ASIC v Stephen William Vizard (2005) - Breach of Duty of Directors

Case note: ASIC V STEPHEN WILLIAM VIZARD (2005)
Case introduction: ASIC v Vizard [2005] provides a good example of the case it was illustrated
by the court that what are the circumstances where it can be stated that there has been a breach of
the duty of the directors according to which we should not improperly use information received
by them in their capacity as the director of the corporation. The decision in Vizard’s case acts as
a reminder regarding the powers available with the ASIC for pursuing a suspected breach of the
Corporations Act by the directors by adopting civil penalty proceedings. In this case, Vizard was
the former nonexecutive director of Telstra. Therefore briefly speaking, some information was
used by Vizard that was obtained by him as a result of his position as the director of Telstra
before purchasing the shares in three IT companies in which Telstra had also shown its interest.
Therefore in the case, it was admitted by Vizard that there has been a breach and therefore the
court ordered him to pay a civil penalty of $390,000. At the same time, Vizard was also
disqualified by the court from acting as a director of the company for the next 10 years.
These are the circumstances under ASIC made a declaration that it was going to start civil
penalty proceedings against Steve Vizard in the Federal Court. It was alleged by the ASIC that
there has been a breach of duty by Vizard as the director of Telstra Corp. Ltd. This breach took
place when Vizard had improperly use the information that was available to him as the director
of Telstra for the purpose of achieving your personal advantage. According to the ASIC, Vizard
had used confidential information of Telstra between March and July 2000 four trading in the
shares of 3 listed public corporations.
In this case, the ASIC was seeking the following orders against Vizard. The first was the
declaration that the former corporations’ law has been breached by Vizard on three separate
occasions when he improperly used Telstra information for the purpose of achieving a personal

advantage. ASIC was also seeking pecuniary penalties from the court to such amount that may
be considered as appropriate by the court for each contravention. Similarly, the ASIC was
looking for a disqualification order from the court with prohibited Vizard from involving in the
management of the Corporation for such as may be considered as fit by the court.
The duties/responsibilities breached: the additional duties that have been imposed on the
directors and other officers of corporations have been provided with statutory force in the form
of the provisions that are mentioned in chapter 2D, Corporations Act. Along with the provisions
regulating the conduct of the directors of insolvent or nearly insolvent corporations (like the duty
of the directors to prevent the company from trading if it is insolvent), these provisions and the
predecessors of these provisions have seen a lot of litigation during the recent years. Particularly
in view of the high-profile corporate collapses that took place during the recent years, including
the HIH and One. Tel, the ASIC has started to follow a number of directors and other officers of
corporations regarding the management of their corporations. The decision in ASIC v Stephen
William Vizard [2005] FCA 1037 acts as a reminder regarding the powers available with the
ASIC for pursuing a suspected breach of the Corporations Act by the directors by adopting civil
penalty proceedings. Such proceedings can be initiated against the directors of high-profile and
substantial corporations.
As mentioned above, this case is related with the duty of the directors which prohibits them from
using the information received by them as a result of their position in the company. In this regard
it as been mentioned in section 183(1) of the Act that any information received by the person as a
result of the fact that such person is a director or other officer of the corporation, should not use
such information improperly and with a view to achieve a personal advantage or to cause a loss
to the company (ASIC v Colgate-Palmolive Pty Ltd., 2002).

It needs to be noted that section 183(1) is a civil penalty provision in view of s1317E of the Act.
When the court is satisfied that there has been a breach of s. 183, the court is required to make a
declaration of such a breach under section 1317E. Then it is available to the court to make an
order. In accordance with section 1317G, which provides that the director or the officer is
required to pay a pecuniary penalty to the Commonwealth (this becomes a civil debt payable to
the ASIC on behalf of the Commonwealth), in case the court is satisfied that there has been a
breach which:
 Significantly, prejudices dangers of the Corporation or its members; or
 Significantly prejudices the ability of the company to pay its creditors; or
 Can be described as serious.
Apart from it, another order can also be made by the court under s 1317H which requires the
director of the office of the corporation to provide compensation to the company for the damage
that has been caused as a result of the breach of duty (Rich v ASIC, 2004). As mentioned below,
the court has the power to make some other orders which include the order disqualifying the
director from managing a corporation for a particular period.
In 2000, Mr. Vizard was the nonexecutive director of Telstra Corp. Ltd. At the same time
another company was also set up by him. This was known as Creative Technology Investments
Pty Ltd. and the sole director and shareholder of this company was Mr. Lay, the accountant of
Vizard. In December 1999, Brigham Pty Ltd., which was a trustee company and Vizard, his wife
and their children had been officially owned the shares of Brigham. This company entered into a
loan agreement with CTI and loans were given to CTI out of the funds that were provided by