ASIC v Adler (2002) 41 ACSR 72; [2002] NSWC 171 New South Wales Supreme Court

Case Facts and Issue ASIC v Adler (2002) 41 ACSR 72:

The case deals with four types of transactions and involved in the largest company collapse all throughout Australian history.

Specifically, Rodney Adler is involved in another company which is Pacific Eagly Equity (PEE), and is also a shareholder and a director at HIH. 

Adler loaned money from HIH to buy shares from the company where he was involved. To give perspective, HIH is one of the biggest insurance companies in Australia.

HIH had a subsidiary which is Casualty and General Insurance (CGI). CGI then provided undocumented loan to PEE which is worh $10 million along with illegal financial assistance.

The money lent to PEE was used by Adler to buy more shares from HIH to increase the prices of shares by the company.

With these circumstances on hand, ASIC accused Adler of breaching his statutory duties towards HIH, along with Williams who was the CEO and the founder of the company. The case against Adler was he acted within the grounds of improper purpose.

This is presented in his actions when an unsecured loan by Adler was used to buy shares on a company he was involved. Additionally, he also decided to use the money to buy shares and increase the share price of HIH.

For the part of Williams, the case was that he took advantage of his position to put into advantage himself and Adler. It was also part of the case accusations that the Fodera, who is the Finance Director of HIH, also infringed his fiduciary duty by allowing the transaction to transpire.

 

Case Decision:

It was decided by the court that Adler had breached four sections stipulated in the Corporations Act 2001. These sections stipulate:

• the duty to carry out actions with due care and diligence (s 180); 
•  to do actions with good faith and within the realms of proper purpose (s 181);
• to use one’s position properly (s 182);  and
• to not use the information for personal or other advantages (s 183).

Furthermore, Williams and Fodera only breached their duties to a lesser extent.

Case Significance:

The case is significant because it presents an array of fiduciary breaches, which includes taking actions in conflict from the interest of the company, generating undisclosed profits, and carrying out decisions within improper motives.