ASIC v Lindberg: A Landmark Penalty Judgment for Breaching Corporations Act

Read about the landmark penalty judgment handed by the Supreme Court Judge of Victoria, Robson J, on 09th Aug, 2012 in ASIC v Lindberg case. The case was initiated by ASIC against Andrew Lindberg, the previous managing director of the company AWB Limited, for not fulfilling the duties contained in the Corporations Act, 2001.

ASIC V LINDBERG
[2012] VSC 332
(Student Details: )
Business and Corporation Law

Introduction
 Landmark penalty judgment handed by the Supreme
Court Judge of Victoria, Robson J, on 09th Aug, 2012.
 ASIC, initiated legal proceedings against Andrew Lindberg.
 Lindberg was previous managing director of the company
AWB Limited.
 ASIC made a claim that Lindberg had not fulfilled the
duties contained in the Corporations Act, 2001.
 Penalty judgment was given by the court after the
decision was made to settle down the proceedings (Jade,
2017).
 Due to the breaching the provisions of governing
commonwealth act, the judgment restated the pecuniary
penalties and the disqualification order imposition
(Jacobson, 2012a).

ASIC v Lindberg
 Highly publicized case where the allegations were laid against the
violations which were undertaken by the company AWB.
 These were carried for the resolutions of United Nations, herein
referred to as UN, which were undertaken with Iraq. The resolution
called on the UN’s member states, for preventing the sale of any
kind of commodity to Iraq and this had some exceptions, drawn
from humanitarian basis and the exception included food material.
 An attempt was made through this resolution to deny the hard
currency to the regime of Iraq.
 Oil for Food Program, herein referred to as OFP, had the
responsibility of undertaking the sanction which led to the
proceeds from the sale of petroleum products of Iraq being placed
under the UN’s escrow account.
 The release of funds from this account was only allowed for the
commodities which were permitted, including the food material. A
 WB was a huge supplier of wheat to Iraq as per the OFP (Austlii,
2017).

ASIC v Lindberg
 Two key matters on the basis of which the violation of
the UN resolution had been claimed.
 First Matter:
 Related to the 10% payment made as being the trucking
fee which was related to the contracts of wheat undertaken
with Alia.
 Alia was an intermediary company which was passing on
this fee to the Iraqi government and so, the hard currency
was obtained by the government.
 This was in addition to the fact that the payment being
received by AWB was designed in a manner so as to
reimburse such payments.
 Hence, through this entire transaction, the money held in
the UN escrow account was being made use for such
purposes which were restricted under it (Austin and
Reynolds, 2012).

ASIC v Lindberg
 Second Matter:
 Contract undertaken between the company, i.e., AWB and Tigris.
 Tigris was a third party and the purpose of this contract was the
recovery of outstanding $8 million which was related to the
shipment of wheat to Iraq.
 AWB had inflated the prices of wheat under OFP contracts.
 These contracts had the valid approval of UN; though, this approval
was taken without the UN being given the knowledge regarding the
purpose or the increase in the prices.
 The contract of Tigris and AWB had been portrayed wrongly as debt
payment recovery by AWB to Tigris as being the service fee, and the
commission payment by Tigris to AWB as being the success fee.
 Different investigations were asked to be carried on under the OFP
for the activities which were undertaken by AWB and included in this
was the Project Rose, in addition to the external investigation of the
UN Independent Inquiry Committee.
 Project rose was the AWB’s internal investigation (Austin and
Reynolds, 2012).

ASIC v Lindberg
 All this was undertaken with the proceedings which
were brought against Lindberg by ASIC as he had
violated his obligation of working in good faith.
 A lot of delays were encountered and related
applications were filed and this included the application
by the ASIC to modify the statement of claim.
 Once this was done, a long process was started by the
parties in the late parts of 2009 to negotiate on the
actions’ settlement.
 Apart from Lindberg, ASIC also started the proceedings
against the chief financial officer of the company, Peter
Ingleby.
 Though, this is a different matter which was dealt in
ASIC v Ingleby [2012] VSC 339 (Wyld, 2012).

Duties Breached
 Violations were made for four different matters.
 Lindberg’s failure in carrying out the needed enquiries in the debt
recovery matter related to Tigris for such a high value.
 Lindberg faulted was informing the AWB’s board about Project Rose
only regarding the examination of documents which the company
had, and about the interviews conducted with the present employees
of the company.
 Information which he failed to pass to the company’s board that the
debt of Tigris had been recovered by increasing the wheat prices in
the OFP contracts, along with the fact that there had been a wrong
description of the commission and the success fee.
 Not informing the company’s board till Sep 2005 that he had attained
the knowledge in Feb 2005 by Independent Inquiry Committee of the
UN that the company Alia was being used by the government of Iraq
as a source to channel the funds and that in reality, there had been
no exemption given to AWB in the matter of trucking fee. The fourth
fault also included the non disclosure regarding the inclusion of 10%
as kickback in the prices of the contract (Austin and Reynolds, 2012).

