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Case Study of ASIC v Healey

Question

Task: Conduct research and analysis of a case of Australia which is not older than ten yrs (time period from the jurisdiction made in the case) which deals with the inability of the company director’s/ officer’s responsibility in conducting his duties as per the Corporation Act 2001 (Cth).

Answer

Introduction
The employees and higher officials of a company operating in Australia are bound to follow the provisions and responsibilities provided in the Part 2D 1 of the Corporation Act, 2001 laid down by the commonwealth (Cassidy, 2006). The law controls and oversees all the business institutes operating in the country. This law was imposed because of the realization by the realization of Australian legislation that the higher officials like board directors and managers work in order to satisfy the requirement of the shareholders. This special law brings the governing officials of a company like directors under the civil and criminal liabilities which obliges them to meet the duties mentioned in the subsidiary sections of the law (Latimer, 2012).

In the situation of Australian Securities and Investments Commission v Healey [2011] FCA 717, the Chief Financial Officer along with the seven managements of the company were accused of violating the responsibilities mentioned in the governing act (Walmsley and Puri, 2011). In the below section of the report, a thorough evaluation is conducted on the sections like background of the case, and various liabilities and responsibilities violated by the officials of the concerned company. A very elaborate study of the judgment made in this case is also conducted prior to the conclusion in this report.

Background
As per the happenings and over takings in the circumstance of ASIC V Healey, the petitioner ASIC had initiated a civil proceedings versus the ex-non-executive director, previous CFO, and the ex-CEO of the company in the Australian Federal Court contained in the Centro Retail Group and the Centro Properties Group (Australian Institute of Company Directors, 2011). The board of ASIC has sought an argument of breach and violation of the guidelines and duties laid under the Corporation Act against the units and organizations under the Centro Group and asked for the verification of their Budget and expenditures. The Centro retail Group involves two subsidiary companies which are Centre Property Trust and Centro Properties Limited. Although these subsidiary units were not included in this case (Bryans, 2011).

The case of ASIC V Healey which was petitioned by the Australian Institute of Company Directors circled around the theme pertaining the responsibility of the manager to contemplate and identify the fiscal calculations efficiently to devise appropriate strategies for attaining maximum productivity and bringing the company in the right track of progress. In simple words, the arguments made by the ASIC as petitioners were pertaining to the violation of persistence, diligence, and duty of care from behalf of directors. Besides this, the inability to carry out appropriate steps in harmony to the financial statement of the Centro group was being put forward by the defendant (Bryans, 2011).

It was argued by the ASIC board that the financial reports prepared by the officials of Centro Group for the financial period that terminated on June 30th, 2007 were not satisfying the guidelines and rules of the bookkeeping. It was likewise put forward by the defendant that the details regarding the performance of the company were not provided in a clear and honest manner since the value of current interest-bearing liabilities were not segregated in the data. Many vital and significant data were not revealed in the financial report and hence it lacked transparency. The major sections which remained hidden in the report were the volume of short-term loan laterally with its maturing period and the mortgage. The company not only had maintained the ambiguity in the report but also tried to deceive the board by appropriating the amount in the list of non-current liabilities. Because of these reasons the ASIC has accused the Centro group of showcasing fraudulence in relieving the temporary liability of the firm (Halsey Legal Services, 2017).

The character of Breach conducted by the Centro Group
In section 180 of the Corporation Act promulgated in 2001 a set of guidelines for conducting the duty was laid down for the directors and the higher officials of the company. The law enforced them to conduct their business by showcasing precaution and diligence in every step of the business process (Australasian Legal Information Institute, 2017). A benchmark for the directors to carry out the task in a very diligent and careful manner in case of a sensible and prudent person is laid down in the aforementioned law. Thus the duties should be conducted as per a very wise and prudent behaves in a critical condition considering the similar state of affairs with the same environment and the same set of responsibilities (WIPO, 2015).

By using the provisions in section 180(1) public notions is established for the violation of the laid guidelines by charging the section 1317 E. As per the regulations and the direction of the section 1317 E the court s endowed with the power to deliver the statement of contravention in opposition to the higher official who violates the conventions provided under the section 180 (1) (ICNL, 2017). When this violation is found to have occurred, the board of ASIC could levy monetary penalization as written down under section 1317 G and is also relevant under the circumstances of disqualification under section 206 C (Federal Register of Legislation, 2017).

