Research on ANY Australian case (ideally not more than 10 years old since the de

Question

Research on ANY Australian case (ideally not more than 10 years old since the decision by the Court) involving breach of company director’s/officer’s duties under the Corporations Act 2001 (Cth).

Write a report outlining the following:

a. Case introduction.

b. The duties/responsibilities breached (ex. CA sections 181 or 588G) and explain why the duties were breached.

c. Discuss and critically ANALYSE the court/tribunal decision and the reason for the decision in view of the Corporations Act.

d. Where possible and applicable, the relevance of the decision to the development of Australian corporations law or the impact of the decision on the operation of companies in Australia.

Explanation / Answer

a. Case introduction: This is a case of the Australian Securities and Investment Commission (ASIC) v Cassimatis (No. 8) [2016] FCA 1023. According to judgements of the fed court of the Australian government, ASIC began proceedings in 2010 against Mr and Mrs Cassimatis for alleged breaches of their duties as directors of Storm (Storm Financial Limited), an Australian financial services licence holder (AFSL) under section 180(1) of the Corporations Act. Mr Emmanuel Cassimatis and Mrs Julie Cassimatis are the two directors of Storm who modelled a client borrowing against the equity in their homes with a margin loan and bringing in a cash reserve. The Court found that directors of a financial services company had breached their duties as directors, because a reasonable director with their responsibilities and in the company’s, circumstances should have been reasonably aware that the company was likely to contravene the Corporations Act, with catastrophic consequences for the company.

b. The duties/responsibilities breached (ex. CA sections 181 or 588G) were when Storm was solvent, Mr and Mrs Cassimatis were the only directors and shareholders, so every decision was taken with permission of the Cassimatis couple. ASIC alleged that Storm's exposure to risk was because of the directors acting with care and diligence. Storm contravened the Corporations Act by providing advice to investors and financial assistance to vulnerable clients who were identified and pleaded by ASIC. The duties were breached because they gave inappropriate advice to vulnerable clients in indiscriminate circumstances where the clients were pleaded by ASIC.

c. The court/tribunal decision and the reason for the decision in view of the Corporations Act are according to Storm. ASIC government website, the court found that the couple acted honestly "genuinely held the view that capital loss could never occur with index fund investment in the Storm model". According to McCabe Curwood, Andrew Lacey article, Mr and Mrs Cassimatis submitted that s 180(1) does not apply where the directors are the sole shareholders of a solvent company; or, more specifically, that “there is nothing per se illegal in a director of a solvent company causing or permitting a company to pursue a venture, no matter how risky or even foolhardy”, if this is authorised by the shareholders was rejected as it did not have any support. The court decision was correct as many investors suffered significant, life-altering, losses after the GFC which led to suspension or cancellation of Storm’s AFSL because of application of Storm Model. Under section 1317S, the Cassimatis couple were not excused of the blunder rather because they acted honestly, and they agreed for the capital loss that occurred due to Storm Model advising to investors to use homes as security for investments.

d. The relevance of the decision to the development of Australian Corporations’ law: The case clarified that the harm to investors is not confined to only financial harm rather it extends to the interests of the corporation, its reputation, brand image, and related to compliance with the law leading to potential loss of a company’s licence. ASIC created a law related to an independent public duty requiring consideration of a “general norm of conduct” which is not limited to the interests of the corporation as it is a duty to consider for the public interest.

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