Directors’ Duties: ASIC v Vizard (2005) FCA 1037

Running head: DIRECTORS’ DUTIES
Directors’ Duties
Name of the Student
Name of the University
Author Note

1DIRECTORS’ DUTIES
ASIC V VIZARD (2005) FCA 1037:
Issue:
The issue in this case is related to the duties of a director in regard to improper use of
information. In this case, the matter in issue is concerned with the fact that whether it is the duty
of the director to refrain from using confidential information that has been obtained during the
course of his duty as a director. In this regard, the nature of the duty is such that it has been
declared to be for improper purpose.
Facts:
In the year 2000, Stephen Vizard was appointed as the non-executive director of the
Telstra Corporation Limited. During the tenure of his directorship, there were three occasions
where Stephen Vizard was involved in improper use of information that was obtained by him
when he was acting as a director of Telstra. In this case, firstly, it can be observed that the
defendant Stephen Vizard was involved in a series of business activities. However, he intended
to involve in share trading which is quite a public activity. Therefore, in order to hide such
trading activities from the public, he made certain arrangements. In the first place, he established
the company Creative Technology Investments Pty Ltd and thereafter he made his accountant the
sole director and shareholder of such company. In the second instance, the breach was caused by
involving the trustee company Brigham Pty Ltd and its shares were owned beneficially by
Vizard’s (defendant) wife and children. There was a loan agreement between Brigham Pty Ltd
and Creative Technology Investments Pty Ltd. However, loan funds can only be obtained from
Brigham to Creative Technology Investments Pty Ltd if the defendant provides access to releted
funds or entities. In this regard, it is noteworthy to mention here that, the process of share trading
commenced after the loan agreement has been completed. It is worth mentioning that, three

2DIRECTORS’ DUTIES
transactions were entered for the purpose of practicing share trading. The nature of the
transaction is such that, Stephen Vizard has entered those by obtaining relevant and confidential
information from the company records which during that point of time indicated that such kind
of trading would prove to be profitable.
The first trade involved a merger between Telstra and Sausage Software which took place
in regard to his prior knowledge. There was a stake held by Telstra in both Sausage Software and
Solutions 6 Holding Limited. However, in 2000, confidential discussion took place between
Telstra, Sausage Solutions and Solutions 6 Holding Limited and the basis of the discussion
involved a possible merger of Sausage Solutions and Solutions 6 Holding Limited. Thereafter,
two subsequent emails were sent to the organization further informing that, the idea of the
merger was well advanced and further proposals were made in regard to the merger of the two
companies. During this point of time, the defendant became obvious that, the proposed merger is
likely to become public and would increase the share price of Sausage Solutions. According to
the case of ASIC v Vizard [2005] FCA 1037; (2005) 145 FCR 57, the confidential information
was used by Stephen Vizard when he was serving his position as a director of Telstra regarding
buying the shares in three IT companies. The nature of the act was such that it was considered to
be improper use of information. Lastly, it can be stated that the directors are free to use any
information for the benefit of the company however; such information shall not be used for
personal benefit.
Relevant Laws and Principles:
Under the Corporation Act 2001 (Cth), the issue has been well recognized by the law.
According to the provisions of Section 183(1) of the Corporations Act 2001(Cth), directors are