The argument produced by ASIC in this event as discussed earlier discussed about the letdown of the manager in carrying out the needed action to satisfy the parameters and policies of the Centro group as per the procedures prescribed by director in accordance with the section 295 A, the international accounting standards sanctioned by the section 296, Bestowing very clear and reasonable opinion accordance with section 298. The director had also infringed the commandments given in the article provided under 344 (1) in the Corporation Act, 2001. The section 344 (1) levies the liability on the senior managers to carry out all the needed activities to confirm via book keeping retained retained and its necessity to state the requirements written in the act (Bryans, 2011).

The major points affirmed by the court in the case of ASIC V Healey was concerning the circumstance where the responsibility narrowed in section 344 that the necessary actions should be commended for safeguarding the obedience with the guidelines for financial reporting besides which the director is required to scrutinize it in a minute level directly to ascertain if any mistake has happened in accounting or other figures. Although it was not specified any guideline to identify the failure from behalf of the director while the inspection of the external auditor, the previous auditors like Price Waterhouse Coopers have failed to point out those mistakes in the past (Bryans, 2011).

The defending parties have taken this issue as a strong argument, the defy the petitioner's argument of carrying out the wrong conduct and violating the section 180. The section of 601 FD (1) (b) shows strong similarity with this article in which precise stress is made on the said officers in the firm beneath a listed scheme. In this case, the efficiency and aptitude of the director in allotting different works to the auditor and the supervising team and their dependence on the procedure and systems of the company were also pondered upon which was relevant to the sections 189, 190, and 198 D (Bryans, 2011).

Evaluating the tribunal decision
It was being sentenced by Justice Middleton that each single manager in the organization had violated the guidelines restricted on them by the segment described in the section 180 (1), which is in accordance with section 601 F D (3), and the conventions laid down in section 344 (1) of the Corporation Act, 2001 (Jacobson, 2011). If considered the law in accordance with the given case study of ASIC v Healey, it is very evident that the managers of the concerned institute had unsuccessful to carry out the actions which were necessary to ascertain that the procedures in the law are followed very efficiently. It was moreover found in this case by the judge that there was a malfunction in conducting all the tasks that an intelligent person should have been done if he was in the place of directors to complete the work in accordance with the rule proclaimed by the government. While concluding it was being stated by the judge that the absolute breakdown in doing the task with appropriate honesty and cautiousness from behalf of the directors while analyzing the financial statements of the concerned company (Federal Court of Australia, 2011).

That was also mentioned by Justice Middleton that the dependency on the recommendation of auditors could not be replaced by those in a management team to recognize different issues in the organization by satisfying the responsibilities laid down in the law upon the Board and also the evaluation of the reports. As per the commandments provided in the section, each director in the company board is provided with the responsibility of sanctioning the statements in the financial report. By the virtue of this law, the directors on the board have been provided with the liability of concentrating on cautiously examining the financial statements in the given circumstances which can’t be simply renounced and allotting particular tasks to the employees (Australasian Legal Information Institute, 2011).

Middleton had provided the main motive following providing a certain ruling in the ASIC v Healey. It was clearly highlighted in this case by him that the mentioned directors involved in the case were knowledgeable, meticulous, and very seasoned officials. No evidence was presented that the directors have performed in a dishonest way while carrying out the appropriate duties (Paolini, 2014). It was being made clearer in the jurisdiction that the processes involved were not of an artless character. In fact, the processes involved were tough and required technical brilliance. The judge had opined that it was the duty of the higher officials to carry out the duty as per their skill and aptitude which involved a meticulous analysis of financial statements presented (Australasian Legal Information Institute, 2011).

Because of these causes, Justice Middleton further supported the findings of ASIC in the ASIC v Haley case, which accused the defendant of violating the sections of 180 (1). 601 F D (3), and 344 (1) because of the inefficiency f the directors to show necessary caution and honesty in the assigned task. It was also clarified by the judge that there was no evidence of dishonesty or fraud activity conducted by the directors. The aforesaid case just signifies the inefficiency of the officials in carrying out the task by undertaking appropriate stages which must have been commenced as in the post of a director by complying with the rules and regulations imposed on him. The defendant could be claimed guilty for not performing the activity with utmost caution and diligence as expected from that of a prudent individual being described in the law. It was the expected level of wisdom, efficiency, and aptitude of the director which the judge had interrogated upon (Australasian Legal Information Institute, 2011).

