Money from a federal government grant – awarded in the dying days of the Morrison government – was transferred into a mortgage offset account controlled by the brother of the former president of the Queensland Liberal National party, a court has heard.
Guardian Australia reported in October that Green Day Energy – a fledgling “green coal” company – had had its bank account frozen and become mired in legal action, 18 months after being awarded a $5.5m commonwealth grant.
In a judgment on Thursday, the federal court judge Roger Derrington found that the former LNP president David Hutchinson had breached his duties as a director of the company, was unfit to remain in financial control and had been “prepared to misapply the company’s funds rather audaciously for his own benefit and for the benefit of his relatives”.
In his judgment, Derrington detailed claims about “suspicious transactions” from the $5.5m grant awarded to Green Day Energy to convert prickly acacia, an invasive outback weed, into woodchip pellets with properties similar to coal.
Those transactions included a $500,000 transfer from the company to the mortgage offset account of Hutchinson’s brother Stephen and to Stephen’s wife.
The transaction was included in an expenditure report, submitted to the federal government, as being paid to an engineering company for “plant and equipment”.
“That description was false,” Derrington said. “Although [David] Hutchinson was responsible for the accounts, he had no explanation as to why the recipient of the funds and the use to which they were being put were misleadingly represented in this way.
“It seems that the effect of the transfer to the offset account was to reduce the amount of interest that Mr Stephen Hutchinson and his wife were required to pay on their loan.
“Despite [David] Hutchinson’s assertions to the contrary, there was no valid reason for Green Day Energy’s funds to have been used in that manner.”
The judgment says Hutchinson conceded in cross-examination that he had not sought approval from the board of Green Day Energy before transferring the money.
“Whilst Mr Hutchinson and his brother have returned the $500,000 to the account of Green Day Energy, and may have paid some interest on the sum, that cannot negate the obvious impropriety of the transaction that was undertaken,” it says.
“Indeed, it gives the appearance merely that they were trying to restore some of their credibility once they were caught in the process of, quite unmistakably, misusing the company’s funds.”
The court also heard that Green Day Energy had bought two motor vehicles. One of those, a Nissan Navara, had been bought by Hutchinson “purportedly for Green Day Energy, but was registered in his own name and not that of the company”. The other, a Ford Ranger, was used by his brother “exclusively for his own purposes, and stored at his private residence”.
“These dealings by Mr Hutchinson reinforce the view that he has been prepared to misapply the company’s funds rather audaciously for his own benefit and for the benefit of his relatives,” the judgment says.
“Such behaviour is offensive to ordinary understandings of sound financial management. It strengthens the conclusion that he should not remain in a position where he enjoys financial control over Green Day Energy.”
The judgment says Hutchinson’s “permitting – if not actively facilitating – the misuse of company funds for his benefit and the benefit of his brother” was a “serious” breach of his statutory and fiduciary duties.
“Additionally, it is a matter of great concern that, in the course of his crossexamination, he was seemingly unable to acknowledge that certain of the dealings with his brother were inappropriate,” the judgment said.
The court ruled that Hutchinson had invalidly placed Green Day Energy into administration amid a dispute with his business partner, the former LNP official and candidate Brad Carswell.
The court also found that Carswell’s removal as a director of Green Day Energy was invalid. It ordered both of those actions voided.
The company was registered with the Australian Securities and Investments Commission three days before Christmas in 2021 – the same day that the federal government released the grant guidelines for its “securing raw minerals program”.
The grant was approved by the then minister for regionalisation, Bridget McKenzie, after being assessed by the government business grants hub and reviewed by a committee.
McKenzie made several election announcements in the following weeks about regional businesses awarded money from the $29m securing raw minerals program. The grant to Green Day Energy does not appear to have been announced until after the election.
A spokesperson for McKenzie told Guardian Australia in October that the office of the former deputy prime minister, Barnaby Joyce, had taken carriage of an announcement because McKenzie was not visiting the region.
“To the best of our recollection the former minister did not meet or speak with Green Day Energy prior to the grant being awarded,” the spokesperson said. “Senator McKenzie was the responsible minister for the program, which was a competitive grants program.”
The federal government is “considering its position” in relation to the grant.
Guardian Australia has approached David Hutchinson for comment.
