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Case introduction

Discuss about the ASIC vs Mariner corporation limited [2015].

The decision given in Australian Securities and Investments Commission v Mariner Corporation Limited [2015] FCA 589 was based on the applicability of different sections covered under the Corporations Act, 2001 (Cth). The first matter which was dealt with in this case was the prohibition put through the act through section 621(2) on the bluffing bids (Jade, 2018). The crux of the matter led to the court holding that the need of recklessness under this section resulted in the bar of contravention being set high, so that these violations would take place on in egregious situations. An example of this was that there was lack of genuine intent of following through the bid. In this matter, the proposition regarding prohibition giving the meaning of a bidder having reasonable grounds of believing that they would be able to fulfil their obligations where a major part of the offer in the bid was accepted was rejected by the court. This case is also important from the viewpoint of director duties, particularly in context of the ability of directors in invoking the business judgment rule (Prickett and Teo, 2015). This discussion is focused majorly on this second aspect of the ASIC v Mariner case and would highlight the duties which were breached in this case.

Mariner was a corporate investment company. This company aspired to buy either all of the shares or a majority of those shares of a company called Austock Group Ltd. Olney-Fraser was the CEO of Mariner Corporations Ltd who got an unsolicited approach on June 08th 2012 from one James Goodwin, the joint MD of Arena Investment Management Limited, which was Morgan Stanley Inc.’s part of international real estate arm. An interest in making purchase of business unit of Austock was communicated by Goodwin in the initial communication, and this was to be done once the takeover was done (Usher Levi, 2016).


After this approach, on the following days, more discussion was undertaken between Olney-Fraser and Goodwin regarding the possible purchase and also on the possible chances of funds from Arena being provided for facilitation of this takeover. Despite the extension discussions between the two parties, a binding agreement could not be attained. A key feature of this discussion was hat none of the other company directors of Mariner were aware of this communication. Yet, Olney-Fraser did provide different proposals to Mariner’s two other non-executive directors (Usher Levi, 2016).

Facts of ASIC v Mariner

On June 25th 2012, Mariner put out a statement to ASX where the announcement regarding company having made a conditional offer to Austock for acquisition of all of their shares @ 10.5 cents per share (Ricci and Miyairi, 2016). This was deemed as an off market offer. It was the view of Mariner board that the value of Austock was $20 million approx, which was needed for funding the takeover. The company got a letter from Austock which provided that the offer was invalid based on price per share which was offered, and this led to an increase in the bid by 11 cents, so as to allow for minimum bid price rule being met. However, another company did put a more attractive offer, resulting in the takeover bid of Mariner falling apart (Usher Levi, 2016).

Section 180(1) of the Corporations Act imposes a duty of care and diligence on part of directors and other officers as a civil obligation. This section requires the directors of companies to exercise their powers and discharge their duties compulsorily in a manner which show adopting of degree of diligence and care compulsorily. This has to be done on the measures of reasonable person exercising similar duties faced with similar situation and holding same position as the director in question. The civil penalty provisions for beach of section 180(1) are covered under section 1317E of the Corporations Act (Federal Register of Legislation, 2018).


This section not only provides the penalty provisions, but also puts forth the defences in terms of the business judgment rule covered under section 180(2). As per this rule, the director of the company, when making a business judgment rule, would not be liable for breach of section 180(1), or for the breach of similar duties under the common law and in equity. In this context, there is a need to show that:

  • The judgment made by the director was for a proper purpose and in good faith,
  • Did not have any material personal interest of director in the main matter of judgment,
  • Director informed properly themselves on this matter in a reasonably appropriate manner, and
  • Rationally had faith in judgment as being the best decision for the company (Federal Register of Legislation, 2018).

The proceedings against the directors of Mariner were initiated by ASIC based on the following breaches being alleged:

  • The directors alleged the absence of financial resources for funding the bid as reckless, resulting in the contravention of section 631(2)(b) of the Corporations Act;
  • The company had been engaged in deceptive or misleading conduct, which resulted in the breach of section 1041H of the Corporations Act, as a result of the initial offer of 10.5 cents being made under the takeover bid;
  • The breach of director duties as provided under section 180(1) of the Corporations Act, in context of duty of care and diligence not having being upheld (Jade, 2018).

The application submitted in this case was dismissed by the Federal Court judge Beach J. This was because the directors of the company, in the view of the judge, had not made a reckless decision which could result in breach of section 180(1) when the announcement of takeover bid for Austock was made by the directors without securing the necessary funding for backing it up. As per Justice Beach, the directors had fulfilled the required elements of defence covered under section 180(2) and this made entitled to the exculpatory operation. In deeming the company as not reckless, the evidence was thoroughly considered by Beach J. He went on to reject the proposition that a contravention on part of the company by default meant that the directors of such company had contravened their duties as have been set out through Corporations Act. In reaching his decision, the director duties, their obligations when they took any risk, and the needs for fulfilling business judgment rule were analysed (Jacobson, 2015).  

Duties/ Responsibilities breached


In order to reach to the decision of the Mariner directors having exercised their reasonable diligence and care, Breach J noticed that this duty was based on a range of different factors:

  • The situation faced by the company in context of its type, size, nature of business, composition of board of directors and terms of its constitution.
  • Responsibilities and position of directors, skills and experience, and terms and conditions on which they acted as director, their responsibility towards business of the company, informational flows, and the different systems in place.
  • The different situations, acts and omissions of the specific case (Jacobson, 2015).