Exploring the relevance of the decision
In the case of ASIC V Healey, Justice Middleton corroborated that the fundamental, the complex obligation of the director included the engrossment and inclination towards the management of the firm and hence carrying of essential actions appropriate to the condition and environment of the company. From this, it is clear that it was the accountability of the director to read, acquire the knowledge and thereby contemplate each section of the provided report. Each director of the firm has a responsibility towards this and he should be well aware of the content provided in the report and he should provide the decisive statement regarding its quality. This valid elucidation provided by the judge Middleton was very significant as there was a very good emphasize on the aptitude of directors to depend upon their auditors and the supervisors for relevant financial accounts. The jury made the ruling regarding the case of ASIC v Healey that the director should possess limitless capability and information. Thus the allocation of the tasks should be done on a regular basis. The directors are primarily required to be cautious and sensible while making strategic decisions by thoroughly checking the data provided by the subordinates and thus interpreting and deducing the information in it. They should carry out inquiries if there is any dimension ambiguous. Such investigations should be conducted only if there are problems detected in the financial statement (Bryans, 2011).

Conclusion
The various aspects of the ASIC v Healey and the jurisdiction made in it were thoroughly contemplated and scrutinized in the above report. It was a very significant case in the corporate history of the nation since the blame of inefficiency was not charged on a single individual but on a group of seven different directors in the board all along with the CFO of the Centro group, who is a very significant officer in the company. The director board and the higher officials were observed to be inefficient in undertaking the task as per the commandments are given in section 180 (1). As per the law, they failed to conduct the task meticulously and diligently while scrutinizing the reports provided by different departments in front of the board. The directors had failed to work in accordance with the instructions and significant aspects given in the law as it was compulsory to read and understand cautiously different attributes of the report. The higher officials and the directors of the Centro group were discovered to be responsible of violating the law imposed on them regarding the suitable conduct of duties in ASIC v Healey case.

References
Australasian Legal Information Institute. (2011) Australian Securities and Investments Commission v Healey [2011] FCA 717 (27 June 2011). [Online] Australasian Legal Information Institute. Available from: https://www.austlii.edu.au/au/cases/cth/FCA/2011/717.html [Accessed on 20/08/17]

Australasian Legal Information Institute. (2017) Corporations Act 2001. [Online] Australasian Legal Information Institute. Available from:
https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/ [Accessed on: 20/08/17]

Australian Institute of Company Directors. (2011) Centro Case Summary. [Online] Australian Institute of Company Directors. Available from:
https://www.companydirectors.com.au/~/media/Resources/Director%20Resource%20Centre/Governance%20and%20director%20issues/case%20summary/ASIC%20v%20Healey%20Centro%20Directors%20Federal%20Court%20Judgment%20%2027%20June%202011.ashx [Accessed on: 20/08/17]

Bryans, P. (2011) ASIC v Healey. [Online] Lexology. Available from:
https://www.lexology.com/library/detail.aspx?g=1db0b085-6f89-445e-8548-f1172a1f24b0 [Accessed on: 20/08/17]
Cassidy, J. (2006) Concise Corporations Law. 5th ed. NSW: The Federation Press.

Federal Court of Australia. (2011) Australian Securities and Investments Commission v Healey (No 2). [Online] Federal Court of Australia. Available from:
https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2011/2011fca1003 [Accessed on: 20/08/17]
Federal Register of Legislation. (2017) Corporations Act 2001. [Online] Australian Government. Available from: https://www.legislation.gov.au/Details/C2013C00605 [Accessed on: 20/08/17]

Halsey Legal Services. (2017) Directors' duties: Control and understand the flow of management information. [Online] Halsey Legal Services. Available from:
https://www.halseys.com.au/detail.php?id=19 [Accessed on: 20/08/17]

ICNL. (2017) Corporations Act 2001. [Online] ICNL. Available from:
https://www.icnl.org/research/library/files/Australia/Corps2001Vol4WD02.pdf [Accessed on: 20/08/17]
Jacobson, D. (2011) Centro (ASIC v Healey) Case Note: Directors’ Duties For Financial Statements. [Online] Bright Law. Available from: https://www.brightlaw.com.au/centro-asic-v-healey-case-note-directors-duties-for-financial-statements/ [Accessed on: 20/08/17]
Latimer, P. (2012) Australian Business Law 2012. 31st ed. Sydney, NSW: CCH Australia Limited.
Paolini, A. (2014) Research Handbook on Directors Duties. Northampton, MA, USA: Edward Elgar.
Walmsley, S., and Puri, R. (2011) The Centro decision - ASIC v Healey & Ors [2011] FCA 717. [Online] Johnson Winter & Slattery. Available from: https://www.jws.com.au/en/legal-updates-archive/item/198-the-centro-decision-asic-v-healey-ors-2011-fca-717 [Accessed on: 20/08/17]

WIPO. (2015) Corporations Act 2001. [Online] WIPO. Available from:
https://www.wipo.int/wipolex/en/text.jsp?file_id=370817 [Accessed on: 20/08/17]


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ASIC v Healey Case Study


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