Analysis of ASIC v Whitlam Case: Breach of Directors' Duties

Running head: BUSINESS LAWS
Business Laws
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Introduction
This paper has the purpose of analyzing the judgement of the court provided in the case
of ASIC v Whitlam [2002] NSWSC 591 in the light of duties of directors which are owed to a
company. The paper describes in brief the revenant facts of the case. The paper also highlights
the duties which potentially may have been breached by the defendant in this case while acting in
a way which would contravene the duties. The paper also critically analyzes findings of the court
with respect to the decision in this case. What impact the decision may potentially have on the
development of Corporation Law has also been analyzed in the situation. The Chairperson may
be provided with the power to vote in proxy for the members who are not present in the meeting.
In the given situation the chairperson has the duty to act in accordance to the instructions
provided to him or her by the members with respect to the way in which they would exercise
their power. If they fail to exercise the powers in such manner they may be liable for the
contraventions of the directors duties imposed on them by the Corporation Act 2001 (Cth).
Case facts
The allegations in the given situation came to light when the company had to pass two
resolutions which were in relation to increasing the remunerations of the directors. These
resolutions had been named as resolution 6 and resolution 7. A case had been filed by the ASIC
against the director and chairman of NRMA Ltd (the Company), Mr Whitlam (The defendant
director) with respect to the breach of the civil penalty provisions.
The allegations were in relation to the breach of s 232 provided by the Corporation Law
as he failed to vote proxies in compliance with the instructions provided to him by the members
who had appointed him as the proxy against the resolution in context. The provisions of section

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180, 181 and 182 of the Corporations Act 2001 (Cth) had also been alleged to be violated by the
directors in context as he altered the minutes of a meeting of directors of NRMA Insurance
Group Limited (NIGL). The director had asked the returning officer to make three separate poll
papers in relation to proxy votes. The paper were segregated into those who had supported the
resolution , those who rejected the resolution and those votes which were undirected. With
respect to the meeting in order to constitute a valid vote a pole paper was signed. A poll paper
was signed to form a valid vote. The poll paper has been filled but by the defendant director but
they have not been signed in relation to 3,973 votes against resolution 6. This allowed the
company to pass the resolution 6 via a special resolution. If these votes would have been counted
then the resolution would not have been passed. A claim had been made by the ASIC that the
director in relation to his conversation with the returning officer had knowledge that resolution 6
would not be able to pass the special resolution if these votes were counted. This is the reason
why the director had not signed the proxy form to make resolution 6 pass the special resolution.
Allegation had also been made against the director that being the member of the board he
had changed the board minutes of August 11 2000. The board minutes had contained matters in
relation to proposed remuneration of the defendant director. The alternation indicated that the
board has accepted the proposed recommendation made by the director in relation to the
remuneration.
Breach of duties
In relation to the above discussed facts the defendant director had contravened various
provisions of law. Under section 232(2) of the corporation law (repealed) the director was
required to function in an honest way at all times for the purpose of discharging duties and