Apple Fields Directors Exonerated

Apple Fields Limited. Press release 04/07/2016

APPLE FIELDS DIRECTORS EXONERATED.

Decision from the Court of Appeal, released 30/06/2015
PRAIN & SCHROEDER v FINANCIAL MARKETS AUTHORITY [2016] NZCA 298 [30 June 2016]

1 Charges brought by the FMA against Directors Justin Prain and Mark Schroeder were upheld on appeal in the High Court but the orders made against them have been quashed in the Court of Appeal.

2 Leave to appeal was granted because the judgement under appeal raises a question of general or public importance.

3 Apple Fields is an issuer for the purposes of the Financial Reporting Act 1993. It was required to file audited financial statements but failed to do so from 2011 because generally accepted accounting practice (GAAP) required that it consolidate its accounts with those of Noble Investments Ltd, a private company with whom it had a close business relationship, but whose director refused to supply the financial information that Apple Fields needed.

4 The Court upheld an available statutory defence that the directors took all reasonable and proper steps to comply. In so doing it examined whether they acted reasonably in not seeking a second opinion about the need for consolidation from a “top tier” accountancy firm, as suggested by the FMA. It also dismissed a finding in the High Court that the directors should have pursued legal advice as to whether Apple Fields could compel Noble to deliver its financial information.

5 Today Mr Prain and Mr Schroeder expressed their dismay at the handling of the case by the FMA. “No responsible director would wilfully avoid the requirements of the Financial Markets Act. The FMA are aware that we have pursued and continue to pursue by every means possible the correctly audited accounts for AFL”.

6 “However the organisation seems intent on making a public spectacle of directors suspected of any default under the Act. In our case, within two hours of the District Court issuing its finding, the FMA issued a press release using the word “guilty” and the FMA website referred to the matter as a criminal proceeding, which clearly it was not. Although subsequently altered in the FMA record, the Google record persisted. There was widespread press coverage.

7 Our solicitor wrote to the FMA on 24 May 2015 in specific terms: “This is obviously very damaging to the reputations of my clients and arguably defamatory by virtue of its implication they have been guilty of actual criminal conduct”. “Yet our exoneration in the Court of Appeal has not been the subject of any press release by the FMA nor does it appear on their website”.

8 “It would seem a pity if other directors, their families and colleagues should have to face the trauma, vilification and financial costs that we have endured in an effort to carry out our duties as directors and to achieve justice”.

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