Hill and Australian Securities and Investments Commission

The Australian Securities and Investments Commission (ASIC) sought to disqualify Mr. Derry Hill from managing corporations for one year. Mr. Hill challenged this decision, arguing that ASIC lacked the power to impose such an order and, even if it possessed the power, his conduct did not warrant disqualification. The matter was heard by Professor R Deutsch, Deputy President.

The primary legal issues before the court were whether the requirements of section 206F of the Corporations Act 2001 (Cth) had been met for the imposition of a banning order, and whether Mr. Hill's behaviour justified such an order. Specifically, the court had to determine if Mr. Hill's conduct was causally related to the losses suffered by creditors and the ultimate failure of the companies in question, particularly Reed Constructions Australia Pty Limited and Heavy Machinery Pty Limited.

The court reasoned that a discretion to disqualify a director under section 206F should only be exercised if the director's actions or omissions are shown to have caused or significantly contributed to the failure of the relevant corporation. ASIC's case was based on allegations that Mr. Hill failed to ensure companies held security in trust, prevented false statutory declarations, did not ensure payment of PAYG instalments and superannuation, and did not satisfactorily attend to his role as a director. However, the court found that the evidence did not establish that Reed Constructions Australia Pty Limited's failure was caused or contributed to by any act or omission on Mr. Hill's part. Instead, the evidence suggested the company failed due to disputes over major contracts, leading to third parties refusing to pay contract claims, a refusal that did not appear to be related to Mr. Hill's conduct. The court noted a conspicuous absence of any suggestion as to what Mr. Hill could or should have done differently to avert corporate failure.

Consequently, the court determined that none of the breaches of duty alleged by ASIC were established by the evidence and that a disqualification order was not justified in the circumstances. The decisions under review were set aside, and the Tribunal ordered that no disqualification order be made.