Analysis of ASIC v Padbury Mining Limited: Directors' Duties Breach

This case study examines the Australian Federal Court's decision in ASIC v Padbury Mining Limited, focusing on the directors' breaches of their duties under the Corporation Act 2001 (Cth). The case revolves around misleading announcements made by Padbury Mining regarding securing funding for a project. The court found that the directors violated s. 180(1) by allowing the announcements, which were deemed deceptive and misleading, violating s. 1041H. ASIC alleged further violations, including failure to make necessary disclosures under s. 674(2). The court imposed penalties, emphasizing the importance of directors ensuring the accuracy and compliance of company announcements with disclosure requirements. The analysis highlights the implications of this decision for future corporate governance and the responsibilities of company directors in Australia, stressing the need for diligence and care in corporate communications. Desklib provides comprehensive resources including past papers and solved assignments for students.

CORPORATION LAW
ASIC v Padbury Mining Limited [2016] FCA
990
Directors Duties

Introduction
When an individual is assigned as an officer
or a director of the company,
Such obligations are often known as the
directors’ duty
One of the duties which the director have
with respect to the company, is of diligence
and care

Facts of the case
This case is regarding disclosure obligations.
The court in the following case prohibited the
directors with a ban for 3 years.
The court further declared a penalty of sum
of $25,000 considering the violation of the
act.

Facts of the case
The directors are said to be responsible for
violating the s. 180
They were not able to stop the company
from stating an announcement
They said that they are going to get a fund of
amount $6 million,

THE ANNOUNCEMENTS
Securing the funds for the Western Australia
project was done successfully by the
company.
The funds were provided on the terms which
were included in the agreement regarding
the shareholders and were provided by the
private investor.
This project was declared to be expanded by
the Midwest Infrastructure Pty Ltd.

Director’s duties which have been
breached
In a company the directors need to have a
least possible standard of diligence and care
Many reasons by means of which, it is
declared that the following company has
violated the duties mentioned in the CA.
A misleading and deceptive behavior which
was probably made to deceive or mislead was
committed by the company’s directors.
Committing such behavior is also a violation
of the s. 1041H

ASIC ALLEGATIONS
The ASIC was eager to get a statement from the court against the
company, as they violated the act of deceptive and misleading
behavior under s. 1041H.
They also were in need of a statement under the provisions of the s.
674(2) regarding the violation done by the company that was the
failure in making the suitable confession regarding the
announcement.
It was also mentioned by the Australian watchdogs that the directors
of the company have also violated the s. 1041H beside s. 674(2).
Meanwhile, the ASIC were in need of a statement which was
regarding violation of the above mentioned sections, along with that
they also violated s. 180(1).
The ASIC demands the jurisdiction for an order of suspension under
s. 206C and also financial punishment under s. 1317E, to all the
direction of the company.

Court Decision Analysis
In relation to the provisions of s. 180(1) the court declared that the
violation of the section was done by the directors of thee company in
relation to their responsibilities.
The violation was regarding the allowance granted by them for
making such a statement.
The directors of the company were well aware of the fact that if they
let the announcement complete then it would defiantly violate the
provisions of s. 1041H, and the behavior is going to compose of
deceptive and misleading behavior would probably deceive or mislead.
Meanwhile, such violation of the section means major loss of status of
the company, any sensible director in similar situation not have
allowed such a thing.
The individuals who invested their time and money were in fact given
the wrong impression about the announcement done by the company,
as they supported the trading.

Court Decision Analysis
In the case of Australian Competition and Consumer Commission v
Reiwa Inc (1999) 161 ALR 79 at 86 the court declared that it was
the responsibility of the court itself to be completely satisfied by the
penalties forced on the directors are not harmful to the citizens.
Therefore, the proposal made by the ASIC was approved by the
court regarding the penalties.
The directors also agreed in front of the court of the fact that their
company had violated the s. 674((2) at two occasions.
This was done as it was evident and the directors of the company
also agreed that where the provisional essence of the agreement
was given to the sensible investor it would have had a medium
impact on the sum of the share.
The directors also admitted that they also failed to make sure that
appropriate declaration was needed under s. 674(2) of the CA,
towards the parties who provided the fund for the project.

The implications of the decisions provided by the court
in future of the company law in Australia
The directors in the company required to be totally
satisfied prior to the time when the announcement was
been made,
If the directors of the company failed to be completely
satisfied regarding the announcement itself, then the
directors decisions are said to be deceived or misleading
which is likely to deceive or mislead.
where the directors themselves makes the announcement
it needs to be in accordance to the declaration necessities
which are mentioned under the s. 674(2) of CA.
The role of creating advice to the court is given to the
ASIC, in which the penalty is to be forced on the
defendants.

Conclusion
Finishing the investigation it is declared that
directors of the company require being
exceptionally careful while dealing with such
announcements
 it can also have a harmful impact on the
status.
The directors must also hold back by s.
180(1), to involve in such an act which no
sensible director would do in a similar
situation.

References
ASIC v Padbury Mining Limited [2016] FCA
990
Australian Competition and Consumer
Commission v Reiwa Inc (1999) 161 ALR 79
Commonwealth of Australia v Director, Fair
Work Building Industry Inspectorate (2015)
326 ALR 476
Corporation Act 2001 (Cth)