ASIC v Flugge & Geary

[2016] VSC 779

Supreme Court of Victoria

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Interrogate

Catchwords

1. Corporations
2. › Directors and officers
3. › Duties
4. › Duty of care and diligence
5. › Duty to inquire into possible wrongful conduct by company
6. › Whether chairman breached duty by failing to make adequate enquiries
7. › Corporations Act 2001 (Cth), s 180(1)
1. Corporations
2. › Directors and officers
3. › Duties
4. › Duty to act in good faith and for proper purpose
5. › Whether officers breached duty by failing to stop improper conduct
6. › Corporations Act 2001 (Cth), s 181
1. Corporations
2. › Civil penalty proceedings
3. › Limitation period
4. › Six-year limitation period
5. › Whether continuing breach of duty to inquire fell within limitation period
6. › Corporations Act 2001 (Cth)
1. Evidence
2. › Inferences
3. › Jones v Dunkel
4. › Application in civil penalty proceedings
5. › Whether adverse inferences available where defendant does not give evidence

Quick Take

A chairman of a company who is put on notice of possible improper conduct by the company has a continuing duty under s 180(1) of the Corporations Act to make adequate enquiries, and failure to do so constitutes a breach of the duty of care and diligence. This continuing duty may bring conduct within the limitation period even where the underlying wrongdoing commenced outside it. However, the standard of knowledge required to establish breach differs between executive officers and non-executive directors, and the court found that the evidence was insufficient to establish breach against a senior executive (Geary) on the same facts that established breach against the chairman (Flugge).