ASIC v Padbury Mining Limited (2016) FCA 990: A Case Study of Director's Duties in Australian Corporations Law

This report analyzes the case of ASIC v Padbury Mining Limited (2016) FCA 990, focusing on the breach of director's duties under the Corporations Act 2001. The case involved misleading announcements made by Padbury Mining Limited regarding secured funding for a deepwater port project. The report examines the specific duties breached, including those related to care and diligence, continuous disclosure, and misleading or deceptive conduct. It critically analyzes the court's decision, highlighting the penalties imposed on the directors and the implications for the development of Australian corporations law. The report concludes by emphasizing the importance of directors adhering to their legal obligations to protect the interests of the company and its stakeholders.

Business and Corporation law

Table of Contents
Introduction................................................................................................................................3
a. Case introduction....................................................................................................................4
b. duties/responsibilities breached (ex. CA sections 181 or 588G) and explain why the duties
were breached.............................................................................................................................5
c. Discuss and critically ANALYSE the court/tribunal decision and the reason for the
decision in view of the Corporations Act...................................................................................7
d. Where possible and applicable, the relevance of the decision to the development of
Australian corporations law or the impact of the decision on the operation of companies in
Australia.....................................................................................................................................8
Conclusion..................................................................................................................................9
References................................................................................................................................10

Introduction
In this report, the case selected for the analysis of the duties of the director is Asic v Padbury
mining limited (2016) FCA 990. This report clearly provides the analysis of the various
provisions related to the duties performed by the directors. In this report, the reference of the
decisions in terms of the other cases is also provided to develop the effective understanding.

a. Case introduction
This case is an example of the obligations performed by the directors in the organisation.
Herein the decision was given by the federal court of Australia in the year 2016. The
directors of the Padbury Mining Limited are involved in the misleading announcements made
by the ASX. This case is also considered to be a reminder of the significance of the decisions
taken by the ASX. Herein in this case the organisation is indulged in the development of deep
water port at Oakajee. For this, an announcement is made to the Australian stock exchange
which states that the organisation has successfully secured the funding amounted to $6 billion
for the set project. But herein the announcement made does not cover the conditions which
are precedent and on the basis of which the funding depends. There is also made any of the
disclosure regarding the identity of the parties who have provided the funding.
It is analysed from the provisions that the conditions precedent are considered to be very
important. It is required that the company should obtain the bank guarantee which would
match with the funds provided by the proposed funder and it was found that the organisation
does not have the ability to do this. Herein it was found that the last sale price of the shares
which are traded before the announcement made was $0.02 per shares but after the
announcement made the shares are traded at the price which was $0.045. On the same day,
the announcements were made at the request of the company and the shares went into the
trading halt wherein the announcement of the funding was made. It is also provided that the
parties indulged in the agreement of the funding has terminated the terms of the agreement.
Hence in such a situation, the Australian Stock Exchange has prosecuted the organisation and
it's two directors who are involved in the authorisation of the first announcements.

b. duties/responsibilities breached (ex. CA sections 181 or 588G) and explain why the
duties were breached.
As per the provisions of the Corporation Act 2001, it is provided that the directors of the
company are under the obligation to perform the number of the duties and the responsibilities
which are provided thereunder:
It is the duty of the directors to perform their part of the responsibilities and duty of the
effective care. It must be performed to serve the business interests and with the good
intention. All these provisions are provided under the section 181 of the Corporation Act
2001. It is also provided in the sub sections of section 181 that the positions assigned to the
directors should be used in an adequate manner. No misuse of the position should be made.
As per the provisions of section 182, it is provided that the position should not be used to
serve the individual interests. Hence all these provisions put the directors under the obligation
to perform their part of the duties with care. Section 101 H of Corporation act provides that
the individual should not be indulged in such practices which are misleading or deceptive.
Breach of duties ASIC v Adler
Herein, in this case, it is analysed by the court that there is involved the breach of the
provisions of section 101H of Corporation Act 2001. Herein the announcements made by the
Padbury are such which are misleading and deceptive. The announcement made was titled as
oakjee funding secured wherein the amount of $6 billion is secured by the Padbury to
conducts the deepwater port and associated network of rail (ASIC, 2016). The directors of the
company named as Stokes and Quinn has permitted the representation which is required to be
made. In this case, there is a breach of the continuous disclosure regulations by not disclosing
the conditions precedent to the market. This condition provides the idea regarding the fact
that whether the Padbury was entitled to receive the funding or which conditions are fulfilled
and which are not. It is also analysed that there is a failure to disclose the true identity of the
party who had the promise to provide the access to the funding. And the director's duties are
breached when they approve the release related to the announcements. Hence in this case
there is also a breach of the provisions of section 180(1) of the Corporation Act 2001 related
to the due care and diligence.

