Australian Securities and Investments Commission vs. Rich and Others
341
AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v
RICH and Others
5
SUPREME COURT OF NEW SOUTH WALES — EQUITY DIVISION
AUSTIN J
10
1, 18 November 2002, 24 February 2003 — Sydney
[2003] NSWSC 85
15
20
25
30
Directors — Duties — Non-executive chairman of directors — Statutory duty of care
— Responsibilities — Usual practice of chairmen of listed Australian companies —
Duty to keep informed — (CTH) Corporations Act 2001 s 180(1)(b).
Words and phrases — “responsibilities within the corporation”.
One.Tel was a listed company which was placed into voluntary administration and then into liquidation. The plaintiff, ASIC, commenced actions against the three executive directors and G, the non-executive chairman of directors, for breach of their statutory duty of care. G was a chartered accountant with substantial commercial experience. He was a founding director and was also chairman of One.Tel’s Finance and Audit Committee. He applied for an order to strike out the statement of claim against him, on the ground inter alia that no reasonable cause of action was disclosed, because the duties to which he was alleged to have been subject were not known to law.
Held, dismissing the application for dismissal:
(i) The word “responsibilities” referred to the acquisition of responsibilities not only through specific delegation but also through the way on which work was distributed within the corporation in fact, and the expectations placed by those arrangements on the shoulders of the individual director. G’s qualifications, experience and expertise, and his occupation of particular positions in the company, were all matters that made up or contributed to the responsibilities he had within the corporation.
Re City Equitable Fire Insurance Co [1925] 1 Ch 407; AWA Ltd v Daniels
(1992) 7 ACSR 759, approved.
35
40
45
(ii) The court’s role, in determining liability of a defendant for his conduct as company chairman, was to articulate and apply a standard of care that
AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v
RICH and Others
5
SUPREME COURT OF NEW SOUTH WALES — EQUITY DIVISION
AUSTIN J
10
1, 18 November 2002, 24 February 2003 — Sydney
[2003] NSWSC 85
15
20
25
30
Directors — Duties — Non-executive chairman of directors — Statutory duty of care
— Responsibilities — Usual practice of chairmen of listed Australian companies —
Duty to keep informed — (CTH) Corporations Act 2001 s 180(1)(b).
Words and phrases — “responsibilities within the corporation”.
One.Tel was a listed company which was placed into voluntary administration and then into liquidation. The plaintiff, ASIC, commenced actions against the three executive directors and G, the non-executive chairman of directors, for breach of their statutory duty of care. G was a chartered accountant with substantial commercial experience. He was a founding director and was also chairman of One.Tel’s Finance and Audit Committee. He applied for an order to strike out the statement of claim against him, on the ground inter alia that no reasonable cause of action was disclosed, because the duties to which he was alleged to have been subject were not known to law.
Held, dismissing the application for dismissal:
(i) The word “responsibilities” referred to the acquisition of responsibilities not only through specific delegation but also through the way on which work was distributed within the corporation in fact, and the expectations placed by those arrangements on the shoulders of the individual director. G’s qualifications, experience and expertise, and his occupation of particular positions in the company, were all matters that made up or contributed to the responsibilities he had within the corporation.
Re City Equitable Fire Insurance Co [1925] 1 Ch 407; AWA Ltd v Daniels
(1992) 7 ACSR 759, approved.
35
40
45
(ii) The court’s role, in determining liability of a defendant for his conduct as company chairman, was to articulate and apply a standard of care that