ASIC v Adler (2002) 41 ACSR 72 - Case Study

Running Head: CASE STUDY
ASIC v Adler (2002) 41 ACSR 72
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CASE STUDY
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Facts of the Case:
The issue in the case is whether the defendant breached his duty to not make improper
use of his position as per the applicability of section 182.
Adler was the non-executive Director of HIH Company. He also controlled the trust
through Adler Corp and Pacific Eagle Equity Pty (PEE). Adler Corp was PEE’s single
shareholder.
The assets controlled by PEE were technological stock. These stocks were worth less
than 10 million $. However, HIH paid 10 million$ to the trust controlled by Adler. PEE used a
portion of this advanced money to buy the shares of HIH. Adler Corp also owned a good portion
of shares in HIH. No approval of the shareholders or any other statutory regulations were
complied with for such decisions of share purchasing or loan.
ASIC filed a suit against Adler, Williams and Fodera for interfering with the related party
dealings and fiscal help along with the interference with the director’s duty as incorporated in the
Corporations Law 1998 (Cth).
Issues in the Case:
The primary legal issue in the case is whether Adler made adverse profits from the
improper use of his position in the company and the trust under section 182 of the Corporations
Act 1998 (Cth).
The second issue in the case is whether the 10million$ loan as advancved by HIH to PEE
can be recognized as a fiscal benefit from a related party.

CASE STUDY
2
The third issue in the case is whether Adler was entitled to any defence against the breach
of related parties transactions provisions.
Analysis:
The case of ASIC vs, Adler basically explains the appli8cability of section 181 of the
Corporation Act 1988 (Cth). HIH has been considered as the largest company cpollapse in the
history of Australian financial market.
Section 180 of the Act is the duty to act with due care and diligence. According to section
180 (1) of the Corporation Act, the directors and officers of the company are expected to
discharge their duty with proper care and diligence as a reasonable person in that position. In
other words, it is the duty of a director to discharge his powers and duties in the best diligent way
possible as it would have been discharged by a reasonable in that particular position (Australian
Securities and Investments Commission v Rich (2009) 75 ACSR 1, 627 [7254]). In this scenario,
a reasonable director would not have accepted the loan of 10 million $ from from HIH. Thus,
Adler also proved not to be able to protect the company of HIH. In other aspect, the loan was
advanced and accepted without any approval of the shareholders of the company and hence, the
shareholders and the other were not able to safeguard the company from the breach of section
180 of the Act and the subsequent actions. Adler had breached very important and major
provisions of the Act resulting in the failure discharge his duties and obligations effectively as a
director to the company and hence resulting in subsequent legal charges and further actions.
These duties and obligations which were breached were of utmost importance and should have
been carried out with utmost care and diligence (Australian Securities and Investments
Commission v Rich (2009) 75 ACSR 1, 627 [7254]).