Research on an Australian case (not more than 10 years old since the decision by the Court) involving breach of company director’s/officer’s duties. Write a report outlining the following: 1. Case...

Introduction:
The case, which I have chosen is related to “Storm Financial Limited” that is a financial service
provider. The case is formally known as “Australian Securities and Investment Commission (ASIC) v
Cassimatis (No. 8) [2016] FCA 1023” wherein the Federal Court of Australia inspected the nature of
duties of director s of the company that was related to care and diligence owed by them under section
180(1) of the Corporations Act 2001(Cth) (Corporations Act). In the trail, the Federal Court of Australia
found that the directors of the company being a financial service provider had not perform their duties
diligently which had resulted in a breach of duties from their end as it was evident during the trial that
the directors were not vigilant enough to spot out the possibility of their company to contravene the
Corporations Act. As the Court stated that a reasonable director must be aware of any such possibility
in his/her company’s current circumstances. The directors of “Storm Financial Limited” clearly failed
on this front that resulted in catastrophic consequences for the company.
Background:
On 23 May 1994, Emmanuel Cassimatis and his wife Julie Cassimatis found a financial advice
company initially with the name Cassimatis Securities Pty Ltd that was based in Townsville,
Queensland, Australia. The company was later named as “Storm Financial Limited” and it was an
Australian financial services licence holder (AFSL). The financial services provided by the company
was based on a very unique model popularly known as “Double Gearing” or “Storm Model” that was
developed by Emmanuel Cassimatis, one of the two directors. In the model, the clients could obtain a
margin loan to invest in index funds and establish a cash reserve. The loan was borrowed against the
equity in the home, clients had ownership of. Any client who had the capacity to borrow funds could
avail the facility provided by the model. This model actually helped many of the clients to survive
during the “Global Financial Crisis”. However, this model exposed the company towards a very high
risk of default from its clients.
ASIC felt that the directors of the company breached their duties in regards to section 180(1) of the
Corporation Act. This led ASIC to commence proceedings against Emmanuel Cassimatis and his wife
Julie Cassimatis for alleged breaches of their duties related to care and diligence as a director of the
company in a circumstances where the company was solvent. Since Emmanuel Cassimatis and Julie
Cassimatis were the only directors and shareholders of the company, it was clearly identified that
Storm Financial Limited was managed in accordance with the informed wishes of the shareholders,
who were Mr.& Mrs. Cassimatis themselves.
The allegation put forth by ASIC stated that the model was not suitable for all kind of clients, the
company had and the company didn’t differentiate them. There were many investors, who were near
to their retirement age with very limited assets & income and there wasn’t any prospect of recovering
their financial position...