Breach of Directors Duties under Corporation Act 2001 - ASIC v Cassimatis (No. 8) [2016] FCA 1023

The article discusses the breach of directors duties under Corporation Act 2001 in ASIC v Cassimatis (No. 8) [2016] FCA 1023. It covers the consequences of breach, facts of the case, cause of action, decision of the court, and reasoning of the court. The case highlights the role of AISC in situations where the conduct of the corporation has a severe detrimental effect on the clients.

BREACH OF
DIRECTORS
DUTIES
Australian Securities and
Investment Commission (ASIC)
v Cassimatis (No. 8) [2016] FCA
1023

DIRECTORS DUTIES
(CORPORATION ACT 2001)
 Section 180- Observe due care and
diligence
 Section 181- To act in good faith and
best interest of the company
 Section 182- to not misuse position
 Section 183- To not misuse information
 Section 184 – reckless breach of Section
181-183

CONSEQUENCES OF
BREACH
 Section 181- Civil penalty (Section
1317E)
 Section 182- Civil penalty (Section
1317E)
 Section 183- Civil penalty (Section
1317E)
 Section 184- Criminal offence

FACTS OF THE CASE
 Mr Cassimatis (defendant) was the
director of Storm Financial Limited
(Storm)
 Storm provided Financial services in
accordance to a model developed by
the director
 The model involved the use of equity in
home to get a loan for investment
 Severe losses were suffered by the
consumers through the use of the model

CAUSE OF ACTION
 Proceedings were carried on by ASIC
against the directors of Storm.
 The claim was in relation to the breach
of directors duties under section 180
(1).
 Duties were allegedly breached by the
directors when the company was
solvent
 The directors had total discretion over
the management of the company

CAUSE OF ACTION
 The financial services were provided by the
company to those consumers who were
nearing retirement and had no scope of
recovering financial position.
 There must be a reasonable base with respect
to the financial advises provided to clients
 The section was breached by the directors by
letting the company advice the investors in
accordance to a defective model
 The section was breached as the way in which
advice was provided was not consistent with
the CA.

DECISION OF THE COURT
 It was decided by the court that the
directors of storm are liable for the
breach of Section 180(1)
 The decision was related to the issue of
liability only
 Decision on penalties is yet to be made

REASONING OF THE
COURT
 A reasonable degree of care and
diligence was observed by the directors
or not was analyzed by the court using
the test under section 180(1)
 A reasonable director under similar
situation would have been aware of the
consequences of the breach of CA.
 The breaches were not only found to be
reasonably foreseeable but also likely as
per their position. "an extraordinary
degree of control over Storm“.

REASONING OF COURT
 The submission of the ASIC had been
rejected by the court which provided
that actual breach by storm was
adequate to establish breach of section
180(1) of the directors
 The court ruled that the duties under
Section 180(1) are solely owed to the
company.
 Shareholders can authorize acts which
are against the CA but do not have the
power to ratify them.

TAKE AWAY POINTS
 Directors who are the only shareholders of a
company may breach section 180(1) if their
actions contravened legal provisions.
 The case highlights the role of AISC in
situations where the conduct of the
corporation has a severe detrimental affect
on the clients
 When a director of a financial advice
providing company in Australia uses a model
to provide advice, contraventions of the
corporation act with respect to the course of
conduct results in breach of Section 180(1)

REFERENCES
 Corporation Act 2001
 Vrisakis v Australian Securities
Commission (1993) 9 WAR 395.
 Australian Securities and Investment
Commission (ASIC) v Cassimatis (No. 8)
[2016] FCA 1023.
