HI6027 Business & Corporations Law: ASIC v Southcorp Case Analysis

This case study examines the ASIC v Southcorp Limited (No 2) [2003] FCA 1369 case, focusing on the breach of director's duties under Section 674(2) and Section 181 of the Corporations Act 2001 (Cth). The case revolves around Mr. Glen Cunningham, who shared information about Southcorp's expected financial performance with market analysts, leading to a fluctuation in the company's share price. The court found that Mr. Cunningham had not performed his duty according to Section 674(2) and was liable to pay a penalty. The case serves as a significant lesson for directors and officers of corporations in Australia, emphasizing the importance of awareness regarding their roles and responsibilities in continuous disclosure and acting in good faith for the company's benefit.

ASIC v Southcorp Limited (No 2)
[2003] FCA 1369 (27 November
2003); 203 ALR 627; 22 ACLC 1
(Student’s Name)

Section 674 (2) of Corporations Act, 2001 (Cth)
required a listed disclosing entity to disclose the
information which is
1. Not Generally Available
2.have a material impact on price of enhanced
disclosure securities in the view of a reasonable
person. (Section 674
(2) only applies to that listed disclosing entity, on
which provisions of Rule 3.1 of listed rules applies.
Section 674 (2) has Civil Provisions and if a
corporation or it is directors or officers does not
comply the same then court can levy penalties
under Section 1317G of Corporations Act, 2001
(Addison and Chew, 2011).

Section 181 of Corporations Act, 2001
States that every director and officer of the
company must work
1. In good faith of the company and
2. For a reasonable purpose. (Legal Services
Commission of South Australia, 2018).
Further, In general course; Intention of a
defaulter is not relevant for the application
of this section. Even if a director or officer
work without any wrongful intention but
breached their duty under this section, they
same will be held liable.

2. Such information is an
incomplete proposal
3. Basis of such information is a
presumption.
4. Such Information is only need to
available for corporation’s internal
management.
5. Such information is of
confidential Nature or keep trade
secret related to that listed
disclosing entity.
(ICP, 2018).

Facts of the Case:- Mr. Glen Cunningham, Executive General
Manager of Corporate Affairs of Southcorp Limited, has sent
following information via e-mail to 11 market analyst
1. Southcorp is expected to sell it is 2000 Vintage super
premium in financial year 2003
2. That in comparison to financial year 2002 there will be an
impact of order of $30 Million due to poor 2000 Vintage, in
financial year 2003
Cause of this e-mail, market price of shares of Southcorp
Limited has fluctuated very Fluently and the same has fallen
down

Decision of the court
Australian Securities and Investments
Commission has initiated against
Southcorp Limited due to not informing
Stock Exchange about Sell and other
impacts of 2000 Vintage
Court during proceedings has declared
that the provided information was
covered under the exceptional situations
and due to this reason need not to be
sent to analyst as well as to Stock
Exchange
.

Court Further stated that Mr.
Cunningham has not performed his
duty according to the manner
stipulated in Section 674(2) of
Corporations Act, 2001.
As Section 164(2) attracts civil
provisions so for this reason Mr.
Cunningham held liable to pat
penalty of $100,000 (Wolters
Kluwer, 2018).

Conclusion:
This case has it is significant
importance. Mr. Cunningham had
to pay penalties and cost of
proceedings to plaintiff of the case.
It was a case which has given
lesson to Directors and officers of
Corporations in Australia. Now they
have become more aware about
their roles and responsibilities.

References
Legal Services Commission of South Australia. (2018)
General Duties of Directors- Corporations Act 2001
(Cth). [online] Available from:
https://www.lawhandbook.sa.gov.au/ch05s01s03s02.ph
p [Accessed on 01/06/18]
Addison, A. and Chew, L. (2011) Australia: Continuous
Disclosure - What Duties do Directors Have? [online]
Available from:
http://www.mondaq.com/australia/x/155592/Directors+
Officers+Executives+Shareholders/
Continuous+Disclosure+What+Duties+do+Directors+H
ave [Accessed on 02/06/18]

ICP. (2018) ASX Listing Rules. Available
from: https://www.icp.net.au/asx-rules/
[Accessed on 02/06/18]
Wolters Kluwer. (2018) ASIC v
SOUTHCORP LIMITED (NO 2), Federal
Court of Australia, 27 November 2003.
[online] Available from:
https://iknow.cch.com.au/document/at
agUio377942sl10431553/asic-v-
southcorp-limited-no-2 [Accessed on
02/06/18]