‘Unexplained gap’ in case against ex-Rex directors
A court has heard there are significant evidentiary gaps in the corporate watchdog’s case against regional airline Rex and its former executives over optimistic and ultimately inaccurate profit forecasts.
The Australian Securities and Investments Commission alleged that four former Rex executives misled the market by claiming the board was confident of a strong financial result months before handing over a $31.7 million operating loss.
Advocate David Thomas SC, who made closing arguments on behalf of the two directors on Tuesday, argued that the commission’s case relied heavily on evidence against the company rather than the board.
“I note a remarkable and inexplicable gap between the tenor of expert evidence against the company and the complete absence of that evidence against my clients,” he told the NSW Supreme Court.
On February 28, 2023, Rex issued a statement to the market stating that he was optimistic that barring any external shocks, the company would post positive operating profits for the fiscal year.
The statement was not corrected until June 20, when Rex projected a $35 million loss with 10 days left in the fiscal year.
Ultimately, it recorded an operating loss of $31.7 million for 2023/24.
Former Rex chairman Lim Kim Hai admitted ASIC’s allegations against him in May.
The defense teams of other former directors – one-time Nationals MP John Sharp AM, Lincoln Pan and Siddharth Khotkar – argued that the February statement was not intended to be misleading and that any financial forecast was difficult to make accurately.
“Errors or errors of judgment should be allowed under the scheme, whether it be unawareness or breach,” said Mr. Thomas, who represents Mr. Pan and Mr. Khotkar.
ASIC’s legal team claimed that the board should have known about Rex’s legal situation much earlier than June 2023 and that it had breached its continuous disclosure obligations.
ASIC barrister Michael Borsky KC had previously told the court: “Mr Lim in particular, but all of them, knew about this situation long, far in advance and should have taken steps to correct or withdraw the unreasonable guidance well before mid-June.”
Rex went into administration in July 2024 with more than $500 million in debt following an ill-fated expansion of Australia’s competitive capital city routes.
Acquired by US aviation group Air T in October 2025 through EY administrators; The deal was completed in December after the federal government purchased $50 million of the carrier’s debt and provided an $80 million commercial loan to support the purchase and keep regional routes operating.
Rex is Australia’s largest independent regional airline, flying to 53 destinations across the country.
