The Federal Court has disqualified former Murray Goulburn managing director Gary Helou and former chief financial officer Bradley Hingle from managing corporations following an investigation by the Australian Securities & Investments Commission (ASIC) into their role in misleading representations over farmgate milk price decreases in 2016.
Helou has been disqualified for three years and Hingle for two years after their involvement in Murray Goulburn Co-operative Co. Ltd (MG) and MG Responsible Entity Ltd’s (MGRE) continuous disclosure contraventions in 2016.
The allegations related to representations made by Murray Goulburn to its Southern Milk Region dairy farmers about the average farmgate milk price it expected to pay them during financial year 2015/16.
The Court found that Helou and Hingle contravened sections 674(2A) and 675(2A) of the Corporations Act 2001 (Cth) on various occasions on and from 8 March 2016 until 27 April 2016 by being knowingly concerned in the failure of MGRE and MG to disclose that:
- there was likely to be a material decrease in MG’s earnings guidance for FY16 published on 29 February 2016; and
- the earnings guidance for FY16 was unlikely to be achieved from 8 March 2016 until 27 April 2016.
ASIC commenced proceedings in the Federal Court against Helou and Hingle on 20 June 2019 and sought declarations of contravention and disqualification orders (19-152MR).
Sections 674(2) and 675(2) of the Corporations Act require certain disclosing entities to notify the ASX and ASIC of information not generally available, which a reasonable person would expect to have a material effect on the price or value of securities of the entity. Sections 674(2A) and 675(2A) impose liability on persons involved in the disclosing entity’s contraventions.
In an Agreed Statement of Facts and Admissions, Mr Helou and Mr Hingle admitted to contravening sections 674(2A) and 675(2A) of the Corporations Act. The parties to the proceedings filed joint submissions for declarations and disqualification orders to be imposed.
Earlier action
In April 2017, the Australian Competition and Consumer Commission (ACCC) commenced proceedings against MG, claiming it engaged in unconscionable conduct and made false or misleading representations over its farmgate milk price decreases in April 2016. The ACCC also alleged that Helou and Hingle were knowingly involved.
Helou was subsequently fined $200,000 by the Federal Court in December 2018 for being knowingly concerned in Murray Goulburn’s false or misleading claims about the farmgate milk price it expected to pay dairy farmers during the 2015-16 milk season and was ordered him to leave the industry for three years.
Murray Goulburn admitted to making false or misleading representations in breach of the Australian Consumer Law when it represented to farmers in Victoria, SA and southern NSW on 29 February 2016, and subsequently until 27 April 2016, that it could maintain its opening milk price of $5.60/kgms.
ACCC deputy chair Mick Keogh said: “Murray Goulburn’s misrepresentations meant farmers were not informed of the likelihood the final milk price would fall below the opening price. This was important information for farmers as it would have influenced the business decisions each farmer made.
“Farmers were denied the opportunity to plan for the impact of the reduced milk price on their businesses between February and April 2016, including implementing measures to reduce their exposure to a decrease in the milk price or shopping their milk around to other dairy processors.”
The ACCC said it did not seek a penalty against Murray Goulburn because as it was a co-operative, any penalty imposed against it could end up being paid by the very farmers that were misled.
Hingle reached a deal with the ACCC after consenting to an order to pay a contribution to the ACCC’s costs and giving an undertaking to the court that he wouldn’t be involved in the dairy industry for three years.
In November 2016, forensic accountancy Morris Forensic was brought in to review the accounting of MG’s milk supplier support program. It said: “The dairy cooperative could have overstated its earnings to the tune of around $150 million last financial year, and instead of reporting a pretax profit of $57.5 million, would have instead made a hefty loss of $92.5 million.”
By late 2017, companies were circling the embattled business, with Saputo buying the company for $1.3 billion.
