BUSL250 - Assignment on Business and Corporation Law

holmes institute

GROUP ASSIGNMENT 2
Introduction
The directors in the companies of Australia, along with the officers of such companies have been
imposed different responsibilities under Part 2D.1 of the Corporations Act, 2001, which is an act
of commonwealth and governs all the companies in the nation (Cassidy, 2006). The purpose for
imposing the duties on the directors stems from the fact that the business of the company is run
on behalf of the shareholders by them. Under this very part of the governing act, the civil and
criminal obligations are imposed on the directors in case the duties imposed on them are not met
(Latimer, 2012).
Australian Securities and Investments Commission v Healey [2011] FCA 717 was a case, where
seven directors of the company, along with its Chief Financial Officer were held to have
breached the duties imposed through the governing act (Walmsley and Puri, 2011). In the
following parts, a discussion has been carried on this very case, where the background of the
case is discussed, along with the duties and responsibilities which have been breached by the
directors of this case, and before concluding, the decision of the case has been highlighted.
The Case
In the case of ASIC v Healey, civil proceedings were launched by ASIC back in Oct 2009 against
the present and ex non-executive director, the former CFO, and the former CEO of different
entities, in the Federal Court of Australia, within the Centro Retail Group and the Centro
Properties Group, collectively referred herewith as Centro (Australian Institute of Company
Directors, 2011). A declaration was sought out by the ASIC regarding the relevant officers and

GROUP ASSIGNMENT 3
directors breaching the duties which they had under this act, towards the entities within Centro,
for the approval of Financial Reports. Centro Properties Group was a staple entity, which
consisted of Centro Properties Limited and Centro Property Trust. Centro Retail Group was also
a stapled entity, which consisted of Centro Retail Limited and Centro Retail Trust. Though, none
of the entities of Centro were made a party to these proceedings (Bryans, 2011).
The case which was brought by the ASIC revolved around the central proposition regarding the
director duties to read and understand the financial statements in a proper manner; following by
the application of knowledge for having or for the need of having attained for performing the
particular task. In a crux, the claims made in the submission of ASIC were regarding the breach
of duty of care and diligence by the directors, along with their failure in taking the required steps
for making certain the compliances with the financial reporting obligations contained for Centro,
based on the act, were undertaken, for the reasons given here (Bryans, 2011).
ASIC claimed that the financial reports created of the Centro group for the year which ended on
June 30th, 2007 were not complying with the standards of accounting, and also did not provide
the requisite true and fair view of the performance of the entities and of the financial position of
them, due to the failure in classification of a major value of the interest bearing liabilities as
being the current liabilities. The crucial matters were not disclosed in the reports, including the
non-disclosure of the major amount of short-term debt, along with the guarantees for the short-
term debt. Also, in this case, the short-term debt was not only hidden but was also misclassified
as being a serious of non-current liabilities. Due to these reasons, a false view was given of the
short-term debt burden of the company (Halsey Legal Services, 2017).

GROUP ASSIGNMENT 4
Duties/ Responsibilities Breached
The directors have been given a duty/ responsibility through section 180 of the Corporations Act,
2001, to use their powers and discharge their obligations in a manner which depicts care and
diligence (Australasian Legal Information Institute, 2017). For the purpose of undertaking care
and diligence in the work of the officer and director, this section sets out a standard of a prudent
person. So, the duties have to be used in a manner which a reasonable person would use, had
they held the same office with the same responsibilities and were faced with similar situation
(WIPO, 2015).
Through section 180(1), a civil obligation is set out, for the breach of which, civil penalties are
imposed through section 1317E. Under section 1317E the court has the power of making a
declaration of contravention against the officer or director who breaches their duties covered
under section 180(1) (ICNL, 2017). Further, once this declaration is made, ASIC can apply for
pecuniary penalty order pursuant to section 1317G and can also apply for a disqualification order
pursuant to section 206C (Federal Register of Legislation, 2017).
The claim of ASIC in this case was regarding the failure of the director in taking the required
steps for securing the compliances of the Centro group with regards to the declaration by director
pursuant to section 295A, the compliance with the accounting standards pursuant to section 296,
presenting a true and fair view pursuant to section 297 and regarding the annual report of the
directors pursuant to section 298, which effectively led to the contravention of section 344(1) of
the Corporations Act, 2001. This section imposes a duty on the directors to take all the necessary
steps for complying with the financial record keeping and the need for reporting the obligations
contained in the act (Bryans, 2011).