Until this week ASIC’s pursuit of REX Airlines and its directors had also been causing the company’s voluntary administrators (VAs) unease given the potential costs of complying with court orders the regulator’s obtained for disclosure and discovery. But Samuel Freeman, Adam Nikitins and Justin Walsh can now shelve the Xanax.
In the NSW Supreme Court yesterday orders were made which will see the Australian Securities and Investments Commission (ASIC) pay for the costs of its discovery exercise, alleviating the VAs’ concerns that compliance would have diluted creditor returns.
ASIC commenced its case for leave to proceed against the ASX-listed airline in administration in December last year.
The regulator is alleging that former REX executive chair Lim Kim Hai and directors John Sharp, Lincoln Pan and Siddharth Khotkar engaged in misleading and deceptive conduct and contraventions of continuous disclosure obligations.
ASIC’s also alleging that Lim was involved in Rex’s continuous disclosure breach and that he, along with Sharp, Pan and Khotkar, contravened their directors’ duties.
The allegations relate to an ASX announcement released by REX on February 28, 2023 in which the company told investors that it was “optimistic the Group will have positive operating profits for the full FY23 barring any further external shocks”.
Lass than four months later Rex announced forecasting a $35 million operating loss for the financial year ending 30 June 2023. The EY trio were appointed VAs on the 30th of July, 2024.
As an initial stage in the proceedings ASIC wants the company and the other defendants to divulge a range of material which will be poured over by forensic accountants and junior counsel, the latter of whom will be charged with identifying what if anything produced might be subject to claims for legal professional privilege. Fear of self-incrimination hangs like a pall.
The court heard that the regulator will also cough up for the forensic accountants to be engaged up to a cap of $50,000 so there’s a job going for whoever’s in ASIC’s favour and can come across as top shelf operators whilst pitching cheap.
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