BACC11-Erh Transport Services Pty Ltd- Fraud Charges On Trial

Question:

Research and select one media article which has been published after 24 May 2018. The article must relate to an Australian company and to aspects of corporations law covered in the subject during the semester.

Answer:

Introduction

Mr Edward Harold Pye, who was a businessman and the director of ERH Transport Services Pty Ltd, was accused and charged for breaching his duties as a director of the ERH Transport Services Pty Ltd. The Australian Securities and Investments Commission in an investigation alleged that the accused had committed breach on two occasion, which involved approximately $575,000. The article published about this incident indicates that Mr Edward Harold Pye was charged for breaching his duty as a director. The accused went to the Ipswich Magistrate Court after being charged for the incident.

Analysis

The case of Mr Edward Harold Pye revolves around the breaches of duties of director. The director was alleged to misuse his position dishonestly to transfer amount of $550,000 and $25000 to a person and himself from the funds of ERH Transport Services Pty Ltd after an investigation by ASIC. Under Section 184 of the Corporations Act he was charged, which requires that a director of a corporation shall be deemed to commit an offence if they are intentionally dishonest to the corporation and exercise their position or power in a way that goes against the best interest of the company (Asic.gov.au 2018).This study will analyse the facts of the case with the explanation of relevant laws and its outcome.

In the year 2014, the sole director of ERH Transport Services Pty Ltd, Mr Pye, causing dishonest use of his position transferred the amount from the fund of the company on two occasions, firstly, to his account and secondly to the account of another person. ASIC on its investigation charged him for breaching his duty as a director. They claimed that Pye used his position with an intention to gain advantage for himself. A supplementary report was first lodged by the liquidator of the company, Mr Ward, alleging a misappropriation of the funds of REH Transport Services Pty Ltd. Edward Harold Pye had caused a detriment to the company by his act.

The director of a company is expected to act with due diligence with a good faith for the best interest of the company (Fisse, 2018). Section 182 of the Corporations Act 2001 imposes an obligation on the director which requires them to exercise his power, skills and duties for the good faith of the corporation. If a director fails to exercise his duty for the proper purpose and place their personal interest before the best interest of the company, he shall be deemed to commit a breach of his duty. Section 184 of the Act prohibits the director to indirectly or directly gain an advantage from using his position to himself or anyone else. A director who causes such gain of advantage shall be said to commit an offence. A director of a company owe such duties to the company as a whole, namely, the duty to act in good faith and intention, to act for the best interest of the company, to use his power and position for the advantage of the company and not for oneself. Section 184 of the Corporations Act not only prohibits but also imposes some criminal penalties for the breach of duty of the director to act for proper purpose and good faith. To determine whether a director has caused a breach of duty the legal purpose of the power or position of the director and the actual use of such power shall be identified and compared.

It was alleged by the liquidator Mr Ward that the funds which were transferred from the fund of the company to the account of Mr. Edward Harold Pye and another person was not justified and for the benefit of the company. In the case of The Australian Metropolitan Life Assurance Co Ltd v Ure, the court formulated that for the purpose of this section, good faith and proper purpose should indicate the honestly in the act of director while exercising his power which was conferred to him in the course of his duty. Mr Pye failed to satisfy this requirement as he acted for gaining an advantage to himself using his position. Considering the fact ASIC charged the director. The matter is being prosecuted by the Commonwealth director of Public Prosecution

References:

Asic.gov.au (2018). [ebook] Asic.gov.au. Available at: https://asic.gov.au/about-asic/news-centre/find-a-media-release/2018-releases/18-152mr-former-company-director-charged-with-breaching-his-director-duties/ [Accessed 10 Oct. 2018].

Corporations Act 2001

Fisse, B. (2018). [ebook] Aic.gov.au. Available at: https://aic.gov.au/sites/default/files/publications/proceedings/downloads/10-fisse.pdf [Accessed 10 Oct. 2018].

The Australian Metropolitan Life Assurance Co Ltd v Ure [1923] HCA 29; 33 CLR 199; 30 ALR 53