Analysis of Gore v ASIC: Corporation Law Case Study

This case study analyzes the case of Gore v Australian Securities and Investments Commission (ASIC), focusing on the principles of accessorial liability under the Corporations Act 2001. The case revolves around Ms. Mariana Gore's appeal against a lower court's decision regarding her involvement in offering securities without proper disclosure. The Federal Court's decision and its implications for directors and officers of companies are discussed, particularly concerning the requirements for establishing accessorial liability. The analysis delves into the breaches of sections 727(1), 727(2), 1041H, and 12DA of the Australian Securities and Investments Commission Act 2001. The study examines the court's reasoning, the importance of proving knowledge of the contravention, and the impact of the decision on the operation of companies. The study emphasizes the importance of understanding accessorial liability and its implications for directors and officers, as well as the responsibilities related to securities disclosure under the Corporations Act.

Running Head: CORPORATION LAW
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Author Note

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Case Introduction
The case Gore v Australian Securities and Investments Commission [2017] FCAFC 13 has
reiterated that officers, directors and advisors of a company can be held to be personally
liable as an accessory breach of the Corporations Act 2001 by any other director, officer or
advisor. They can be held personally liable for particularly in a scenario which involves
issues of disclosure of securities as provided in Part 6D.2. In this case, Gore v ASIC, Ms.
Mariana Gore made an appeal against the decision of the lower court, which had given the
verdict involving:
 Injunction for time period of seven and a half years according to the provision as
provided in section 1324 of the Corporations Act 2001 restricting her to engage or
carry on any business in the industry of financial services.
 The lower court had given the verdict after it was convinced that the defendant, Mrs
Gore had knowingly contravened the provisions of sections 727(1) and section
727(2). She had offered securities without the issuance of a current disclosure
document. The court held that the defendant had also breached section 1041H and
section 12DA of the Australian Securities and Investments Commission Act
2001while she engaged in isleading and deceptive conduct.
The ASIC had cross-appealed against the terms of the injunction and on the ground that the
terms of the injunction was inadequate. However, the Federal Court dismissed the appeal.
Breach of duties involved in this scenario
In this scenario the provisions of Accessorial liability of a person in aiding another person to
contravene the provisions of the Corporations Act is relevant. It can be stated in accordance
with section 79 of the Corporations Act 2001 a person can be found guilty or personally

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liable if it is established that the former person was involved in the contravention of
provisions of the Corporations Act by the latter person. However, it has been clearly provided
that for being involved in the process of contravention a person:
 Must have abetted, aided, counselled or procured in the contravention
 Directly or indirectly knowingly had been involved in the contravention
 Conspired about the effect of the contravention or the act of aiding another person in
the contravention with others.
It can be stated that Ms. Gore had been knowingly concerned and involved in the
contravention of section 727(1) and 727(2) of the Corporations Act 2001. It has been
specifically provided in section 727(1) of the Corporations Act 2001 that any person, who is
in charge of the operations of business, must not offer securities or issue a form of application
for offering securities, which needs to be disclosed to the investors under part 6D.2 of the
Corporations Act unless ASIC has received the disclosure document for which the securities
had been offered. In section 727(2), it has been provided that a person must not make an
offer of securities or issue application form for offering securities, which needs to be
disclosed to the investors under part 6.2 unless:
 A prospectus is issued for conveying the offer of securities
 A profile statement and a prospectus are issued to convey the offer of securities
 An information statement is used for the offer.
In this caseMsGore had also been concerned with the contravention of section 1041H of the
Corporations Act 2001. It has been provided in section 1041H that any person who engages
in misleading and deceptive conduct will incur civil liability. In subsection 1041H(2) the
definition of engaging in misleading and conduct in relation to financial product has been
given.

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In addition to the aforementioned contraventions Ms. Gore had also been found to have
aided in the contravention of the 12DA of the Australian Securities and Investments
Commission Act 2001(Cth) (AA 2001)
Discussion and the Analysis of the decision of the Court in relation to the case
The Federal Court in relation to this case, dismissed the appeal of appellant and the cross
appeal by the ASIC with costs. The court gave the following reason for dismiss the appeals:
 The federal court stated that that it only wished to address the alleged accessorial
liability of the appellant in relation to breach section s 727 of the Corporations Act
2001(Cth). The federal court further stated that it otherwise agreed with HIS Honour’s
reasons for giving the verdict.
 In this case the primary allegation which had been brought against the appellant was
concerning section 727 of the CA. It was alleged that Ms. Gore was indirectly or
directly knowingly concerned about the contravention of the aforementioned section
(727) by the other defendants. The respondent, ASIC sough declarative and injunctive
relief against her. For the purpose of availing the injunctive the ASIC relied upon the
provisions of the section 1324(1) of the Corporations Act 2001(Cth). This section
states that a person will be held to have engaged in conduct which constitutes a
contravention to the provisions of the Act, attempting to contravene the provisions of
this act, aiding another person in the contravention of the provisions of this act,
inducing another person to contravene this act by threatening him or conspiring with
others to contravene this act.
 In relation to assessment of accessorial Liability of the appellant, the Federal Court
held that there was a distinction between being a party to a contravention or being
concerned in contravention and being knowingly concerned in the contravention or

