WHITLAM v ASIC: Breach of Director Duties under Corporations Act

CORPORATION LAW
Corporation Law

CORPORATION LAW 1
Introduction
The corporation is a separate legal entity and it is governed by the Corporation Act. There are
several cases registered in Australian Courts regarding the issues of the breach of the
Corporations Act. Thus, there are several duties played by every member of the company that
includes officers, directors, managers, executives and also the chairman of the company. In
WHITLAM v ASIC [2002] NSWSC 591 case, there were several laws of the Corporations Act
had been breached. In this, it will be discussed in detail about the case facts, issues, duties
that has breached. The court decision will be analysed and the impact of that decision on the
companies of Australia and on the management of the company. This case aims on the
importance of the laws of the Corporations Act and the effect on the Australian companies
because of these breaches.
Case Introduction
The Court of Appeal in the case WHITLAM v ASIC reversed the order of the lower court
findings that the Whitlam has breached various provisions of the Corporation Law. There is
allegation that has made in relation to the Mr Whitlam that he has breached the laws of the
Corporations Act. Mr Whitlam had failed to properly vote in the resolution 6 as the
instructions given by the shareholders who had been appointed by the proxy. The
amendments that has been proposed in the Articles of Association that if passed will increase
the fixed amount of annual remuneration that has to be distributed among the directors from
$617,000 to $665,000 and it has been supported by Mr Whitlam. Few key questions have
been considered by the court of appeal in this case. The question is that the director has to
vote in accordance as the instructions given by the shareholders for appointing him as a
proxy. The failure of Mr Whitlam to sign the poll papers of the 3973 members constituted
votes. Those votes were consequently rendered invalid under the NRMA’s Article of
Association. The votes are not counted initially but the later the votes have been counted
despite the failure to sign the poll papers by Mr Whitlam. Resolution was defeated as the
votes were counted. The court of Appeal said yes but only in the capacity as an agent and not
as a director. It is also stated by the Court that the proxy votes that has been voted at law as
even the poll papers are not signed by the director. The issues in the case that has risen due to
the breach of the director duties that is required to be obeyed by the directors of the

CORPORATION LAW 2
Corporations Act. The actual decision provided in this case in context of the director duties
whether the Whitman liable or not (Smith, 2012).
Duties breached
The employees of the Corporation who holds the office have some duties towards it under the
Corporations Act. The duties that have given under the Corporations Act required to be
understood by the employees of the Corporation. The officer under section 9 of the
Corporations Act who holds the position equivalent to the director their duties has been
defined under the section of the Corporations Act. The duties under section 181 that in
relation to the duties in section 232(5), 232(6), 250A(c) had been majorly breached in this
case under the Corporations Act (Havenga, 2005). These sections states that the work should
been done in good faith or in an honest way towards the corporation. The person works in the
best interest of the company and must follow the duties that have been breached. The
Corporations Act that has been discussed that it requires the company directors and the other
officers to exercise their duties in a honest way and must for the companies interest that a
person in his place would exercise as if he is a director or the officer in the corporation’s
circumstances. The breach of the Chairman duties has been defined in this section. According
to some academics if the company’s breaches the laws of the Corporation Act, it cannot lead
to the liability of the directors for the breach of their statutory duties. In some cases the court
said that the breach of the director duties of care to authorise or to permit to contravene the
law. Mr Whitlam has breached the duty under section 181, as he has not worked accordingly
to these duties. Mr Whitlam had failed to vote properly as per the resolution 6 and the
instructions given by the shareholders who had been appointed by the prox. If Mr Whitman
has work with accordance with these sections and as if it was passed will increase the fixed
amount of annual remuneration that has to be distributed among the directors from $617,000
to $665,000 and it has been supported by Mr Whitlam. Thus due to poor care and not worked
with diligence it has created the big financial loss for the company. Mr Whitlam failed to sign
the poll papers of the 3973 members constituted votes. Hence it is proved from the evidences
that he has not he has not done his duties in accordance with the laws of the Corporations Act
(Foster, 2010).