Five former Youpla Group directors are alleged to have breached their duties in agreeing to insurance arrangements with a Vanuatu-registered company, actions that were not in the best interests of the collapsed funeral insurer’s Indigenous customers.

The Australian Securities and Investments Commission (ASIC), in civil penalty proceedings launched against the directors, says two of them – Ronald Joseph Pattenden and Jonathan Glen Law – both “beneficially owned and controlled” the Vanuatu company called Crown Insurance Services. 

ASIC commenced the proceedings last week in the Federal Court and the first case management hearing is listed for Thursday. 

Deputy Chair Sarah Court says the corporate regulator’s case “seeks to hold to account those involved in the alleged governance failures and director misconduct that impacted the First Nations people” who bought the funeral policies. 

Youpla, formerly known as Aboriginal Community Benefit Fund (ACBF), collapsed last year and the Federal Government subsequently set up a redress scheme for affected Indigenous policyholders. Its use of high-pressure sales tactics to sell near-worthless products to mostly Indigenous customers was exposed during the 2018 Hayne royal commission. 

The five directors are alleged to have breached their duties between September 2017 and November 2018. The other accused are director Michael Brendan Wilson, CEO Bryn Elwyn Jones and COO Geoffrey Peter Clayton. 

The ASIC concise statement filed to the Federal Court says the Crown policies were renewable annually and on September 4 2017 it was agreed that premiums paid to the Vanuatu company should be doubled. 

“The ACBF entities were the sole customers of Crown,” the concise statement says, adding the “doubling of premiums significantly affected” the financial position of one of the entities. 

ASIC alleges a “substantial reason” for making that decision to increase the premiums was to “gain an advantage” for Crown and in turn Mr Pattenden and Mr Law. 

The regulator further alleges that insuring with Crown left the ACBF entities vulnerable to unaffordable premium increases. 

“ASIC alleges the defendants maintained the arrangement with Crown which moved funds into an overseas company owned and controlled by two of the directors and did not act in the best interest of the ACBF Entities and members,” Ms Court said. 

She says the payments to Crown impacted the viability of the ACBF Entities and put at risk their ability to meet their commitments to members. 

“Directors and officers must comply with their obligations, particularly when it comes to conflicts of interest,” Ms Court said. 

ASIC is seeking declarations of contraventions of the Corporations Act, pecuniary penalty orders and orders disqualifying the defendants from managing corporations.