FEDERAL COURT OF AUSTRALIA

Australian Securities and Investments Commission v Pattenden (Liability and Penalty–Law) [2026] FCA 1690

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 1317G(1) of the Corporations Act 2001 (Cth) (Corporations Act), within 30 days of this order, the second defendant pay to the Commonwealth a pecuniary penalty of $50,000 for contraventions by the second defendant of ss 180(1), 181(1) and 182(1) of the Corporations Act relating to Aboriginal Community Benefit Fund No 2 Pty Ltd (ACBF 2).

2.    Pursuant to s 206C(1)(a)(i) and/or s 206E(1)(a)(ii) of the Corporations Act the second defendant is disqualified from managing corporations for a period of six years from the date of this order.

3.    The second defendant pay a contribution of $10,000 to the plaintiff’s costs of and incidental to the proceeding.

THE COURT DECLARES THAT:

4.    Under s 1317E(1) of the Corporations Act that, in his capacity as a director of ACBF 2, between 4 September 2017 and 30 November 2018, the second defendant:

(a)    failed to consider properly or at all the effect of the Crown Insurance Services Limited (Crown) arrangements on the financial position of ACBF 2;

(b)    failed to consider properly or at all whether continuing the policy with Crown was in the best interests of ACBF 2 and its fund members;

(c)    failed to consider properly or at all whether there were alternative options available to ACBF 2 that would have been in the best interests of ACBF 2 and its fund members;

(d)    failed to pursue properly or at all any alternative options available to ACBF 2;

(e)    preferred his, the first defendant’s and Crown’s financial interests in causing ACBF 2 to maintain its Crown arrangements;

(f)    preferred his, the first defendant’s and Crown’s financial interests in causing or allowing ACBF 2 to accept or agree to pay the increased premium, payment of which occurred on 15 occasions between 4 September and 30 November 2018; and

(g)    failed to ensure properly or at all that ACBF 2, as trustee for the funeral fund operated by it (Fund 2), took all necessary and reasonable steps to protect the Fund (contrary to cl 13.9 of the trust deed),

and by reason of the above:

(h)    failed to discharge his duties to ACBF 2 with the degree of care and diligence that a reasonable person would exercise, if they were a director or officer of a corporation in ACBF 2’s circumstances, and occupied the office held by the second defendant, and had the same responsibilities within the corporation; and

(i)    as a result, breached s 180(1) of the Corporations Act.

5.    Under s 1317E(1) of the Corporations Act that, in his capacity as a director of ACBF 2, between 4 September 2017 and 30 November 2018:

(a)    the second defendant:

(i)    had an indirect financial interest in the Crown policy held by ACBF 2;

(ii)    caused or allowed ABCF 2 to maintain the arrangements with Crown without taking any or all necessary steps to consider and pursue the alternative options available to ACBF 2;

(iii)    caused or allowed ABCF 2 to pay an increase in premiums of 100% without taking any or all necessary steps to consider and pursue the alternative options available to ACBF 2;

(iv)    failed to take all necessary steps to manage the conflict of interest that arose between his duties to ACBF 2 and his interest in Crown and the first defendant’s duties to ACBF 2 and the first defendant’s interest in Crown;

(v)    used his position as director or officer of ACBF 2 to:

A.    obtain an advantage for himself, the first defendant and Crown; and

B.    cause a detriment to ACBF 2.

(b)    the second defendant’s conduct referred to in 5(a) above:

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

(ii)    was done for the improper purpose of gaining an advantage for himself, the first defendant and Crown; and

(iii)    resulted in the second defendant:

A.    gaining an advantage for himself, the first defendant and Crown; and

B.    causing detriment to ACBF 2.

(c)    by reason of the circumstances in 2.1 and 2.2 above, the second defendant:

(i)    failed to exercise his powers and discharge his duties in good faith in the best interests of ABCF 2 and for a proper purpose, and as a result contravened s 181(1) of the Corporations Act; and

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

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 issues of liability and relief in respect of Mr Law, which were the subject of joint submissions and a short hearing on 24 April 2026.

3    As with Australian Securities and Investments Commission v Pattenden (Liability and Penalty - Pattenden) [2026] FCA 1616 (the Pattenden reasons), the submissions proceeded from a statement of agreed facts and admissions (SAFA) dated 30 January 2026. The SAFA is lengthy and does not need to be discussed in detail in order to articulate my reasons for the orders that will be made. However, where pecuniary penalties are imposed, there is virtue in members of the public being able to know in some detail what was the conduct that attracted the penalties. The full text of the SAFA is therefore annexed to these reasons.

4    I have also annexed the parties’ joint written submissions (the submissions). Those submissions summarise the factual background accurately and in some detail. I am content to adopt that summary rather than repeat the exercise.

5    The parties jointly proposed the making of the following orders:

(a)    two declarations under s 1317E(1) recording, in respect of ACBF 2, contraventions by Mr Law of:

(i)    s 180(1);

(ii)    ss 181(1) and 182(1)

of the Corporations Act;

(b)    an order under s 1317G(1) requiring payment of a pecuniary penalty of $50,000;

(c)    an order under s 206C(1)(a)(i) and/or s 206E(1)(a)(ii) disqualifying Mr Law from managing corporations for six years; and

(d)    an order that Mr Law pay a contribution of $10,000 towards ASIC’s costs of and incidental to the proceeding.

6    For the reasons set out below, I am satisfied that the orders proposed by the parties should be made.

Contraventions of the Corporations Act

7    The issues in the proceeding concern the period from 4 September 2017 to 30 November 2018 (the relevant period). During the relevant period, Mr Law was a director of the companies referred to as ACBF 2, ACBF Plans and ACBF Community (together the ACBF Entities). The ACBF Entities operated funeral funds (the Funds) which were marketed mostly to Indigenous communities. They operated as part of a single business (the ACBF business).

8    Mr Law had become a director of the ACBF Entities on 18 May 2017. He was not involved in their day-to-day operations.

9    Each of the ACBF Entities was required by its trust deed or plan rules to insure the lives of members. Each maintained an insurance policy with Crown Insurance Services Limited (Crown). Under those policies Crown was entitled to change the rates at which premiums were calculated on three months’ written notice. Mr Pattenden and Mr Law were also the ultimate owners of the shares in Crown.

10    Mr Law had been a director of Crown since 2008. He ensured that Crown’s regulatory requirements in Vanuatu were met and that its accounts were audited. He also took steps on behalf of Crown in its dealings with the ACBF Entities from time to time.

11    On 4 September 2017, Crown doubled the monthly premiums payable by ACBF 2’s fund (Fund 2). This was a decision taken by Mr Pattenden. On Mr Pattenden’s instructions, Mr Law drafted and then signed and sent the letter to ACBF2 notifying it of the premium increase.

12    Orders are sought against Mr Law only in respect of ACBF 2. The premium increase had a significant negative impact on ACBF 2. There were various steps that the directors of ACBF 2 could have considered taking in order to protect Fund 2 and its members against increases in the insurance premiums payable to Crown. No such steps were considered within the relevant period.

13    Mr Law admits (in terms set out in more detail in the SAFA) that, during the relevant period, in contravention of s 180(1) of the Corporations Act:

(a)    he failed to consider the effect of the Crown insurance policies on the financial position of ACBF 2, to consider whether the Crown policy were in the best interests of members of Fund 2 and to consider or pursue alternatives to the insurance arrangements with Crown (including whether to renegotiate or cancel the policy and find a new insurer, or wind up the Fund); and

(b)    he preferred his, Crown’s and Mr Pattenden’s interests in causing ACBF 2 to maintain the Crown policy and causing or allowing ACBF 2 to accept or agree to pay the increased premium and failed to ensure that ACBF 2, as trustee of Fund 2, took all necessary and reasonable steps to protect the Fund contrary to the trust deed.

