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Australian Securities and Investments Commission - PDF
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Added on 2021-06-14
Australian Securities and Investments Commission - PDF
Added on 2021-06-14
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Australian Securities and Investments Commission v Padbury Mining Limited [2016] FCA990Case introductionFactsAs per the facts, Padbury Mining Limited (Padbury) (1st Defendant) is a public company who shares are normallylisted at the Australian Stock Exchange. The 1st defendant aims at constructing and developing adeep water port at Oakajee and along with it an associated railway network. On 8th April 2014,there were several contracts that were made by the 1st Defendant with several parties. One of theparty to the contract was Superkite Pty Ltd (Superkite), which agreed to provide $6 billion to asubsidiary of Padbury provided there are few pre conditions which must be comply with by the1st defendant. The money was required for the funding of the construction of the Oakajee project.After 3 days, that is, 11th April 2014, an announcement is made by the 1st Defendant at the ASXwherein it made a declaration that the company has acquired $6 billion for thedevelopment and construction of the Oakajee project, but, nothing was disclosed regarding thepre conditions that must be fulfilled by the company in order to secure the money fromSuperkite. Nothing was also disclosed regarding the entities that agreed to comply with the preconditions as mentioned by Superkite.When all these proceedings were going on, at that time, the 2nd (Managing Director) and 3rd(executive director and chairman) defendant were the directors of the 1st defendant and were partof the drafting of the funding announcement and the responsible for the release of the saidannouncement. The 1st defendant also request ASX to halt the trading of the shares till theannouncement is made which resulted in the increase of the trading of the shares from $0.02 pershare to $0.045 a share. However, on 29th April 2014, the agreement to secure funding was terminated, funds were neverraised and the project was never constructed. Because of the above facts there were several duties that were violated. The duties which wereviolated are discussed below along with the reasons as to why the duties were violated. The duties/responsibilities breached (ex. CA sections 181 or 588G) andexplain why the duties were breached.As per the facts, the directors were authorized to make the disclosure but the acts of the directorsare in violation of section 180 (1) and section 674 (2A) of the Corporation Act 2001. For 1st Defendant (Padbury Mining Limited)
I.That there is violation of Section 1041 H (1) of the Corporation Act 2001Reasons That 1st defendant has violated Section 1041 H (1) of the Corporation Act 2001. Theviolation is incurred because the defendant has procured the publication of theannouncement that was made in the market by the Australian Stock Exchange on 11thApril 2014 which was known as Оakajee Funding Announcement. Theannouncement carries with it a secured funding representation that the 1st defendanthas attained funding of $6 billion which is required to build a deep water port andrelated rail network at Oakajee. However, the representation was misled and deceptive or likely to mislead or deceive.The deception is likely to deceive or mislead mainly because the representation thatwas made by the 1st defendant requires it has to comply with certain pre conditionswhich are likely not to be comply with by the its defendant. The inability of thedefendant to comply with the conditions exists when the announcement was made. II.That pursuant to section 1317E, there is violation of sub section 674 (2) of theCorporation Act 2001.Reason That the 1st defendant has not notified to the Australian Stock Exchange Limited anyinformation regarding the funding pre conditions that the defendant is required to becomply with and that are mentioned under Paragraph 22 and 31 of the statement ofclaim. The information must be provided amid the date of release of the OakajeeFunding Announcements, that is, 9:40 am AEST and at or about 2:15 pm AEST on11 April 2011. For 2nd Defendant (Gary Wayne Stokes)I.That pursuant to section 1317E, there is violation of sub section 674 (2) of theCorporation Act 2001.ReasonsThat the 2nd defendant was involved with the 1st defendant, when the contravention ofsub section 674(2) was incurred by the 1st defendant. II.Violation of section 180 (1) of the Corporation act 2001ReasonsThat the 2nd director being associated as a director with the 1st defendant was found tobe in contravention of section 180 (1) of the corporation act 2001. The degree of careand skill that is required from the 2nd defendant wile complying with his duties are notmet as what is expected from a normal prudent man. Te position, responsibilities andthe duties that are associated with the post of the Managing Director of the 1stdefendant was not met by the 2nd defendant when compared with a normal prudentman. He approved and authorized the release of the Oakajee funding Announcementand thus resulted in allowing the 1ts defendant to make a Secured FundingRepresentation which is nothing but the violation of section 1041H of the corporationAct 2001. For 3rd Defendant (Terence Martin Quinn)I.That pursuant to section 1317E, there is violation of sub section 674 (2) of theCorporation Act 2001.Reasons
That the 3rd defendant was involved with the 1st defendant, when the contravention ofsub section 674(2) was incurred by the 1st defendant. II.Violation of section 180 (1) of the Corporation act 2001ReasonsThat the 3rd director being associated as a director with the 1st defendant was found tobe in contravention of section 180 (1) of the corporation act 2001. The degree of careand skill that is required from the 2nd defendant wile complying with his duties are notmet as what is expected from a normal prudent man. The position, responsibilitiesand the duties that are associated with the post of the Executive Director andchairman of the 1st defendant was not met by the 2nd defendant when compared witha normal prudent man. He approved and authorized the release of the Oakajeefunding Announcement and thus resulted in allowing the 1ts defendant to make aSecured Funding Representation which is nothing but the violation of section 1041Hof the corporation Act 2001. Discuss and critically ANALYSE the court/tribunal decision and the reasonfor the decision in view of the Corporations Act.The decision of the Court tribunalThe court makes the following orderi.Against 2nd defendant – Taking into consideration section 1317G of the CorporationAct 2001, the 2nd defendant is found to be in violation of section 180 (1) ad section674 (2A) of the Corporation Act and thus he must be penalized with pecuniarypenalty for $25,000. He is also disqualified from the post of the Managing Directorfor 3 years from the date of the orders by applying section 206Cii.Against 3rd defendant – Taking into consideration section 1317G of the CorporationAct 2001, the 2nd defendant is found to be in violation of section 180 (1) ad section674 (2A) of the Corporation Act and thus he must be penalized with pecuniarypenalty for $25,000. He is also disqualified from managing the corporation for 3years from the date of the orders by applying section 206Ciii.Against 2nd and3rd Defendant – that both the defendant will pay the cots of theproceedings, that is, a fixed sum of $200,000.Reasons for the decisions of the courtThe decision is laid down on 19th August 2016 by Siopis J. I.Misleading conduct – The defendant admitted that the acts that are carried out bythem were misleading and deceptive in conduct. It is admitted by the 1st defendantthat the publication that is made to ASX regarding the funding announcement actuallymakes the potential inventors to believe that the company has secured $6 billion toconstruct the Oakajee project which was not true. The representation was deceptiveand misleading in nature because in reality in order to secure the funds the 1st
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