ACCG2051 Media Assignment S2 2021 PDF

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ACCG2051 Media Assignment for S2 2021. Received 17/20. Used article "Call for ASIC to probe Crown directors’ failure to act"...

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ACCG2051 Media Assignment In December 2020, the corporate giant, Crown Resorts, were on track to open their newest casino in Sydney.1 However, just a month prior to the opening, Crown Resorts had admitted to money laundering.2 In Elouise Fowler and Hannah Wootton’s Australian Financial Review article, “Call for ASIC to probe Crown directors’ failure to act”, published on 16 February 2021 (https://www.afr.com/companies/games-and-wagering/call-for-asic-to-probe-crowndirectors-failure-to-act-20210215-p572j5), they discuss whether the directors at Crown had in fact breached their duties to shareholders by allowing criminal activities to occur.3 A report made by the former Supreme Court judge commissioner, Patricia Bergin SC, listed the failures in the corporate culture at Crown – specifically noting that they were “ignorant or indifferent to the hundreds of millions of dollars that criminals were laundering … and to the regulatory risk of operating in China”, brought upon by the de facto director James Packer.4 Following the release of the report, there was widespread criticism of the company, with many calling to the Australian Securities and Investments Commission (ASIC) to investigate the allegations as part of their role as corporate regulators.5 As stated by the former NSW Supreme Court judge, Anthony Whealy SC, the ignorance and indifference to the criminal activities “raise the question: Have the directors acted at all times in good faith and in the best interests of the company? Have they been honest in their dealing with the decisions they have made as directors?”6 According to the article, there are two particular duties of directors that are applicable to the situation – the first being the duty to exercise reasonable care and diligence, and the second is their duty to avoid conflicts.7 While the article does mention that the inquiry by ASIC doesn’t need to investigate whether the Corporations Act (‘CA’) was breached,8 as it would be outside of the scope of the investigation, they did state that this doesn’t necessarily mean that the law was not breached. Now, as per the article, the main sections that could be applied to this case would be sections 181 through to 183.9 However, there are many other sections of the CA that should also be considered, namely sections 184, 185, 191 and 206. The provisions discussed in the article cover the director’s duty with regards to their position, all being civil obligations. Each section accounts for a different aspect – good faith, use of position and use of information, respectively.10 Section 181 states that directors or other officers must use their powers to ensure they fulfil their duties in good faith in the best interest of the company, and it must be for a proper purpose.11 The following sections, ss 182 and 183, state that people must not use their position or any information they obtained because of their position to either gain advantage for themselves or others, or cause detriment

1 Josh Bavas, ‘Crown Resorts banned from opening new Sydney casino at Barangaroo next month after money laundering bombshell’, ABC News (online at 18 November 2020) < https://www.abc.net.au/news/2020-1118/crown-resorts-banned-from-opening-sydney-casino/12895344>. 2 Ibid. 3 Elouise Fowler and Hannah Wootton, ‘Call for ASIC to probe Crown directors’ failure to act’, Australian Financial Review (online at 16 February 2021) < https://www.afr.com/companies/games-and-wagering/call-forasic-to-probe-crown-directors-failure-to-act-20210215-p572j5>. 4 Ibid. 5 Ibid. 6 Ibid. 7 Ibid. 8 Corporations Act 2001 (Cth) (‘CA’). 9 Ibid ss 181-183. 10 Ibid. 11 Ibid s 181.

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ACCG2051 Media Assignment to the company.12 Assuming that the other officers were in fact aware of the money laundering and the regulatory risk of operating in China, it can be argued that the officers were abusing their power and position to further their own personal interest rather than act in the best interest of the company. Had they taken some action to prevent the criminal activity from occurring, they would have been acting in the best interest of the company, protecting it from negative attention. Furthermore, these sections also apply to the de facto director James Packer. A de facto director, according to s 9 of the CA, is a someone who acts in the position of a director despite not being validly appointed.13 James Parker had abused his power as a director to permit the criminal undertakings that were ongoing on the premises of the casino. Not only were his actions self-serving, but he had abused the information he received during his time as de facto director, making his actions liable to civil prosecution. If pushed by ASIC, as per s 206C of the CA, the Court has the power to disqualify Packer from his position as de facto director.14 It is also important to note that it is possible for Packer to be criminally liable as per s 184, which states that an offence would be committed if they were reckless or dishonest, in addition to the previous sections.15 The article does not mention whether there are any intentions to press criminal charges, as it is evident that Packer’s actions were dishonest, thus liable for criminal charges. Another issue covered in the article is the fiduciary duty to avoid a conflict of interest and the requirement to disclose. While fiduciary duties are not enforceable via ASIC, they are enforceable by the company itself. The CA acknowledges the fiduciary duties in s 185, where it states that the previous sections have an effect in addition to the fiduciary duties.16 The duty to avoid conflict in this case also links in with the requirement to disclose as per s 191.17 As stated in the article, the issue of conflict of interest arose surrounding the board members who were hired by Parker.18 There is reasonable suspicion that Parker failed to give other directors notice of the material personal interest that the other board members had, breaching s191. Hiring individuals with conflicting interests could lead to members breaching ss 181 through to 184, effectively leading to the indifference towards the money laundering and regulatory risks of operating in China. Like the case of Furs Ltd v Tomkies,19 Parker was making a secret profit, and it is highly likely that his board members were also receiving some sort of undisclosed profit or commission. If this was the case, they could be held liable for damages. After considering the facts of the case and applying it to the law, there is a high chance that following the investigations made by ASIC, James Packer will be held liable for breaching his duties as director, albeit being a de facto director. It is unmistakeable that there were multiple breaches of the CA, to which Packer and the other directors could be held liable for.

12 Ibid s 182-183. 13 CA (n 8) s 9 (definition of ‘director’ para (b)(i)). 14 Ibid s 206C. 15 Ibid s 184. 16 Ibid s 185. 17 Ibid s 191. 18 Fowler and Wootton (n 3). 19 Furs Ltd v Tomkies (1936) 54 CLR 583.

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