Morley v Australian Securities and Investments Commission (No 2)

The New South Wales Court of Appeal considered appeals by Mr Morley and Mr Shafron concerning contraventions of the directors' statutory duty of care and diligence under s 180 of the Corporations Law. The Australian Securities and Investments Commission (ASIC) had alleged that both Mr Morley, the Chief Financial Officer, and Mr Shafron, the Secretary and General Counsel, had contravened this duty. The primary dispute revolved around whether Mr Morley should be relieved from liability under ss 1317S or 1318 of the Corporations Act, and the appropriate penalties, including disqualification from managing corporations and pecuniary penalties, for both individuals.

The court was required to determine whether Mr Morley ought fairly to be excused from liability for his contraventions, and if so, whether the court should exercise its discretion to relieve him from liability. Further, the court had to assess the appropriate periods of disqualification from managing corporations and the quantum of pecuniary penalties for both Mr Morley and Mr Shafron, considering the protective and deterrent purposes of the legislation. The appeals also involved a limited costs appeal by Mr Morley and adjustments to costs orders against Mr Shafron.

The Court of Appeal found no error in the costs order against Mr Morley, dismissing his appeal on that point. However, it set aside the original orders for Mr Morley's disqualification and pecuniary penalty, substituting them with a reduced period of disqualification of 2 years and a lower pecuniary penalty of $20,000. Similarly, for Mr Shafron, the court set aside the original pecuniary penalty and reduced it to $50,000, and adjusted his liability for ASIC's costs on a specific issue from one-third to one-quarter. In both cases, the court made no order as to the costs of the appeals and cross-appeals, and reserved liberty to apply regarding the repayment of pecuniary penalties.