ASIC v Cassimatis (No 8) - Breach of Director's Duty

The case of ASIC v Cassimatis (No 8) involves the breach of duty by the directors of Storm Financial Limited resulting in losses for investors during the Global Financial Crisis. The court held both directors liable for breaching section 180 (1) of the Corporations Act 2001. The decision is significant as it clarifies the scope of director's duty and highlights the responsibility of directors who are also shareholders. The arguments made by the directors were rejected by the court.

Business and Corporate Law
ASIC v Cassimatis (No 8)
[2016] FCA 1023
(Student’s Name)

Issue
In this case, a company named Storm Financial Limited
was incorporated with the purpose of providing
financial services to it s client. Mr. Cassimatis, one of
the director of the company has developed a financial
model.
This model was based on double gearing system,
therefore was not successful in the conditions of
financial crises. The director has advised to all of the
clients of the company to follow this model, regardless
their individual specification and status.

Many of the investors of the company faced losses during the period of Global Financial Crisis
(Smith, 2016).
Australian Securities and Investments Commission (hereinafter referred as ASIC) has initiated a
case against Mr. Cassimatis along with Mrs. Cassimatis, who was other director of the company.

Breach of duty and reason thereof
Section 180 (1) says that the directors of the company
must perform their duties with due care and
diligence(Austlii, 2018). Further Section 181 of the act
demands that directors and officers of the company must
act for a proper purpose while dealing on behalf of the
company (Austrian Institute of Company Directors, 2018)
In the given case both the directors did not act either for
proper purpose or with due care and diligence and for this
reason, this can be stated they have breeched their duties.

Arguments of Directors of the company
Directors of the company made an argument that they
were not liable towards section 180 as this section put
an obligation in respect to the company but not the
other persons.
Further they have argued that as they were only
shareholders of the company, hence they have ratified
the acts of directors (Lacey, 2016).

Decision of the court
Court has rejected the argument of guilty directors on the following basis
Court has made it clear that section 180 (1) has wider scope and the same includes interest of shareholders and customers.
Further the courts stated even in those cases where directors are the only shareholders, they cannot ratify any act that is outside of the area of act.
Court held both of the directors liable for breach of duty under section 180 (1) of the act (Lewis Holdway Lawyers, 2017).

Significance of the decision
The decision given in the case is far significant as it has
brought a more clear understanding on section 180 of
the act.
In addition to this those directors who are only
shareholder of the company are more aware about their
roles and responsibility.

Conclusion
At the end, this is to conclude that the studied
case is a significant one that is related to
director’s duty and therefore it shows that
liability of a director is a wider term and includes
interest of all the stakeholders instead only
company itself.

References
Austlii. (2018) Corporations Act 2001 - SECT 180.
[online] Available from:
http://www5.austlii.edu.au/au/legis/cth/num_act/ca20
01172/s180.html [Accessed on 10/09/2018]
Smith, L., H. (2016) Storm Financial former
directors breached law, federal court finds. [online]
Available from: http://www.abc.net.au/news/2016-
08-26/storm-financial-former-directors-breach-law-
justice-finds/7790366 [Accessed on 10/09/2018]

Lacey, A., (2016) The risk of a director/officer of a
corporation assuming vast responsibilities- ASIC v
Classimatis (No 8) [2016] FCA 1023. [online] Available
from: https://mccabecurwood.com.au/asic-v-cassimatis/
[Accessed on 10/09/2018]
Lewis Holdway Lawyers. (2017) Directors Duties: Duty of
Care and Diligence. [online] Available from:
https://www.lewisholdway.com.au/directors-duties-duty-of-
care/ [Accessed on 10/09/2018]
Austrian Institute of Company Directors. (2018) What are
the duties of directors? [online] Available from:
http://www.awlnsw.com.au/assets/Latest%20news/Duties
%20of%20Directors.pdf [Accessed on 10/09/2018]