FEDERAL COURT OF AUSTRALIA

Australian Securities and Investments Commission v Pattenden (Liability and Penalty–Clayton) [2026] FCA 1692

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 fifth defendant pay to the Commonwealth a pecuniary penalty of $20,000 for contraventions by the fifth 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), ACBF Funeral Plans Pty Ltd (ACBF Plans) and Community Funeral Plans Pty Ltd (ACBF Community).

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

3.    The fifth defendant pay a contribution of $2,000 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 chief operating officer of ACBF 2, between 5 October 2017 and 30 November 2018, the fifth 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 the first defendant’s, the second defendant’s and Crown’s financial interests in causing ACBF 2 to maintain its Crown arrangements;

(f)    preferred the first defendant’s, the second defendant’s and Crown’s financial interests in causing or allowing ACBF 2 to accept to pay the increased premium, payment of which occurred on 13 occasions between 5 October 2017 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 fifth 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 fifth 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 fifth 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 fifth 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 fifth 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 Clayton.

3    ASIC filed detailed written submissions in relation to Mr Clayton on 2 April 2026. Mr Clayton, who was unrepresented, did not file written submissions. At a short hearing on 28 April 2026 I heard oral submissions from senior counsel for ASIC, which were not contested by Mr Clayton.

4    As with Australian Securities and Investments Commission v Pattenden (Liability and Penalty – Pattenden) [2026] FCA 1616 (the Pattenden reasons) concerning Mr Pattenden’s liability and penalty, 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.

5    I have also annexed ASIC’s written submissions (the submissions), which summarise the factual background accurately and in some detail. Although Mr Clayton has not joined in advancing those submissions and should not be assumed to agree with everything in them, I am content to adopt that summary rather than repeat the exercise.

6    The annexure to the SAFA contains orders which the parties agree should be made. The parties jointly propose the making of the following orders:

(a)    six declarations under s 1317E(1) recording, in respect of each of the companies referred to as ACBF 2, ACBF Plans and ACBF Community (together the ACBF Entities), contraventions by Mr Clayton of:

(i)    s 180(1); and

(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 $20,000;

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

(d)    an order that Mr Clayton pay a contribution of $2,000 towards ASIC’s costs of and incidental to the proceeding.

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

Contraventions of the Corporations Act

8    The issues in the proceeding concern the period from 4 September 2017 to 30 November 2018 (the relevant period). During the relevant period, Mr Clayton was a director or officer of 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).

9    Mr Clayton had commenced employment in the ACBF business on 11 September 2017. At the start of the relevant period, on 5 October 2017, he became the Chief Operating Officer of the ACBF business. He served in that role throughout (and beyond) the relevant period. Mr Clayton held appointments as a director of ACBF Community from 23 October 2017 to 20 November 2018 and as Secretary of that entity from 23 October 2017 to 4 March 2019. He admits that, for the whole of the relevant period, he made or participated in making decisions that affected the whole or a substantial part of the business of the ACBF Entities as an officer (as defined in s 6(1) of the Corporations Act) of each of those entities.

10    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.

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 and formally communicated to ACBF 2 by a letter from Mr Law to Mr Wilson.

12    The premium increase had a significant negative impact on ACBF 2 and highlighted the fact that ACBF Community and ACBF Plans were exposed to the potential for similar increases. There were various steps that the directors of the ACBF Entities could have considered taking in order to protect the funds that they operated and their members against increases in the insurance premiums payable to Crown. No such steps were considered within the relevant period.

13    Mr Clayton 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 the ACBF Entities, to consider whether the Crown policies were in the best interests of members of the funds that those entities operated 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 funds); and

(b)    he preferred Crown’s, Mr Pattenden’s and Mr Law’s interests in causing the ACBF Entities to maintain the Crown policies 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 Clayton 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 Mr Pattenden and Mr Law’s duties to the ACBF Entities and their interest in Crown, used his position as an officer of ACBF 2 to obtain an advantage for Crown (and ultimately Mr Pattenden 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 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 s 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 Clayton contravened ss 180(1), 181(1) and 182(1) in the ways described in the SAFA and the 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 Clayton from managing corporations for a period of five years. For the reasons set out in the submissions at [144] to [164], I am satisfied that such an order is appropriate. In particular:

(a)    Mr Clayton held a senior position in the ACBF business in which he oversaw the financial affairs of the ACBF Entities and processed the premium payments and claims sent to Crown. He was aware of the financial position of ACBF 2. The premium increase had occurred before he commenced working in the ACBF business, but was specifically brought to his attention by an email that he received from Mr Wilson on 30 October 2018. Mr Clayton knew, or at least ought to have known, that the other ACBF Entities were exposed to similar action on the part of Crown. He was involved in communications with the Office of NSW Fair Trading that raised the question whether the arrangements with Crown were in the interests of fund members. Mr Clayton also admits that he knew or ought to have known that Crown was related to Mr Pattenden and Mr Law and they derived a financial benefit from the ACBF Entities maintaining their insurance with Crown.

(b)    The premium increase had a significant negative impact on ACBF2. Had any analysis been done, it would have been found that similar increases imposed on ACBF Plans and ACBF Community would threaten their viability.

(c)    ASIC accepts that Mr Clayton’s conduct was not deliberate. At worst, Mr Clayton was reckless as to whether the Crown arrangements were in the interests of members of the ACBF Entities.

(d)    Mr Clayton did not profit from the contraventions.

(e)    A period of disqualification is necessary for general deterrence. Specific deterrence is less important because Mr Clayton is no longer a director of any of the ACBF Entities.

(f)    Mr Clayton engaged constructively with ASIC. He made admissions that allowed a contested hearing to be avoided, albeit at a late stage in the proceeding, and accepted responsibility for the contraventions and through the SAFA.

(g)    Mr Clayton was not involved in the decision to increase the premiums payable by ACBF 2. Nor, it should be noted, was he the main decision maker as to whether the ACBF Entities should seek to modify or terminate their arrangements with Crown. However, the fact that he was in a senior management role, with responsibility for aspects of the ACBF Entities’ finances and insight into their financial positions, supports the conclusion that a substantial period of disqualification is warranted.

(h)    Contraventions of three civil penalty provisions for each of the three ACBF Entities are admitted. However, ASIC submits, and I agree, that the contraventions in relation to each entity should be treated as a single course of conduct. Further, they can be traced back to a single cause.

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 submissions) do not need to be repeated here but form part of the basis for my conclusions as to pecuniary penalties.

20    The submissions at [144] to [164], to which I have already referred above, are also directed to the appropriateness of the proposed pecuniary penalty of $20,000. 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 the three ACBF Entities, Mr Clayton (like Mr Pattenden) is liable to a maximum penalty of $1.8 million. His contraventions were much less pervasive and serious than those of (for example) Mr Pattenden but were also far from trivial. It is also significant that:

(a)    Mr Clayton had a role that was subordinate to Mr Pattenden and Mr Jones in the structure of the ACBF business;

(b)    there is nothing in the SAFA to indicate that Mr Clayton had previous experience as a director or officer of a company;

(c)    Mr Clayton did not benefit financially from the contraventions (in contrast to Mr Pattenden and Mr Law); and

(d)    Mr Clayton has (as noted above) cooperated with ASIC, taken responsibility for his conduct and saved the public from the expense of a contested 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, Law and Wilson 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].

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 FIFTH DEFENDANT

FEDERAL COURT OF AUSTRALIA DISTRICT REGISTRY: NEW SOUTH WALES

DIVISION: GENERAL    NO NSD 935 OF 2023

CONTENTS

Part I    Introduction    2

Part II    Parties and background    2

2.1    The parties    2

2.2    The ACBF business    3

2.3    Operation of the Funds    3

2.3.1    ACBF 2 and Fund 2    4

2.3.2    ACBF Plans and Fund 3, and ACBF Community and Fund 4    6

2.3.3    ACBF Administration    9

2.3.4    ACBF Group Holdings    10

2.4    Crown arrangements    11

2.5    Mr Clayton’s role    15

2.5.1    Other defendants    15

Part III    Admissions about the doubling of premiums for ACBF 2    18

3.1    Premium increase for ACBF 2    18

3.2    Effect of the premium increase and Crown arrangements on ACBF 2    19

3.3    Effect of the premium increase and Crown arrangements on ACBF Plans and ACBF Community

PART I    INTRODUCTION

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

2.    ASIC commenced these proceedings against the first defendant (Mr Pattenden), the second defendant (Mr Law), the third defendant (Mr Wilson), the fourth defendant (Mr Jones) and 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 Clayton admits that, between 5 October 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 each of the ACBF Entities (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. Mr Pattenden was the founder and, at all material times, was responsible for overseeing the operation of and any significant decision relating to the ACBF group of companies and business.

