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Business law report analyzing ASIC V Cassimatis


Task: Write a short report on the Law of ASIC v Cassimatis [2016] FCCA 1023


The present case, ASIC v Cassimatis, deals with the instance of breach of duties committed by the directors. If looked up the current model of media, many news and instances of breach of duties by directors could be noticed which signifies that the breach in the director's duty is now more frequent and the study of this issue bears large importance (Aroney et al. 2015). The current endeavors and episodes comprised of cases of director’s duties have increased the introduction of a new provision in the Corporation Act. Regarding this issue, a lot of cases are remaining undecided on the benches of various courts in the country of Australia. This report is being drafted to review and conduct a very detailed analysis of the decisions made by the court and the responsibilities laid down by it for directors pertaining to the breach of duty in the renowned case of ASIC v Cassimatis [2016] FCCA 1023.

In the corporate history of Australia, the case of ASIC v Cassimatis holds a lot of significance since it deals with the breach of the provisions laid down in the Corporation Act 2001. This case thus consequently deals with the breach of duty committed by the directors in an organization (Barnett 2017). The post of the director is a very important and influential rank in a company since he is laid with the responsibility to take all the strategic conclusions which would have great potential to impact the future of the firm (Berk et al. 2013). Hence, it is very crucial that the person employed as a manager should carry out the inflicted liabilities honestly and diligently keeping in mind the interests and objectives of the company. If referred to the provisions and subsections provided in the Corporation Act it would be perceived that the director has to face a legal penalty if he performs the prohibited activities against the interests of shareholders for his personal gain or profit. It is under the sections from 180 to 184 that the provisions and endowments of the Corporation Act are laid down.

A petition has been submitted by the Australian Securities and Investment Commission against the well-known company Storm Financial Limited, which accuses that Mr. Cassimatis, the director of the company has conducted grave violations of the regulations laid down in the Corporation Act of 2001, which makes him liable for the lawful punishment described under it. ASIC had also held the company liable for the unlawful activities committed by the director since the company could have traced his obvious misbehavior and have controlled him from proceeding further illegal deeds (Blair 2015).

The aforesaid incident had happened in the year 2008 while the concerned director of the Storm Financial Limited had installed a particular financial model in the business processes and made it indispensable to spend a high amount of revenue in each stage of the project. As mentioned before, Storm Financial Limited is a business giant in the financial market of Australia so there was no further trouble in disbursing the extra amount in executing the process. It was being argued by the ASIC that the company was incapable of predicting the risks and perils in the domestic market and the possible result of these failures in the circumstance of an unfortunate financial downturn.

The managers of the company actually had claimed that the strategic division and the consequential disbursement would provide a positive impact in the future and because of this statement may of the ignorant investors had put their money in the proposed project and provided false hope of benefits to them (Chia and Ramsay 2015). In the due course of time, the company started to face crucial financial issues as a part of which the money f the investor was all gone astray which caused immense loss to them.

It was also claimed by the ASIC board that the concerned directors of the Storm Financial Limited were incapable of predicting the risk and had not occupied any plan to recover from this disaster. Instead of performing their duties, the managers have promulgated blatant statements like the money invested in the financial sector is prone to risk and thus the incident that happened was a very common and conventional occurrence (Coffee, Sale and Henderson 2015).

Responsibilities of the directors
Rendering to the guidelines laid down in the Corporation Act of 2001, it is directed that the appointed directors have specific duties and regulations to abide while working in a company. The responsibilities of the directors are well described in the subsections of the Corporation Act 2001 by the legislation. As per the clause of 180 (1) provided under this act, it is made obligatory that the managers of the firm should act in accordance with the regulations provided with utmost care and responsibility. The law has also abided the directors to make their actions very honest and harmonious to the ideologies of the company. The failure in doing so would make them liable for the punishments laid down under the subsections of the Corporation Act 2001. The clause which deals with the punishments regarding the breach of duty by directors is involved in section 1317 under the Corporation Act 2001 (Crane and Matten 2016). The managers of the company have the responsibility towards the shareholder and other subsidiary investors in the company. The section 945 A which is laid under the clause of Corporation Act 2001 elaborates about the liability of the managers to gather al the relevant details about the stockholders before initiating the process of receiving funds from them.

The ruling of the court in this case
The jury bench had reviewed all the arguments and the evidence produced by both of the parties. In this case of ASIC v Cassimatis, the jury had ruled out that the managers or the directors appointed in the Storm Financial Limited had breached various commandments described under clause 180 (1) of the major section Corporation Act 2001 (Ferrell and Fraedrich 2015). By contemplating various aspects of the case, the jury had held that in company guidelines the provisions for the better conduct of the managers were provided. The jury has observed that the managers of the organization had done their work in a very dishonest and irresponsible way and thus failed in understanding the commandments and regulations laid down under the Corporation Act effectively. It was made evident in this case that the deeds done by the directors of the company were not at all considered to be the actions of Good Faith. Apart from the breach of the aforesaid sections, the court had also held the directors for violating the regulations provided under clause 945 A under the directives of the Corporation Act.

