Morley v Australian Securities and Investments Commission

The appeal concerned declarations made by the primary judge that certain individuals, including the appellant Morley, had contravened their statutory duties under the *Corporations Act 2001* (Cth) and that a company had contravened its obligation to comply with the ASX Listing Rules. The Australian Securities and Investments Commission (ASIC) alleged that a misleading announcement was sent to the ASX, and that a resolution to approve this announcement was passed at a board meeting. The dispute involved detailed consideration of the factual circumstances surrounding this board meeting and the subsequent announcement.

The court was required to determine whether the pleaded version of the draft announcement was taken to the board meeting, whether a resolution to approve it was passed, and whether ASIC had fulfilled its obligations of fairness in the proceedings. Further issues included whether non-executive directors contravened their duty of care and diligence in voting for the resolution, and whether the company secretary and chief financial officer were officers of the company and had contravened their statutory duties of care and diligence. The admissibility of certain evidence, including prior inconsistent statements and admissions, was also in question.

The Court of Appeal allowed the appeal in part, setting aside declarations made against the appellant Morley. It found that ASIC had breached its obligation of fairness by failing to call witnesses who were present at the board meeting, and that this failure meant the onus of proof had not been discharged. Consequently, it was not proved that the resolution to approve the announcement had been passed. The court also considered the duties of directors and officers, noting that non-executive directors may rely on management, but that this reliance has limits. The court found that the company secretary and chief financial officer were officers and that certain breaches of their duties were properly found, particularly concerning the failure to advise on the omission of superimposed inflation from estimates.

In relation to the appellant Morley, the appeal was allowed, and the declarations and orders made against him were set aside, with the proceedings dismissed. ASIC was ordered to pay Morley's costs of the appeal. However, in relation to other parties and declarations, the appeal was dismissed or allowed in part, with further directions to be given for the conduct of the remaining aspects of the proceedings.