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being a party to the contravention. The court held that neither knowledge of the
essential elements of contravening the section in consideration, nor participation of
the appellant in contravention in consideration is sufficient to attract accessorial
liability. The Federal court had been satisfied about the aspect of the judgment of
Rares J which stated that the appellant had participated in the contravention of section
727. However, the Court focused on the question which concerned about the
knowledge of MS. Gore about the possibility of the contravention at the time when
she participated in the contravention.
 The Court cited the case Yorke v Lucas (1985) 158 CLR 661 for the purpose of
assessing the accessorial liability of the appellant. In this case it had been held by the
judges unanimously that for establishing accessorial liability of a person for
contravening the statutory provisions of this act in civil proceedings, it is important to
prove all of the essential elements of the contravention and that alleged person had the
knowledge of facts which said that the knowledge of the alleged person must not be
constructive nut actual as held in the case Australian Securities and Investments
Commission v Adler [2002] NSWSC 171, (2002) 168 FLR 253 (ASIC v Adler).
 The Federal court held that knowledge of the important elements of the contravening
conduct does not require knowledge of the fact that the conduct in consideration is
contravening conduct. The judgment in the first instance with respect to the case
(Australian Securities and Investments Commission v ActiveSuper Pty Ltd (in
liq) (2015) 235 FCR 181; [2015] FCA 342) provided that defendants had been
indirectly or directly been concerned in the contravention of section 727 of the
Corporations Act 2001. The court had granted injunctions which restrained the
defendants from engaging in business activities which involved financial products,
financial services and superannuation.

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 Upon receiving the application of appeal the Federal court considered extensively the
state of Ms. Gore’s knowledge at the time of her participation in the contravention.
The majority of the judges of the Federal Court upheld the decision of the Primary
Judge and subsequently dismissed the appeal of Ms Gore as well as the cross appeal
by the ASIC. However, Dowsett and Gleeson JJ had a disagreed with the initial
judgment given by the primary judge. The disagreement was in regards to the analysis
of the elements of section 727(1) of the (Gore v ASIC at [37]-[40]). It can be stated
that the primary judge in this case had identified the following elements in relation to
interpretation of the aforementioned section:
 The contravenor had offered the securities or had distributed an application of the
securities
 The offer of securities needed to be disclosed to the investors as per Part6D.2 of the
Corporations Act 2001
 However, no profile statement, prospectus or offer information was lodged with the
Australian Securities Investment Commission.
It had been stated by Dowsett and Gleeson JJ that the primary judge had considered that
ASIC was required to only prove the first and third element and that the ASIC was not
required to establish in the court that the defendants possessed the knowledge, that they
were mandated to disclose the securities being offered to the investors under Part 6D.2.
However, with reference to the case Giorgianni v The Queen (1985) 156 CLR 473
and Yorke v Lucas, Dowsett and Gleeson JJ found that the primary judge did not identify
the second element correctly. It was held by the aforementioned judges that the relevant
knowledge in this case referred to the knowledge of the relevant facts which led to the
need for the disclosure of the information and not that such disclosure was necessary
under Part 6D.2. It had been further held by the aforementioned judges that the approach

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of the primary judge was erroneous as ignorance of law cannot be considered to be a valid
excuse.
Relevance of the Decision and the impact of the decision on the operation of the
companies
It can be stated that the decision of the aforementioned case sends a timely warning to the
directors of the companies and has also been successful in explaining the implications of
accessorial liabilities. The Federal Court of Australia has recently considered in numerous
cases whether directors can be accessory to contraventions of the provisions of the
Corporations Act 2001and the Australian Securities and Investment commission Act 2001.
The case Australian Securities and Investments Commission v ActiveSuper Pty Ltd is
followed by the investigations commenced into the operations of two self-managed
superannuation fund (SMSF) advisory companies; Royal Capital and Active Super Pty Ltd.
In relation to the case the Federal Court had held that it is important for a person take part in
the contravention intentionally and with the actual knowledge of the important elements of
the contravention for him to incur accessorial liability. Further it had been held by the Federal
Court that evidence or proof of actual knowledge about the essential elements can be derived
from the direct knowledge of the circumstances of the person and their failure to conduct
enquires to eliminate any suspicion. Such proof can also be derived from actual and direct
evidence. Inaction of a person or mere knowledge of such person is not sufficient for
establishing that a person was knowingly concerned in the contravention. It can be stated that
section 79 of the Corporations Act 2001 (Cth) has been relied upon in many recent decisions
of the courts in conjunction with the provisions of common law regarding accessorial liability
as provided in the Barnes v Addey (1874) LR9Ch App244 (Barnes v Addey) case. In the case
of Gore vs ASIC it was held by the majority of the court that it was unnecessary for the
appellant to have knowledge of the provisions with respect to the offer of securities or the

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specific legal provisions in relation to disclosure of such offer to the investors as mentioned
in the Corporations Act 2001. It was held by the court that the knowledge of the factual
matters leading to the illegality was sufficient enough to establish a breach of section 79 of
the CA and incur accessorial liability. Therefore in light of the decision of the
aforementioned case, it can be stated that the impact of the principle of accessorial liability is
generally more far reaching. However, a difficulty is often encountered while proving the
knowledge of the accessory about the contravention of any section of the corporations act for
the establishment of accessorial liability. Therefore in light of the judgment of the
aforementioned case it can be said that business associates and advisors must be conscious of
getting involved in illegal dealings that may give rise accessorial liability.

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Reference List:
Barnes v Addey (1874) LR9Ch App244 (Barnes v Addey) case
Corporations Act 2001 (Cth)
Australian Securities and Investments Commission v ActiveSuper Pty
Giorgianni v The Queen (1985) 156 CLR 473
Australian Securities and Investments Commission v ActiveSuper Pty Ltd (in liq) (2015)
Australian Securities and Investments Commission v Adler [2002] NSWSC 171, (2002) 168
FLR 253 (ASIC v Adler)
Yorke v Lucas (1985) 158 CLR 661