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 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.

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 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 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 approximately $1.81 million;

22.2.    paid administration fees to ACBF Administration of approximately $1.18 million;

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 approximately $952,622, including

$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 members.

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

24.1.    received member contributions of approximately $1.72 million;

24.2.    paid administration fees to ACBF Administration of approximately $1.12 million;

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 approximately

$1.21 million 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 Plans and Fund 3, and ACBF Community and Fund 4

28.    Between at least 2005 and 30 November 2018, Funds 3 and 4 operated as follows:

28.1.    for Fund 3, membership was marketed to Indigenous Australians;

28.2.    for Fund 4, membership was marketed to non-Indigenous Australians;

28.3.    a person became a member by submitting a membership application form and their application being accepted;

28.4.    fund members were required to make regular (usually fortnightly) payments as contribution amounts;

28.5.    the contribution amounts to be paid by fund members were calculated in accordance with the application form signed by the member or otherwise agreed with ACBF Plans or ACBF Community and were determined by:

28.5.1.    the fund member’s age and chosen benefit amount; and

28.5.2.    a corresponding health classification based on information provided as part of the application process;

28.6.    on the death of a nominated person (including a fund member) and following the making of a claim to ACBF Plans or ACBF Community, 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, calculated in accordance with the application form; and

28.7.    the rules and application form did not provide members with a cancellation payment on cancellation of their membership.

29.    The plan rules for Funds 3 and 4 stated that they could not be amended except in accordance with the provisions of the plan rules.

30.    From 2005 to 30 November 2018, other than the requirements of the constituent documents of the ACBF Entities, neither the ACBF Entities nor the ACBF business had any system in place for notifying or managing conflicts of interest.

31.    For the financial year 1 July 2016 to 30 June 2017, ACBF Plans:

31.1.    received member contributions of approximately $3.82 million;

31.2.    paid administration fees to ACBF Administration of approximately $2.6 million;

31.3.    paid underwriting premiums to Crown of $1.18 million;

31.4.    received payments from Crown of:

31.4.1.    $787,000 by way of claim payments; and

31.4.2.    $14,599 by way of profit share payments; and

31.5.    had a loss of $76,173.

32.    As at 30 June 2017, ACBF Plans had net assets of $15,294.

33.    For the financial year 1 July 2017 to 30 June 2018, ACBF Plans:

33.1.    received member contributions of approximately $3.63 million;

33.2.    paid administration fees to ACBF Administration of approximately $2.6 million;

33.3.    paid underwriting premiums to Crown of $1,508,945;

33.4.    received payments from Crown of:

33.4.1.    $792,000 by way of claim payments; and

33.4.2.    $135,666 by way of profit share payments; and

33.5.    had a profit of $95,166.

34.    As at 30 June 2018, ACBF Plans had net assets of $110,460.

35.    For the financial year 1 July 2016 to 30 June 2017, ACBF Community:

35.1.    received member contributions of $97,286;

35.2.    paid administration fees to ACBF Administration of $31,791;

35.3.    paid underwriting premiums to Crown of $41,677;

35.4.    received payments from Crown of:

35.4.1.    $32,000 by way of claim payments; and

35.4.2.    $nil by way of profit share payments; and

35.5.    had a loss of $38,121.

36.    As at 30 June 2017, ACBF Community had net assets of $8,957.

37.    For the financial year 1 July 2017 to 30 June 2018, ACBF Community:

37.1.    received member contributions of $91,252;

37.2.    paid administration fees to ACBF Administration of $15,901;

37.3.    paid underwriting premiums to Crown of $37,705;

37.4.    received payments from Crown of:

37.4.1.    $28,000 by way of claim payments; and

37.4.2.    $4,465 by way of profit share payments; and

37.5.    had a loss of $176.

38.    As at 30 June 2018, ACBF Community had net assets of $8,781.

39.    As at 30 June 2017:

39.1.    Fund 3 had 13,487 members; and

39.2.    Fund 4 had 308 members.

40.    On 11 March 2022, ACBF Plans and ACBF Community entered liquidation.

2.3.3    ACBF Administration

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

42.    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.

