Australian Securities Commission v Donovan, John Phillip & Anor [1998] FCA 986

Australian Securities Commission v Donovan, John Phillip & Anor [1998] FCA 986

The respondents, as directors, breached their duty of care and diligence under s232(4) by permitting the company to sell growerships and quotas without a market for the product and in disregard of professional advice, resulting in serious financial loss and insolvency; such conduct constitutes a serious contravention warranting prohibition orders and pecuniary penalties.

Parties
Applicant: Australian Securities Commission; First Respondent: John Phillip Donovan; Second Respondent: Julia Gwendolin Donovan
Jurisdiction
Australia
Judgment Date
20 August 1998
Procedural Posture
Civil Penalty Application / Final Judgment
Outcome
Declaration of contravention, prohibition orders, civil penalties, and costs awarded.
Legal Topics
Directors' Duties, Duty of Care and Diligence, Civil Penalties, Prohibition Orders, Management of Corporations
Corporations Law Directors' Duties Duty of Care and Diligence Civil Penalties Prohibition Orders Management of Corporations

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Parties

Australian Securities Commission

Applicant

John Phillip Donovan

First Respondent

Julia Gwendolin Donovan

Second Respondent

Procedural Posture

Civil Penalty Application / Final Judgment

Legal Issues

  1. 1 Whether the respondents breached the duty of care and diligence under s232(4) of the Corporations Law
  2. 2 Whether the prohibition from managing corporations should be imposed under s1317EA
  3. 3 Whether the contravention is 'serious' and warrants civil pecuniary penalty

Ratio Decidendi

The respondents, as directors, breached their duty of care and diligence under s232(4) by permitting the company to sell growerships and quotas without a market for the product and in disregard of professional advice, resulting in serious financial loss and insolvency; such conduct constitutes a serious contravention warranting prohibition orders and pecuniary penalties.

Court Disposition

Declaration of contravention, prohibition orders, civil penalties, and costs awarded.

Orders

  • Declaration that respondents contravened s232(4) of the Corporations Law.
  • John Phillip Donovan prohibited from managing a corporation for 10 years.