Storm Financial Limited Assignment Report

Running head: COMPANY LAW
COMPANY LAW
Name of the Student:
Name of the University:
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COMPANY LAW1
1. ASIC v Cassimatis (No 8)
Overview of ASIC
The present assignment involves a case1 instituted by ASIC against Mrs. and Mr.
Cassamatis, Storm Financial Limited (Storm)’s executive directors that they had caused the
breaching of s180(1) of the Corporations Act 2001(Cth)2 by making and allowing Storm to give
advice only to some investors according to the ‘Storm model’ in such a way that caused the
company to breach some sections of the said Act like section 945A(1)3 as per Langford (2017)4.
This section that was repealed in the year of 2012 provided that financial service licensee like
Storm shall give advice to the clients as per sections 945A(1)(b) and 945A(1)(c)5.
ASIC started proceedings against the couple in 2010 for breaching of duties of care as
well as diligence as per s180(1)6. It was alleged that the directors caused the breach of their
duties when Storm was solvent and they were the only directors as well as shareholders of the
company.
ASIC further alleged that by allowing financial services to only vulnerable investors who
were about to retire, having limited income and assets and no chance to recover their financial
position in case of loss, Storm caused the breach of the then sections of the Act that reasonable
basis of financial advice to the retail clients. ASIC held that the directors breached s180(1) by
allowing Storm to give advice to the investors as per the model that caused Storm to infringe the
1 ASIC v Cassimatis (No 8) [2016] FCA 1023.
2 Corporations Act 2001(Cth) s180(1).
3 Corporations Act 2001(Cth) s945A(1).
4 Langford, R.T., (2017). Stakeholder Interests and the Duty of Care.
5 Corporations Act 2001(Cth) ss945A(1)(b), 945A(1)(c).
6 Corporations Act 2001(Cth) s180(1).

COMPANY LAW2
Act and allowing Storm to give financial advice in such a way that again contravened the said
Act as per Baxt (2016)7.
These actions led the company to a risk of cancelling its AFSL, an order of ban and also
civil proceedings made by the investors and all these risks are reasonably foreseeable. It further
alleged that risk that can be suffered by the company will be more than what would be allowed
by a director acting carefully and diligently.
The court in this case applied the test of section 180(1)8 that whether the directors had
applied care and diligence like other while using their powers during the performance of their
duties as given in Vrisakis v Australian Securities Commission9. The court found that company
had breached the Act by allowing financial services as per the Storm Financial model of category
of vulnerable clients as identified by ASIC.
The court also while deciding the case noted that although the duty of diligence and care
sounds similar, the standard which must be followed by the officer or a director must be
according to the situation of the corporation as well as the position and responsibilities of the
director as per his position as per Hanrahan (2018)10. The court also referred to the case of
Shafron v Australian Securities and Investments Commission11 and held that nonexecutive
directors must not be subjected to the same level of the executive directors. Hence, breach of
section 180(1) by both of them was established in this case. It was held that both of them could
be also excused from contravention as per section 1317S12. As per this provision, a person is
relieved by the court for breaching a civil penalty, partly or wholly from his obligations provided
7 Baxt, B., 2016. Directors' counsel: Forgiving directors for breaches of duty. Company Director, 32(10), p.54.
8 Corporations Act 2001 (Cth) s 180(1).
9 Vrisakis v Australian Securities Commission (1993) 9 WAR 395.
10 Hanrahan, P., 2018. Directors' counsel: Law enforcement. Company Director, 34(11), p.36.
11 Shafron v Australian Securities and Investments Commission (2012) 247 CLR 465.
12 Corporations Act 2001 (Cth) s1317S.