Breach of Directors Duties Company law in the case of ASIC v Padbury Mining Limited [2016] FCA 990 Breach of Directors Duties

ASIC v Padbury Mining Limited [2016] FCA 990 Breach of Directors Duties Company law The presentation purports to discuss the case of ASIC v Padbury Mining Limited [2016] FCA 990 that lays down discussion in relation to the duties of the directors under the Corporation Act 2001 ( Cth ).

ASIC v Padbury Mining Limited [2016]
FCA 990
Breach of Directors Duties
Company law

The presentation purports to discuss the case of
ASIC v Padbury Mining Limited [2016] FCA 990
that lays down discussion in relation to the
duties of the directors under the Corporation Act
2001 (Cth).
The duties of the directors are given by the
members of the board of directors of a company
who has been provided with the duties under the
provisions of the statute as well as the common
law.
These are the obligations that are known as
duties of the directors.
Introduction

The is about the announcement that has been
made by the company (defendant) in relation to
There was an announcement that was not
supposed to be made by the company but the
directors did not prevent the company to make
the announcement that the company will be
receiving the fund the amounts to 6 million
dollars. Australian security exchange (ASX).
This fund was supposed to be used in carrying
out a project in the west of Australia
Case Facts

The fund for the project in the west of Australia has
been received successfully by the company.
There had been an agreement with a private
investor who agreed to provide funding based on
certain conditions.
There are certain terms that needs to be complied
with the agreement to secure the funding but the
company has failed to mention in the announcement.
One of the terms of the agreement has mentioned
that if the bank does not guarantee to 1.3 billion that
is needed to be secured by the company then the
fund will not be procured.
Case Facts

There are certain terms that needs to be complied
with the agreement to secure the funding but the
company has failed to mention in the
announcement.
One of the terms of the agreement has mentioned
that if the bank does not guarantee to 1.3 billion
that is needed to be secured by the company then
the fund will not be procured.
However, these terms exist in the agreement, but
there were no steps that were taken by the
directors of the company to mention that the
agreement is conditional.
Problem with the Announcement

Section 180(1) was the primary duty which
had been breached by the directors
Other contraventions of the CA Include
Section 674
Section 728
Section 1041H
Breach of duties

Declaration in relation to the violation of
section 674
Declaration in relation the violation of section
1041H
Declaration for the breach of section 180(1)
Ban for directors for a three year period
under section 206C
Pecuniary penalties under the provisions of
section 1317H
Remedy which ASIC Seeks

The directors as well as the defendant
company have evidently violated the
provisions of section 674(2) and 1041(h) of
The CA.
This is because the highly conditional terms
which were present in the agreement the
company had with the financer has been
omitted from the prospectus.
The directors were rightly held not to have
complied with the test provided via the rules
of section 180(1) of the CA.
CRITICAL ANALYSIS OF THE
DECISION

In the case of Commonwealth of Australia v Director, Fair Work
Building Industry Inspectorate (2015) 326 ALR 476 the decision of
the court signified that a regulatory body has to take into
consideration
In the case of Australian Competition and Consumer commission v
Reiwa Inc (1999) 161 ALR 79 the judge has stated that when the
question is in relation to the determination of penalties to be
imposed by the courts, the courts must be convinced beyond
reasonable doubt that the penalties are not contrary to public
interest and such interest is to be considered while making such
announcements.
The court came to the conclusion that the penalties which the ASIC
seeks are not detrimental to public interest and thus took the
suggestion made by the ASIC in relation to the penalties. Thus the
penalties of the imposed by the courts in this case are also justified.
CRITICAL ANALYSIS OF THE
DECISION

The primary implication of the decision which has
been identified is that the level of satisfaction in
relation to making an announcement has to be
reasonable in situation where the announcement
would materially affect the price of the share.
Where the directors failed to act in a reasonable
way as asked above they would be considered to
have contravened the duty of due diligence and
care under section 180(1)
Suggestions for Penalties in relation to
contraventions of the CA can be proposed by the
ASIC to the courts.
IMPLICATIONS OF THE DECSION

Thus it can be concluded for the above
discussion that the directors cannot merely
claim that they had informed themselves
about the subject matter of the decision
where a reasonable director would not have
taken such decision.
Conclusion

ASIC v Padbury Mining Limited [2016] FCA 990
Australian Competition and Consumer Commission
v Reiwa Inc (1999) 161 ALR 79
Australian Securities and Investments Commission
v Cassimatis (No 8) [2016] FCA 1023
Commonwealth of Australia v Director, Fair Work
Building Industry Inspectorate (2015) 326 ALR 476
Corporation Act 2001 (Cth)
Sino Australia Oil and Gas Limited (in liq) v Sino
Australia Oil and Gas Limited (in liq) [2016] FCA
934.
References