Corporations Act, 2001 (CA) is the legislation, which through its section
198(1) provides that the business of the company is undertaken based on the
directions given by the director and this is done for the shareholders of the
company. As the directors run the business and operations of the company, they
have to fulfil the different duties which are covered in the CA (CCH Australia,
2011). This duty is also imposed on the key officers and employees of the
company, where they have a significant role to play in the company. In such cases
where the duties as have been put on the directors or the officers of the
company are not upheld, or are not fulfilled as they were meant to, the
pertinent individual has to bear the liabilities covered under this act. One
such example of the case is ASIC (Australian Securities and Investment Commission)
vs. Mariner Co. Ltd. 2015FCA 589. This case shows the negligence and contravention
of duties by the directors of Marnier to perform the obligations of the bids
they made forward to ASIC (Jacobson, 2015. Though, when the matter reached the
court, the defence available to the directors through this act was used, to
acquit the director of the charge of breaching the directors’ duties.

of the case

In this case, Mariner was the
defendant, which was basically a corporate investment company. The defendant
wanted to purchase either all the shares of Austock Group Ltd (AGL) or a
substantial number of shares in this company. In this company, the Chief
Executive Officer was Olney-Fraser (OF) who had been unsolicited approached by
James Goodwin (JG) on 08 June 2012. James was basically the joint managing
director of Arena Investment Management Limited (AIML). Arena was a company
which formed a part of the international estate arm of Morgan Stanley Inc (MSI).
During the initial communication, JG had expressed his interest in purchasing
the business unit of AGL pursuant to the completion of takeover. After the
passage of some of the days from the initial approach being made, more
discussions were undertaken between OF and JG in context of the potential
purchase and of the potential of the funds being made available in order to
facilitate the takeover from AIML. There had been quite detailed discussion
which was undertaken between OF and JG, and yet a binding agreement was not
attained amidst the two. According to User Levi (2015) other directors of the
Mariner were not notified of the communication, also they were not aware that
OF had presented the proposal to two non executive directors of Mariner.

On June, 2015 Marnier made the first
bid for the purpose of acquisition to the ASX, which was termed as confidential
offer by the company acquire large number of shares of AGL. This offer was to
be done at 10.5 %.  This particular offer
was described as an off market offer. Mariner’s board had the impression that
the value of AGL was approximately $20 million, which was the sum required for
the purpose of funding this takeover. Mariner got a letter from AGL in which it
had been provided that this offer had been invalid due to the price per share
which was being offer. As a result of this, the bid of Mariner was increased by
11% for each share. For meeting the minimum bid price rule, the amount had to
be raised. In the mean while another company named Folkstone offered much
attractive bid than Mariner as compare to Mariner, and they defeated the bid of
the Mariner. As a result of this, the Australian Securities and Investments
Commission (ASIC) initiated a claim in court against the company, along with
against its director, owing to the contravention of duties covered in Part 2D.1
of the CA (Australasian Legal Information Institute, 2015).

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Responsibilities breached

CA puts different duties and
responsibilities on the directors of the companies (Paolini, 2014). A key provision
covered under this act is section 180(1) of this act. As per this section, the
directors have a civil obligation of carrying on their work in a careful and
diligent manner, when the duties are discharged by them and when the powers are
exercised by them, as would be done by an individual holding the same office as
the director, having the same responsibilities and powers, and facing the same
situation (ICNL, 2018). Such a scenario in which the provisions covered in this
section are not upheld, civil obligation covered under section 1317E become
applicable on the breaching director/ officer. Under this section, upon finding
the breach of duty by the director or officer, the court makes a declaration of
contravention. The ASIC can only make an application to the court when once the
declaration has only been done. ASIC can make the declaration regarding to the
disqualification of directors for certain period of time from being on the same
role in the company. This can be done under section 206C only if their claims
were proven in the court against the Mariner`s directors. The ASIC also has the
option of applying for pecuniary penalties to be paid by the director as per
section 1317G of CA (Federal Register of Legislation, 2018).

Under subsection 2 of section 180 of
CA, the defence from the liabilities mentioned above is stated. This section
covers the defence to the directors in such cases where they make a business
judgement. When this is done, they are not held liable for the civil penalties
(WIPO, 2015). Based on this section, the director has to show that the judgment
undertaken by them, held a proper purpose and was in good faith; this is
followed by the individual lacking a major personal interest in the matter of
judgement; next comes the director being informed on the matter of the
judgement reasonably and also has reasons to believe that the judgment was
proper; lastly, this belief had reasonable backing and was in the company’s (Jade,

This case saw the ASIC initiating
claims against the directors of Mariner for contravention of section 180(1) of
CA owing to the announcement by the company of the takeover bid in AGL, which
showed failure of care and diligence, as a result of which the company had been
in breach of section 631(2)(b). As a result of this, the company made the
announcement to the authorities which then resulted in section 1041H being
violated. This was in addition to the directors providing that Mariner would be
bidding at 10.5% for each share and this was not possible legally owing to the
applicability of section 621(3). This was coupled with the failure of all of
the directors of Mariner, in taking into consideration, the regulatory
restrictions in context of Mariner’s ability in acquisition of a higher
percentage of shares in AGL (Australasian Legal Information Institute, 2015). Basically,
the ASIC contentions were that the directors of Mariner were in breach of the
provisions of CA owing to the announcement of off market takeover bid. This was
due to the shortfall in the required funding for acting upon this bid, along
with in the making of offer for a price which was lower than the one required
by the statute (Addisons Lawyers, 2015).

of Court

The facts of this were quite
complicated and therefore were carefully analysed by the court. In order for
the court to decide upon the takeover bid related director duty breaches, a
business friendly approach was undertaken where the business decisions undertaken
by the directors were analysed from business perspectives. In doing so, the warnings
in the background, for questioning the second guessing of the decisions were
also undertaken. It was held by the court that there were three major
observations in the case brought before it by the ASIC against the directors of

Firstly, the directors in this case had the
proper background and also were experts in mergers, finance and acquisitions. As
a result of this background, the directors were able to make proper judgment
calls, and could create strategies on the basis of assessment of risks for
adopting the transactions, which were the central part of this case. The court also
stated that the directors of the Mariner should be provided the benefit of
hindsights in order for the second guessing of the judgments. Because such
judgments requires more observations and analysis on the paper for the purpose
to know what actually had happened at the time and there was a need to
acknowledge the speed at which such events take place in reality (Prickett and
Teo, 2015).

