Law Of ASIC v Cassimatis [2016] FCCA 1023 †MyAssignmenthelp.com

Question: Discuss about the Law Of ASIC v Cassimatis [2016] FCCA 1023. Answer: Introduction: Director and outcomes of the breach by the directors base the present case on the grounds of breach of duties. The many newspapers and channels that the growth of cases regarding the breach of directors duties has been increased rapidly have reported it (Aroney et al. 2015). The provision regarding the breach of directors duties has been attracted the provision of the Corporation Act. Several cases are pending before the various courts of Australia regarding the same and in this report, an attempt has been made to discuss and critically analyse the courts decision and responsibilities of the directors regarding one of the important caselaw named ASIC v Cassimatis [2016] FCCA 1023. Discussion: The current case is one of the most significant cases in the history of Australia regarding the violation of the respective provisions of the Corporation Act 2001 attracts the grounds regarding the breach of duty by the director (Barnett 2017). Directors are the most important part of a company and they are eligible to take all the necessary decisions regarding the benefit of the company (Berk et al. 2013). Therefore, it can be narrated that the directors should have to perform their duties in good faith and think about the benefit of the company. Under the Corporation Act, several sections have been mentioned where from it is clear that if any director of a company tried to gain illegal benefit or anything that harm the interest of the shareholders,law will abstain them from doing so. The provisions mentioned under the Corporation Act are engraved under section 180 to section 184. An allegation had been made by the ASIC against the financial giant Storm Financial Limited that points out that the director of the company Mr. Cassimatis had breached the respected provisions of the Corporation Act 2001 and liable for the violation of the respected Act. Allegations have also been made against the illegal acts of the directors of the company and it was alleged that the company had failed to perform their duties in good faith (Blair 2015). The problem arose in the year 2008 when the director of the company had adopted one financial model and call for investment from every stages of the society to invest money in the project. The company was one of the well known companies in the financial sector of Australia and therefore, the company had not face any trouble regarding the investment. Allegation made by the ASIC that the company had failed to point out the risks of the financial sector and also did not mention the outcomes of the situation if the money are being faced by financial downturn. It was announced by the directors of the company that the result of the investment will be beneficial in nature and it was observed that many people who had no knowledge about the financial risk, invested their money into the project with the dream to gain certain profits (Chia and Ramsay 2015). After certain times, the company had faced a huge financial crisis and all the invested money were lost and the investors had to face a lot of problem. It was alleged by the ASIC that the director of the company had not taken any wise step regarding the security of the interest of the investors rather defended himself with the statement that in the financial sector, risk is an obvious factor (Coffee, Sale and Henderson 2015). Duties of the directors: It is provided by the Corporation Act 2001 that the directors of the company has certain duties to be performed. There are certain sections mentioned under the Corporation Act 20010 regarding the provisions of the duties of the director. According to section 180 (1) of the Act, it is required that the directors of a company should have to perform their duties with necessary care and diligence. It has also been mentioned under the provision that the directors should act in good faith regarding the acts of the company and if they are unable to exercise their duties by maintaining the necessary provisions of the Corporation Act 2001, certain penalties will be imposed on them. The penalty provision in this case is section 1317 of the Corporation Act 2001 (Crane and Matten 2016). It is the duty of the director of the company to secure the interest of the shareholders and the investors as well. There is another relevant section under the Corporation Act 2001 (section 945A) regarding the du ty of the directors to search for the background of the investors before taking or accepting money from them. Decision of the court: After perusing all the necessary documents and examined the relevant witnesses, the court had observed that the directors of the Storm Financial Limited had violated the provision stated under section 180(1) of the Corporation Act 2001 (Ferrell and Fraedrich 2015). It has been rightly observed by the court that the company had intervened all the necessary provisions regarding the directors liability. It has also been observed by the court that the directors of the respective company had failed to interpret the relevant sections of the Corporation Act successfully. The acts of the directors of the company had not met the provisions of the term Good Faith. It has also mentioned by the Court that the director of the company had failed to maintain the rules mentioned under section 945A of the Corporation Act. Critical analyse of decision: It is clearly stated under the provisions of the Corporation Act 2001 that it is the utmost duty of the director of a company to act in good faith while performing their job. It is required by them to act with due care. The term due care and diligence means all the acts that is positive in nature. The parameter regarding the same is what a prudent man of general intelligence will do in certain circumstances. The provision of section 180(1) of the Corporation Act is mandatory in nature and it binds the director of any company to do any arbitrary works against