Detailed Report: ASIC vs Adler Case and Corporate Law Implications

This report provides an in-depth analysis of the ASIC vs Adler case, focusing on breaches of the Corporations Act 2001. The case involves an unsecured loan from HIH Casualty and General Insurance Ltd. to Pacific Eagle Equity. Adler, a key figure, along with other directors, was found to have breached duties, including misuse of position and failure to act in good faith. The court's decision included banning Adler and other directors from company directorships, imposing penalties, and ordering compensation. The report details the reasons behind the court's ruling, emphasizing the directors' failure to perform their duties and the improper use of their positions for personal gain. It also highlights the breach of the business judgment rule, providing a comprehensive overview of the case's legal and ethical implications.

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Business and Corporation Law

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Table of Contents
Introduction................................................................................................................................3
Court’s tribunal decision............................................................................................................4
Reasons behind this decision.....................................................................................................4
Conclusion..................................................................................................................................6
References..................................................................................................................................7

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Introduction
This report is about ASIC vs Adler, 2002 case. In this case, an unsecured loan of $10 million
was given by HIH casuality and general insurance ltd. to Pacific Eagle Equity private limited
(PEE). The controller of PEE was Adler. Adler and Williams were the managing directors
of HIH and HIHC and Fodera was the finance director of HIH. Adler was also a shareholder
of HIH through the Adler Corporation Limited (Kourula, et al., 2017). This report explains in
detail the tribunal decision of the court and the reasons behind this decision as per the
corporation act.

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Court’s tribunal decision
The court gave the decision that Adler has breached various duties under the Corporation act,
2001. The duties breached by Adler includes duty not to misuse the position, duty not to use
the information in improper manner, duty related to good faith, duties as a director, duty of
care. For the breach of these duties, the court has given the decision to ban Adler to be
appointed as a director of any company for at least 20 years and the other director William,
was banned for 10 years. The court also imposed penalties on all of them and the amount of
penalty was $450000 for Adler, $250000 for William, $450000 for Adler Corporation and
$5000 for Fodera. In addition to this, the court has ordered that William, Adler and Adler
Corporation were required to pay a sum of $7,986,402 as a compensation to HIHC
(Bainbridge and Connor, 2016).
Reasons behind this decision
There are a number of reasons behind this decision. The first reason was inability of directors
to perform their duties which means they have given the loan to PEE withount any legal
documentation. Fodera as the finance director of HIH failed to perform his duties as he gave
the loan of $10 million to PEE without any information to the board of HIH. As per this case,
Adler had breached the duty to act with deligence by granting the loan to PEE and then using
the amount for purchasing the shares of HIH (Peden, 2017). This was done by Adler to
increases the prices of shares of HIH. This resulted in a total loss of investment to PEE. One
more reason behind the decision was improper use of the position. In this case, Adler misued
his powers because all the transactions whether they were related to granting of loan or
buying and selling of HIH shares, these all transactions took place for the personal benefit of
Adler. He misused his position to take personal benefit. Adler, Williams and Fodera breached
the rule of business judgement. Business judgement means that the directors are required to
make any decision related to the company with honesty and without thinking about their

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personal benefits but here in this case, the decision is taken by all the three directors for their
personal benefits (Yoshikawa and Hu, 2017).

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Conclusion
At last it is concluded that this loan was given by HIHC to PEE with an intention that PEE
acquire the shares of HIH which was the holding company of HIHC. But because of this a
material loss was suffered by HIHC and HIH.

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References
Bainbridge, W. and Connor, T. (2016) Another Way Forward? The Scope for an Appellate
Court to Reinterpret the Statutory Business Judgment Rule, COMPANY AND SECURITIES
LAW JOURNAL, 34(6), pp.415-437.
Kourula, A., Pisani, N. and Kolk, A. (2017) Corporate sustainability and inclusive
development: highlights from international business and management research, Current
Opinion in Environmental Sustainability, 24, pp.14-18.
Peden, E. (2017) Civil and criminal liability of directors and officers of sporting clubs,
Commercial Law Quarterly: The Journal of the Commercial Law Association of Australia,
31(1), p.12.
Yoshikawa, T. and Hu, H.W. (2017) Organizational citizenship behaviors of directors: an
integrated framework of director role-identity and boardroom structure, Journal of Business
Ethics, 143(1), pp.99-109.