ASIC v Maxwell & Ors [2006] NSWSC 1052

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ASIC v Maxwell & Ors [2006] NSWSC 1052
Student’s Name
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Case Facts
Mr. Maxwell was one of the directors of two group companies: the Central
Development Group and the ProCorp Group. At the same time, Maxwell was running another
business; Business Express Success Techniques Pty Ltd. The director put his company as a
consultant for the two group companies. However, he placed an advertisement in the
newspaper which consisted of misleading promotional material with the intention of
attracting more public investors. The court determined that Mr. Maxwell failed to satisfy his
obligations and duties as the directors and improperly using his power as the director of the
company to gain financial advantage. The ASIC had already alleged that the director
breached his duties as stipulated in Corporation Act 2001 (CTH). As a result, he was
completely suspended from managing corporations or even providing financial services .Mr.
Maxwell. The court determined that Mr. Maxwell should pay $936,500 in compensations and
an additional $110,000 and $55,500 costs (Baxt, 2009).
The judges determined that the big issue in this cases was whether, in the context of
these corporations, Mr. Maxwell contravened his obligations as a director by allowing and
taking part in the various contraventions that were committed by those companies or any of
them. The resulting jeopardy to the organisation was the incurred liability for the
contraventions of fundraising and other misleading conducts under the corporation's act. Such
provisions are considered as civil penalty provisions and the exposure was driven by criminal
intentions under the Act. The countervailing benefits from the fundraising were the perceived
profits that were intended to be derived from the developments that the fundraising would
facilitate.

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Breaches of directors’ duties under the Corporations Act 2001(Cth)
The Corporations Act 2001 provides the terms of directors under section 9 where it
indicates that a person holding the duties of an organisation as a director is obliged to operate
with due diligence and avoid circumstances that would lead to a conflict of interest . Under
the Act, the general duties have further been elaborated under s 180 to s 184 of the
legislation. Fiduciary duties are clearly stipulated under section 185 as a provision of general
laws.
Notably, companies have the full liberty to make independent judgement of all its
directors. In this case of Mr. Maxwell, since he was the director of two different
organisations, he owed conflicting fiduciary obligations. Being a fiduciary, the court
determined that they were not supposed to exercise their powers as a director of both
companies for his own benefits or any other third party, without clearly expounding such
interest to the directors and obtaining informed consent from the directors. Company
directors are often faced with the dilemma of choosing between multiple opportunities, thus
tempting them to seek their own individual interests using their power for their own benefits.
Section 182(1) of the Corporation Act provides that a manager should refrain from improper
use of the power to gain benefits for themselves or cause damage to the company (Hill, &
McDonnell, 2009).
It was evident from the cases that the promotional brochure produced by Mr.
Maxwell conveyed misleading information that the mortgage would be secured over the
ProCorp properties and that a caveat would be lodged to provide the interests of all the
investors. The brochure further indicates that the loans would be used in low-risk
investments. Such actions go against the provisions of the Corporations Act 2001(Langford,
& Ramsay, 2014).Under the Act, the responsibilities of directors are classified as common