Corporations Law Assignment: ASIC v Vines Case Analysis - HA3021

This report provides a comprehensive analysis of the ASIC v Vines case, a significant legal precedent in Australian Corporations Law. The report begins with an introduction to the case, detailing the facts surrounding Mr. Vines, a former GIO officer, and his alleged negligence. It explores the specific duties and responsibilities of company officers as outlined in the Corporations Act, particularly section 180(1), concerning the duty of care and diligence. The report highlights the breaches of these duties by Mr. Vines, including failures in due diligence and the misrepresentation of profit forecasts. It then examines the court's decision, including the rejection of Mr. Vines' contentions and the implications of the ruling. The impact of the court's decision on corporations is discussed, including the implementation of ethical and governance policies, training programs, and the emphasis on directors' responsibilities. The report concludes by reiterating the importance of the Corporations Act and the lessons learned from the ASIC v Vines case, emphasizing the need for directors and management to act with due care and diligence. References from legal and academic sources support the analysis.

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Corporations Law

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INTRODUCTION
This report is the study of the case ASIC v Vines 55 ACSR 617 that was the leading case of
Australia. The facts had been analysed in the case introduction that will show that how Mr
Vines had been negligent of his duties. The duties and responsibilities of an officer were
breached as provided in the Corporations Act. After this case, several developments had been
made in the field of Corporation law. The NSW Court of Appeal had given the leading
judgement in the case that will be discussed in this report. The importance of Corporation Act
and the effect of the decision on the companies and their management will be discussed in
this report. The companies have taken several steps to improve their policies so that the
breach of the laws of the Corporation Act cannot take place. This case has many contentions
and the legal issues on which the court had decided the case will be discussed in this report.
CASE INTRODUCTION
Mr Vines a former GIO officer had been found to be in the contravention of section 180(1) of
the Corporations Act to work with due care and diligence on many occasions during the
course of AMP’s takeover bid for GIO Australia. Although the profits had been forecasted
but due to the catastrophe in America this margin had been substantially reduced. While he
was of the situation that the situation was tight in Australia but then also he took a bid and
made an expectation that the bid will go beyond from $60-65 million (2006 Cases (a), 2007).
However, when the bid was closed it was already reached to $74 million (Jensen, 2017). Thus
the offer has been closed with the 57% of the shareholders has accepted the bid. Mr Vines
does not know about the increased amount but it was known by some of the people of AMP.
ASIC had declared that Mr Vines had breached many of the statutory duties and not shown
care and worked with diligence towards the company. He was the officer of the company and
he has the duty and responsibilities towards the company. As in the year, 2006 Mr Vines had
been disqualified for the notional period of 3 years till 30 June 2007 and had been penalized
with $100,000 and was also been ordered to pay the 22% of the ASIC’s Costs (Da Silva
Rosa, Filippetto and Tarca, 2008). However, Mr Vines had some relieved in the seven
contraventions that had been identified by the trial court judge. Mr Vines and ASIC both had
appealed for the penalty that had been imposed by the trial court judge. The lower Court was
severe in his rulings against the Vines and the officers of the GIO Australian Holdings. In

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doing so there has been made a number of observations that have been made by the court
(2006 Cases (b), 2007).
DUTIES BREACHED
The duties had been breached by the Mr Vines in this case that has been given under section
232 (4) of the Corporations Act. Now in the Corporation Act, 2001 it is included under
section 180(1) of the Corporations Act. Section 180(1) of the Corporations Act says that the
director has the duties and responsibilities towards the Corporation to work with due care and
diligence. The breach of these duties can raise the legal issues that what happened in this
case. Mr Vines had been found to be in the Contravention of his duties to work with due care
and diligence while signing the management sign off had failed to take some of the positive
steps in advising the Due Diligence Committee based on assumptions that are underlying the
profit forecast (Barker, 2015). He has also contravened his duties to work with care and
diligence while supporting the integrity of the forecast of the profit of the GIO profit to the
committee of Due Diligence. Mr Vines had also contravened his duties in working with due
care and diligence was in the period that was failing in giving the attention to the forecast of
the GIO Re profit would be achieved after Part B had been issued. Mr Vines from the
evidence had been found that he has breached many of the laws of the Corporations Act and
it was mainly the section 180(1) of the Corporations Act. Mr Vines has the duty towards the
Corporation and its owner to do his duty with due care and diligence. Therefore, ASIC had
found to be in the contravention of his officer duties and for that reasons he faced legal issues
(Ahern, 2011).
DECISION OF THE COURT
The Court had given the leading judgement in this case of ASIC v Vines. The Court had given
a decision by rejecting many of the contentions of Mr Vines in the case. The contention made
by Mr Vines in the case that he has not breached the duty of negligence in establishing the
statutory duties was higher than what is required to be breached in accordance with the
Common law or tort. The Court of Appeal had rejected the argument and the decision of the
Lower Court had been established that the standard care was required. It is well known that
the amount of negligence that was required to establish a breach of the statutory duties that
was on the context of the statue that had been breached. It means that in the criminal case, the
negligence should be proven higher and on the other side the civil liability that had been

