Asic v Adler and 4 Ors

(2002) 168 FLR 253; [2002] NSWSC 171

Supreme Court of NSW

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Interrogate

Catchwords

1. Corporations
2. › Directors' duties
3. › Duty of care and diligence
4. › Non-executive director causing subsidiary to make undocumented payment to entity controlled by director
5. › Whether business judgment rule available where director had material personal interest
6. › Corporations Act 2001 (Cth), s 180
1. Corporations
2. › Directors' duties
3. › Good faith and proper purpose
4. › Director causing company funds to be used to purchase parent company shares to support share price for personal benefit
5. › Whether breach of duty to act in good faith and for proper purpose
6. › Corporations Act 2001 (Cth), s 181
1. Corporations
2. › Directors' duties
3. › Improper use of position
4. › Director using position to gain advantage for himself and associated entities
5. › Whether improper use of position to cause detriment to company
6. › Corporations Act 2001 (Cth), s 182
1. Corporations
2. › Directors' duties
3. › Improper use of information
4. › Director using knowledge of investment committee procedures and company susceptibility to proposals
5. › Corporations Act 2001 (Cth), s 183

Quick Take

A non-executive director of a parent company who participates in making investment decisions affecting a subsidiary's business is an 'officer' of that subsidiary within s 9 of the Corporations Act. The business judgment rule in s 180(2) is unavailable where the director has a material personal interest in the subject matter of the judgment or where no business judgment was made in good faith for a proper purpose. For accessory liability under s 79 in relation to s 208 contraventions, knowledge of the essential factual elements of the contravention is sufficient; knowledge that the arm's length defence under s 210 is unavailable is not required, as s 210 is a defence rather than an element of the contravention. Compensation for breach of directors' duties is calculated by analogy with a defaulting trustee, assuming the misapplied funds had been invested safely.