14    Mr Law also admits that, during the relevant period, in contravention of ss 181(1) and 182(1) of the Corporations Act, he failed to take all necessary steps to manage the conflict of interest that arose between his and Mr Pattenden’s duties to ACBF 2 and their interest in Crown, used his position as an officer of ACBF 2 to obtain an advantage for Crown (and ultimately himself and Mr Law), and caused detriment to ACBF 2.

15    These contraventions are clearly established on the facts set out in the SAFA, for the reasons explained in the joint submissions.

Declarations

16    As explained in the Pattenden reasons, ss 180(1), 181(1) and 182(1) are defined as “civil penalty provisions” by s 1317E(3) of the Corporations Act and 1317E(1) requires the Court to make a declaration of contravention if it is satisfied that a person has contravened a civil penalty provision. In the light of my acceptance that Mr Law contravened ss 180(1), 181(1) and 182(1) in the ways described in the joint submissions, declarations will be made in the form proposed by the parties.

Disqualification orders

17    The provisions of the Corporations Act empowering the Court to make disqualification orders, and the approach of the Court to such orders, are discussed in the Pattenden Reasons at [16] to [19]. That discussion does not need to be repeated here but forms part of the basis for the conclusions expressed below.

18    The parties jointly propose an order disqualifying Mr Law from managing corporations for a period of six years. For the reasons set out in the joint submissions at [113] to [128], I am satisfied that such an order is appropriate. In particular:

(a)    Mr Law knew or ought to have known that the premium increase would be very damaging to the interests of ACBF 2. He admits that he did not consider properly or at all the effect of the Crown arrangements on the financial position of ACBF 2 or whether continuing to insure with Crown was in the best interests of ACBF 2 and fund members.

(b)    Mr Law had been a director of and had an interest in Crown since 2008. Crown had been established in order to insure the ACBF Entities and had no other clients. Mr Law therefore was (or at least should have been) well aware of the relationship between the ACBF Entities and Crown, including the role and interests of Mr Pattenden, and the position that the ACBF Entities were in as a result of that relationship.

(c)    Mr Law had only been a director of the ACBF Entities for a relatively short time before the relevant period. However, he had been a director of Crown (albeit not in Australia) for a much longer period and therefore had some experience with what was required of a director.

(d)    The premium increase created a substantial risk that ACBF 2 would become insolvent within about four years, leaving fund members without cover and unable to recover cancellation benefits..

(e)    Mr Law, through his interest in Crown, derived a financial benefit from ACBF 2 continuing to pay premiums to Crown. He also received remuneration for the work that he performed for Crown.

(f)    In these circumstances considerations of general and specific deterrence call for a significant period of disqualification.

(g)    In important respects Mr Law acted on the instructions of Mr Pattenden, who was the key decision-maker who initiated the premium increase. For that reason he should face a shorter disqualification period than Mr Pattenden. However, his involvement as a director and the ultimate owner of shares in Crown makes his involvement in the contraventions more significant than those of some other defendants (Mr Jones and Mr Clayton).

(h)    Mr Law has engaged constructively with ASIC, including by attending two examinations and accepting service in the present proceeding despite not being a resident of Australia. He has admitted the contraventions and accepted responsibility for them through the SAFA. That has avoided the cost to the public of a contested hearing which would have run for around three weeks.

(i)    Two separate declarations are to be made, involving contraventions of three civil penalty provisions. However, the parties submit, and I agree, that the contraventions should be treated as a single course of conduct.

Pecuniary penalties

19    The Pattenden reasons also discuss the approach of the Court to the assessment of civil penalties generally (at [21] to [24]) and the approach to cases where the parties present an agreed position as to penalties (at [25] to [26]). Those discussions (which are consistent with the joint submissions) do not need to be repeated here but form part of the basis for my conclusions as to pecuniary penalties.

20    The joint submissions at [113] to [128], to which I have already referred above, are also directed to the appropriateness of the proposed pecuniary penalty of $50,000. I have taken into account the factors discussed in those paragraphs, important aspects of which have been noted above in connection with the proposed disqualification.

21    Having engaged in contraventions of ss 180(1), 181(1) and 182(1) of the Corporations Act in respect of ACBF 2, Mr Law is liable to a maximum penalty of $600,000. The contraventions were serious and involved Mr Law preferring his own interests to those of a company of which he was a director. However, it is also significant that:

(a)    Mr Law had substantial experience as a director, but had only been a director of companies in Australia for a short time;

(b)    Mr Law was not the initiator or the prime mover in the conduct that led to the contraventions and acted substantially under the direction of Mr Pattenden; and

(c)    Mr Law has (as noted above) cooperated with ASIC, taken responsibility for his conduct and saved the public from the expense of a lengthy hearing.

22    Taking these matters into account, I am satisfied that the proposed pecuniary penalty is proportionate to the penalties proposed in relation to Messrs Pattenden, Wilson and Clayton and is within the “permissible range” referred to in Volkswagen Aktiengesellschaft v Australian Competition and Consumer Commission [2021] FCAFC 49; 284 FCR 24 at [127] (Volkswagen).

Costs and disposition

23    An order for costs in a lump sum is expressly authorised by r 40.02 of the Federal Court Rules 2011 (Cth) and would, in any event, be within the Court’s implied power in circumstances where the parties agree as to the amount that should be paid. There is no reason not to make the proposed costs order.

24    Orders will therefore be made in the terms proposed by the parties.

Associate:

Dated:    11 November 2026

ANNEXURE 1

STATEMENT OF AGREED FACTS AND ADMISSIONS OF THE SECOND DEFENDANT

FEDERAL COURT OF AUSTRALIA DISTRICT REGISTRY: NEW SOUTH WALES

DIVISION: GENERAL    NO NSD 935 OF 2023

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Plaintiff

RONALD JOSEPH PATTENDEN

and others Defendants

CONTENTS

Filed on behalf of the Plaintiff, ASIC Prepared by: Jody Marshall

AGS lawyer within the meaning of s 55I of the Judiciary Act 1903

Address for Service:

The Australian Government Solicitor,

Level 33, 300 George St, Brisbane, QLD 4000 Jody.Marshall@ags.gov.au

File ref: 22004985

Telephone: 07 3360 5751

Lawyer's Email: Jody.Marshall@ags.gov.au

Annexure A    23

THE COURT DECLARES THAT    23

Mr Law    23

THE COURT ORDERS THAT    25

PART I    INTRODUCTION    

1.    This Statement of Agreed Facts and Admissions (SAFA) is made jointly by the plaintiff (ASIC) and the second defendant (Mr Law) for the purposes of section 191 of the Evidence Act 1995 (Cth).

2.    ASIC commenced these proceedings against Mr Law and the first defendant

(Mr Pattenden), the third defendant (Mr Wilson), the fourth defendant (Mr Jones) and the fifth defendant (Mr Clayton) on 30 August 2023. ASIC seeks declarations that the defendants contravened ss 180(1), 181(1) and 182(1) of the Corporations Act 2001 (Cth) (Corporations Act), orders that the defendants pay pecuniary penalties to the Commonwealth and disqualification orders against the defendants from managing corporations.

3.    By reason of the agreed facts and admissions in this document, Mr Law admits that, between 4 September 2017 and 30 November 2018 (the Relevant Period), he contravened ss 180(1), 181(1) and 182(1) of the Corporations Act in relation to ACBF 2 (as defined below).