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imposed on the civil cases and it like being in the Corporations Act. The Court of Appeal had
also found that with the agreement with the precedent-based law test that the standard related
is that of a sensible officer in these circumstances. It becomes necessary to penalize for
bringing seriousness. The Court had presumed from the observations that the statutory
responsibility of consideration and reliability that has included the carelessness in relation to
the precedent-based law. Hence, the Court had found all the defendants guilty under the
breach of section 180(1) of the Corporations Act. Mr Vines had given the notional period of 3
years till 30 June 2007 and had been penalized with $100,000 and was also been ordered to
pay the 22% of the ASIC’s Costs. Some contraventions that that were given in the favour of
Mr Vines and were upheld by the Court of Appeal (Jacobson and Jacobson, 2007).
DECISION IMPACT
The Court of Appeal decision, in this case, has opened the eyes of many Corporations who
had been governed by the Corporations Act. There are many laws of the Corporations Act
that had been breached by the Mr Vines who was an officer under section 9 of the
Corporations Act. The Companies who do not take laws of the Corporations Act seriously
had been frightened by this decision and had changed many policies in the company. There is
an ethical and governance policies had been implemented so that the companies must work
with the show due care and diligence towards their work (Cassel, 2016). The companies had
started training programs to improve their working culture and to guide their directors and the
officers that how to work efficiently and with the work with proper care and diligence. There
is required for any Corporation members the duty to work with care and diligence or it can
affect the companies functioning. The directors and the officers owe a duty not only towards
the Corporations but also towards the shareholders, customers and the investors. Many
governance theories had been implemented in the companies that say, directors, officers and
the managers are the agents of the Shareholders (Mire, 2016). The companies have set
minimum care of standard policies that the directors care towards work till not limited to their
knowledge or expertise but they should do more than that by just not merely limited to their
field of expertise. The liability of directors cannot be avoided by just lack of skill or the
knowledge. The companies had ensured that the directors must monitor and guide the
management of the company. The company must ensure that their directors that they make
the environment familiar with the management. The companies had ensured that their daily
day-to-day activities must be monitored (Kinsey and Dayman, 2007). In the Board Meeting,

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they must ensure that the regular attendance of the directors, officers regular attendance must
be there, must familiarize with the company’s financial position and can review financial
statements. The directors cannot take excuse or avoid their liability for the insolvent trading
by just saying that they cannot read the financial statements. The Companies also must ensure
that the directors of the companies had been up-to-date about the all the characteristics of the
company’s operations. The information available to the due to their position cannot be
misused by the directors. It can be concluded from all these submission that the companies
had been alerted from this case and taken major steps to improve the condition of the working
in the company (Hargovan, 2009).
CONCLUSION
It can be concluded from this case Mr Vines had breached the laws of the Corporations Act.
The decision of the Court of Appeal from the evidence it had proved that Mr Vines had not
done his with due care and diligence. The importance of the Corporations Act in the
Corporation had been proved in this case. Mr Vines was found to be in the contravention of
section 180(1) of the Corporations Act by both the Courts. Thus, it becomes an eye-opening
case for many Australian Companies. The major change had come in the working of
Australian Companies. These case has taught many lessons and mainly for the Corporations
that they must work with due care and diligence. Therefore, the companies had implemented
many policies that the directors and the management of the companies must ensure with those
policies. Thus in the conclusion, this decision was important in the context of the
Corporations Act.

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References
2006 Cases. (2007) ASIC v VINES, Supreme Court of New South Wales, 23 December 2005.
[Online] Available from:
https://iknow.cch.com.au/document/atagUio607443sl24303100/asic-v-vines[Accessed 20th
September 2018]
2006 Cases. (2007) VINES v AUSTRALIAN SECURITIES AND INVESTMENT
COMMISSION , Supreme Court of New South Wales, Court of Appeal, 22 June 2007:
[Online] Available from:
https://iknow.cch.com.au/document/atagUio1145043sl159836198/vines-v-australian-
securities-and-investment-commission. [Accessed 20th September 2018]
Ahern, D. (2011) Guiding Principles for Directorial Conflicts of Interest: Re Allied Business
and Financial Consultants Ltd; O'Donnell v Shanahan. The Modern Law Review, 74(4),
pp.596-607.
ASIC v Vines 55 ACSR 617
Barker, S. (2015) “Directors' personal liability for corporate inaction on climate
change." Governance Directions 67(1)
Cassel, D. (2016) Outlining the Case for a Common Law Duty of Care of Business to
Exercise Human Rights Due Diligence. Business and Human Rights Journal, 1(02), pp.179-
202.
Corporations Act, 2001, (Cth)
Da Silva Rosa, R., Filippetto, J. and Tarca, A. (2008) ASIC actions: canaries for poor
corporate governance? Accounting Research Journal, 21(1), pp.67-86.
Hargovan, A. (2009) Company Secretary: Directors and Officers' Statutory Duty of Care
Following James Hardie. Keeping good companies, 61(10), p.586.
Jacobson, D. and Jacobson, D. (2007) ASIC v Vines appeal decided - Australian financial
services law and credit law from Bright Law. [Online] Australian financial services law and
credit law from Bright Law. Available from: https://www.brightlaw.com.au/corporate-
governance/asic-v-vines-appeal-decided/ [Accessed 20 September. 2018].

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Kinsey, D. and Dayman, A. (2007) Vines, how much care and diligence is required by
executive officers? Keeping Good Companies, 59(5), p.290.
Mire, S.L. (2016) Independent directors: partnering expertise with independence. Journal of
Corporate Law Studies, 16(1), pp.1-37.