The corporate regulator has launched civil proceedings against the former managing director of sandalwood oil producer Quintis, after the company kept its board in the dark about the termination of a supply contract with Nestle unit Galderma.
Frank Wilson, who is also named as a respondent in several class actions, failed to discharge his duties as a company director, the Australian Securities and Investments Commission alleges in its Federal Court action, filed Wednesday.
“ASIC is alleging that by failing to disclose to the Quintis board of directors that key contracts with Nestle-owned Galderma (Galderma agreements) had been terminated, Mr Wilson did not discharge his duties to Quintis with the degree of care and diligence that a reasonable person in the position of managing director would exercise,” the watchdog said in a statement.
Wilson was allegedly aware in early 2017 that the contract with Galderma had come to an end, but Quintis’ board was not notified until May 9 last year. Quintis is not a defendant in the action, ASIC said.
The regulator also alleges Wilson knew that Quintis was disclosing misleading or deceptive information about the supply contracts in response to a query by the Australian Stock Exchange in March 2017.
The case is scheduled for a hearing on June 28.
Quintis and Wilson were hit with a third class action over the lost contract in late May. The case, brought by Piper Alderman, also names Quintis auditor Ernst & Young as a co-defendant.
The accounting giant is accused of engaging in in misleading and deceptive conduct by signing off on the company’s 2015 and 2016 financial reports, which allegedly overstated its profits and assets.
The case has been filed as a consumer protection action. Two other class actions — led by Bannister Law and Gadens Lawyers — have been brought under the Corporations Act and allege breaches of the company’s disclosure obligations to the market.
All three actions centre on the shock admission by Quintis — which is now in receivership — to ASX on May 10, 2017. The company told shareholders that its board and top management had been in the dark for months about the lost contract.
Galderma changed the formula used in its Benzac skincare line that contained Quintis sandalwood oil and had ceased its agreement with Quintis’s US-based unit Santalis in December 2016.
“The Board of Quintis was advised late yesterday that on 16 December 2016, Santalis and Galderma entered into an agreement that terminated Galderma’s licensing and supply arrangements with Santalis, with the termination to take effect from 1 January 2017,” the company told ASX.
“Prior to yesterday’s advice, the fact and details of the contract termination had not been provided to current members of both the Board of Quintis and its senior management (outside of Santalis).”
The case is ASIC v Frank Cullity Wilson.
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