PART II    PARTIES AND BACKGROUND    

2.1    THE PARTIES

4.    ASIC is a body corporate established by s 7 of the Australian Securities Commission Act 1989 (Cth) and that continues by operation of s 261 of the ASIC Act. It is entitled to sue by reason of s 8 of the ASIC Act.

5.    The facts relevant to the roles and responsibilities of each of the defendants are set out in Part 2.5 below.

2.2    THE ACBF BUSINESS

6.    The proceedings relate to certain companies in the ACBF business, which operated to provide funeral benefits to nominated persons on the death of a fund member or nominee.

7.    The ACBF group of companies relevantly included:

7.1.    The Aboriginal Community Benefit Fund Pty Limited (ACBF 1). ACBF 1 operated

FUND 1;

7.2.    Aboriginal Community Benefit Fund No 2 Pty Ltd (ACBF 2). ACBF 2 operated

FUND 2;

7.3.    ACBF Funeral Plans Pty Ltd (ACBF Plans). ACBF Plans operated Fund 3;

7.4.    Community Funeral Plans Pty Ltd (ACBF Community). ACBF Community operated Fund 4;

7.5.    ACBF Consultants Pty Ltd;

7.6.    ACBF Group Holdings Pty Ltd (ACBF Group Holdings); and

7.7.    ACBF Administration Pty Ltd (ACBF Administration).

8.    ACBF 2, ACBF Plans and ACBF Community are referred to collectively in this SAFA as the ACBF Entities.

9.    The ACBF business was a single business with common management across each of the entities within that business. During the Relevant Period, Mr Law was a resident of Vanuatu and a director of the ACBF Entities.

10.    In the period from 2010 to 30 November 2018, the ultimate holding company of the group of companies through which the ACBF business operated was Just Solutions Limited (Just Solutions), a company registered in Vanuatu. Just Solutions owned the majority of the shares in ACBF Group Holdings, being the Australian company which ultimately owned the ACBF group of companies.

2.3    OPERATION OF THE FUNDS

11.    In summary, each of the relevant ACBF Entities operated as follows. Further details are set out below.

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

13.    ACBF Plans operated Fund 3 from 2005. Fund 3 was subject to plan rules and was registered as a contributory funeral benefit business under the Funeral Funds Act 1979 (NSW) (Funeral Funds Act). ACBF Plans operated Fund 3 for the purpose of providing funeral benefits to nominated persons on the death of a fund member, and was marketed to, and until September 2017 was only available to, Indigenous Australians.

14.    ACBF Community operated Fund 4 from 2005. Fund 4 was subject to plan rules and was registered as a contributory funeral benefit business under the Funeral Funds Act. ACBF Community operated Fund 4 for the purpose of providing funeral benefits to nominated persons on the death of a fund member, and was marketed to non- Indigenous Australians.

15.    ACBF Administration provided the ACBF Entities with various administrative services in return for an administration fee. Further details in relation to ACBF Administration are set out below.

2.3.1    ACBF 2 and Fund 2

16.    Between at least 2002 and 30 November 2018, Fund 2 relevantly operated as follows:

16.1.    fund members were required to make fortnightly payments as contribution amounts;

16.2.    the contribution amount to be paid by fund members was set out in the application form signed by the member and automatically increased according to the fund member’s age as follows;

16.3.    the contribution amounts paid by fund members were held on trust by ACBF 2 and were to be applied in accordance with the provisions of the trust deed;

16.4.    on the death of the fund member who had made at least 2 payments, and following the making of a claim to ACBF 2, ACBF 2 would pay $6,000 to a nominated person (subject to any increase of the amount to be paid, made on application by a member after paying contribution amounts for at least one year);

16.5.    where a fund member wrote to ACBF 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 the member’s total membership payments from the 26th payment onwards;

16.6.    if the fund member applied to increase the amount to be paid, they were required to agree to give up their entitlement to a cancellation benefit;

16.7.    where a fund member missed payment of 4 payments in a calendar year:

16.7.1.    the fund member became a non-financial member. Fund 2 was not required to make a payment on the death of a non-financial member;

16.7.2.    ACBF2 would write to the non-financial member, asking that they recommence payments and pay all outstanding amounts within 1 month.

16.7.3.    if the non-financial member did so, they would no longer be a non- financial member;

16.7.4.    if the non-financial member failed to do so, membership was automatically cancelled and no payment was required to be made either on cancellation or on the death of the member; and

16.8.    where Fund 2 was wound up and there were surplus funds following the payment of Fund 2’s debts and liabilities, fund members entitled to receive a cancellation benefit would be entitled to be repaid an amount up to the maximum amount of their cancellation benefit.

17.    Under the trust deed for Fund 2, ACBF 2 had the power to take such action as it thought fit for the adequate protection of any part or parts of the Fund.

18.The trust deed for Fund 2:

18.1.    stated that it could not be amended except in accordance with the provisions of the trust deed; and

18.2.    could potentially be amended on application under s 81 of the Trustees Act 1925

(NSW) by ACBF 2 to the Court.

19.    Prior to Fund 2 closing to new members in 2004, as at 31 December 2003, Fund 2 had approximately 15,760 members (including non-financial members).

20.    As at June 2017, Fund 2 had approximately 5,809 members. Each of those members had made fortnightly contributions to Fund 2 since at least 2004.

21.    As set out further below, Fund 2 was required to maintain an insurance policy to underwrite the lives of its fund members. From 2002, ACBF 2 used Crown Insurance Services Limited (Crown) as its underwriter.

22.    For the financial year 1 July 2016 to 30 June 2017, ACBF 2:

22.1.    received member contributions of $1,811,606;

22.2.    paid administration fees to ACBF Administration of $1,184,765;

22.3.    paid underwriting premiums to Crown of $578,633;

22.4.    received payments from Crown of:

22.4.1.    $626,000 by way of claim payments; and

22.4.2.    $15,584 by way of profit share payments; and

22.5.    had a net operating profit of $9,794.

23.    As at 30 June 2017, ACBF 2 had net assets of $952,622, including approximately $1.44 million of cash and cash equivalents. The cash held by ACBF 2 was intended to cover the value of cancellation benefits payable to those members entitled to a cancellation benefit.

24.    For the financial year 1 July 2017 to 30 June 2018, ACBF 2:

24.1.    received member contributions of $1,715,764;

24.2.    paid administration fees to ACBF Administration of $1,118,603;

24.3.    paid underwriting premiums to Crown of $922,990;

24.4.    received payments from Crown of:

24.4.1.    $546,091 by way of claim payments; and

24.4.2.    $61,650 by way of profit share payments; and

24.5.    had a net operating loss of $198,779.

25.    As at 30 June 2018, ACBF 2 had net assets of $753,843, including $1,210,447 of cash and cash equivalents.

26.    On 24 November 2021, ACBF 2 went into administration.

27.    On 2 March 2022, a liquidator was appointed to ACBF 2. On 11 April 2022, a receiver was appointed to Fund 2.

2.3.2    ACBF Administration

28.    ACBF Administration provided various administration services to each of the ACBF Entities and Funds 2, 3 and 4 in return for a fee.

29.    The fees charged by ACBF Administration were not based on the cost to ACBF Administration to provide those services to each of the ACBF Entities.

30.    ACBF Administration paid dividends each year from its net profits and retained profits to ACBF Group Holdings. For the financial years from 2015 to 2018, the revenue, expenses, profits and dividends paid by ACBF Administration were as follows:

2.3.3    ACBF Group Holdings

31.    ACBF Group Holdings was the ultimate holding company of ACBF 1, the ACBF Entities and ACBF Administration. As set out in further detail below, from 2010 ACBF Group Holdings was owned by Just Solutions.