the interest of the company and against the interest of the investors or the shareholders as well. It has been mentioned in ASIC v Fortescue Metals Group Ltd. [2011] FCAFC 19 that the directors of the company should not violate the provisions of the Corporation Act 2001 regarding section 180(1). It has been stated in this case that the provision of the Corporation Act will be imposed on all the directors of the company. A clear intention should be taken into consideration regarding the thorough analysis of the relevant provisions of Corporation Act reveals that the interest of the company and the shareholders will not be mitigated at any cost. In Vrisakis v ASICC [1993] 9 WAR 395 it was stated that it is one of the most important tasks of the director of a company to apply his positive mind so that it will be possible to maintain a balance to avoid the potential risks regarding the interest of the company. In the case of the Cassimatis, it was contended by the directors of the company that the provisions of the Corporationlaw is not applied on the sole director of the company. It is also contended that the statute will not allow imposing the penalty provisions on the sole director of the company. In Shafron v ASIC [2012] 247 CLR 465 that the scope of section 180(1) of the Corporation Act is not possible to limit up to the statutory limit or duties and therefore, it is proved that the decision of the court regarding the case is appropriate in nature. It was proved by the examinations of the witnesses that the investors of the company were from very low stages of the society and without checking the background of them, the director of the company had allowed them to invest. The aftermath effect of the financial downturn regarding the company was detrimental in nature and it was observed that the director of the company had not even act for securing the interest of the investors rather he stated that the investors must know about the financial risk of the financial arena. Therefore, it has been proved that the director of the company had failed to perform his duties under section 945A of the Corporation Act 2001. It has also been seen that many investors became insolvent after the downturn and they pointed their finger against the director of the Storm company as he had not mentioned about the risks of the financial problems and had not taken any positive steps to secure the interest of the investors (Keane and McKeown 2014). Other relevant section: Certain provisions of the Corporation Act mentioned under the section 206E (1) is also applicable in this case. It has been observed by the Court that there are certain elements for the applicability of the section, which are as follows: It is to be proved that the person who has violated the provision of the Corporation Act are holding the post of the directors or other officers; The provisions of the Corporation Act has been violated by him for at least two times; There shall be sufficient ground to show that the respondent or the alleged person had failed to take reasonable steps regarding the prevention of the interference. The court should also be satisfied regarding the grounds of the disqualification. It has been observed that the directors of the company had fulfilled all the criteria regarding the sections of 206E (1) and therefore the section can be imposed on the directors of the company too. Therefore, it has been proved that the decisions of the court regarding the case of the Cassimatis is appropriate in nature and the same has been proved by different case laws and the documents submitted by the Australian Securities and Investment Commission. Some of the statements are also been proved by the submission made by the witnesses of the case (Laing, Douglas and Watt 2015). Impact of the decision: It has been observed that the decisions made in the case of Cassimatis have opened many doors regarding the breach of the directors duties. It has been proved that the outcomes of the breach had made the interpretation of the sections of the Corporation Act more predictable and the scope of the relevant sections was become wider (Hedges et al. 2015). The excuse that has been taken by the directors of the company in general are been discussed here and it has been proved that the grounds made by the respondent company y in such situations are based on vague knowledge of the directors of the company. It has been reported by many newspaper that the rate of the growing nature of the breach of duties by the directors can be controlled and is controlled by the decision of the court in the case of the Cassimatis. It has also been reported that the acts of the directors to gain illegal money without taking due care for the interest of the company and the investors shall not be considered any more (Langford 2015). Conclusion: Therefore, from the above-mentioned case, it can be said that the decision of the court regarding the matter is quite justified and the observation of the court is based on the certain relevant case studies regarding the same. It has also been proved that the court had rightly analyse all the provisions of the corporation Act 2001 relating to the case and the nature of the decision of the case is wide enough. The court had rightly imposed penalties on the alleged company and suspended the directors of the company to continue the business. After all, the case is one of the most important case regarding the breach of duties by the director and created effective impression on the industrial development in the continent of Australia. References: Aroney, N., Gerangelos, P., Murray, S., Stellios, J. (2015).The Constitution of the Commonwealth of Australia: History, Principle and Interpretation. Cambridge University Press. Barnett, H. (2017).Constitutional and administrative law. Taylor Francis. Berk, J., DeMarzo, P., Harford, J., Ford, G., Mollica, V., Finch, N. (2013).Fundamentals of corporate finance. Pearson Higher Education AU. Blair, M. M. (2015). 12. 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