Establishing Contraventions in Dean-Willcocks v Commissioner of Taxation

The case of Willcocks v Commissioner of Taxation [1991] highlights the importance of court satisfaction with statutory requirements, even if parties to a case agree on contraventions and penalties. The court is not bound by admissions made by parties and must establish breach of relevant section (180(1) of the Corporations Act). In this case, the court found four contraventions by a director: failing to undertake enquiries, failing to notify the board, inflating prices, and failing to inform the board about UN Independent Inquiry Committee's findings. The court concluded that the breaches were serious and imposed pecuniary penalties (A$100,000) and suspension period. This case demonstrates that even if parties agree on contraventions, the court must still be satisfied with statutory requirements before imposing penalties.

Running head: BUSINESS LAWS
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Case introduction
The case of ASIC v Lindberg [2012] VSC 332; 91 ACSR 640 is related to the breach of
directors duties and the defendant director being negligent towards the operations of the
organization. In this case the plaintiff was the Australian Securities and Investment Commission
was the plaintiff and Mr Lindberg the Managing director of AWB LIMITED was the defendant.
Civil penalty proceedings have been instituted by the ASIC against the defendant Mr Lindberg
for the contraventions of the Corporation Act 2001 (Cth) (CA). The breach was related to the
involvement of the director in wheat trade with Iraq for his organization through misusing Oil
For food Program which was administrated by United Nations. The defendant director had been
negligent over providing bribes to the government officials in Iraq in order to secure business
deals. The director was found in this case to not apply diligence and care in relation to the
operations of the company in Iraq and thus leading to loss for the company.
The proceedings were commenced in late 2009 against the defendant; however the
proceedings had been adjourned to ensure that AISC can amend its claim against the defendants1.
There was a lengthy negotiation between the parties to the case as the hearing did not resume for
the purpose of settling the proceedings. The defendant through the process of negotiation agreed
formally that he had made four contraventions in relation to section 180(1) of the CA. The main
admission was that with respect to the provisions of the section the defendant director was not
able to deploy reasonable skill and care with respect to his obligations towards the organization
and all other allegations against him had been dismissed2.
1 ASIC v Lindberg [2012] VSC 332; 91 ACSR 640 at [1]
2 ASIC v Lindberg [2012] VSC 332; 91 ACSR 640 at [2]

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The parties to the case have provided a statement related to the contraventions which have been
admitted, the statement is in relation to the facts which have been agreed and submission which
have been agreed on the relevant legal principles. The appropriate penalties in relation to the
contraventions which have been agreed have also been submitted by the parties, which are a
disqualification period of two years and a pecuniary penalty of $1000003.
As a declaration of contravention cannot be made by consent of ASIC and the alleged director
unless a basis is found by the court in relation to the facts that evidence satisfy the statutory
requirements which signifies that the contraventions have been made. The burden of in this case
is on the ASIC to prove the contraventions in relation to the balance of probabilities.
The duties breached by the directors
In the case of ASIC v Cassimaties the director have allegedly violated the provisions of the
CA related to section 180(1). The section states that the directors and officers of an organization
have the responsibility of implementing the best possible skills they have towards the company
and continue the operations of the company with care and diligence. The actions of the directors
and the other officers have to be in good faith and in best interest of the company.
The section is said to be violated when a reasonable director placed in the same position and
circumstances of the alleged violator of the duty would have not indulge in actions which had
been done by the violator. To make it simple the actions of the alleged contravener of the section
are compared to those of a reasonable person to analyze the actions were in the best interest of
the company or not.
3 ASIC v Lindberg [2012] VSC 332; 91 ACSR 640 at [3]

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If it is found that the reasonable person would not have done such actions which have been
committed by the directors or officers than it is said that the duty have been violated. The test
under section 180(1) has been used by various cases such in Australia such as the case of
Shafron v Australian Securities and Investments Commission4 and (ASIC) v Cassimatis5.
Analysis of the decision
The distinct feature in this case was that the contraventions made by the directors have
already been admitted by the by and have been accepted by the ASIC. The penalties in relation to
the contraventions have also been decided upon by the parties to this case. The role of the court
in this case is only to determine that question that whether the statutory requirements to establish
the contraventions have been meet or not. The parties in the case have wanted a pecuniary
penalty of $100000 as they have stated that the contraventions made by the director are
“serious”. The role of the court in this case is also to provide that the contravention made by the
defendant is “serious” or not to result in pecuniary penalties6.
In the case of Dean-Willcocks v Commissioner of Taxation7 it was stated by Austin J that
the court is never bound to the admission made by the parties to the case. In this case it was
provided by the judge that the admission of the parties may be rejected by the court if it is found
that the admissions seek a judgment which is not present naturally8.
The judge in this case ruled that his task is to find out whether the evidence provided to him
is enough to establish the breach of section 180(1) of the CA. the jurisdiction of the court is
4 [2012] HCA 18
5 (No. 8) [2016] FCA 1023.
6 ASIC v Lindberg [2012] VSC 332; 91 ACSR 640 at [6]
7 (2004) 49 ACSR 325 (Dean-Willcocks).
8 ASIC v Lindberg [2012] VSC 332; 91 ACSR 640 at [8]