32.    ACBF Group Holdings:

32.1.    earned revenue from the receipt of dividends from ACBF Administration;

32.2.    had nominal expenses; and

32.3.    paid dividends to Just Solutions which, for financial years 2015 to 2018, matched the value of the dividends paid by ACBF Administration to ACBF Group Holdings, being:

32.3.1.    Financial year 2015: $2,270,000;

32.3.2.    Financial year 2016: $2,170,000;

32.3.3.    Financial year 2017: $2,110,000; and

32.3.4.    Financial year 2018: $410,000.

2.4    CROWN ARRANGEMENTS

33.    To operate the Funds, each ACBF Entity was required by the trust deed or plan rules (as applicable) to maintain an insurance policy that underwrote the lives of its fund members. Between 2002 and at least 30 November 2018, ACBF 2, ACBF Plans and ACBF Community chose to satisfy the requirement to maintain an insurance policy by insuring with Crown.

34.    Crown:

34.1.    was registered in Vanuatu by Mr Pattenden in 2002;

34.2.    provided insurance services to the ACBF Entities from 2002;

34.3.    between 2002 and 30 November 2018, operated its business from Vanuatu; and

34.4.    between 2002 and 30 November 2018, was not subject to prudential or other regulatory requirements in Australia.

35.    Between 2002 and 15 February 2022, the ACBF Entities were the only entities insured by Crown.

36.    Under the terms of the policies with Crown:

36.1.    the ACBF Entities were required to pay premiums to Crown (cl 9.1);

36.2.    on the death of a fund member or other nominee (as relevant), Crown was required to pay the relevant ACBF Entity the relevant sum insured (cl 8.2);

36.3.    Crown had the power to vary the premium by giving the ACBF Entity three months’ written notice (cl 9.5.1 for ACBF 2 and cl 9.5 for ACBF Plans and ACBF Community);

36.4.    where an ACBF Entity failed to pay the required premium 14 days after the due date, Crown could give three months’ notice of termination and the policy would lapse and cover would cease (cl 9.6 for ACBF 2 and cl 9.9 for ACBF Plans and ACBF Community);

36.5.    the policies were renewable annually at the expiry of the policy year, being the 12 months between annual review dates;

36.6.    there was no obligation on Crown to renew the policies at the annual review date;

36.7.    Crown and the ACBF Entities had a profit-sharing arrangement in accordance with a self-participation formula; and

36.8.    Crown was not required to provide services to the ACBF Entities other than the payment of claims by fund members.

37.    Crown’s premiums for Fund 2 were structured as “level premiums”. Level premiums did not vary by age, unlike the premiums charged by Funds 3 and 4 which increased as members aged.

38.    A consequence of an insurer charging level premiums is that the financial burden on the insurer increases as members age, particularly for a closed fund such as Fund 2. Typically, an insurer manages this by setting the premium rate so that in the early years the premiums paid by the fund are higher than the cost of expected claims, so that the insurer can retain some of the premiums to cover the increased claim costs in later years.

39.    The premiums received by Crown from Fund 2 for financial years 2002 to 2016 significantly exceeded the cost of claims paid by Crown for Fund 2. In financial year 2017, Crown for the first time paid more in claims for Fund 2 than it received by way of premiums. As set out in more detail below, on 4 September 2017 Crown doubled the premiums payable by Fund 2 with effect from 1 August 2017, the result of which was that for financial year 2018 Crown again received more in premiums from Fund 2 than it paid in claims.

40.    From 2003 (for Fund 2) to at least 2018, Crown paid to each of Funds 2, 3 and 4 a ‘profit share’ based on a formula.

41.    The table below sets out for financial years 2002 to 30 November 2018 for Fund 2 the premiums received by Crown, claims paid by Crown, profit share paid by Crown and the net profit or loss of Crown.

2.5    MR LAW’S ROLE

42.    Mr Law:

42.1.    was a non-resident of Australia;

42.2.    was a director of the ACBF Entities between 18 May 2017 and 30 November 2018;

42.3.    was a director of Crown from 2008 until at least 30 November 2018;

42.4.    held shares in Asian Markets Limited as a trustee for the Esperance Bay Trust. In accordance with a memorandum of wishes, at all relevant times distributions from the Esperance Bay Trust were requested to be paid to Mr Law’s son;

42.5.    held shares (as a minority shareholder) in Just Solutions, indirectly, by way of the shares held on trust in Asian Markets Limited during the Relevant Period;

42.6.    held shares in Crown from:

42.6.1.    January 2008 directly; and

42.6.2.    from 2010 and throughout the Relevant Period, as a trustee for the Esperance Bay Trust.

43.    While a director of the ACBF Entities and Crown, Mr Law:

43.1.    was not involved in the day-to-day operations of the ACBF Entities;

43.2.    made sure that for Crown all statutory matters were looked after such as regulatory reports to the Reserve Bank of Vanuatu and that Crown’s accounts were audited annually; and

43.3.    from time to time, took steps on behalf of Crown or one or more of the ACBF Entities including as set out below in this SAFA.

44.    From around 2014 and throughout the Relevant Period, Mr Law did not receive any direct benefit or detriment as a result of any increased profits received or losses sustained by Crown (despite the shareholding in paragraph 42.6.2 above). For the Relevant Period, Asian Markets Limited received a fixed return for its investment in Crown (via Just Solutions). This fixed return, and the value of the investment in Crown, depended on Crown remaining solvent and therefore Mr Law had an indirect interest in payments to Crown.

45.    At least during the Relevant Period, in addition to the fixed return referred to above, Mr Law was paid $12,500 per quarter for roles relating to Crown. Mr Law was never paid any remuneration by any of the ACBF Entities for his role as director in relation to those entities.

46.    On 30 November 2018, Just Solutions and ACBF Consultants Pty Ltd sold their shares in ACBF Group Holdings to Elah Valley Pty Ltd (Elah Valley). Mr Jones and Mr Clayton were the only directors and acquired ownership interests in ACBF Group Holdings through Elah Valley. As part of the sale agreement for ACBF Group Holdings, Elah Valley was bound to ensure that the ACBF Entities continued to insure with Crown. Mr Law received no financial benefit, directly or indirectly, from the sale of ACBF Group Holdings.

2.5.1    Other defendants

Mr Pattenden

47.    Mr Pattenden was:

47.1.    a director of ACBF 2 during the Relevant Period and also between:

47.1.1.    29 January 1992 and 18 October 2002;

47.1.2.    29 November 2007 and 7 January 2008; and

47.1.3.    19 May 2010 and 30 November 2018;

47.2.     director of ACBF Plans during the Relevant Period and also between:

47.2.1.    10 December 1997 and 23 July 2007;

47.2.2.    29 November 2007 and 7 January 2008; and

47.2.3.    5 March 2014 and 30 November 2018;

47.3.    a director of ACBF Community during the Relevant Period and also between:

47.3.1.    23 May 1996 and 23 July 2007;

47.3.2.    29 November 2007 and 7 January 2008; and

47.3.3.    5 March 2014 and 30 November 2018;

47.4.    from at least April 2002 until 30 November 2018, responsible for overseeing the operation of and any significant decision relating to:

47.4.1.    the ACBF business; and

47.4.2.    the ACBF Entities,

and acted in the role of a chief executive officer or managing director of the ACBF business and the ACBF Entities during that time;

47.5.    the founder and, at all material times, a director and, indirectly, the majority shareholder of Crown; and

47.6.    indirectly, the majority shareholder of Just Solutions through Mr Pattenden’s company Bu Teck Management Ltd (Bu Teck). Mr Pattenden was the sole shareholder of Bu Teck from October 2013.

