Business Law Case Study: Gonzo's Director Duty Breach and Penalties

This case study analyzes a business law problem concerning Mr. Gonzo, a director of UR Saved Pty Ltd, and his potential breach of director duties under the Corporations Act. The analysis examines whether Mr. Gonzo acted in good faith and in the best interests of the company when he learned about an investment opportunity with Travel Services R Us Pty Ltd. The solution applies relevant sections of the Corporations Act, including sections 181, 182, 183, and 184, and compares the situation to precedents like WHITLAM v ASIC and ASIC v Adler, and R v Rivkin. The assignment concludes that Mr. Gonzo breached his duties and is liable for penalties due to his failure to act in good faith, misuse of information, and improper use of his position for personal gain, ultimately advising him on the importance of adhering to director duties to avoid legal implications. The case highlights the importance of ethical conduct and the potential legal ramifications of conflicts of interest in corporate governance.

Business Law
Business Law

Business Law 1
Issue
Does the duty have been breached by Mr Gonzo as the director of UR Saved? Whether he
should be penalized for this breach?
Rules
This problem had the basic rules that are under section 181 of the Corporation Act that the
director or the officer should work in the best interest of the company or in good faith. In
WHITLAM v ASIC [2002] NSWSC 591 case, the Court had found Mr Whitlam in the
contravention of the section 181 as he is the Chairman of the company and he has not done
his duties in good faith. Section 182 states that the director should not use his position
improperly for their personal benefit or the benefit of someone else determinant to the
company. Section 183 states that the person cannot take an advantage of the information they
gain in the course of their director duties to gain any advantage for himself or for somebody
else. . In ASIC v Adler (2002) 41 ACSR 72; [2002] NSWC 171 case, the court had found the
Adler in the breach of the section 180, 181,182 & 183 as he had misuse the information he
has gained in the course of his director duties for the person gain. Section 184 states that if
any of the duties breached as not worked in good faith or improper use of information and the
use of position for the personal gain or for the gain of the others then the criminal liability
will arise. In case, R v Rivkin [2002] NSWSC 1182: 198 ALR 200; 45 ACSR 366, Mr Rivkin
had misuse the information, his position, not acted in good faith and the court found to be in
the guilty under section 184 of the Corporations Act
Application
The rules that are breached in this case, as firstly Mr gonzo did not worked in good faith
under section 181 of the Corporation Act. He has the information that Travel Services R Us
Pty Ltd is searching for the investors and if UR Saved will invest then will earn good profits.
He mislead his company by saying that the venture is very risky and speculative venture and
not suitable for U R Saved but he only invested his own money. He invested $100,000 in the
Travel Services R Us Pty Ltd and earned the profit of $ 1.5 million within the six months of
the investment similarly, it was happened in the case of (ASIC v Adler). It had been proved
that he had breached the section 183 by the use of information he had gained due to his
position as a director for the personal benefit. He also breached the section 182 by improper

Business Law 2
use of his position for the personal benefit. Thus, it can be said that Mr gonzo had done the
criminal offence under section 184 of the Corporations Act, as he had not worked in good
faith, use the information and the improper use of his position as similar in the case (R v
Rivkin). These breaches of the duties had mentioned in the other three cases where these
duties had been breached. Thus, the duties had been breached by Mr Gonzo and he is liable
for the penalties. Therefore, it is advisable for Mr Gonzo that he should understand his
director duties that if the breach of his duties that can effect to the legal implications.
Conclusion
It can be analysed from the case that the director duties of the Corporations Act had been
breached by the Mr Gonzo and he is liable for being penalized. Mr Gonzo is liable for the
criminal penalties for the breach of the sections 181,182,183 & 184 of the Corporations Act.
In the Conclusion Mr Gonzo has been advised to follow his director duties that are given
under the Corporations Act, 2001.