LWP Action Update #21. Apologies for the poor formatting.
We welcome the start of the regulatory action to be taken against this company. They have been a blight on the corporate landscape for too long and anticipate further action to be taken in due course.
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Update on Court CaseLast month we discovered that LWP director Siegfried Konig had lost the unlosable court case over the failed Graphenera Joint Venture. While the final cost decision is still pending, the latest round of court documents help shed some interesting light on the case. Before falling on his sword, the last we heard from Konig was when he informed the market that LWP would be "vigorously defending" the application for costs brought on by Volkov. A review of the Outline of Submissions from Volkov contains a number of items as the basis for the costs application, including: The proceedings do not establish a course of action.
LWP failed to comply with the Court Order from the previous court hearing where they were to submit a Statement of Claim
the original court application by LWP was based on the premise of there being a current Shareholders Agreement yet correspondence from both sides showed this had already been terminated. Konig's affidavit omitted this information.
a live issue as to whether the Shareholders Agreement was ever operative as it was signed by persons as Graphenera directors when they were not and conditions precedent to the Shareholders Agreement were not met. This information was also omitted from Konig's affidavit.
LWP's first solicitor had attempted to rectify the above items by backdating key ASIC documentation
There was no identifiable course of action against Viktor Volkov.
LWP was required to submit material to correct the deficiencies in their application but submitted no material
LWP failed to respond to a request for an order of dismissal and an order for indemnity costs.
Quite the list! Now as Konig had informed us that he planned to vigorously defend the costs application, it should follow that all these items are refuted in full. Konig's affidavit states:
LWP did not proceed with lodging a Statement of Claim as it was negotiating a way to proceed without ligitation.
Proceedings should be dismissed with no costs awarded because of the matters in this affidavit (see above)
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So in summary, Konig sought to proceed without ligitation in a case he initiated and costs not be awarded for this reason while failing to address any of the long list of items identified by both the judge and Volkov's lawyer. These proceedings were doomed to fail and never should have commenced. Konig's affidavit also included some correspondence with Volkov which, while unrelated to the vigorous defence of the costs application, are interesting in their own right.
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This makes mention of a proposed new listing for Volkov - Synthesis Graphene Australasia Ltd - due to list in November. One to keep an eye on (http://sga.global/). Some familiar names of Barry Dawes and Bruce Dwyer are also mentioned as working with Volkov again. Breach of Director Duties The key theme of this court case boils down to director duties. The ASIC website outlines a list of key director responsibilities including:
give the interests of the company, its shareholders and its creditors top priority, which includes acting in the company’s best interests (even if this may not be in your own interests)
Is a director representing the company and shareholders interests without legal representation an action that is in the best interests of those parties? The issue of when directors will be liable under directors' duties for contraventions of the law by the company has been the subject of some recent judicial comment. The relevant test to which a director will be held involves balancing the foreseeable risk of harm to the company against the potential benefits that could reasonably have been expected to accrue from the director's conduct. The risk-benefit "balancing" involves considering what a reasonable person would have done in response to the foreseeable risk of harm. The magnitude and likelihood of risk as well as the burden of alleviating action are also relevant considerations. Would a reasonable person have forgone legal representation, ignored the judges orders and failed to address any of the shortfalls identified in the previous hearing? Does the benefit of saving on legal costs outweigh the risk of losing the case outright? Serious corporate contraventions may well lead to legal action against directors for a breach of the duty of care and diligence.
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Media UpdateThere continues to be interest from members of the media with additional coverage anticipated in the near future. The Courier Mail recently released on Sean Corbin's axing as Managing Director of Franchise Retail Brands Link to Article Link to LWP Action Copy
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Regulatory ReviewA review of the responses of the regulatory bodies, including the ASX and ASIC, has been initiated by a prominent member of the Shadow Ministry. Interest in this company, and the lack of regulatory action, has been shown by a number of MPs and senators including the Chair of the Joint Committee on Corporations and Financial Services. This matter will be raised at the Committees meeting this month.
