ASIC v Healey: A Case Study on Breach of Duties by Directors under Corporations Act 2001

Corporations Law
ASIC v Healey

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Introduction
In Australia, Corporations Act, 2001 (Cth), herein referred to as CA, is the main legislation
which sets out the duties and responsibilities for the directors and officers of the nation, and
these are particularly covered under Part 2D.1 of CA (Cassidy, 2006). The reason for putting
such duties on the directors is that the business of any company is operated for the shareholders
of such company. As a result of these provisions of CA, a breach of the imposed duties and
responsibilities result in both civil and criminal liabilities for the director or officer (Latimer,
2012).
The case of ASIC v Healey [2011] FCA 717 relates to the breach of the aforementioned duties
for seven directors and the Chief Financial Officer of the company (Walmsley and Puri, 2011).
This case continues to be a leading decision for the directors in aspect of what not to do while
participating in the daily affairs of the company. The following parts would cover a discussion of
what exactly happened in this case, the duties which were breached, the arguments made by the
parties and the decision given by the court.
Factual Background
The ASIC initiated civil proceedings in this case in October 2009 against the present and
previous non-executive directors, CFO and CEO of different companies, covered under the
Centro Retail Group (Retail) and Centro Properties Group (Properties) in the Federal Court of
Australia (Australian Institute of Company Directors, 2011). And this group, for the purpose of
this discussion, has been referred to as CG. ASIC sought for a declaration against the pertinent
directors and the officer for violating their duties based on the CA, which were owed for the

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reasons of being a part of CG, related to the sanction of the financial reports. ‘Properties’ was a
staple organization which was formed by Centro Property Trust and Centro Properties Limited.
Retail was also a stapled organization, which was formed of Centro Retail Trust and Centro
Retail Limited. None of these entities of Centro however were made as a party to the
proceedings brought forward by ASIC (Bryans, 2011).
Issue
The main issue of this case can be stemmed from the contentions raised by the ASIC regarding
the possible breach of duties covered under Part 2D.1 of the CA by the defendants of this case.
Rule
Under the CA, particularly its section 180(1), the company directors are required to make use of
their powers and fulfil their duties in such a manner which shows care being taken, along with
being diligent in performing their tasks (Austlii, 2017). For being careful and diligent, the
directors and the other officers of the company are required to adopt the standards of a rational
individual. Hence, there is a need to fulfil the obligations in such a manner as a reasonable
individual would do, in case they held the same responsibilities and the same office as that of the
officer or director (WIPO, 2015).
A breach of provisions covered under section 180(1) result in the attraction of civil obligations
set out under section 1317E of CA. This section gives the courts with the power of making a
declaration of contravention against the director or officer in question, who has been accused of
breaching the provisions of CA (ICNL, 2017). Upon the grant of this declaration, the ASIC can
move on to apply for the pecuniary penalties stated under section 1317G or to go forward with