Duties Breached
 Contravention of section 180(1) of the Corporations
Act, 2001.
 Lindberg was not only the MD but was also the
company’s CEO and so the duties were applicable on
him.
 Yet, there was a failure on his part in undertaking his
obligations and using his powers in a diligent and
careful manner.
 Any reasonable individual would have undertaken
the needed care in the given situation, had they
been the MD or the CEO of the company and had the
powers and duties of Lindberg.
 The parties reached an agreement regarding the
violations; however, this did not include any
deliberate wrongdoing, dishonesty or any ounce of

Court’s Decision
 Court order was sought out by the ASIC to give the legal
validity to the amicably decided penalties and disqualification.
 Robson J had to decide if the violations had the required
seriousness.
 Justice Robson held that there had been a violation of section
180(1) and he also upheld that Lindberg had been negligent in
the matter of performance of the duties by being the director
and the officer of the company.
 Court agreed on the absence of dishonesty, deliberate
wrongdoing and moral turpitude in the conduct of Lindberg.
 Though, a clear failure in performance of duties by Lindberg,
 Any reasonable person in Lindberg’s place would have
undertaken care.
 Holding the significance of section 180, Robson J held the
violation of this section by Lindberg (Austin and Reynolds,
2012).

Court’s Decision
 Robson J stated that these penalties were within the range
which is permissible, even when it was on the upper side of
this range.
 Referred to ASIC v Donovan (1998) 28 ACSR 500 for
deciding upon the seriousness of the matter.
 Admission by Lindberg, along with the fact that he knew
that this matter was quite serious, owing to his vast
experience, resulted in this admission being of significant
nature.
 Reference was made by the court to the previous authorities
for the only reason of protection of the general public; but
also the acting as a specific and general deterrent.
 After considering all these reasons, Justice Robson gave
order giving legality to the disqualification orders and the
pecuniary penalties (Austin and Reynolds, 2012).

Conclusion
 Matter which was put before the court in ASIC v
Lindberg was significant, where the ex-MD of the
company, after violating his duties laid down under the
Corporations Act, agreed to be punished.
 This punishment not only included him being
disqualified from being the director of the company for
a specified time period, but also led to the imposition of
pecuniary penalties on him.
 The acts undertaken by him were such that allowed the
purpose of the UN resolutions to be discarded.
 Cases like these act as a guidance and even a warning
to the directors and officers of the companies in the
nation, to diligently undertake their work.
 And in case the same is not done, they can also be
asked to pay penalties like Lindberg.

References
 Adams, M.A. (2012) Australian Corporate Governance. [Online] The University of Hong
Kong. Available from: http://www.law.hku.hk/aiifl/wp-content/uploads/2012/05/ppt-
AusCorpGovernance-ADAMS-12Oct.pdf [Accessed on: 13/08/17]
 Austin, R., and Reynolds, C. (2012) Minter Ellison Alert | ASIC v Lindberg – more on the
duty of care and diligence. [Online] MinterEllison. Available from:
http://www.minterellison.com/publications/asic-v-lindberg/ [Accessed on: 13/08/17]
 Austlii. (2017) Australian Securities & Investments Commission [ASIC] v Lindberg
[2012] VSC 332 (9 August 2012). [Online] Austlii. Available from:
http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/vic/VSC/2012/332.html?
stem=0&synonyms=0&query=Lindberg [Accessed on: 13/08/17]
 Jacobson, D. (2012a) ASIC v Lindberg (AWB) Update. [Online] BrightLaw. Available from:
https://www.brightlaw.com.au/asic-v-lindberg-awb-update/ [Accessed on: 13/08/17]
 Jacobson, D. (2012b) ASIC v Lindberg: AWB Penalty. [Online] BrightLaw. Available from:
https://www.brightlaw.com.au/asic-v-lindberg-awb-penalty/ [Accessed on: 13/08/17]
 Jade. (2017) ASIC v Lindberg [2012] VSC 332; 91 ACSR 640. [Online] Jade. Available
from: https://jade.io/article/269532 [Accessed on: 13/08/17]
 Wyld, R. (2012) An Update From Australia – AWB Wheat Kickbacks To Iraq Result In
Sentences. [Online] FCPA Professor LLP. Available from:
http://fcpaprofessor.com/category/andrew-lindberg/ [Accessed on: 13/08/17]