When it came to the application of the business judgment rule, Beach J highlighted the conduct of the three directors. The analysis conducted by Beach J on Olney Fraser is a key highlight of this case. The first requirement of section 180(2) was that there had to be a business judgement. For being such a judgment, there needs to be decision for taking or not taking an action with regards to the matters which pertain to the operations of the business conducted by the company. In this case, the pertinent business judgment was regarding the decision of initiation of Austock takeover bid where the key starting point, which was also a necessary one, was undertaken through the announcement made on June 25th (Jacobson, 2015).

The nature of business of Mariner and the evidence regarding possible benefits to the company for getting control on the other company, the very decision of initiating the takeover through the announcement would be the business judgment for this case. The characterisation of decision of directors by ASIC as  judgment was not in compliance with the Corporations Act or on the reliance placed on Australian Securities and Investments Commission v Fortescue Metals Group Ltd [2011] FCAFC 19 as this case had been set aside on different grounds. This was deemed as a misconceived analysis of Olney-Fraser made judgment. Hence, there was no decision made on part of the director which was against compliance of the Corporations Act (Jacobson, 2015).


Apart from this, the view of Beach J was that Olney-Fraser had exercised proper judgment for supporting takeover bid for the other company through the announcement. Evidence was presented by the director that in that particular situation, a drover’s dog could have easily funded the entire bid. This was seen in light of major and relevant experience in context of such deals. The judge further held that the requirement of good faith for proper purpose was fulfilled in this case. This was because Olney-Fraser had supported the takeover bid and made the proper announcement as there was a major chance of company making huge profits, where Olney-Fraser genuinely believed that announcement and perusal of takeover bid was in best interest of the company (Jacobson, 2015).

Why the duties were breached?

In context of the third requirement, the judge held that there had been no material personal interest of the director in this judgment. Lastly, the directors had informed themselves on the subject matter of this particular judgment to such an extent that was reasonably appropriate for the directors based on Australian Securities and Investments Commission v Rich [2009] NSWSC 1229. Olney-Fraser took into consideration the sufficient information for making the informed judgment where he took part in different discussions and meetings with different parties. Olney-Fraser did inform himself regarding the matter to be appropriate for the company, resulting in fourth requirement being fulfilled. His belief was held as a rational one. This led to the court holding that all the requisite elements of business judgment rule had been satisfied by Olney-Fraser and was therefore entitled to exculpatory operation which he otherwise had to rely upon (Jacobson, 2015).

Through the ruling given in the case of Australian Securities and Investments Commission v Mariner Corporation Limited, it was established that the bidders and the directors can be confident of not being in contravention or violation of the Corporations Act, where they make announcements of proposed takeover bids. This was despite the fact that such bidders and directors had not made arrangements for firm funding. This particular case is important ruling in context of both director duties and takeovers. This case is an important reminder regarding the approaches which are taken by the Takeover Panel as have been covered under the Guidance Notes and also in the decisions. This is in addition to the approaches adopted by ASIC in context of the Regulatory Guides, which cannot be deemed as binding on the court where the courts have to determine the legal meaning of some of the provisions of the Corporations Act (Prickett and Teo, 2015).

In context of risk taking by the directors, this case gave out important statements. The duty provided under section 180 did not impose a wife ranging obligation on the directors for making certain that the affairs of company were undertaken as per the law. This was not to be used as a back door entry for visiting the accessorial liability for the directors. Beach J provided that the assumption that director duties have been contravened just because a company has contravened certain provisions of the Corporations Act was entirely wrong approach. Such a contravention of section 180 would not take place till the time there was an actual damage which was caused to the company as a result of these violations or where the relevant conduct resulting in company’s interest or that of the interest of its creditors or shareholders being harmed was reasonably foreseeable. There was a need for reasonably foreseeable harm to thus be present. Further, the balance between foreseeable risk of harm and possible benefits for the company also had to be evaluated in such cases, so as to allow for calculated risks to be taken by the management (Jacobson, 2015).

Reference List

Australian Securities and Investments Commission v Fortescue Metals Group Ltd [2011] FCAFC 19

Australian Securities and Investments Commission v Mariner Corporation Limited [2015] FCA 589

Australian Securities and Investments Commission v Rich [2009] NSWSC 1229

Corporations Act, 2001 (Cth)

Federal Register of Legislation. (2018) Corporations Act 2001. [online] Available from: https://www.legislation.gov.au/Details/C2007C00541 [Accessed 12/05/18]

Jacobson, D. (2015) Case Note: Directors Successfully Rely On Business Judgment Rule. [online] Available from: https://www.brightlaw.com.au/case-note-directors-successfully-rely-on-business-judgment-rule/ [Accessed 12/05/18]

Jade. (2018) Australian Securities and Investments Commission v Mariner Corporation Limited [2015] FCA 589. [online] Available from: https://jade.io/article/398014 [Accessed 12/05/18]

Prickett, F., and Teo, X. (2015) Mariner decision gives directors of bidders greater latitude when announcing takeover bids. [online] Available from: https://www.claytonutz.com/knowledge/2015/june/mariner-decision-gives-directors-of-bidders-greater-latitude-when-announcing-takeover-bids [Accessed 12/05/18]

Ricci, S.A.G., and Miyairi, J. (2016) From Enactment to Mariner: Does the Statutory Business Judgment Rule Change the ‘Acoustic Separation’ Between Conduct Rules and Decision Rules in Australia? [online] Available from: https://www.business.unsw.edu.au/About-Site/Schools-Site/Taxation-Business-Law-Site/Documents/Gramitto-Ricci-Miyairi_CLTA-Conference-Paper.pdf [Accessed 12/05/18]

Usher Levi. (2016) Corporate Directors & the Mariner Decision. [online] Available from: https://www.usherlevi.com.au/corporate-directors-the-mariner-decision/ [Accessed 12/05/18]

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