48.    Between 1996 and 2010, Mr Pattenden owned shares in ACBF Group Holdings. In 2010, Mr Pattenden sold his shares in ACBF Group Holdings to Just Solutions for $20 million, by way of vendor finance, with interest payable on demand by Mr Pattenden, to be repaid over approximately 12 years. From 2010 to at least 30 November 2018, Just Solutions received dividends from Crown and on paid those dividends to Bu Teck, which then paid those amounts to Mr Pattenden in repayment of the vendor finance.

ACBF Group Holdings also paid dividends to Just Solutions, which it on paid to Bu Teck, which then paid those amounts to Mr Pattenden.

Mr Wilson

49.    Mr Wilson was:

49.1.    a director of ACBF 2 and ACBF Plans between 18 November 2014 and 19

December 2017;

49.2.    a secretary of ACBF 2 and ACBF Plans between 18 May 2017 and 19 December

2017;

49.3.    a director of ACBF Community between 18 November 2014 and 23 October

2017; and

49.4.    a secretary of ACBF Community between 18 May 2017 and 23 October 2017.

50.    Mr Wilson was employed as the company accountant and financial controller for the ACBF business (and ACBF Entities) from 6 March 2014 and November 2015 respectively.

51.    Mr Wilson formally ceased employment with the ACBF business (and ACBF Entities) on 7 February 2018, however he had stopped performing the duties of his role in around October or November 2017.

52.    Throughout his employment with the ACBF business, Mr Wilson:

52.1.    transferred dividends to Just Solutions from ACBF Group Holdings, and liaised with Mr Pattenden about the transfer of those dividends;

52.2.    liaised with the actuary about actuary reports prepared for the ACBF Entities, which contained a statement that “[a]t the valuation date all Plan liabilities to pay funeral benefits have been insured with Crown Insurance Services, which is a Vanuatu company with the same majority ownership as the ACBF Group”;

52.3.    provided Mr Pattenden by email each month the figures relevant to the claims and premiums paid by each ACBF Entity to Crown;

52.4.    was responsible for causing the financial statements of the ACBF Entities to be prepared and liaising with the auditors in this respect, and dealt with the financial statements of the ACBF Entities ended 30 June 2016.

Mr Jones

53.    Mr Jones was:

53.1.    a director and secretary of ACBF 2 from 18 December 2017 until 29 January

2021;

53.2.    a director and secretary of ACBF Plans from in or around 18 December 2017 until 29 January 2021;

53.3.    a director of ACBF Community from 23 October 2017 until 29 January 2021; and

53.4.    the Chief Executive Officer (CEO) of the ACBF business between 5 October 2017 and 30 November 2018.

Mr Clayton

54.    Mr Clayton ultimately took over the position of financial controller from Mr Wilson in around early October 2017. Mr Clayton was:

54.1.    a director of ACBF Community between 23 October 2017 until 20 November

2018;

54.2.    a secretary of ACBF Community between 23 October 2017 until 4 March 2019; and

54.3.    the Chief Operating Officer (COO) and a financial controller of the ACBF business from 5 October 2017 until at least 30 November 2018.

55.    During the Relevant Period, Mr Law:

55.1.    acted in accordance with Mr Pattenden’s instructions in relation to ACBF 2, ACBF Plans and ACBF Community; and

55.2.    deferred to Mr Pattenden for overseeing the operation of and any significant decision in relation to ACBF 2, ACBF Plans and ACBF Community.

PART III    ADMISSIONS ABOUT THE DOUBLING OF PREMIUMS FOR ACBF 2

3.1    PREMIUM INCREASE FOR ACBF 2

56.    On or around 4 September 2017, Mr Pattenden called Mr Law and told Mr Law that Crown would double the premium payable by Fund 2, and instructed Mr Law to draft a letter from Crown to Fund 2 in relation to the doubling of premiums.

57.    At 1:09pm on 4 September 2017, Mr Law emailed Mr Wilson, copied to Mr Pattenden:

Following telephone call from Ron, see draft below to go on Crown letterhead.

Can you check wording please and also advise new address. Is it better if Ron signs the letter rather than me?

Thanks Jon

********************************* 4th September 2017

Michael Wilson

Financial Controller/Director ACBF Group of Companies

????? (was 44A Griffith Street) Coolangatta 4225

Dear Michael

Increase in premiums – Fund 2

In regards to Fund 2 we request that you increase the premiums by 100% to payers and nominees effective from 1st August 2017.

This decision is being made due to payer higher risk factors. Kind regards

Crown Insurance Services Limited Ron Pattenden

Director

58.    At 1:26pm on 4 September 2017, Mr Wilson responded to the email described at paragraph 57 above, stating that the “wording is fine… Doesn’t really matter if it is you or Ron, either will do. Ron would probably ask you to sign this.”

59.    At 1:57pm on 4 September 2017, on instructions from Mr Pattenden, Mr Law sent a letter to Mr Wilson, copied to Mr Pattenden. The letter stated:

Increase in premiums - Fund 2

In regards to Fund 2 we request that you increase the premiums by 100% to payers and nominees effective from 1st August 2017.

This decision is being made due to payer higher risk factors.

3.2    EFFECT OF THE PREMIUM INCREASE AND CROWN ARRANGEMENTS ON ACBF 2

60.    Between 4 September 2017 and 30 November 2018, the premiums paid by ACBF 2 to Crown, the claims paid by Crown to ACBF 2, and profit share paid by Crown to ACBF 2 were as follows:

61.    As referred to in paragraphs 22.5 and 24.5 above, ACBF 2 went from an operating profit of $9,794 for the financial year ending 30 June 2017 to an operating loss of

$198,779 for the financial year ending 30 June 2018. But for the doubling of premiums, ACBF 2 would have made an operating profit for the financial year ending 30 June 2018.

62.    At the time of the premium increase and continuing until 30 November 2018:

62.1.    Fund 2 was closed to new members;

62.2.    ACBF 2 maintained cash reserves for the purpose of meeting its potential liability to pay cancellation benefits to fund members, which liability was not insured under the policy with Crown;

62.3.    ACBF 2 was not accumulating, or attempting to accumulate, amounts from which to pay claims by fund members;

62.4.    ACBF 2 did not otherwise maintain cash reserves for the purpose of paying fund members’ claims and instead relied on the policy with Crown for this purpose, with such reliance arising from the fact that ACBF 2 did not have any alternative source of funds to pay member claims;

62.5.    ACBF 2 could not increase its revenue from member contributions without:

62.5.1.    altering the terms of the trust deed to allow it to increase member contributions, which, according to the trust deed, would have required the written consent of 75% of fund members; or

62.5.2.    applying to the Court to seek a variation of the trust deed under s 81 of the Trustees Act 1925 (NSW);

62.6.    an increase in premium of 100% would have a significant negative impact on ACBF 2’s financial position:

62.6.1.    With the doubling of the Crown premiums during the Relevant Period, ACBF 2’s projected cash position went from remaining positive indefinitely to $0 within four years.

62.6.2.    In addition, if ACBF 2 had been brought to an end, it would have had amounts available to pay creditors or fund members. If ACBF 2 had been wound up, there would have been surplus funds following the payment of debts and liabilities for eligible fund members to be repaid an

amount up to the maximum amount of their cancellation benefit. Similarly, if all fund members of ACBF 2 who were eligible for payment of a cancellation benefit validly cancelled their memberships, there would have been funds available for distribution to those members.

62.7.    Fund 2 had options available to it in lieu of continuing the Crown arrangements, namely:

62.7.1.    accepting the Crown higher premium rates but with mitigation by attempting to increase contribution rates or negotiating lower administration fees; and

62.7.2.    attempting to negotiate and agree alternative terms with Crown;

62.7.3.    attempting to find an alternative insurer;

62.7.4.    attempting to move to a self-insurance arrangement;

62.7.5.    attempting to negotiate lower administration fees;

62.7.6.    attempting to increase contribution rates; and

62.7.7.    winding up.

