The Australian Securities and Investments Commission (ASIC) launched proceedings against Paul Ryan, director of Dixon Advisory & Superannuation Services (DASS), for decisions made in the lead-up to an insolvency that were alleged to have disadvantaged creditors.

The Federal Court was told on Monday (17 June) the “critical events” at the heart of the proceedings occurred in December 2021, after DASS agreed to pay a $7.2 million penalty for the financial advice it gave to invest in the US Masters Residential Property Fund.

Class actions were also filed against DASS, but were halted when the company entered into voluntary administration in January 2022.

ASIC alleged Ryan amended the constitution of Dixon Advisory on 22 December 2020 for the benefit of holding company E&P Operations. Ryan was also a director of the latter company.

Two days later, Ryan was allegedly involved in executing a deed of acknowledgement of debt between DASS and E&PO.

At that time, E&P Operations allegedly owed DASS over $19 million and the deed “adversely affected” DASS’ right to recover the sum.

The deed set out the debt would only be payable after certain penalties in legal proceedings were actioned.

Counsel for ASIC, Philip Solomon KC, said the deed “transferred the existing receivable into a receivable impaired by” the clauses.

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“My learned friend won’t accept the word ‘impaired’, but it was the very purpose of the deed to impress upon the receivables these conditions and that’s what the deed did,” Solomon said.

Solomon added directors behind the group were allegedly “concerned to ensure the receivable was impaired so it couldn’t be called upon subsequently in the administration or subsequent liquidation”.

“That impairment was for the benefit of every other entity upstream to the group and the detriment of DASS [and] creditors,” he said.

Over the course of the week-long trial, ASIC said the court would be taken to events in July, August and September 2020 and how that may have affected the central alleged controversy in December.

The court will also be asked to consider the communications between directors behind DASS and law firm MinterEllison.

In the final week leading up to the deed of acknowledgment, E&P Wealth’s executive director of strategy and operations, Marc Falkiner, exchanged emails with a partner at MinterEllison about the reasonableness of the deed. Ryan was CC’d into those emails.

To avoid conflict, MinterEllison said it would frame its opinion “for the benefit of the E&P” and existing directors of DASS in their personal capacity as directors, “and not for the benefit of DASS as an entity”.

Solomon said the “central issue in this case” is the “reasonableness or otherwise of Ryan’s reliance on this opinion”.

“When Your Honour comes to consider the Minters advice and reliance, if any is placed on it, another contextual matter is the very detailed preparation evidenced by the emails … that occurred in advance of the provision of the advice,” Solomon said.

Solomon went on to clarify that the case hinges specifically on Ryan’s state of mind when he allegedly reviewed two points in the deed, commented on them, and marked up changes.

In the first, the deed set out that “since July 2020, DASS has also been meeting the costs and expenses of E&PO”.

It had been crossed out and a comment on the document said it was “wrong” and should be “removed from the opinion and the deed”.

The second point read: “The limitation of the purposes to which the proceeds of repayment of the intercompany debt may be applied … formed part of the negotiations between DASS and E&O when the temporary suspension of the management fee ordinarily charged to DASS by E&PO was put in place”.

“The proposed deed will acknowledge this,” it added.

MinterEllison accepted the marked up changes to those two points.

Solomon said ASIC’s case will be Ryan allegedly knew, or was blind to, the inaccuracies in the marked up changes.

“Let me be clear as to our case: it was a palpable breach of statutory duties for Ryan to authorise for the deed to be executed.

“There was no reliance from Ryan in any relevant sense on the Minters advice … [and] Ryan will agree in cross-examination that important aspects of the assumption were not correctly stated and I expect that, properly tested, he will agree he knew that,” Solomon said.

Solomon clarified the case will also go to Ryan’s alleged involvement in each draft of the deed, the “circumstances in which Minters was asked to give advice and the purpose for which they were asked”.

Counsel for Ryan, Peter Wallis KC, said ASIC’s case “ignored some very critical events” and did not take into account the commercial position of the E&PO group from around mid-2021.

Facing class actions and other litigation, Wallis said DASS threatened the “ongoing survival of the group” and decisions made by Ryan were made in the best interests of shareholders.

By the time of the events in December, Wallis said the group needed to “arrive at a method” of paying the claims above and beyond what had already been allocated through its insurance.

“We say [Ryan] needed to be and was highly conscious of the interests of the group’s shareholders and he needed to take into account those interests,” Wallis added.

Wallis said ASIC should not be “making something” of MinterEllison’s advice being sought in the week the deed was executed, because it missed the context that the firm was advised weeks earlier.

“We would not say it has been fairly flagged that the group … was looking for MinterEllison’s guidance not only about the terms of the deed but the propriety,” Wallis clarified.

More to come.

Naomi Neilson

Naomi Neilson is a senior journalist with a focus on court reporting for Lawyers Weekly. 

You can email Naomi at: This email address is being protected from spambots. You need JavaScript enabled to view it.