Corporate Law: Defenses for Trump Developments Directors - Case Study

This case study analyzes a corporate law scenario involving Trump Developments Ltd and potential actions by the Australian Securities and Investment Commission (ASIC) and the Australian Securities Exchange (ASX). The assignment examines whether the directors of the company have any defenses against accusations of breaching the Corporations Act 2001. The case highlights several breaches, including failure to exercise reasonable diligence and care, acting against the company's constitution by investing in casinos instead of residential apartments, and using their positions to the company's disadvantage. The document references relevant sections of the Corporations Act and the landmark case of ASIC vs Rich (2009) to support its arguments. The primary defense available to the directors is the claim that their actions were intended to benefit the company, even though the outcome was not as expected.

Running head: CORPORATE LAW
Corporate Law
Name of the student
Name of the university
Author note

1
CORPORATE LAW
ISSUE
Do the directors of the company, Trump Developments Ltd, have any defences against an action
by the Australian Securities and Investment (ASIC) or the Australian securities Exchange
(ASX)?
RULE
The facts of the case make it clear that the directors of the company, Trump Developments Ltd,
have breached the provisions of the Corporations Act, 2001.
Section 180 of the Corporations Act, 2001 stipulates that a director or other officer of a company
must act and use his powers in respect of his position with reasonable diligence and care.1
The directors of the company failed to do so and ran into massive overruns and exhausted all of
the company’s resources. They also failed to ensure that the developmental works in USA and
the Carribean were conducted under a safe environment. Their failure led to the casualty of 3
workmen.
Section 181 of the Corporations Act, 2001 lays down that a director of a company should
discharge their duties and use their powers in respect of the company for a purpose laid down by
the constitution of the company and in good faith keeping the best interests of the company.2
1Austlii (2017). Retrieved 1 September 2017, from
http://www.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/consol_act/ca2001172/s180.html
2Austlii (2017). Retrieved 1 September 2017, from
http://www.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/consol_act/ca2001172/s181.html

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CORPORATE LAW
The facts of the present case make it clear that the directors of Trump Developments Ltd
contravened the provisions of this section by investing in development of Casinos in a substantial
manner when the company’s constitution clearly stated that their primary function would be
development of residential apartments. In addition to this, they also amassed foreign investment
for their developmental projects, which is in contravention of the constitution of the company.
Section 182 of the Corporations Act, 2001 establishes that a director of a company should not
use his position to the disadvantage of the company.3
Big Donald used his position as the Chief Executive Director of the company to invest in Casino
Development even though Hillary opposed the idea. Bernie and Little Marco decided to side
with Big Donald to prevent another unpleasant confrontation. These events establish that Big
Donald used his position to the loss of the company.
Section 184 of the Corporations Act, 2001 stipulates that an officer or director of a company’s
acts shall be treated as an offence if those actions are within the scope of his powers and position
in relation to the company and those acts are:
• Reckless; or
• Not honest by intention; or
• Not in good faith and in the corporation’s best interests;
• For a purpose that is proper4
3 Austlii (2017). Retrieved 1 September 2017, from
http://www.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/consol_act/ca2001172/s182.html
4Austlii (2017). Retrieved 1 September 2017, from
http://www.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/consol_act/ca2001172/s184.html

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CORPORATE LAW
The facts of the case establish that the directors of Trump Developments are in contravention of
the above-mentioned provisions.
APPLICATION
In the landmark case of ASIC vs Rich, 2009, the ASIC brought charges of breaching his duty of
care that led to the collapse of the One Tel. telecommunications company. The proceedings of
this case ran for almost nine years and it was held that the ASIC had failed to prove any of its
charges against Mr. Rich and thereby dismissed the case.5
The only defence that the company’s directors have is to plead that their conducts were intended
towards the best interests of the corporation (in respect of the company’s bankruptcy) as the
constitution of the company did not expressly prevent them to enter into developmental works
other than residential apartments. In respect of the workmen casualties, the directors may plead
that they exercised duty of care to the best of their abilities.
CONCLUSION
The only defence left to the directors of Trump Development Ltd., is to plead that their actions
were intended keeping the best interests of the company in mind.
5 ASIC v Rich 635 [7288]

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CORPORATE LAW
Reference List
ASIC v Rich 635 [7288]
Austlii (2017). Retrieved 1 September 2017, from
http://www.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/consol_act/ca2001172/s180.html
Austlii (2017). Retrieved 1 September 2017, from
http://www.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/consol_act/ca2001172/s181.html
Austlii (2017). Retrieved 1 September 2017, from
http://www.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/consol_act/ca2001172/s182.html
Austlii (2017). Retrieved 1 September 2017, from
http://www.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/consol_act/ca2001172/s184.html