63.    If calculations were performed at the time by Mr Law, the result of those calculations would have been:

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

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

63.3.    If ACBF 2 could have self-insured and remained solvent for seven years and for considerably longer with administration fee reductions and contribution increases.

63.4.    If ACBF 2 had been wound up, it would have sufficient funds to pay out all cancellation benefits.

64.    At the time of the premium increase and continuing until 30 November 2018, there was a substantial risk that:

64.1.    in the circumstances described in paragraphs 62 and 63 above, the effect of the premium increase, if it continued to be paid, would be that ACBF 2 would become insolvent within approximately four or less years and would need to be wound up.

64.2.    if ACBF 2 was wound up in insolvency, ACBF 2’s policy with Crown would be terminated and the members of Fund 2 that were entitled to a cancellation benefit may not be able to recover all or part of any cancellation benefit they were owed;

64.3.    if fund members’ cover was cancelled, they would be without funeral cover; and

64.4.    the members of Fund 2 were never told, and therefore could not and did not know or understand, the matters referred to in subparagraphs 64.1 to 64.3 above, and had no way of knowing them unless explained to them by information provided by ACBF 2.

65.    Mr Law ought to have known the fact described at subparagraph 64.1 above because it would have been revealed had he asked for analysis to be undertaken of the effect of the 100% premium increase on ACBF 2’s financial position, which he did not do but ought to have done.

3.3    MAINTAINING THE CROWN ARRANGEMENTS FOR THE ACBF ENTITIES

66.    At various times in September 2018, Mr Jones and Mr Clayton communicated with the Office of Fair Trading New South Wales (NSW Fair Trading) about whether the Crown arrangement was in the best interests of fund members.

67.    In September 2018, two months prior to Mr Law’s resignation as director, Mr Jones advised Mr Law of NSW Fair Trading’s concerns.

68.    As a result of NSW Fair Trading’s concerns and the ACBF business’s involvement in the Financial Services Royal Commission, from around 20 September 2018, Mr Jones and Mr Clayton gave some consideration to whether:

68.1.    the ACBF business should offer a new product; and

68.2.    for that new product, the ACBF business should insure with an Australian insurer rather than with Crown.

69.    Despite the matters in paragraphs 66 to 68 above, at no time during the Relevant Period did Mr Law consider properly, or at all, changes to the insurance arrangements with Crown for Fund 2.

PART IV    FORMAL ADMISSIONS RELATING TO SS 180(1), 181(1), 182(1) OF THE

    CORPORATIONS ACT    

70.    By 4 September 2017, and continuing until 30 November 2018:

70.1.    Mr Pattenden was the majority owner and ultimate controller of Crown, with Mr Law acting in accordance with Mr Pattenden’s instructions in his capacity as director of Crown. Mr Pattenden had a direct financial interest in Crown, and Mr Law had an indirect financial interest in Crown, and benefitted financially from ACBF 2 insuring with Crown;

70.2.    Mr Law knew or ought to have known that if the premiums paid by ACBF 2 to Crown were to double from the amount paid by ACBF 2 before the Relevant Period, then there was a risk for ACBF 2 that it would become insolvent;

70.3.    Mr Law knew that on 4 September 2017, Mr Pattenden and Mr Wilson hadagreed that the premium paid by ACBF 2 to Crown would increase by 100% effective from 1 August 2017 at Mr Pattenden’s direction;

70.4.    Mr Law knew that ACBF 2 paid Crown premiums in amounts that were double the amount of the premium that had previously been paid;

70.5.    Mr Law ought to have known that an increase in premium of 100% would have a significant negative impact on ACBF 2’s financial position;

70.6.    Mr Law ought to have known that the effect of the premium increase, if it continued to be paid, would be that ACBF 2 would become insolvent within approximately four or less years and would need to be wound up;

70.7.    Mr Law ought to have known that there was a substantial risk that if ACBF 2 was wound up in insolvency, the remaining members of Fund 2:

70.7.1.    would not be able to recover all or part of any cancellation benefit they were owed; and

70.7.2.    would be without funeral cover;

70.8.    Mr Law ought to have known that the members of Fund 2 did not know or understand the matters referred to in paragraphs 70.6 and 70.7 above, and had no way of knowing them unless explained to them by information provided by ACBF 2;

70.9.    Mr Law ought to have known at the time of the premium increase and continuing until 30 November 2018 that there was a reasonable chance that if the members of Fund 2 understood the matters referred to in paragraphs 70.6 and 70.7 above, they would cancel their membership with Fund 2;

70.10.    Mr Law knew or ought to have known that ACBF 2 maintained its policy with Crown at the increased premium;

70.11.    by causing or allowing ACBF 2 to maintain its policy with Crown at the increased premium, Mr Law and Mr Pattenden (through Crown) benefitted financially from ACBF 2 continuing to pay premiums; and

70.12.    Mr Law preferred the financial interests of Crown, himself and Mr Pattenden over the financial interests of ACBF 2 and fund members.

71.    A reasonable director or officer of a corporation in ACBF 2’s circumstances and who occupied the office held by Mr Law and had the same responsibilities, and who had knowledge of the risks to ACBF 2 and its fund members referred to in paragraph 70 above, in acting with care and diligence when considering whether:

71.1.    to pay the increased premium to Crown on behalf of ACBF 2; and

71.2.    to continue to maintain ACBF 2’s policy with Crown, would have taken all necessary steps to:

71.3.    consider whether the Crown policy was in the interests of ACBF 2, both generally and at the time of the doubling of ACBF 2’s premium;

71.4.    pursue alternatives to ACBF 2’s insurance arrangements with Crown, including considering whether to:

71.4.1.    attempt to renegotiate the Crown insurance policy;

71.4.2.    cancel the Crown insurance policy and attempt to transition to self- insurance (and whether and how to amend the trust deed to allow for this);

71.4.3.    attempt to find a cheaper external insurer;

71.4.4.    attempt to increase reserves from which to pay Crown;

71.4.5.    attempt to notify members of the risks to Fund 2 inherent in the arrangements with Crown; and

71.4.6.    wind up the trust and pay eligible members who were entitled to it a cancellation benefit.

72.    At all times from 4 September 2017 (the date of the decision to increase the premium) and continuing until 30 November 2018, Mr Law:

72.1.    failed to consider properly or at all the effect of the Crown arrangements on the financial position of ACBF 2;

72.2.    failed to consider properly or at all whether continuing the policy with Crown was in the best interests of ACBF 2 and its fund members;

72.3.    failed to consider properly or at all whether there were alternative options available to ACBF 2, as described in paragraph 71.4 above, that would have been in the best interests of ACBF 2 and its fund members;

72.4.    failed to pursue properly or at all any of the alternative options described in paragraph 71.4 above;

72.5.    preferred his, Mr Pattenden’s and Crown’s financial interests in causing ACBF 2 to maintain its Crown arrangements;

72.6.    preferred his, Mr Pattenden’s and Crown’s financial interests in causing or allowing ACBF 2 to accept or agree to pay the increased premium, payment of which occurred on 15 occasions between 4 September 2017 and 30 November

2018; and

72.7.    failed to ensure properly or at all that ACBF 2, as trustee for Fund 2, took all necessary and reasonable steps to protect the Fund (contrary to cl 13.9 of the trust deed).

