LAW Assignment

Case: ASIC V Alder (2002) 41 ACSR 72

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Professor Name:

University Name:

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 Table of Contents
Introduction ..................................................................................................................................... 3

Happenings of the case ............................................................................................................ 3

Primary legal issues ................................................................................................................. 3

Penalties are given ................................................................................................................... 4

Actions of the directors ........................................................................................................... 4

Why was ASIC involved ......................................................................................................... 5

Interesting observations or comments ..................................................................................... 5

What this case taught us .......................................................................................................... 5

Conclusion ...................................................................................................................................... 6

References ....................................................................................................................................... 7

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Introduction
In context to this case ASIC v Adler, the defendant court imparted that directors had breached
180(1). Section 180(1) subjects the standard of conduct in context to the directors adhere to the
general law. In this case, what happened was that it dealt in context to four transaction types. The
three defendants in context were Raymond Williams, Rodney Alder and Dominic Fodera. HIH
was one of the largest companies in Australia that subjected to collapse. In June 2000 HIHC
which was the subsidiary company of HIH, imparted an undocumented and unsecured loan to
PEE1.

 Happenings of the case

This was the company that was controlled by Adler. The transfer in this regard was done by
Fodera. The arrangement of the loan was initiated without the information of the directors of
HIH. PEE was conferred as the trustee of AEUT. Adler is here along with his wife was the
shareholders and the directors. The AEUT then issued shares to HIHC for $ 10 million.
However, the trust managed by PEE was worth less than $ 10 million. In this context, we find
that there is a breach in context to Section 180 (1) by Adler. This is because it is obvious that no
one will grant a loan of huge amount to PEE without appropriate safeguarding. Under the
Corporations Act each of the directors confers the same right whether they are executive
directors or they are non- executive directors. There was a breach in context to the Corporations
Act as the reasonable steps were not initiated by the three directors.

 Primary legal issues

HIHC has illegally financed 10 million PEEs to acquire shares of HIH. No other director or
investment committee has disclosed the matter. As a result, the confidence value of 10 million
units was lower than the initial membership written by HIHC. As a result, the move was
purposefully detrimental to the interests of HIH, HIHC, and shareholders. Adler violated the

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ASIC V Alder (2002) 41 ACSR 72

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duties of several directors2. Companies are covered by Sections 180, 181, 182 and 183 of this
Act. In this context, they violated:

 They did not act following diligence and care (Section 180)
 They did not act in context to the best interest regarding the company (Section 181)
 They did not action context to a proper purpose (Section 181)
 They used their position in improper terms (Section 182)
 They misused information (Section 183)

In this case, it was found that Mr Williams contravened his duties concerning a director in
context to Section 180 of Corporations Law. As a director he did was not able to ensure proper
safeguarding before the loan of $10 million was sent top PEE. In this case, we also find that
Fodera contravened the rights as a director in context to Section 180(1) as he did not submit a
proposal to the investment committee for the approval of the loan3.

 Penalties are given

The penalties that were imposed by the judge Santos J was that Alder was disqualified in context
to managing the company for 20 years. Williams was debarred from running the company for 10
years. They were also ordered by the judge to pay compensation plus interest of $ 7158112
leaving the interest rate. Other penalties were subjected in context to the defendants. Alder was
subjected to dollar 450000. Alder Corp was subjected to dollar 450000. Williams was subjected
to $ 250000 and Fodera was subjected to dollar 5000.

 Actions of the directors

As a general rule, a director has a responsibility and responsibility to oversee the management of
the corporation and to ensure that it is in the best position. The violation of the directors of the

2
https://aicd.companydirectors.com.au/-/media/cd2/resources/director-resources/director
tools/pdf/05446-6-2-duties-directors_general-duties-directors_a4-web.ashx

3
https://www.irwinlaw.com/titles/corporations-law-australia

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various bodies of governmental or non-governmental entities can be detrimental not only to these
companies and their shareholders but also to the civil and criminal liability of their respective
directors. Sections 180 to 183 were avoided by Adler. This case was quite similar to the case of
ASIC v Rich where the directors were the shareholders and breached their duties as the directors
under the Corporations Act.

To deal with care and diligence, firstly, Section 180 and section 180 (1) of the Corporations Act
subject to state that the directors or other officers of a corporation, with due care and care, should
be appointed if they are reasonable persons4.

 Why was ASIC involved

ASIC was involved because of it the body that regulates the as in context to the financial services
to protect the Australian investors, creditors and the consumers. This body is responsible for the
admiration of legislations like the Corporations Act. There are several Sections under this act and
any company or director who violates is subjected to ASIC.

 Interesting observations or comments

In the context of the case, ASIC v Adler, to avoid liability under subsection 180(1), Adler filed a
business judgment defense. The court concluded that the defense, 180 (2), was not valid for
Adler's protection. This was unique in the sense that three loans were made which were not
secure. This rule can only be applied when a decision is made and a corporation cannot be
offended, because managers lack good faith and good intentions.

 What this case taught us

In ASIC vs. Adler, the director did not allow HIHC to use any money to recover part of HICH
and would not pay PEE $ 10 million. Adler could not confirm whether HIHC had any security
measures in place. From this case, it could be stated that the duties of the director are very
important to adhere to. A breach in context to the director's duties in this context has led to fines

4
http://classic.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s180.html

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and impositions for 20 years. The law makes it clear that a director must be honest and act in the
best interests of the company or its shareholders.

Conclusion
As per the above discussion, it can be comprehended that the duties of the directors are very
important to comprehend. They must carry their work with ought most trust. The breach and the
penalties driven by the Judge was very much to look for in this case.

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References
Aicd.companydirectors.com.au (2019), from:
https://aicd.companydirectors.com.au/-/media/cd2/resources/director-resources/director
tools/pdf/05446-6-2-duties-directors_general-duties-directors_a4-web.ashx [Accessed On: 13th
August 2019]

ASIC V Alder (2002) 41 ACSR 72

Classic.austlii.edu.au (2019), from:

http://classic.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s180.html [Accessed On: 13th
August 2019]

Irwinlaw.com (2019), from:

https://www.irwinlaw.com/titles/corporations-law-australia [Accessed On: 13th August 2019]