in due course to acquire the ACBF business from Mr Pattenden and Mr Law, and Mr Jones had communicated with Mr Pattenden on that very topic a few days before he received the Fair Trading letter. In that communication Mr Jones had been at pains to assure Mr Pattenden that the connection between the ACBF Entities and Crown would be maintained and had expressed interest in acquiring Crown himself at some stage.

125    The failure to address the conflict of interest of Mr Pattenden and Mr Law during the relevant period did not involve a “use” of Mr Jones’s position and therefore did not contravene s 182(1). However, I am satisfied that Mr Jones failed to discharge his duties as a director (and as an officer) of ACBF 2 (a) in good faith and in the best interests of ACBF 2 and (b) for a proper purpose. He therefore contravened s 181(1).

ACBF Funds and ACBF Community

126    The first way in which ASIC puts its case has no application to ACBF Funds and ACBF Community, as their premiums had not been doubled by Crown. However, the second way in which the case is put applies to these companies in exactly the same way as it applies to ACBF 2. I am therefore satisfied that Mr Jones contravened s 181(1) in relation to these companies.

CONCLUSION

127    Mr Jones contravened ss 180(1) and 181(1) of the Corporations Act in respect of each of ACBF 2, ACBF Plans and ACBF Community during the relevant period in substantially the manner alleged by ASIC. I am not satisfied that Mr Jones contravened s 182(1).

128    I will hear further from the parties as to the terms of the declarations that should be made in the light of my conclusions above. The proceeding will then be listed for case management in order to make timetabling orders for the determination of the remaining issues in the proceeding against Mr Jones (including penalties and costs).

Associate:

Dated:    30 October 2026