Australian Securities & Investments Commission v Kobelt

The Australian Securities and Investments Commission (ASIC) brought proceedings against Mr. Kobelt, alleging contraventions of the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth). The dispute concerned Mr. Kobelt's conduct in relation to a financial services business, specifically allegations of misleading and deceptive conduct and breaches of his duties as a director. The matter was heard by the High Court of Australia.

The High Court was required to determine, among other things, whether Mr. Kobelt had contravened section 12DA of the ASIC Act by engaging in conduct that was misleading or deceptive or was likely to mislead or deceive, and whether he had contravened his duties as a director under section 180(1) of the Corporations Act. A key issue was the interpretation of "dishonest" in the context of director's duties and the application of the objective standard of care and diligence.

The Court reasoned that the standard of care and diligence required of a director under section 180(1) of the Corporations Act is an objective one, requiring a director to exercise the degree of care and diligence that a reasonable person would exercise if they were a director in the circumstances of the corporation. The Court further held that the concept of "dishonesty" in the context of director's duties involves a departure from the standard of objective commercial morality. The Court found that Mr. Kobelt's conduct, viewed objectively, did not meet the required standard of care and diligence, nor did it amount to dishonesty.

Ultimately, the High Court allowed Mr. Kobelt's appeal, finding that the primary judge had erred in concluding that Mr. Kobelt had contravened the relevant provisions of the Corporations Act and the ASIC Act. The Court set aside the orders made by the primary judge.