Australian Securities and Investments Commission v Somerville

In this case, the Australian Securities and Investments Commission sought to hold certain individuals and entities accountable for breaches of directors' duties under the Corporations Act 2001. The case involved the sale of assets from one company, which was subsequently wound up, to a new company, with the consideration being "V" class shares that carried preferential rights to dividends up to the possible value of the assets. No dividends were ever declared on the "V" class shares, raising questions about the validity of the consideration provided for the asset sale. The court was tasked with determining whether the directors of the vendor company had breached their duties under sections 181, 182, and 183 of the Corporations Act, and whether the solicitor involved in preparing the documents and advising on the transactions was also liable.

The central legal issues were whether the transactions were properly considered and if the directors had breached their duties by entering into them. The court examined whether the "V" class shares constituted proper consideration for the sale of the assets, given that no dividends were ever declared. Additionally, the court considered whether the solicitor who advised on and drafted the documents for the transactions could be held liable under the Corporations Act. The court needed to determine the applicability of section 79 of the Corporations Act, which addresses the liability of persons involved in contraventions.

The court concluded that the directors of the vendor company had indeed breached their duties. The "V" class shares did not constitute proper consideration for the sale of the assets, as no dividends were ever declared. This meant that the directors failed to act in the best interests of the company and did not exercise their powers and discharge their duties with the care and diligence that a reasonable person would exercise. Furthermore, the court held that the solicitor was also liable as a person involved in the contravention, as they had advised on and drafted the documents for the transactions, which led to the breaches. The court's decision underscored the importance of ensuring that transactions are properly considered and that directors act in the best interests of the company. The final orders included declarations of breach of duty and penalties imposed on the directors and the solicitor involved.