43.    For Fund 2, the fees payable to ACBF Administration were calculated as follows:

43.1.    an annual fee, totalling $300,000 (excluding GST);

43.2.    a weekly member fee of $2.80 per member (excluding GST).

44.    For financial years 2015 to 2018, the administration fees paid by ACBF 2 to ACBF Administration were as follows:

44.1.    for financial year 2015: $1,219,615;

44.2.    for financial year 2016: $1,223,500;

44.3.    for financial year 2017: $1,184,765; and

44.4.    for financial year 2018: $1,118,603.

45.    For Fund 3, the fees payable to ACBF Administration were calculated as follows:

45.1.    an annual fee, totalling $100,000 (excluding GST); and

45.2.    during the Relevant Period, a weekly member fee of $ 2.80 per member (excluding GST). Each year, the actuary for Fund 3 provided an actuarial report including assumptions about the maximum weekly member fee payable by Fund 3 to ACBF Administration (which the actuary noted would be ‘negotiated’ between the Fund 3 and ACBF Administration).

46.    For financial years 2015 to 2018, the administration fees paid by ACBF Plans to ACBF Administration were as follows:

46.1.    for financial year 2015: $2,663,870;

46.2.    for financial year 2016: $2,825,929;

46.3.    for financial year 2017: $2,609,746; and

46.4.    for financial year 2018: $2,037,899.

47.    For Fund 4, the fees payable to ACBF Administration were calculated as follows:

47.1.    an annual fee, totalling $10,000 (excluding GST);

47.2.    during the Relevant Period, a weekly member fee of $0.90 per member (excluding GST). Each year, the actuary for Fund 4 provided an actuarial report including assumptions about the maximum weekly member fee payable by Fund 4 to ACBF Administration (which the actuary noted would be ‘negotiated’ between the Fund 4 and ACBF Administration).

48.    For financial years 2015 to 2018, the administration fees paid by ACBF Community to ACBF Administration were as follows:

48.1.    for financial year 2015: $35,937;

48.2.    for financial year 2016: $36,816;

48.3.    for financial year 2017: $31,791; and

48.4.    for financial year 2018: $15,901.

49.    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:

2.3.4    ACBF Group Holdings

50.    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.

51.    ACBF Group Holdings:

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

51.2.    had nominal expenses; and

51.3.    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:

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

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

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

51.3.4.    Financial year 2018: $410,000.

2.4    Crown arrangements

52.    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.

53.    Crown:

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

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

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

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

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

55.    Under the terms of the policies with Crown:

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

55.2.    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);

55.3.    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);

55.4.    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);

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

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

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

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

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

57.    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.

58.    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.

59.    From 2003 (for Fund 2) or 2006 (for Funds 3 and 4) to at least 2018, Crown paid to each of Funds 2, 3 and 4 a ‘profit share’ based on a formula.

60.    The table below sets out for financial years 2002 to 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.

61.    In total, for financial years 2002 to 30 November 2018, for Fund 2:

61.1.    Crown received $16,345,137 in premiums;

61.2.    Crown paid $8,056,029 in claims;

61.3.    Crown paid $2,266,816 in profit share; and

61.4.    Crown’s net premiums received less claims and profit share was $6,022,292.

62.    The table below sets out for financial years 2005 to 2018 for Fund 3 the premiums received by Crown, claims paid by Crown, profit share paid by Crown and the net profit or loss of Crown.

63.    Between 1 July 2005 and 30 November 2018, ACBF Plans paid Crown total premiums of approximately $22.6 million, approximately $7.5 million was paid by Crown by way of fund members’ claims and approximately $4.5 million was returned to ACBF Plans by way of profit-sharing payment.

64.    The table below sets out for financial years 2005 to 2018 for Fund 4 the premiums received by Crown, claims paid by Crown, profit share paid by Crown and the net profit or loss of Crown.

65.    Between 1 July 2005 and 30 November 2018, ACBF Community paid Crown total premiums of approximately $788,000, approximately $265,000 was paid by Crown by way of fund members’ claims and approximately $240,000 was returned to ACBF Community by way of profit-sharing payment.

2.5    Mr Clayton’s role

66.    Mr Clayton commenced employment with the ACBF business on 11 September 2017.

67.    Mr Clayton, was:

67.1.    appointed a director of ACBF Community between 23 October 2017 until 20 November 2018;

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

67.3.    the Chief Operating Officer (COO) of the ACBF business from 5 October 2017 until June 2019.

68.    By reason of his positions as director and secretary of ACBF Community and the COO of the ACBF business described above, Mr Clayton also:

68.1.    acted in the position of a director, within the meaning of s 9(1) of the Corporations Act, of:

68.1.1.    ACBF 2 and ACBF Plans between 5 October 2017 and relevantly

30 November 2018; and

68.1.2.    ACBF Community between 5 October 2017 and 23 October 2017, and

20 November 2018 to 30 November 2018; and

68.2.    between 5 October 2017 and 30 November 2018, made or participated in making decisions that affected the whole or a substantial part of the business of the ACBF Entities as an officer, within the meaning of s 9(1) of the Corporations Act, of each ACBF Entity.

69.    Mr Clayton approved accounts receivable, dealt with the accountant and auditor, processed the premium payments and claims for Crown.

2.5.1    Other defendants

Mr Pattenden

70.    Mr Pattenden was:

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

70.1.1.    29 January 1992 and 18 October 2002;

70.1.2.    29 November 2007 and 7 January 2008; and

70.1.3.    19 May 2010 and 30 November 2018;

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

70.2.1.    10 December 1997 and 23 July 2007;

70.2.2.    29 November 2007 and 7 January 2008; and

70.2.3.    5 March 2014 and 30 November 2018;

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

70.3.1.    23 May 1996 and 23 July 2007;

70.3.2.    29 November 2007 and 7 January 2008; and

70.3.3.    5 March 2014 and 30 November 2018;

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

70.4.1.    the ACBF business; and

70.4.2.    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;

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

70.6.    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.

71.    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

72.    Mr Law was:

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

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

72.3.    the sole shareholder of Asian Markets Limited;

72.4.    indirectly, the minority shareholder of Just Solutions through Mr Law’s company Asian Markets Limited during, at least, the Relevant Period;

72.5.    a beneficial owner of shares in Crown from:

72.5.1.    January 2008, directly; and

72.5.2.    2010 and throughout the Relevant Period through his shareholding in Asian Markets Limited.

Mr Wilson

73.    Mr Wilson was:

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

December 2017;

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

2017;

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

2017; and

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

74.    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.

75.    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.

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

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

76.2.    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”;

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

76.4.    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

77.    Mr Jones was:

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

2021;

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

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

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

78.    During the Relevant Period, Mr Clayton:

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

78.2.    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

79.    At 1:57pm on 4 September 2017, Mr Law sent a letter to Mr Wilson copied to Mr Pattenden in the terms described below.

4th September 2017 Michael Wilson

Financial Controller/Director ACBF Group of Companies Suite T216

Level 2 The Strand

72-80 Marine Parade

Coolangatta, QLD, 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. Jonathan Law

Director Kind regards

Crown Insurance Services Limited

80.    The premium paid by ACBF 2 to Crown was increased by 100% prior to 5 October 2017, being the date:

80.1.    of Mr Clayton’s appointment as COO of the ACBF business; and

80.2.    from which Mr Clayton acted in the role of director of ACBF 2.

81.    On 30 October 2017, Mr Clayton received an email from Mr Wilson with a copy of a Crown increase in premiums letter received from Jonathan Law on 4 September 2017, referred to at paragraph 79.

82.    Given that from 5 October 2017 Mr Clayton was the COO of the ACBF business and acted in the role as director of ACBF 2, Mr Clayton ought to have reviewed and been familiar with the FY2017 accounts to identify the increased premiums paid by ACBF 2.

83.    Each month, Mr Pattenden was sent emails by Mr Clayton which were generally copied to Mr Jones, from December 2017 for November 2017, to the end of the Relevant Period, attaching spreadsheets for each of Funds 2, 3 and 4 setting out details of:

83.1.    premium payments made to Crown by the relevant Fund;

83.2.    claims received by the relevant Fund, and the total claims payable by Crown to the Fund; and

83.3.    the amount of profit share payable by Crown to the relevant Fund.

84.    In light of paragraphs 81 to 83, Mr Clayton knew or ought to have known of the increased premium paid by ACBF 2 to Crown.

3.2    Effect of the premium increase and Crown arrangements on ACBF 2

85.    Between 5 October 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: