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Former Rex executive chair Lim Kim Hai has admitted to misleading investors over the airline’s financial performance.
In an unexpected turnaround, Lim – who, along with three fellow former Rex directors, had denied ASIC’s claims surrounding a statement released to the ASX in February 2023 – gave up the fight on Wednesday and agreed to accept penalties.
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“Former Rex executive chair Lim Kim Hai admitted, in the Supreme Court of New South Wales, to all alleged contraventions against him,” the regulator said in a statement.
“ASIC and Mr Lim will ask the Court to impose pecuniary penalties and disqualification orders, as well as other orders, against Mr Lim.
“The penalties and orders are subject to the Court’s consideration and approval. The matter remains ongoing against the other parties to the proceeding.”
The case brought by ASIC against Lim, alongside his fellow former directors John Sharp, Siddharth Khotkar, and Lincoln Pan, concerns a market update in February 2023 saying Rex was “optimistic” about a full-year profit.
According to ASIC, Rex had seen operating losses in the year to date before issuing that statement and had not prepared a financial forecast for FY23 beforehand. The airline later forecast a $35 million loss for that financial year and ultimately posted a $31.7 million loss.
According to ASIC in a 2024 press release, Rex “did not have a reasonable basis for that claim for a number of reasons, including because it had incurred operating losses in the financial year to date, and it did not prepare a financial forecast for FY23 before issuing the announcement”.
“Our case will allege serious governance failures at Rex. Rex’s directors had a responsibility to take reasonable steps to ensure the company complied with the law and we will seek to hold them to account,” said ASIC chair Joe Longo at the time.
“We will allege four of Rex’s directors breached their duties because they failed to take steps to ensure the market had accurate information about the company’s financial performance.”
The court had heard from ASIC on Monday that the airline had needed to bring in $9.5 million per week to break even for the 2023 financial year, but was bringing in “under $600,000 a day”, with the regulator alleging that Lim had known of Rex’s financial situation when the statement was made.
“Mr Lim, in particular, but all of the defendants knew the position much, much earlier and ought to have taken steps to correct or withdraw the unreasonable guidance well before the middle of June,” said Michael Borsky KC, lawyer for ASIC.
As reported in the Australian Financial Review, Lim may now potentially be compelled to testify against the three other defendants.
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