The court went on to state that the transactions
in question had to be carefully looked upon, and an ex ante approach had to be
adopted. This approach provides that an individual is not only required to look
at the risks, but also has to weigh the benefits of such risks. The directors
of Mariner had undertaken this very approach and the same was not required to
be evaluated in context of the quoted section. This is the reason why the
judges adopted a retrospective analysis of the transactions which took place
and stated that this approach could not be overlooked.

This led to the court stating that there was an
absence of credibility in the evidence put forth by the ASIC for attaching
Mariner’s directors.  (Jade, 2015).  

Justice Beach also made additional
observations in this case in context of the breach of quoted duties and quashed
these claims based on business judgement rule. He stated that for showing that
the director had not discharged his duties properly, the reasonable foreseeable
harm had to be shown on the company’s interest. There was a need of balancing
this risk of harm which was foreseeable owing to the contraventions, with the
potential advantages which the company could get due to going forward with the
risky venture or idea. This is the reason why the court not only looked at the
foreseeable risk of harm’s nature and magnitude, but also did look at the
degree of the possibility of this taking place with the expenses, difficulty
and inconvenience in taking steps to alleviate such action. This was in
addition to the balancing of the possible risk of harm against the expected
profits which could result from the undertaken risk, which was a matter of
dispute here. According to Justin beach point of view, the company`s management
needed to take more calculated risk that involved such uncertainties, and which
were of commercial and business nature. The present of risk does not result in
section 180(1) being breached. And just because such a risky venture resulted
in losses for the company, the duty of directors is not taken to be contravened.
In giving this judgement, reference was made to the case of ASIC v
Rich (2009) 75 ACSR 1 and the difference between the two cases were
highlighted, and a varied decision was given in comparison to the quoted cases,
for the directors of Mariner (Jade, 2015).

and Implications

Thus, this case acts as a proof that
the provisions covered under CA are not discriminatory or harsh for the
directors and that they give proper chances to the directors to defend the
actions undertaken by them. Due to these reasons, in this case, the directors
of Mariner were acquitted for the risky venture undertaken by them, and the
claims of ASIC were quashed. This case reaffirms the strength of business
judgment rule and aids the directors in continuing with the risky ventures,
when the decision is undertaken in a careful manner. Where such decisions result
in a loss for the company, the directors, by fulfilled the provisions and
requirements covered under section 180(2) of CA, can safeguard themselves from
the civil penalties covered under section 1317E of CA. Though, it is crucial
that all the elements covered under section 180(2) are followed (Heading and
Wood, 2015). A key lesson here is that the directors would have to show that
the requirements covered under this section were fulfilled, in order to
safeguard themselves against these liabilities. Nevertheless, it provides the
directors would enough safety, to work in the best interest of the company, in
case of risky ventures.



Addisons Lawyers. (2015) Mariner Decision Will Not Affect Takeover
Bid Funding Strategy. Online Addisons Lawyers. Available from:
Accessed on: 09/01/18

Australasian Legal Information
Institute. (2015) Australian Securities
and Investments Commission v Mariner Corporation Limited 2015 FCA 589 (19
June 2015). Online Australasian Legal Information Institute. Available
Accessed on: 09/01/18

CCH Australia. (2011) Australian Corporations & Securities
Legislation 2011: Corporations Act 2001, ASIC Act 2001, related regulations.
Sydney, NSW: CCH Australia.

Federal Register of Legislation.
(2018) Corporations Act 2001.
Online Federal Register of Legislation. Available from: Accessed on: 09/01/18

Heading, B., and Wood, B. (2015) ASIC v Mariner Corporation Limited.
Online Lexology. Available from:
Accessed on: 09/01/18

ICNL. (2018) Corporations Act 2001. Online ICNL. Available from:
Accessed on: 09/01/18

Jacobson, D. (2015) Case Note: Directors Successfully Rely On
Business Judgment Rule. Online Bright Law. Available from:

Case note: directors successfully rely on business judgment rule

Accessed on: 09/01/18

Jade. (2015) Australian Securities and Investments Commission v Mariner Corporation
Limited 2015 FCA 589. Online Jade. Available from: Accessed on: 09/01/18

Jade. (2018) Corporations Act 2001 (Cth). Online Jade. Available from: Accessed on: 09/01/18

Paolini, A. (2014) Research Handbook on Directors Duties.
Northampton, Massachusetts, United States: Edward Elgar.

Prickett, F., and Teo, X. (2015) Mariner decision gives directors of bidders
greater latitude when announcing takeover bids. Online Clayton UTZ.
Available from:
Accessed on: 09/01/18

Usher Levi. (2015) Corporate Directors & the Mariner
Decision. Online Usher Levi. (Available from: Accessed
on: 09/01/18

WIPO. (2015) Corporations Act 2001. Online WIPO. Available from: Accessed on: 09/01/18


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