Corporations Law: Asic V Vines

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Corporations Law: Asic V Vines

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Corporations Law: Asic V Vines

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Question:
Discuss about the Corporations Law: Asic V Vines.

Answer:

Introduction

ASIC v Vines is one of the leading cases on the duties and responsibilities of an officer of a company. There have been several developments in the law ever since the first judgment in this regard (Allens.com.au, 2016).
The facts indicate that AMP has announced a hostile takeover bid for GIO Australia. Mr. Vines was the CFO of GIO and was also a member of the adequate diligence panel that was established to respond to the AMP’s bid. Though profits were forecasted in the matter, yet because of a catastrophe in America, this margin substantially reduced. Mr. Vines was aware that the situation was tight in Australia, yet he took a bid and expected that the increase would not be beyond $60-$65 million although, at the time when he made the bid, the increase had already reached $74 million. The offer was closed with 57% of shareholders acceding to it. The exceeded amount though not known to Mr. Vines was known to some of the people in AMP. Subsequently, ASIC sought declarations that Mr. Vines had breached his statutory duties of showing care and diligence in the dissipation of his functions as an officer of the company (Ahern, 2011).
The care and diligence duty has been given in Section 232(4) of the Corporations Act. The present Corporations Act 2001 has included this in Section 180(1). It was contended by Mr. Vines that the degree of negligence that was needed to establish a breach of statutory duty was higher than that which was required to be proved either in tort or common law. This was rejected by the Court of Appeal unanimously, and the decision as delivered by Austin J established the requisite standard of care required (Cassel, 2016).

It was established that the degree of negligence that was needed to establish a breach of statutory duties was dependent on the context of the statute that was breached. This meant that in the case of a criminal case, a higher degree of negligence would have to be proved; on the other hand, in civil cases and like in the Corporations Law, a civil penalty could have been imposed. To establish and demonstrate a higher degree of seriousness, a penalty should be imposed (Jacobson and Jacobson, 2007). A man who has broken the statutory obligation may just be precluded from dealing with an organization if the Court is additionally fulfilled that the individual is not a fit and appropriate individual to do as such. These contemplations drove the Court to presume that the statutory obligation of consideration and constancy includes a level of the carelessness of no higher request than that forced at precedent-based law. The Court of Appeal found that, in agreement with the precedent-based law test, the standard to be connected is that of a sensible officer in the conditions. What a sensible officer would do in light of a danger relies on upon the greatness of the danger and the likelihood of its event, measured against the cost, trouble and burden of making an easing move, and any clashing obligations the officer may have (Gottschalk, 2016).
It was established that the honesty defenses took in this regard under Section 1317JA, and 1318 should be relied on. Mr. Vines indeed did not have access to any information on which he could rely to gather information from the shareholders. Moreover, the disclosures would have been material for the board when important decisions were being taken. Mr. Vines made no unqualified statements and even if he made certain statements, he did not contravene his duty of care because e they were made under the shoes of a management confidence in the GIO Re profit forecast. Mr. Vines, in fact, acted honestly in the matter, and he had no clue of the raised amounts. He, in fact, took care and diligence, and the profit forecast that was made by him in Part B was of the significant consequence for a fully knowledgeable business composition in a setting that was supporting an antagonistic takeover (Lowry, 2012). The investors need to be protected, and the targeted shareholders make sure that by endeavoring that the information that is provided to them is accurate and completed on its own. Mr. Vines had thus provided the accurate information, and it was beyond his control if the market situation moves towards a worse side. Thus, liability on Mr. Vines was relieved.

References:
Ahern, D. (2011). Guiding Principles for Directorial Conflicts of Interest: Re Allied Business and Financial Consultants Ltd; O’Donnell v Shanahan. The Modern Law Review, 74(4), pp.596-607.
Allens.com.au. (2016). Allens: Publication: Focus: Implications of Vines v ASIC. [online] Available at: https://www.allens.com.au/pubs/ma/fomamay07.htm [Accessed 14 Sep. 2016].
Cassel, D. (2016). Outlining the Case for a Common Law Duty of Care of Business to Exercise Human Rights Due Diligence. Business and Human Rights Journal, 1(02), pp.179-202.
Gottschalk, J. (2016). Defining Fiduciary Duties in a Majority Nonlawyer-Owned Law Firm: How Allowing Nonlawyer Owners Could Impact State Requirements of Director Fiduciary Duties.SSRN Electronic Journal.
Jacobson, D. and Jacobson, D. (2007). ASIC v Vines appeal decided – Australian financial services law and credit law from Bright Law. [online] Australian financial services law and credit law from Bright Law. Available at: https://www.brightlaw.com.au/corporate-governance/asic-v-vines-appeal-decided/ [Accessed 14 Sep. 2016].
Lowry, J. (2012). The Irreducible Core of the Duty of Care, Skill and Diligence of Company Directors: Australian Securities and Investments Commission v Healey. Mod. L. Rev., 75(2), pp.249-260.

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