Australian Securities and Investments Commission v Mariner Corporation Limited [2015] FCA 589

The case of Australian Securities and Investments Commission v Mariner Corporation Limited [2015] FCA 589 was based on the applicability of different sections covered under the Corporations Act, 2001 (Cth). This case is important from the viewpoint of director duties, particularly in context of the ability of directors in invoking the business judgment rule. The decision given in this case established that the bidders and the directors can be confident of not being in contravention or violation of the Corporations Act, where they make announcements of proposed takeover bids. The ruling also gave out important statements in context of risk taking by the directors.

Australian
Securities and
Investments
Commission v
Mariner
Corporation
Limited [2015]
FCA 589

Case introduction
◂ The decision given in Australian Securities and
Investments Commission v Mariner Corporation Limited
[2015] FCA 589 was based on the applicability of
different sections covered under the Corporations Act,
2001 (Cth). The first matter which was dealt with in this
case was the prohibition put through the act through
section 621(2) on the bluffing bids (Jade, 2018).
◂ This case is also important from the viewpoint of director
duties, particularly in context of the ability of directors in
invoking the business judgment rule (Prickett and Teo,
2015).
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Facts of ASIC v Mariner
◂ On June 25th 2012, Mariner put out a statement to ASX where
the announcement regarding company having made a
conditional offer to Austock for acquisition of all of their shares
@ 10.5 cents per share (Ricci and Miyairi, 2016).
◂ This was deemed as an off market offer. It was the view of
Mariner board that the value of Austock was $20 million approx,
which was needed for funding the takeover.
◂ The company got a letter from Austock which provided that the
offer was invalid based on price per share which was offered,
and this led to an increase in the bid by 11 cents, so as to allow
for minimum bid price rule being met.
◂ However, another company did put a more attractive offer,
resulting in the takeover bid of Mariner falling apart (Usher Levi,
2016). 3

Duties/ Responsibilities breached
◂ Section 180(1) of the Corporations Act imposes a
duty of care and diligence on part of directors and
other officers as a civil obligation.
◂ This section not only provides the penalty
provisions, but also puts forth the defences in
terms of the business judgment rule covered
under section 180(2).
◂ As per this rule, the director of the company,
when making a business judgment rule, would not
be liable for breach of section 180(1), or for the
breach of similar duties under the common law
and in equity. 4

Why the duties were breached?
◂ The directors alleged the absence of financial resources
for funding the bid as reckless, resulting in the
contravention of section 631(2)(b) of the Corporations
Act;
◂ The company had been engaged in deceptive or
misleading conduct, which resulted in the breach of
section 1041H of the Corporations Act, as a result of the
initial offer of 10.5 cents being made under the takeover
bid;
◂ The breach of director duties as provided under section
180(1) of the Corporations Act, in context of duty of care
and diligence not having being upheld (Jade, 2018).
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Court/ Tribunal decision and
reasons in view of Corporations Act
◂ The application submitted in this case was dismissed by
the Federal Court judge Beach J.
◂ This was because the directors of the company, in the
view of the judge, had not made a reckless decision
which could result in breach of section 180(1) when the
announcement of takeover bid for Austock was made by
the directors without securing the necessary funding for
backing it up.
◂ As per Justice Beach, the directors had fulfilled the
required elements of defence covered under section
180(2) and this made entitled to the exculpatory
operation.
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Court/ Tribunal decision and
reasons in view of Corporations Act
◂ The nature of business of Mariner and the evidence regarding possible
benefits to the company for getting control on the other company, the
very decision of initiating the takeover through the announcement
would be the business judgment for this case.
◂ The characterisation of decision of directors by ASIC as judgment was
not in compliance with the Corporations Act or on the reliance placed
on Australian Securities and Investments Commission v Fortescue
Metals Group Ltd [2011] FCAFC 19 as this case had been set aside on
different grounds.
◂ This was deemed as a misconceived analysis of Olney-Fraser made
judgment.
◂ Hence, there was no decision made on part of the director which was
against compliance of the Corporations Act (Jacobson, 2015).
◂ Apart from this, the view of Beach J was that Olney-Fraser had
exercised proper judgment for supporting takeover bid for the other 7

Relevance of the decision
◂ Through the ruling given in the case of Australian
Securities and Investments Commission v Mariner
Corporation Limited, it was established that the
bidders and the directors can be confident of not
being in contravention or violation of the
Corporations Act, where they make
announcements of proposed takeover bids.
◂ This was despite the fact that such bidders and
directors had not made arrangements for firm
funding.
◂ This particular case is important ruling in context
of both director duties and takeovers. 8

Relevance of the decision
◂ In context of risk taking by the directors, this case gave
out important statements.
◂ The duty provided under section 180 did not impose a
wife ranging obligation on the directors for making
certain that the affairs of company were undertaken as
per the law.
◂ This was not to be used as a back door entry for visiting
the accessorial liability for the directors.
◂ Beach J provided that the assumption that director
duties have been contravened just because a company
has contravened certain provisions of the Corporations
Act was entirely wrong approach. 9

Reference List
◂ Australian Securities and Investments Commission v Fortescue Metals Group Ltd [2011] FCAFC 19
◂ Australian Securities and Investments Commission v Mariner Corporation Limited [2015] FCA 589
◂ Corporations Act, 2001 (Cth)
◂ Federal Register of Legislation. (2018) Corporations Act 2001. [online] Available from:
https://www.legislation.gov.au/Details/C2007C00541 [Accessed 12/05/18]
◂ Jacobson, D. (2015) Case Note: Directors Successfully Rely On Business Judgment Rule. [online] Available from:
https://www.brightlaw.com.au/case-note-directors-successfully-rely-on-business-judgment-rule/ [Accessed 12/05/18]
◂ Jade. (2018) Australian Securities and Investments Commission v Mariner Corporation Limited [2015] FCA 589. [online] Available
from: https://jade.io/article/398014 [Accessed 12/05/18]
◂ Prickett, F., and Teo, X. (2015) Mariner decision gives directors of bidders greater latitude when announcing takeover bids. [online]
Available from: https://www.claytonutz.com/knowledge/2015/june/mariner-decision-gives-directors-of-bidders-greater-latitude-
when-announcing-takeover-bids [Accessed 12/05/18]
◂ Ricci, S.A.G., and Miyairi, J. (2016) From Enactment to Mariner: Does the Statutory Business Judgment Rule Change the ‘Acoustic
Separation’ Between Conduct Rules and Decision Rules in Australia? [online] Available from:
https://www.business.unsw.edu.au/About-Site/Schools-Site/Taxation-Business-Law-Site/Documents/Gramitto-Ricci-Miyairi_CLTA-
Conference-Paper.pdf [Accessed 12/05/18]
◂ Usher Levi. (2016) Corporate Directors & the Mariner Decision. [online] Available from: http://www.usherlevi.com.au/corporate-
directors-the-mariner-decision/ [Accessed 12/05/18]
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