73.    Mr Law, for each of the acts or omissions described in paragraph 72 above, between 4 September 2017 and 30 November 2018:

73.1.    failed to discharge his duties to ACBF 2 with the degree of care and diligence that a reasonable person would exercise, if they were a director or officer of a corporation in ACBF 2’s circumstances, and occupied the offices held by Mr Law, and had the same responsibilities within the corporation; and

73.2.    as a result, breached s 180(1) of the Corporations Act.

74.    By reason of the matters described in paragraph 70 above, and Mr Law’s position as director of ACBF 2 as set out in Part 2.5 above, Mr Law:

74.1.    caused or allowed ACBF 2 to maintain the arrangements with Crown from 4 September 2017 until 30 November 2018 without taking any or all necessary steps to consider and pursue the matters in paragraph 71.4 above;

74.2.    caused or allowed ACBF 2 to pay an increase in premium of 100% without taking any or all necessary steps to consider and pursue the matters in paragraph 71.4 above; and

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

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

74.4.1.    obtain an advantage for himself, Mr Pattenden and Crown; and

74.4.2.    cause a detriment to ACBF 2.

75.    Mr Law’s conduct referred to in paragraph 74 above:

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

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

75.3.    resulted in Mr Law:

75.3.1.    gaining an advantage for himself, Mr Pattenden and Crown; and

75.3.2.    causing detriment to ACBF 2.

76.    For each of the acts or omissions described in paragraphs 74 and 75 above, between 4 September 2017 and 30 November 2018, Mr Law:

76.1.    failed to exercise his powers and discharge his duties in good faith in the best interests of any of ACBF 2 and for a proper purpose, and as a result contravened s 181(1) of the Corporations Act; and

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

77.    From 4 September 2017 until 30 November 2018, the contraventions of ss 180(1), 181(1) and 182(1) of the Corporations Act by Mr Law, as admitted by Mr Law in paragraphs 73 to 76 above:

77.1.    materially prejudiced the financial interests of ACBF 2 and its members;

77.2.    materially prejudiced the ability of ACBF 2 to pay its creditors; and

77.3.    were serious.

PART V    ADMISSIONS OF OTHER FACTS    

5.1    THE NATURE OF THE LOSS OR DAMAGE SUFFERED

78.    Paragraphs 62.6 and 63 above outline how the increase in Crown premiums by 100% for ACBF 2 had a significant negative impact on ACBF’s financial position and describes alternative scenarios or possibilities that could have been pursued by Mr Law. The total amount of increased premium that was paid by ACBF 2 to Crown during the Relevant Period was approximately $592,961.

79.    The above alternative scenarios or possibilities may be contrasted with what actually took place, namely, that ACBF 2 entered liquidation in March 2022, with members and creditors to receive no or negligible payments.

80.    As described in paragraph 71.4 above, Mr Law had options available to him to pursue for ACBF 2 in lieu of continuing the Crown arrangements or varying the arrangements with Crown but did not consider or pursue any such alternative options.

5.2    MR LAW’S FINANCIAL POSITION

81.    Mr Law does not rely on his financial position to mitigate the penalty.

5.3    WHETHER PREVIOUSLY FOUND TO HAVE ENGAGED IN SIMILAR CONDUCT

82.    Mr Law has not been found to have engaged in similar conduct.

5.4    COOPERATION WITH ASIC AND CONTRITION

83.    Mr Law:

83.1.    despite being a resident of Vanuatu and not being a resident of Australia, agreed to participate in two section 19 examinations, responded to a section 33 notice, and accepted service of this proceeding; participated in the mediation in good faith at which time the proceedings against him were settled;

83.2.    cooperated with ASIC to agree a detailed SAFA setting out the underlying facts and admissions going to his liability and penalty;

83.3.    cooperated with ASIC and agreed to the declarations set out at Annexure A; and

83.4.    agreed to give evidence to assist ASIC in this proceeding if required.

84.    As a result of his willingness to settle the matter, ASIC has been spared a contested trial of an estimated 3 week duration with the consequent savings in time and cost to the public and ASIC (as it will enable it to focus on and pursue other matters).

Date: Click here to enter text.

................................................................

James Docherty AGS lawyer

for and on behalf of the Australian Government Solicitor Lawyer for the Plaintiff

................................................................

Mitchell Carey

Carey Litigation Lawyers

Lawyer for the Second Defendant

ANNEXURE A

SHORT MINUTE OF ORDERS

FEDERAL COURT OF AUSTRALIA DISTRICT REGISTRY: NEW SOUTH WALES

DIVISION: GENERAL    NO NSD 935 OF 2023

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Plaintiff

RONALD JOSEPH PATTENDEN

and others named in the Schedule Defendants

___________________________________________________________________

THE COURT DECLARES THAT MR LAW

1.    Under s 1317E(1) of the Corporations Act 2001 (Cth) (Corporations Act) that, in his capacity as a director of Aboriginal Community Benefit Fund No 2 Pty Ltd (ACBF 2), between 4 September 2017 and 30 November 2018, the Second Defendant:

1.1.    failed to consider properly or at all the effect of the Crown Insurance Services Limited (Crown) arrangements on the financial position of ACBF 2;

1.2.    failed to consider properly or at all whether continuing the policy with Crown was in the best interests of ACBF 2 and its fund members;

1.3.    failed to consider properly or at all whether there were alternative options available to ACBF 2 that would have been in the best interests of ACBF 2 and its fund members;

1.4.    failed to pursue properly or at all any alternative options available to ACBF 2;

1.5.    preferred his, the First Defendant’s and Crown’s financial interests in causing ACBF 2 to maintain its Crown arrangements;

1.6.    preferred his, the First Defendant’s and Crown’s financial interests in causing or allowing ACBF 2 to accept or agree to pay the increased premium, payment of which occurred on 15 occasions between 4 September 2017 and 30 November 2018; and

1.7.    failed to ensure properly or at all that ACBF 2, as trustee for the funeral fund operated by it (Fund 2), took all necessary and reasonable steps to protect the Fund (contrary to cl 13.9 of the trust deed),

and by reason of the above:

1.8.    failed to discharge his duties to ACBF 2 with the degree of care and diligence that a reasonable person would exercise, if they were a director or officer of a corporation in ACBF 2’s circumstances, and occupied the office held by the Second Defendant, and had the same responsibilities within the corporation; and

1.9.    as a result, breached s 180(1) of the Corporations Act.

2.    Under s 1317E(1) of the Corporations Act that, in his capacity as a director of ACBF 2, between 4 September 2017 and 30 November 2018:

2.1.    the Second Defendant:

2.1.1.    had an indirect financial interest in the Crown policy held by ACBF 2;

2.1.2.    caused or allowed ACBF 2 to maintain the arrangements with Crown without taking any or all necessary steps to consider and pursue the alternative options available to ACBF 2;

2.1.3.    caused or allowed ACBF 2 to pay an increase in premium of 100% without taking any or all necessary steps to consider and pursue the alternative options available to ACBF 2;

2.1.4.    failed to take all necessary steps to manage the conflict of interest that arose between his duties to ACBF 2 and his interest in Crown and the First Defendant’s duties to ACBF 2 and the First Defendant’s interest in Crown;

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

2.1.5.1.    obtain an advantage for himself, the First Defendant and Crown; and

2.1.5.2.    cause a detriment to ACBF 2.

2.2.    the Second Defendant’s conduct referred to in 2.1 above:

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

2.2.2.    was done for the improper purpose of gaining an advantage for himself, the First Defendant and Crown; and

2.2.3.    resulted in the Second Defendant:

2.2.3.1.    gaining an advantage for himself, the First Defendant and Crown; and

2.2.3.2.    causing detriment to ACBF 2.

