Use of confidential information:

ASIC v Vizard (2005)

In this case, well known television personality Steve Vizard was a director of Telstra and in that capacity used confidential
information to determine when he should buy and sell shares for his own personal benefit and advantage.
The Court held that in so doing Mr Vizard had contravened section 183 (Improper Use of Information) by using the
confidential information obtained during the course of his directorship for personal benefit. The court awarded damages and
disqualified Mr Vizard from being a director.
Taking up Corporate opportunity

Cook v Deeks [1916]

The directors of Toronto Construction Company had a disagreement with another director, who is Cook. The majority of the
directors were able to carry out a project using the name of the company. After which, they then diverted the project to another
company in order to exclude Cook from the project, and the new company itself. The shareholdings of the directors were then put
to use by carrying out a resolution that Toronto Construction Company does not have anything to do with the new project, which
then automatically excluded Cook out from the project. The court ruled that indeed the majority directors and the shareholders
breached their fiduciary duty making the resolution they have made to invalidated. The reason was the majority directors and
shareholders must always bear in mind that even though they are in control of most of the business activities of the company, they
are not free to forgo the companys interests.

Competing with the company

Bell v Lever Brothers Ltd [1932]
Lever Bros had 99% of the share capital of Niger Co Ltd and appointed Bell to be the managing director
of it for 5 years. 3 years later when Niger was to be amalgamated with another company, Lever Bros
agreed to terminate Bell's contract for a payment of 30,000 to compensate for his loss of
employment. It was later discovered that Bell had been in breach of his duty which meant that Lever
Bros could have dismissed him without compensation. They claimed that the compensation agreement
was void and that they should be able to recover their money. Lever Bros were successful in the lower
courts and Bell appealed to the House of Lords.

ASIC v Healey (2011) commonly known as the Centro case

In this case, the directors and chief financial officer of the Centro group of companies were found to have contravened
section 180(1) of the Corporations Act 2001 (Cth) (Act) namely, the duty of care and diligence. They did so by approving
consolidated financial statements which failed to disclose very significant short-term liabilities (in the sum of $1.5 billion and
$1.75 billion).
Although the directors argued they could not be expected to know that the liabilities were current liabilities within the
meaning of the relevant accounting standards, the Centro case highlights that directors are not able to escape liability by
claiming reliance on the audit committee, auditor or management. The Court found that the deficiencies in the financial
statements were plain on the face of the documents and the directors had a personal responsibility to review and approve
them.
Directors should not merely act on the information supplied based on the fact it comes from an advisor or management.
They need to ask questions as appropriate.
One of the directors was fined, and disqualified from managing corporations for two years given his special position of power
and knowledge.
Fodare Pty Ltd v Shearn (2011)
In this case, a sole director of a company was held to have contravened her duty to act in good faith in the best interests of
the company (and also held to have contravened her duty to act for a proper purpose, to act with reasonable care
and diligence, and not to make improper use of her position). She contravened these duties by causing some of the
funds resulting from the sale of a property owned by the company to be given to herself and members of her family and also
by not having the company keep proper financial records. Directors need to ensure that they act in good faith, in the best
interests of the company and for a proper purpose. Here, the former director was required to pay compensation as well as
costs.
Cassegrain v Gerard Cassegrain & Co Pty Ltd (2012)
A contravention of the duty to act in good faith in the best interests of the company (and also the duty to act with
reasonable care and diligence, and the duty not to make improper use of position) was found where two directors
arranged for the company to sell the shares that it held in two other companies to a person who was both the wife of one of
the directors and also the daughter of the other director. Relevantly, the shares were sold at a significant undervalue and
there was no independent valuation of the shares before the sale. The duty to act in the best interest of the company cannot
be overridden by personal benefits. The interests of the company must be paramount.
Diakyne Pty Ltd v Ralph (2009)
In this case, a managing director was held to have contravened his duty to act in the best interests of the company (along
with his duty to act in good faith, and the duty not to make improper use of his position) by authorising a payment in
excess of $100,000 from company funds to a company that the director controlled. The payment was purportedly a bonus
payment pursuant to a contract, but in circumstances where:

the bonus was not payable under contract;

the companys financial position was poor; and

the director had a conflict of interest and took no steps to protect the interests of the company.

Although the director acted honestly, this does not excuse any directors from being found to have breached the duties
outlined in the Act. The company was entitled to orders against the former director for repayment plus interest plus costs.