ASIC vs Vizard CASE Notes PDF

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CASE NOTE

The High Court of Australia Australian Securities and Investments Commission v Vizard [2005] FCA 1037

SUMMARY OF THE FACTS The defendant (Vizard) was a non-executive director of Telstra. This position allowed Vizard to access highly classified information from internal briefing documents and board meetings where on three separate occasions in the year of 2000 used it to benefit himself and his family. The documents that Vizard had access to outlined schemes and plans of acquisition of a particular information technology firms. Vizard created a family trust under his name that was managed by his accountant where he purchased shares in firms which Telstra planned on acquiring. These firms included Sausage Software Ltd, Computershare limited and Keycorp Limited. Vizard did not use any of Telstra’s funds however many of the trades made by Vizard were losses. Following the discovery of Vizard’s actions Australian Securities and investments commission commenced proceedings against Vizard for breach of section 183 of the corporations Act 2001.1 Issues Section s 232(5) and 183(1) The issues of the matter was that Vizard breached his duty as a director to not improperly use corporate information for his own advantage under the section s 232(5) and 183(1) of the corporations Act. Section 283(5) of the corporations Act provides that “An officer or employee of a corporation, or a former officer or employee of a corporation, must not, in relevant circumstances, make improper use of information acquired by virtue of his or her position as such an officer or employee to gain, 1 Australian Securities and Investments Commission v Vizard [2005] FCA 1037

directly or indirectly, an advantage for himself or herself or for any other person or to cause detriment to the corporation.”2 Once Vizard made the transaction to purchase the Keycorp and sausage shares he was in violation of section 232(5) In addition, section 183(1) which replaced and repealed s 232(5) states that: “A person who obtains information because they are, or have been, a director or other officer or employee of a corporation must not improperly use the information to: (a)

gain an advantage for themselves or someone else; or

(b)

cause detriment to the corporation.”3

Both s 183(1) and s 232(5) were civil penalty provisions under the “s 1317E(1) for the corporations law after 13 march 2000 and s 232(6B) of the corporations law prior to 13 march 2000”4 Civil Breaches of Sections 283 and 183 have a penalty provision of upwards of $200,000. However examination of similar cases such as Rich vs Australian securities and investment commission presented the court the possibility of a disqualification period since in this case the court ruled that “ a disqualification order was imposed to protect the company’s shareholders against further abuse, but also by way of punishment and, importantly, for general deterrence”5. Though, In Ltd v Gulliver “it was ruled that the respondent as a director was entitled to buy the shares themselves and received no penalty”6. Leaving the possibility 2

Commonwealth consolidated Acts. (2001, january 1). CORPORATIONS ACT 2001 SECT 232(5). Retrieved from Commonwealth consolidated Acts: http://www5.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s283da.html

3

Corporations Act 2001 - section 183 . (2001, january 1). corporations Act 2001 section 183 . Retrieved from commonwealth consolidated acts: http://www5.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s183.html

4

Jade. (2005, march 23). Jade. Australian Securities and Investments Commission v Vizard [2005] FCA 1037, 16. Retrieved from Australian Securities and Investments Commission v Vizard [2005] FCA 1037: https://jade.io/article/111020/section/140122

5 Rich v Australian securities and investment commission (2004) 50 ACSR 242 6 Ltd v Gulliver [1967] 2 AC 134

that the court may deem Vizard actions as legal. Overall, if the court deem that Vizard is in breach of s 183(1) and s 232(5) of the corporate law, Vizard has the possibility of facing a penalty of upward of $200,000 and a possible disqualification order.

Summary of the judgment of Finkelstein Vizard admitted responsibility to breaking section 183 of the corporation Act 2001. As a result, the federal court of Australia ordered vizard to pay $390,000 in penalties to cover the ASIC’s costs of its investigation into the affair and was also disqualified as acting as a director proportionally to the gravity of the offence for 10 years.

Identification and explanation of the penalties imposed onto the defendant The court explained that to properly evaluate the correct disqualification period they had to keep in mind “not to impose a period which is out of all proportion to the gravity of the offence”7. The disqualification period of 10 years reflected “the need to protect society from the kind of unlawful conduct engaged in by the defendant”8. Additionally, the pecuniary penalties totalling $390,000 was imposed in case of any hardship that the corporation may incur because of Vizard’s ban and for the covering cost of ASIC’s investigation into the affairs.

Bibliography Commonwealth consolidated Acts. (2001, january 1). CORPORATIONS ACT 2001 - SECT 232(5). Retrieved from Commonwealth consolidated Acts: http://www5.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s283da.html

7 Australian Securities and Investments Commission v Vizard [2005] FCA 1037 8 Australian Securities and Investments Commission v Vizard [2005] FCA 1037

Corporations Act 2001 - section 183 . (2001, january 1). corporations Act 2001 - section 183 . Retrieved from commonwealth consolidated acts: http://www5.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s183.html Jade. (2005, march 23). Jade. Australian Securities and Investments Commission v Vizard [2005] FCA 1037, 16. Retrieved from Australian Securities and Investments Commission v Vizard [2005] FCA 1037: https://jade.io/article/111020/section/140122 Ltd v Gulliver [1967] 2 AC 134 Rich v Australian securities and investment commission (2004) 50 ACSR 242 Australian Securities and Investments Commission v Vizard [2005] FCA 1037...