Case Study: Directors' Duties in ASIC v Mariner Corporation Litigation

This case study examines the Australian Securities and Investments Commission v Mariner Corporation Limited case, focusing on the alleged breaches of directors' duties under the Corporations Act 2001 (Cth). The case involves a public announcement of a takeover bid, and the ASIC contended that the directors violated duties of care and diligence (section 180(1)), misleading and deceptive conduct, and the rules regarding takeover bids. The court's decision hinged on the business judgment rule (section 180(2)), determining whether the directors acted reasonably, in good faith, for a proper purpose, and with informed decision-making. The analysis highlights the court's reliance on the business judgment rule, the evidence presented, and the implications of the decision in relation to the meaning of "reasonably believed" and the opportunity for directors to take calculated risks. The case study references supporting legal precedents and clarifies the application of the business judgment rule in the context of directors' duties and corporate law.

DIRECTORS
DUTIES
CORPORATION
LAW
AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION V
MARINER CORPORATION LIMITED [2015] FCA 589

Case Introduction
 Australian Securities and Investments Commission v Mariner
Corporation Limited relates to announcement of take-over bids
and breach of directors duties.
 it has alleged by the ASIC that the directors and the company
have contravened the rules under Corporation Act 2001 (Cth)
(the Act).
 Section 631(2)(b) (take-over bids)
 1041H (Misleading and deceptive conduct)
 Due diligence and care duty of section 180(1)

Case Facts
 A takeover bid had been publically announced by the defendant
company.
 The Bid was alleged to be made recklessly by the ASIC
 The company did not have the required financial resources or
support to make the Bid
 The terms of making the takeover bid clearly stated that a bid
cannot be made below 11 cent every share whereas the
company wanted to make a bid at 10.5 cent per share

Submission by the defendant
 They have not made any breach in relation to either section
1041H
 They have not made any breach in relation to either section
631(2)(b)
 Allegation made by the claimant for the breach of s 180(1) of the
Act are without any evidence

Submission by the Claimant
 ASIC contended that section 180 has been contravened even if
the conduct was not misleading and deceptive.
 The defendants had not complied with the business judgment
rule
 The defendants actions were not in goof faith and proper purpose

Breach of duties
 The ASIC clarifies in relation to the situation that it holds the
three directors in violation of the duties under section 180(1) of
the CA as a reasonable director in the same role having the same
responsibilities would not breach by making a reckless public
announcement the rules under s 631(2)(b) of the Act
 A reasonable director would not breach section 1041H and
indulge in a misleading and deceptive conduct.
 A reasonable director would not make an unlawful announcement
which is contrary to s 621 (3).

Evidence relied upon by the ASIC
 Peoples Department Stores Inc. (Trustee of) v. Wise,
[2004] 3 S.C.R. 461
 Reasonably believed was what was actually believe by the
directors Australian Securities and Investments
Commission v Rich. (2009) 236 FLR 1
 The factors of the business judgment rule
 Fortescue Metals Group Ltd v Australian Securities and
Investments Commission [2012] HCA 39
 The kind of decision taken by the directors

Decision of the court
 there has been no recklessness on the part of the company or
the directors.
 directors of the company have not violated section 631 (2)(b)
and therefore they are not reckless.
 the price or funding representation made by the company was
not a conduct which is misleading or deceptive or is likely to
mislead or deceive
 the directors of the organisation did not commit an action which
can be regarded as for contravention of section 180(1) of the act.

Analysis of the decision
 The court relied on the business judgment rule to address the
issue of the contravention of directors duties.
 The business judgment rule is provide under section 180(2) of
the CA
 The business judgment rule applied as there was a business
judgment in which the directors were involved.

Analysis of the decision
 The business judgement rule has been consciously used by the
directors for the purpose of supporting the bid
 The directors provided evidence that the circumstances which
were present at that time when the bid was made the Bid would
have even been made by a “dover dog”.
 The court viewed the evidence provided by the directors in the
light of substantial and relevant actions which take place in these
kinds of deals.
 The court was satisfied with the fact that the directors and the
company had complied with the requirement of proper purpose
and in good faith

Analysis of the decision
 The business judgment provisions analyze personal interest
 There was no question of any personal interest in this case
 The business judgment rules asks for informed decision making
 The court held that the decision making was informed
 The business judgment provisions asks the decision to be in best
interest of the company
 The court held the requirement to be satisfied by the court as
any reasonable director would believe that the action was in the
best interest of the company

Implications of the decision
 The meaning of “reasonably believed” had been satisfied by the
court
 Breach of CA provision does not evidently result in the breach of
Directors duties
 The directors are given the opportunity to take calculated risks