By Fedix team • • 3 min read
ASIC is seeking leave to appeal a NSW Supreme Court decision concerning three former non-executive directors of Regional Express Holdings Limited (Rex) and a profit forecast made on 28 February 2023. The Court had found that the directors did not contravene their duties in relation to that forecast. The appeal process is not complete: ASIC says the leave application will be determined on a date to be decided. Read ASIC’s media release.
What has changed
ASIC’s announcement is about a proposed appeal, not a final appeal outcome. ASIC says it is seeking leave to challenge the Court’s decision on the former non-executive directors because it is concerned there were errors in the primary judge’s findings. ASIC also draws a clear boundary around the matter: it is not appealing the Court’s decision in relation to Rex.
The underlying dispute relates to a forecast made by Rex on 28 February 2023. ASIC reports that the Court found Rex breached continuous disclosure obligations in relation to that forecast from 14 April 2023, while it did not find that the three non-executive directors breached their duties or that Rex engaged in misleading conduct. The proposed appeal concerns the findings about the directors. It should not be described as a finding that those directors breached their duties: ASIC’s announcement says the Court did not make that finding, and the appeal remains to be determined.
ASIC’s release states: “ASIC is seeking leave to appeal the decision of the Supreme Court of NSW that former Regional Express Holdings Limited (Rex) non-executive directors The Hon John Sharp AM, Siddharth Khotkar and Lincoln Pan did not contravene their directors’ duties in relation to a profit forecast made by Rex on 28 February 2023.”
Who should pay attention
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Book a demo (opens Microsoft Bookings in a new tab)Prefer to write? Contact us about a demo instead of booking a slotAccountants and tax agents advising company directors may find the update relevant when discussing how forecasts are prepared, reviewed and presented to a board. ASIC’s announcement does not set out a new rule or determine how another company’s circumstances should be treated. It reports a specific proceeding and an intended appeal, so readers should avoid treating it as a conclusion about every director, forecast or company.
The practical value is in helping clients keep a clear account of their own decision process. For a forecast under consideration, an accountant could ask the board to retain the source information and assumptions, note who prepared and reviewed the forecast, record material changes, and capture the questions raised before approval. This is general governance record keeping, not a statement of the legal test in the Rex matter.
A practical discussion
Consider a board reviewing a forecast after trading conditions change. A useful record might show which inputs were updated, why the directors considered those inputs relevant, what uncertainty was discussed and what further review was requested. The example is general and does not describe the Rex forecast or predict how a court would assess a different company’s records.
Accountants can also help directors distinguish a forecast’s underlying business assumptions from the way the forecast is communicated. Where a client asks what the Rex decision means for its own responsibilities, point them to ASIC’s release and suggest they obtain advice from an appropriately qualified legal adviser. Do not present the pending appeal as having resolved the issue.
The next step in the Rex matter is for the Court to determine the leave application; ASIC has not stated a date. Accountants can follow the official update and keep client discussions grounded in the published facts. Read the full ASIC release, and visit Fedix resources for more articles for Australian accountants.