Vocation directors liable for company’s misleading statements

In Australian Securities and Investments Commission v Vocation Limited (In Liquidation) [2019] FCA 807 the Federal Court of Australia decided that Vocation Ltd (In Liquidation) made misleading and deceptive statements to the ASX and UBS AG Australia in a 25 August 2014 ASX announcement and in a due diligence questionnaire (DDQ) which formed the basis for a placement in September 2014 which raised approximately $74m from investors. It also found that Vocation’s CEO Mark Hutchinson and CFO Manvinder Gréwal contravened section 180 of the Corporations Act by causing or permitting Vocation’s contravention of section 1041H in relation to the 25 August Announcement and the DDQ and its Chair John Dawkins and the CEO contravened section 180 of the Act by causing or permitting Vocation’s contravention of section 674(2) of the Act.

The proceedings related to various statements made to the ASX and in documents relating to a fully underwritten placement to institutional and sophisticated investors in September 2014 and a review undertaken by the Victorian Department of Education and Early Childhood Development (DEECD) into two of Vocation’s main registered training organisations (RTOs).

On 25 August 2014, Vocation issued an ASX announcement which included the following statement: ‘Vocation’s funding contracts with the DEECD have not been suspended and are continuing’.

On 10 September 2014, Vocation issued an ASX announcement of ‘a fully underwritten placement to institutional and sophisticated investors to raise approximately $74 million’. On 27 October 2014, Vocation announced the completion of a review by the DEECD into Vocation’s two main RTOs – BAWM Pty Ltd and Aspin Pty Ltd.

Under the terms of the settlement reached between Vocation and DEECD, Vocation lost almost $20 million in government funding and the two RTOs relinquished their funding contracts.

The adverse review findings triggered a significant fall in Vocation’s share price, its earnings and market value. In the lead-up to the announcement of the review findings, Vocation had maintained that the review was part of normal business activities and that neither the review nor its anticipated outcomes were material to Vocation.

The Federal Court will hear submissions on pecuniary penalties against the officers, disqualification orders and costs on a date to be fixed.

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