c. Discuss and critically ANALYSE the court/tribunal decision and the reason for the
decision in view of the Corporations Act.
In this case, the decision was provided by the Federal Court in the Perth. It is provided by the
court that there is involved the breach of the various provisions of the corporation act 2001.
Hence as per the order issued by the court both the directors of the organisation were banned
from the management of the cooperation for the time period of three years and the penalty of
$25,000 is also levied on the directors (Coleman, 2017). And both of them is also liable to
make the payment of $200000 as an ASIC’s costs in the conduct of the court proceedings.
Herein the order made by the court is such which covers the consent of the parties. Hence it is
assessed that in this case there is a breach of the provisions of section 180(1) by the directors
of the company due to failure to comply with the duty to care and diligence. It is analysed
that all the directors or officers of the corporations are under the responsibility to provide the
protection to the interests of the business by the application of the adequate laws and the
regulations. Hence the conduct of such officers is not as per the terms of the laws which are
provided in the Corporation Act and hence they need to be guilty in accordance with the
provisions of the act (Harris, 2018). Hence the directors are liable for not complying with the
provisos of the Corporation Act 2001 which holds them liable towards the breach of the
provisions of the Corporation Act 2001.
Hence it is also analysed from the above case that this case acts as a strong reminder of the
decisions given by the Australian stock exchange and also the duties applicable on the
directors regarding the performance of the duties and the acts. Herein, in this case, it is
evaluated that the directors involved in the Padbury Limited has violated the provisions and
the transactions are involved without performing the duty of care and diligence. Hence it is
found that the decisions given by the court are true and correct in this relation and as per the
laws applicable to the country. The breach of the various provisions of the corporation act by
the directors shows that the officers or directors are not taking the provisions in a serious
manner which holds them liable towards the penalties and the other acts (Chemerinsky,
2016). Hence the decisions given by the court is such which shows that the more
concentration needs to be given to the acts of the corporation laws and the provisions. The
importance of these Lawson the functioning of the organisation is effectively lad in the given
case.

d. Where possible and applicable, the relevance of the decision to the development of
Australian corporations law or the impact of the decision on the operation of companies
in Australia
This case provides an idea regarding the acts of the directors in the performance of their part
of the duties and the acts. The judgment given by the courts and the facts of the case shows
that the directors are not taking the organisation as a whole and does not care about the
interests of the company (Golding, 2012). Hence there is an requirement that the effective
mechanism needs to be ensured which helps in the effective compliance with the various
provisions of the laws. The decisions given by the court has proved to be successful and has
also contributed in the development of understanding to the directors that the laws are very
important to follow otherwise it can affect the directors and also the strict penalty can be
levied. But there is a need that the strict actions should be taken by the judiciary so that all the
provisions of the corporation act are followed and fulfilled
The effective compliance of the laws helps both the organisation and the directors in terms of
the improved functioning. This helps in the reducing the expenditure of the business by
saving them from the unnecessary litigations and the laws (Halland, 2015). Hence it is
provided that if both the organisation and the directors are complying the provisos of the
corporation act then it is in the long-term interests of the business. This helps in companies
while working in Australia to save them from the unnecessary litigations.

Conclusion
This report concluded with the strong decisions which act as a reminder for the functioning of
the Australian stock exchange and the laws. All the provisions and the laws applicable to the
directors has been effectively cleared from the report. The decisions gave acts as an example
for the other organisation regarding the acts of the non-performance of the duties and the
misleading announcements made. Hence it is also concluded that the directors should
perform their part of the duties with the due care and the diligence.

References
 ASIC, (2016). 16-263MR Padbury Mining directors banned for three years due to
'Oakajee Funding Secured' announcement. Available at: http://asic.gov.au/about-
asic/media-centre/find-a-media-release/2016-releases/16-263mr-padbury-mining-
directors-banned-for-three-years-due-to-oakajee-funding-secured-announcement/
[Accessed on: 17.05.2018].
 Chemerinsky, E. (2016). Constitutional law. Wolters Kluwer Law & Business.
 Coleman, G (2017). Plain English Guide to The Responsibilities of a Director.
Available at: http://www.colemangreig.com.au/Publication-13-Plain-English-
Guide-to-The-Responsibilities-of-a-Director.aspx. [Accessed on: 17.05.2018].
 Golding, G. (2012). Tightening the screws on directors: care, delegation and
reliance. UNSW Law Journal Volume 35(1).
 Halland, W. (2015). Legal obligations of directors of Australian companies.
Available at: http://hallandwilcox.com.au/legal-obligations-of-directors-of-
australian-companies/. [Accessed on: 17.05.2018].
 Harris, B. (2018). Business and Corporation law. Faculty of Business. Charles
Sturt University.