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established by the making of a declaration in relation to “pecuniary penalty order s per section
1317G and disqualification order under s206 (c)9
The court provided that it is satisfied that the contravention of section 180(1) have been made by
the defendant as have been admitted by him. All the contraventions are related to the admission
of negligence by the directors towards his operations in relation to the company. The court also
found that no contravention made by the director depicted that there was intention, moral
turpitude or dishonesty of committing such actions. The court found that there was a failure on
the part of the defendant to do his duties in relation to the company which a reasonable director
would have done in the same circumstances. The court in this case also concluded the fact that
the breaches which have been made by the directors were serious. The court also ruled that it
believes that the asked penalties and suspension period is within the permissible rage also it is at
the higher end of the range. The court therefore provided that the pecuniary penalty of $100000
along with the suspension period were appropriate to be provided to the parties of the case.
This was because the court in relation to the first contravention of recovering Tigris debt found
that the director have failed to undertake enquiries that the recovery in question was in
accordance to the UN resolution and had been initiated with the approval or knowledge of the
UN.
The court found this on the basis of the evidence provided by the parties and therefore
established the first contravention. The court was provided with the evidence that the non
enquiry was for a certain period and which have been actually made after a certain time by the
director. Therefore the contravention is an omission and not a contravention done knowingly10.
9 ASIC v Lindberg [2012] VSC 332; 91 ACSR 640 at [10]
10 ASIC v Lindberg [2012] VSC 332; 91 ACSR 640 at [26]

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The second contravention was related to failure of the director to notify the board of the
company about the fact that as three former employees were not interviewed who had important
information about AWB misusing the OFFP the project rose was limited.
The evidence in relation to the contravention provided to the court depicts that the director had
knowledge that the three former employees were likely to have relevant information. It was also
within the knowledge of the director that the boards of AWB and AWBI had information in
relation to the purpose of project rose. There is no evidence to show that a reasonable person
would have given such information or not, however the court relied on the admission of the
director to state that the contravention 2 also had been made. There was evidence to show that
the director had lack of expertise in relation to investigation but still the director must have told
the board about it. Thus the directors have been negligent and have not willfully violated duties
in relation to the second contravention11.
The third contravention was related to the fact that the director did not give information to the
board that inflammation of price has been used to recover the Tigris Debt as per contract AI670
and AI680. The director also did not inform the board with respect to the agreement entered
upon by the company with Tigris, or the payment to Tigris have been “misdescribed” by the
agreement not as a debt but a fee along with describe the commission kept by AWBI as a
“success fee”12
The court in this case found that the contravention of section 180(1) had been made by the
defendant director as he had failed not only to exercise his powers but also to discharge his
duties in form of a managing director and chief executive of AWB with reasonable diligence and
11 ASIC v Lindberg [2012] VSC 332; 91 ACSR 640 at [40]
12 ASIC v Lindberg [2012] VSC 332; 91 ACSR 640 at [45]

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care which would have been done by a reasonable person in the same circumstances. This was
because evidence provided by the parties provide that the director had been given the Tigris
agreement but he was not able to read it or read it and failed to understand that it states that the
money to be given to Tigris was described as a service fee. In the same way that of contravention
1 and 2 it is implied that a reasonable person would have properly read the agreement and
understood its meaning and thus the contravention 3 under section 180(1) of the CA also has
been established. The failure of the defendant to specifically provide information to the board
that the Tigris Debt have been obtained through the use of Inflation price as per contract 1670
and A 1680 from the Escrow Account of UN13.
The contravention 4 in this case is related to the failure on the part of the director to provide
information to the board that evidence had been received by the UN Independent Inquiry
Committee with respect to OFFP (IIC) from former officials of the Iraqi Government. The
information provided that Alia was used to direct funds to Iraq and kickbacks had been paid to
all suppliers which included AWB who also made payment through Alia always. The evidence
depicted that there was an actual failure on the part of the defendant to inform the board and thus
like the other three contraventions the fount was also found to be made14.
Take away points
1. Even if the directors and the ASIC agree to the fact that contraventions have been made
by the directors and also set out penalties for it the court in order to approve such
13 ASIC v Lindberg [2012] VSC 332; 91 ACSR 640 at [51]
14 ASIC v Lindberg [2012] VSC 332; 91 ACSR 640 at [65]

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penalties and contraventions the court have to be satisfied in relation to the statutory
requirements.
2. The declaration made and the penalties by the parties to the case are accepted by the
courts if statutory requirements are made even if the penalties are at the higher end of the
range.
3. To avail pecuniary penalties serious breach have to be established

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Bibliography
ASIC v Lindberg [2012] VSC 332; 91 ACSR 640
Australian Securities and Investments Commission v Cassimatis (No 8) - [2016] FCA 1023
Corporation Act 2001 (Cth)
Shafron v ASIC [2012] HCA 18