ASIC v Adler & 4 Ors [2002] NSWSC 171

Reported Decision : 41 ACSR 72 (2002) 20 ACLC 576

New South Wales Supreme Court

CITATION : ASIC v Adler & 4 Ors [2002] NSWSC 171 revised - 09/04/2002 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 2753/01 HEARING DATE(S) : 26/11/01-30/11/01, 3/12/01-7/12/01, 10/12/01-14/12/01, 17/12/01-21/12/01 JUDGMENT DATE : 14 March 2002

In the matter of HIH Insurance Limited (in provisional liquidation) ACN 008 636 575 and HIH Casualty and General Insurance Limited (in provisional liquidation) ACN 008 482 291

Australian Securities & Investments Commission (Plaintiff) PARTIES : Rodney Stephen Adler (First Defendant) Raymond Reginald Williams (Second Defendant) Dominic Fodera (Third Defendant) Adler Corporation Pty Ltd (ACN 054 924 373) (Fourth Defendant) Lynda Sharon Adler (Fifth Defendant) JUDGMENT OF : Santow J

R B S Macfarlan QC/ P Durack (Plaintiff) COUNSEL : B W Walker, SC/ I M Jackman (First and Fourth Defendants) P Crutchfield (Second Defendant) J E Sexton, SC (Third Defendant) Jan Redfern, Solicitor for ASIC (Plaintiff) Gilbert & Tobin (First and Fourth Defendant) SOLICITORS : Arnold Bloch Leibler (agent: Sparke Helmore) (Second Defendant) Dibbs Crowther & Osborne (Third Defendant) Speed and Stracey (Fifth Defendant) CATCHWORDS : CORPORATIONS - Were director's or officer's duties breached under ss180, 181, 182 and 183 of Corporations Act - Relevant principles applicable to those duties and to determining who is an officer and to delegation by a director - Were each of three directors in breach of those statutory duties as director or officer by reason of their respective involvements in certain transactions - These transactions encompassed the making available of $10 million to an intended unit trust associated with the first director and initially undocumented and then the immediate application of that $10 million in part in buying shares in parent company of the company providing the $10 million and subsequently in application in part in buying unlisted investments owned by that director's associated company with capital raising difficulties and in making loans to associates of that director - Relevance of fact that no approval or ratification obtained to these transactions from investment committee or board - Role of other two directors and their respective responsibilities - Accessory liability by reason of involvement of directors in breach of s208 of Corporations Act (related party benefits) and s260A of Corporations Act (financial assistance for purchase of shares) - Did the relevant companies contravene these provisions - How the provisions to be construed in particular "financial benefit" and "arm's length terms" - What is required for such accessory liability under s79 of Corporations Act in the way of "involvement" - Whether Jones v Dunkel inference may be drawn from failure by Defendants to give evidence in these proceedings for civil penalty when concurrent Royal Commission - Causation and applicable test - Mode of calculation of loss - Relief by way of declaration - Other relief sought including compensation and banning orders to be dealt with separately. Corporations Act 2001 (Cth) s9; s79; s180; s181; s182; s183; s184 s190; s198; s205; s206; s208; s209; s210; s228; s229; s251; s259; s260A to