2.3.    by reason of the circumstances in 2.1 and 2.2 above, the Second Defendant:

2.3.1.    failed to exercise his powers and discharge his duties in good faith in the best interests of ACBF 2 and for a proper purpose, and as a result contravened s 181(1) of the Corporations Act; and

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

THE COURT ORDERS THAT

3.    Under s 1317G(1) of the Corporations Act that, within 30 days of this order, the Second Defendant pay to the Commonwealth of Australia a pecuniary penalty of $50,000 for contraventions by the Second Defendant of ss 180(1), 181(1) and 182(1) of the Corporations Act relating to ACBF 2.

4.    Under s 206C(1)(a)(i) and/or s 206E(1)(a)(ii) of the Corporations Act that the Second Defendant is disqualified from managing corporations for a period of 6 years from the date of this order.

5.    The Second Defendant must pay a contribution of $10,000 to the Plaintiff’s costs of and incidental to the proceeding.

SCHEDULE

FEDERAL COURT OF AUSTRALIA DISTRICT REGISTRY: NEW SOUTH WALES

Division: General    No NSD 935 of 2023

RESPONDENTS

Second Respondent    Jonathan Glen Law

Third Respondent    Michael Brendan Wilson

Fourth Respondent    Bryn Elwyn Jones

Fifth Respondent    Geoffrey Peter Clayton

Date: Click here to enter text.

ANNEXURE 2

Form 1

Rule 2.13(2)

JOINT SUBMISSIONS

OF ASIC AND SECOND DEFENDANT

FEDERAL COURT OF AUSTRALIA DISTRICT REGISTRY: NEW SOUTH WALES

DIVISION: GENERAL    NO NSD 935 OF 2023

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Plaintiff

RONALD JOSEPH PATTENDEN and others Defendants

A    INTRODUCTION

1.    These submissions are jointly filed by the Plaintiff (ASIC) and the Second Defendant (Mr Law).

2.    Between 4 September 2017 and 30 November 2018 (Relevant Period), Mr Law was a director of ACBF 2, ACBF Plans and ACBF Community (collectively, the ACBF Entities), which operated funeral funds mostly marketed to Indigenous consumers, and a director of a Vanuatuan company Crown Insurance Services Limited (Crown) from 2008 until at least 30 November 2018, which underwrote the funds operated by the ACBF Entities (being Fund 2, Fund 3 and Fund 4 respectively).

3.    On 4 September 2017, Crown doubled the premium payable by ACBF 2. This had a significant negative impact on ACBF 2.

4.    Mr Law admits that, during the Relevant Period, in contravention of s 180(1) of the

Corporations Act 2001 (Cth) (Corporations Act):

4.1.    he failed to consider the effect of the Crown insurance policies on the financial position of ACBF 2, to consider whether the Crown policies were in the best interests of members of ACBF 2 and to consider or pursue alternatives to the insurance arrangements with Crown (including whether to renegotiate or cancel the policy and find a new insurer, or wind up ACBF 2);

4.2.    he preferred his, Crown’s and another director of the ACBF Entities and Crown, Mr Pattenden’s, interests in causing ACBF 2 to maintain the Crown policies, causing or allowing ACBF 2 to accept or agree to pay the increased premium and failed to ensure that ACBF 2, as trustee of Fund 2, took all necessary and reasonable steps to protect the Fund contrary to the trust deed.

5.    Mr Law also admits that, during the Relevant Period, in contravention of ss 181(1) and 182(1) of the Corporations Act, he failed to take all necessary steps to manage the conflict of interest that arose between his and Mr Pattenden’s duties to ACBF 2 and his and Mr Pattenden’s interest in Crown, used his position as an officer of ACBF 2 to obtain an advantage for Crown, himself and Mr Pattenden, and caused a detriment to the ACBF 2.

6.    The parties have filed a Statement of Agreed Facts and Admissions on 30 January 2026 (SAFA). Annexure A to the SAFA set out the Agreed Proposed Orders, which seek:

6.1.    two declarations under s 1317E(1) of the Corporations Act;

6.2.    a pecuniary penalty of $50,000 under s 1317G(1) of the Corporations Act;

6.3.    a disqualification order under s 206C(1)(a)(i) and/or s 206E(1)(a)(ii) of the Corporations Act that Mr Law be disqualified from managing corporations for a period of 6 years; and

6.4.    an order that Mr Law pay $10,000 as a contribution towards ASIC’s costs of and incidental to the proceeding.

B    THE CONTRAVENING CONDUCT B1.    FACTUAL BACKGROUND

ACBF business

7.    The ACBF business was a single business with common management across each of the entities within that business. During the Relevant Period, Mr Law was a resident of Vanuatu and a director of the ACBF Entities.1

8.    The ACBF group of companies relevantly included: ACBF 1, ACBF 2, ACBF Plans, ACBF Community, ACBF Consultants Pty Ltd, ACBF Group Holdings and ACBF Administration.2

9.    In the period from 2010 to 30 November 2018, the ultimate holding company of the group of companies through which the ACBF business operated was Just Solutions Limited (Just Solutions), a company registered in Vanuatu. Just Solutions owned the majority of the shares in ACBF Group Holdings.3

Operation of the Funds

10.    The SAFA explains in detail the way in which the Funds of each of the ACBF Entities operated.4

11.    In summary, for Fund 2:

11.1.    ACBF 2 was trustee of Fund 2, which operated as a trust established by deed.5

11.2.    ACBF 2 operated Fund 2 from 1993 for the purpose of providing funeral benefits to nominated persons on the death of a fund member. Fund 2 was marketed, and only available, to Indigenous Australians. Fund 2 was closed to new members from 2004.6

11.3.    On the death of the fund member who had made at least 2 payments, and following the making of a claim to ACBF 2, ACBF 2 would pay $6,000 to a nominated person (subject to any increase of the amount to be paid, made on application by a member after paying contribution amounts for at least one year).7

11.4.    Where a fund member wrote to ACBF 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 the member’s total membership payments from the 26th payment onwards.

11.5.    Where Fund 2 was wound up and there were surplus funds following the payment of Fund 2’s debts and liabilities, fund members entitled to receive a

1    SAFA at [9].

2    SAFA at [7].

3    SAFA at [10].

4    SAFA at Section 2.3, [11]-[32].

5    SAFA at [12].

6    SAFA at [12].

7    SAFA at [16.4].

cancellation benefit would be entitled to be repaid an amount up to the maximum amount of their cancellation benefit.9

11.6.    The trust deed for Fund 2:

(a)    required Fund 2 to maintain an insurance policy to underwrite the lives of its fund members. From 2002, ACBF 2 used Crown as its underwriter;10

(b)    provided ACBF 2 with the power to take such action as it thought fit for the adequate protection of any part or parts of the Fund;11

(c)    could not be amended except in accordance with the provisions of the trust deed, and could potentially be amended on application under s 81 of the Trustees Act 1925 (NSW) by ACBF 2 to the Court.12

11.7.    On 24 November 2021, ACBF 2 went into administration.13

11.8.    On 2 March 2022, a liquidator was appointed to ACBF 2. On 11 April 2022, a receiver was appointed to Fund 2.14

12.    ACBF Administration provided administration services to each of the ACBF Entities and Funds 2, 3 and 4 in return for a fee.15 The fees charged by ACBF Administration were not based on the cost to ACBF Administration to provide those services to each of the ACBF Entities.16

13.    ACBF Group Holdings was the ultimate holding company of ACBF 1, the ACBF Entities and ACBF Administration.17 ACBF Group Holdings earned revenue from receiving dividends from ACBF Administration, had nominal expenses and paid dividends to Just Solutions for financial years 2015 to 2018.18

Crown arrangements

14.    The SAFA explains in detail the way in which the Crown arrangements with each of the ACBF Entities operated.19