Former Murray Goulburn chief executive officer Gary Helou and chief financial officer Brad Hingle have failed in their bid to have a case against them by the Australian Securities and Investments Commission thrown out.
The pair had attempted to have the ASIC case thrown out on the grounds it was an abuse of process.
But Justice Jonathan Beach, in a judgment handed down in the Federal Court on Friday, dismissed their claims that ASIC should have taken action against them sooner and that it was unfair for it to have waited for the results of another case brought against the pair by the Australian Competition and Consumer Commission.
Justice Beach said although ASIC should have brought the present proceeding a lot sooner, that did not mean the administration of justice had been brought into disrepute by its failure to do so.
"In terms of whether the administration of justice has been brought into disrepute, ASIC's conduct has sailed close to the line," he said.
"Nevertheless in all the circumstances this aspect has not been made out."
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The pairs' claims had centred around the way in which ASIC and the ACCC cases had proceeded.
ASIC settled a case against Murray Goulburn and the Murray Goulburn Responsible Entity at the end of 2017, under which MGRE paid a $650,000 penalty.
But the settlement reserved ASIC's right to later issue proceedings against Mr Helou and Mr Hingle.
The ACCC proceedings were settled last year.
Mr Hingle was dismissed by consent - and agreed to not be involved in the management of a dairy industry business and pay $50,000 towards the ACCC's costs.
Mr Helou made various admissions, was ordered to pay $200,000 and a further $50,000 towards ACCC's costs and gave an undertaking to not be involved in any animal-based dairy company for three years.
But Mr Helou and Mr Hingle claim they did not realise there was still risk of action being taken against them by ASIC.
They said ASIC had deliberately waited until the ACCC decision because it was unhappy with the outcome.
They said their settlement with the ACCC could prejudice this latest case.
The pair argued ASIC should have brought action against them earlier - either at the same time as its case against MG or in conjunction with the ACCC case.
Mr Helou said the new proceedings would put him to significant cost, expense and stress.
But Justice Beach dismissed those arguments.
He said the three cases did not cover the same ground - and that the latest action was about the corporate governance failure.
He also dismissed their argument that ASIC and the ACCC were essentially the same as they were both Commonwealth entities.
He was also not satisfied that neither was unaware of the risk that ASIC could still pursue them, when they were negotiating their settlements with the ACCC.
"Mr Hingle walked away from the ACCC proceeding with no penalty and a limited disqualification," he said.
"If ASIC had told him prior to his deal with the ACCC that the more favourable the deal with the ACCC, the more likely ASIC was going to be dissatisfied with it and was likely to sue him, is it seriously suggested that he would have rejected the good deal with the ACCC and had a fight with both regulators including front-loading significant costs?
"I very much doubt it."
Justice Beach said he found the evidence presented to support Mr Helou's argument for this "underwhelming".
"There is other evidence that supports the proposition that he was aware of a real risk," he said.
"In my view it is likely that Mr Helou knew that there was a real risk at and after the time of the resolution of the earlier ASIC proceeding that he may be the subject of further proceedings by ASIC."
Justice Beach said Mr Helou's view that the ACCC proceedings were the end of the matter were "overly optimistic and not reasonable".
"In my view the likely position is that he always knew of the risk but chose to stay silent in the hope that ASIC might not separately pursue him," he said.
The judgment revealed that ASIC took action against the pair because it wanted to deter others from similar behaviour.
Justice Beach also indicated his willingness to hear the matters against the pair and a separate related class action together in February.
The Australian Securities and Investments Commission launched the proceedings against Mr Helou and former MG chief financial officer Brad Hingle in late June for their involvement in the failure of MG-related company, MG Responsible Entity, to disclose to the ASX market-sensitive information in a timely manner.
This involved announcements made to the ASX in the February preceding the company's decision to cut the farmgate milk price for the 2015-16 financial year and downgrade its profit.
ASIC alleges that Mr Helou and Mr Hingle breached their duties as directors and officers to act with reasonable care and diligence by:
- Failing to adequately monitor the financial position and performance of MG and MGRE against the February earnings guidance.
- Failing to inform the board before April 26, 2016, of information which indicated the February earnings guidance was unlikely to be achieved.
- Causing or otherwise permitting MG and MGRE to make misleading statements in the February announcement; and
- Causing or otherwise permitting MG and MGRE to breach their continuous disclosure obligations.
ASIC also alleges that Mr Helou engaged in misleading or deceptive conduct by approving the February announcement.
ASIC is seeking that both men contravened sections of the corporations act and that each be disqualified from managing a corporation for a period deemed appropriate by the court.
Read the full judgment below: