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 Discuss about the Business Law for Forum Pty Ltd.


  • The registration of Australian Investors Forum Pty Ltd was done on 18th May, 1999.
  • Lloyd –Cocks was appointed as a secretary of the Company and Mr. Luvara was appointed as the sole Director of the Company.
  • The business of the Company was carried on from an office in North Sydney.
  • The business of the Company was founded on the concept of share investment club and the business grew rapidly.
  • AIF promised that it would soon be listed in the Australian Stock Exchange and based on that promise it received an amount of $2.1 M from its clients for subscription of its shares. The monies thus received were used in the business of the Company and the shares were never issued to the subscribers. However, the company was never listed in the Stock Exchange.

The following issues have been considered by the Supreme Court of New South Wales:

  • Whether the “disclosure requirements” under section 727 (1) of the Corporations Act 2001 has been contravened by the defendants or not?
  • Whether the defendants are liable to be disqualified under the provisions of Section 206E or not?
  • Whether the directors or other officers of AIF, in their various business dealings, have breached the provisions under Section 180, 181 and 182 of the Corporation Act or not? (Harris, 2013)

Section 727(1) of the Corporation Act, 2001

According to Section 727(1), an offer of securities must not be made by a person unless a proper disclosure of the offer is made to the ASIC through a disclosure document.

Section 206 E

The provision as laid down under Section 206E is as follows:

A person may be disqualified from managing corporations for such period as the Court deems fit on an application by ASIC if:

The person:

1. Has not been able to take reasonable steps while acting as an officer of a body corporate, which has contravened this Act at least twice.

2. Has himself contravened this Act at least twice while acting as an officer of a body corporate.

3. Has contravened Section 180(1) and 181 of this Act (in case the body corporate is a corporation)

4. The satisfaction of the Court is necessary for justifying the disqualification under clause (1)

5. The person’s conduct may be considered by the Court before any decision is made under this Section.

Section 180

Under Section 180, a Director or other officer of a Corporation has to act carefully and with diligence while discharging their duties and exercising their powers.

Section 181

Under the provision of Section 181, a Corporation’s director or other officer must act in good faith while discharging their duties and exercising their powers. The best interests of a Company and a proper purpose are also needed to be taken into consideration by such Director or officer.

Section 182

Under Section 182, directors or other officers or employees of a Corporation cannot use their position for causing detriment to the Company or gaining undue advantage.

Section 708(10)

Under 708(10), the disclosure of offer of securities is not required if:

1. Making of the offer has been done through a financial services licensee

2. The satisfaction of the licensee is necessary with regard to the previous experience of the persons to whom the offer is made and which allows them to look into:

3. The offer’s merit

4. The securities’ value

5. The involvement of risk in acceptance of the offer

6. Information needs of the offeree

7. Whether adequate information has been furnished by the offeror

8. A statement containing the reasons for satisfaction of the licensee relating to the aforesaid matters needs to be given  by the licensee


9. A written acknowledgement is needed to be signed by the offeree that a disclosure document has not been given (Kolivos & Kuperman,2012).


At the beginning of the trial Mr. Stack, appeared on behalf of ASIC and Lloyd Cocks and Messrs Anthony appeared for themselves and for Sacvere and Metrobank respectively. Since the defendants were not represented legally, there was the need for a certain flexibility degree in the trial. The defendants were alleged of certain contraventions that emerged before July 2001, that is before the commencement of the Corporations Act of 2001. However, several contraventions occurred after the commencement of the said legislation. The Corporations Act makes the inclusion of the provisions of the Corporations Law that the defendants have allegedly contravened. The parties to the dispute therefore made the proceeding on behalf of the provisions that are statutory, which are expressly provided in the Corporations Act.

ASIC made the allegation on the part of Lloyd Cock and Messrs Anthony that they have involved themselves in the commissions of the provisions of civil penalty and the provisions of no penalty of the said Act. The contraventions of both the provisions are relied upon in the said act as the ground for orders of disqualification under Section 206E of the Corporations Act. There was the submission by ASIC regarding the establishment of the standard of evidence to stand the fact of contravention of the Act. The submission that is made ASIC made the point that the disqualification is of a civil nature despite the contravention is a result of the breach of civil penalty provisions or the breach of the non-civil provisions of penalty.

There are several decisions that regard the fact that those decisions are to be considered as the standard of evidence where the order of disqualification is sought under Section 206E and Section 206C of the Corporations Act. It has been held by the Court that the standard of proof is required to find a declaration that would contain the contravention or the list of the procedures that would be in relation with the civil standard and not the standard that is criminal.     

In this case, ASIC alleged Cocks and Messrs Anthony to have committed infringement of both criminal and civil provisions of the Act. The contraventions relied on proving section 206E as a ground of disqualification or not. According to the ASIC, the standard of proof required for proving contravention of any part of the Act of an order of disqualification is a civil standard. However, the ground for proving contravention does not depend on the fact whether it was a civil stipulation or a non-civil stipulation (Griffiths, 2015). 

Relevant Rules:

A number of case laws were taken into consideration in which standard of proof was required for proving disqualification under section 206E or section 206C of the Corporations Act (Malbon, 2013). In cases such as ASIC V. Alder, Briginshaw v Briginshaw, ASIC v Plymin and ASIC v Whitlam, the Court considered that the “standard of proof” required for finding breach of the Act is a civil standard and not a wrong standard though the attributes of the proceedings requires “prosecutorial fairness (Kolivos & Kuperman, 2012).” Section 130 (8) A of the Corporation Act (CA), deals with the application of Criminal Code. Section 13.2 (1) of the Criminal Code, “burden of proof” in a case must be released beyond considerable uncertainty (Richardson, 2012). However, in section 1332 of the Corporations Act, standard of proof shall be applicable in cases where a person has breached any stipulation of the Corporation Act or a default has been made in obeying the provision of this Act or any action that is regarded as unlawful as per the proviso of this Act. Alternatively, a person who has in any way been part of contravention directly or indirectly of this Act, the doctrine of standard of proof shall become applicable (Spagnolo, 2013).

At the beginning, Anthony and Cocks stated that the companies involved in the proceedings were proprietary companies or public companies excepting for Sage Global Fund Limited. They argued that their actions had been ratified by the shareholders of the relevant corporations so that no contraventions had been committed which could give rise to the imposition of civil penalty orders in favour of the companies concerned.).  However, contravention of the provisions of the CA were alleged by the ASIC and none of the shareholders never held Anthony or Cocks liable for breach of common law duties or fiduciary duties. ASIC sought orders for disqualification against Anthony and Cocks under section 206E and 1317H of the CA (Ha & McGregor, 2013).

In the case of Forge v. ASIC, the Court agreed to the fact that there is difference of view in Australia as to whether or not shareholders of an organization can ratify infringement by a director of a lawful duty. Though it may be proved that the shareholders of every organization may ratify an act that may give rise to infringement of the Act, nonetheless the judgment of the Forge case excludes any issues that the contravention was approved. The scenario of this case depicted the importance of breach of legislative duties of the directors. The breach of such duties is not only important to the shareholders of the corporation but also to other members of the corporation. The sentence provisions of the Corporations Act allow a company to be in the position to improve loss caused by the breach of duties of the directors for the benefit of the shareholders and creditors (Harris, 2013).


It was found that:

1. A disclosure statement has not been filed with ASIC as required under Section 727(1)

2. A financial Service licensee (AIF) has made the offer

3. A statement of reasons as required under Section 708(10)(c) was not given by AIF to the offerees

4. No acknowledgement was signed by the offeree as required under Section 708(10)(d)

Thus, Mr. Lloyd-Cocks, while acting as the Director of the company has failed to take reasonable steps for preventing the company from contravening the Corporation Act, 2001 and he himself was found to contravene this Act (Ha & McGregor, 2013). Thus, the present case falls under the ambit of Section 206E.

Moreover Mr. Lloyd-Cocks and Mr. Anthony, while acting as a Director and officer of AIF respectively, have been found to violate the provisions of Section 180, 181 and 182, in their business dealings with Medionics and Biotech. They have also violated the above mentioned provisions while issuing 210,000,000 shares in AIF on 16 May 2001 (Spagnolo, 2013).


The Court held Mr. Anthony liable for breach of section 206 (A) (1) of the Corporation Act between the time December 2000 until October 2001. Additionally, the Court held Cocks liable for breaching sections 180 (1), section 181 (1) and section 182 (2) of the Corporation Act. In total, 28 contraventions of the Act by Cocks were proved against him, the proceedings stood over for proof and submissions as to resulting respite (Spagnolo, 2013). Justice Palmer in this case noted that the payment of the management fee was not maintained and no records pertaining to the fee of the management was available. He stated that an ordinary man, when dealing with business transactions would insist on a contract in writing and an invoice for a detailed list of transactions (Richardson, 2012). He noted that the Board did not have detailed report of their meetings or of theor management fee. This case shows the importance of documenting board issues at the time of attending meetings and maintaining proper agreements when relying exemptions of arm’s length. Written records are helpful as they protect the interests of the person against any kind of allegation (Corones, 2012).


Asic v Australian Investors Forum Pty Ltd and Ors (No 2) [2005] NSWSC 267 (4 April 2005)

Corones, S. G. (2012, November). Liability of suppliers of extended warranties under the Australian consumer law. In Australian Consumer Law and Extended Warranties Halfday Seminar.

Griffiths, J. (2015). Application of the Australian consumer law to government commercial activities. Commercial Law Quarterly: The Journal of the Commercial Law Association of Australia, 29(3), 3.

Ha, H., & McGregor, S. L. (2013). Role of Consumer Associations in the Governance of E-commerce Consumer Protection. Journal of Internet Commerce, 12(1), 1-25.

Harris, B. (2013). Economic Cost Provisions in Fixed-Rate Home Loan Contracts and Breaches of Australian Consumer Law. J. Pol. & L., 6, 95.

Kolivos, E., & Kuperman, A. (2012). Consumer law: Web of lies-legal implications of astroturfing. Keeping good companies, 64(1), 38.

Malbon, J. (2013). Taking fake online consumer reviews seriously. Journal of Consumer Policy, 36(2), 139-157.

Richardson, M. (2012). Why policy matters: Google Inc v Australian Competition and Consumer Commission. Sydney L. Rev., 34, 587.

Spagnolo, L. (2013). Law Wars: Australian Contract Law Reform vs CISG vs CESL.

Sutton-Brady, C., Kamvounias, P., & Taylor, T. (2015). A model of supplier–retailer power asymmetry in the Australian retail industry. Industrial Marketing Management, 51, 122-130.

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