A deep analysis of the jurisdiction on this case
The directors are obliged to conduct their duties in accordance with the good faith and upliftment of the organization as per the crystal-clear guidelines provided under the Corporation Act 2001. Very diligent and ethical work and responses are expected from the directors. The acts which would be conducted in a very honest way and for the upliftment of the company comes under the division of the expression due care and diligence. The director is expected to make decisions and behave accordingly as that as a prudent ad wise person behaves in a likewise situation. The commandments provided under the stipulation of 180 (1) of the clause Corporation Act are very compulsory and significant in nature. This stipulation restricts the higher authority and the directors of the company from committing any decisions or actions which may have the probability to turn against the objective of the firm, stakeholders, investors, and the shareholders. The court had earlier observed in the case of ASIC v Fortescue Metals Group Ltd. [2011] FCAFC 19 that the executive directors of the company har forbade to breach the commandments mentioned in the 180 (1) of Corporation Act 2001. The court of Australia had held in this report that the liabilities engraved in the section of the Corporation Act are applicable to all the authorities and directors appointed in the company inside the company.

If contemplated and taken into account the Corporation Act, it is provided that the purity of the intention should be taken very seriously and the purpose of the investors and the company altogether should not be compromised at any cost. It was being stated by the court in the Vrisakis v ASICC [1993] 9 WAR 395 that the application of an optimistic point of view is very crucial and necessary to sustain the equilibrium by avoiding the hidden risks in the market which has the potential of impacting the company in a very negative way.

If looked at the case of ASIC v Cassimatis, the defendant i.e. the directors put forward the argument that the commandments in the Corporation law are not exclusively applicable to the executive appointed in the company. The defendants had also argued the punishment and the penalty for breach should not be held liable for the director only since it is a collective action taken by the company. As per the observations made by the court in the case of Shafron v ASIC [2012] 247 CLR 465 it had been made clear that the extent of the sub-clause 180 (1) provided under the section of Corporation Act could not be restricted to the concept of its legal constraints and obligations and hence it was being held that the jurisdiction made in this case by the court was very precise and accurate in character.

In this case a very meticulous analysis of the evidence and data presented and consequently, it was observed that the majority of the investors and shareholders were from the lower strata of the economy and their livelihood would go down if any depreciation in the investment occurs. The company had not even thought of investigating the financial capacity and the living conditions of the investors and pointlessly allotted them with the options to invest in the organization. This had caused the company to fall in a very depraved condition of which the company was not prepared for which made the condition much worse than anticipated. Adding to the misery of the shareholders, the director of the company had ignored the loss that happened to the investors and instead stated blunt comments like the money endowed was already subjected to the possible risks in the market without even thinking about their sentiments. The directors of the company held the investors responsible for the loss incurred. Hence it was being held by the court that the provisions and the regulations provided under clause 945 A under the section of Corporation Act 2001 were breached by the directors appointed in the concerned company in ASIC v Cassimatis. The court had also observed in this case that the majority of the patrons and the investors of the company because of their sensitive economic condition. For these all unfortunate events, the shareholders and the investors of the company held the directors accountable for it since there were no prior notifications regarding the risks prevailing in the market and other possible financial perils and operational complexities. Not only limited to this ignorance, but the directors of the Storm Companies also had no prior plans to overcome the disasters and hence providing at least a little relief to the financiers (Keane and McKeown 2014).

Other laws in coherence with and relevant to the provided case study
Although it was not mentioned in the previous section of the report the major provisions like section 206 E (1) were also violated in this case. The court in the case of ASIC v Cassimatis held that certain steps and stages should have been practiced to fulfill the guidelines of the law.

  • In order to blame a certain person regarding this breach of duty mentioned under the clause of Corporation Act needs to be proved and verified as holding the post of the directors in the defendant party’s company.
  • It should be proved by the petitioner that the violation of the said Corporation Act had happened for a minimum of 2 times.
  • The relevant evidence and sufficiently significant circumstances should be put forward to demonstrate that the accused individual was unsuccessful in taking liable actions to prevent the condition causing any sort of hindrances and risks.
  • Apart from the examinations conducted by the ASIC, the jury bench should also be convinced with the indicting arguments for disqualification made on the ground of breach of duty by the director.

In this case the court has held that the regulations and other commandments laid under the 206 E (1) have been fulfilled by the authorities and directors of the Storm financial company. By the afterward financial condition of the company after the breach of the regulations, it had been more evident and apparent that the regulations provided in the Corporation Act are very important to follow, the breach of which cause damage to the company itself (Hedges et al. 2015). It had been observed that the directors had made obnoxious statements to the investors regarding their financial loss because of the unfortunate incident and it was apprehended by the court that the declaration made by them was because of the sheer ignorance. In many media like newspapers and channels, it was being frequently reported that the frequency of breach in the duties of the director mentioned in the corporation Act is increasing day by day and it could be curtailed only by the intervention of court like done in the case of ASIC v Cassimatis. The media had also stressed on the fact that the decisions made by the directors to make illegal advancement and profits should be avoided at any cost otherwise the results would be against the interest of the company and the investors (Langford 2015).

N this report on the ASIC v Cassimatis, it was observed that the court had taken a very clear and valid decision by examining the contextual background and the presented evidence keeping in mind the jurisdiction made in the relevant earlier cases. Along with contemplating the arguments in the case of ASIC v Cassimatis the jury had examined the untouched aspects of the corporation act 2001 in a very broadway. The defendant party was held guilty and was imposed with the genuine punishments provided under the law and ordered the company to dismiss the culpable directors who have acted against the interest of the company to make personal gains. The case is considered to be a milestone in the context of a breach of duties committed by the directors which had made all the officials working in Australia aware of the law and has led to constructive development of the domestic economy. ASIC V Cassimatis case assignment assignments are being prepared by our law assignment help experts from top universities which let us to provide you a reliable assignment help online service.

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