D; s1317; s1318; s1371(1); s1383; s1400(2); LEGISLATION CITED : Evidence Act s41; s60; s79; s128 Trade Practices Act 1974 (Cth) s75B ASC v Gallagher (1993) 10 ACSR 43 Australian Innovation Ltd v Petrovsky (1996) 21 ACSR 218 AWA Limited v Daniels t/as Deloitte Haskins & Sells (1992) 7 ACSR 759; (1995) 37 NSWLR 438) Biala Pty Ltd v Mallina Holdings Ltd (1994) 15 ACSR 1 Beach Petroleum NL v Johnson (1991) 105 ALR 456 Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1 Bennett v Minister of Community Welfare [1992] 176 CLR 408 Bonnington Castings Ltd v Wardlaw [1956] AC 613 Brickenden v London Loan & Savings (1934) 3 DLR 465 Briginshaw v Briginshaw (1938) 60 CLR 336 Burton v Palmer (1980) 2 NSWLR 878 Canson Enterprises Limited v Boughton & Co (1991) 85 PLR(4th) 139 Cashflow Finance Pty Ltd v Westpac Banking Corp [1999] NSWSC 671 Chapman v Hearse (1961) 106 CLR 112 Charterhouse Investment Trust Ltd v Tempest Diesels Ltd [1986] PCLC 1 Chew v R (1992) 173 CLR 626 Re City Equitable Fire Insurance Co. Ltd [1925] Ch 407 Claremont Petroleum NL v Cummings (1992) 10 ACLC 1685, 9 ACSR 1; on appeal (1993) 11 ACLC 125, 9 ACSR 583 [CC s229 1989] Commercial Assurance Co of Aust Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 Commonwealth Bank of Australia v Friedrich (1991) 5 ACSR 115 Daniels t/as Deloitte Haskins & Sells v AWA Ltd (1995) 37 NSWLR 438 Re Dawson [Deceased] (1966) 2 NSWLR 211 Dilose v Latec Finance Pty Ltd (1966) 84 WN (Pt 1)(NSW) 557 Fabre v Arenales (1992) 27 NSWLR 437 Fitzgerald v Penn (1954) 91 CLR 268 Fitzsimmons v R (1997) 23 ACSR 355 Georgianni v The Queen (1985) 156 CLR 473 GPG (Australia Trading) Pty Limited v GIO Australia Holdings Limited (2001) 40 ACSR 252 Henville v Walker (2001) 182 ALR 37 CASES CITED : Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 Hutton v West Cork Railway Co (1883) 23 ChD 654 Insurance Commissioner v Joyce (1948) 77 CLR 39 Jones v Dunkel (1959) 101 CLR 298 LMI v Baulderstone [2001] NSWSC 866 Luxton v Vines (1952) 85 CLR 352 Maguire v Makaronis (1997) 188 CLR 449 March v E & MH Stramare Pty Limited (1991) 171 CLR 506 Mills v Mills (1938) 60 CLR 150 O'Halloran v R T Thomas & Family Pty Ltd (1998) 45 NSWLR 262 Pereira v Director of Public Prosecutions (1988) 63 ALJR 1 Permanent Building Society (In Liq) v McGee (1993) 11 ACSR 260 Permanent Building Society (in liq) v Wheeler (1994) 14 ACSR 109 Phipps v Boardman [1967] 2 AC 46 Pilmer v Duke Group Limited (In Liq) (2001) ALJR 1067 Re Property Force Consultants Pty Ltd (1995) 13 ACLC 1051 Queensland Mines Ltd v Hudson (1978) 18 ALR 1 R v Byrnes (1995) 183 CLR 501 R v Russell (1933) VLR 59 Richardson & Wrench (Holdings) Pty Ltd and Anor v Ligon No. 174 Pty Limited (1994) 123 ALR 681 RPS v The Queen (2000) 199 CLR 620 Sheahan (as liquidator of South Australian Service Stations) (In liq) v Verco (2001) 37 ACSR 117 Simar Transit Mixers Pty Ltd v Baryczka (1998) 28 ACSR 238 SS Pharmaceutical Co Ltd v Qantas Airways Ltd [1991] 1 L1 Rep 288 Stuart v The Queen (1976) 134 CLR 426 Target Holdings Ltd v Redferns (1996) 1 AC 421 Wallersteiner v Moir (1975) 1 QB 373 Wambo Mining Corporation Pty Ltd v Wall Street (Holdings) Pty Ltd (1998) 16 ACLR 1601 Wilkinson v Feldworth Financial Services Pty Ltd (1998) 29 ACSR 642 York v Ross Lucas Pty Limited (1985) 158 CLR 661 DECISION : See paras 775 - 777.