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Explain what will be the likely outcome against Bill? Answer addresses relevant section of Corporations Act (Cth) 2001

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Question 1 - It is said that we all make a variety of contracts every day. How can this be? How do we make agreements without actually necessarily saying anything to another party or even determining the terms of these agreements?

Answer - Contract cannot be called as contract under commercial law if it does not involve:-

Intention

Agreement and

Consideration

If any of the above is missing then a contract becomes void and unenforceable under common law.

Additionally, a contract is valid only when parties to the contract are legally capable, giving their free consents without any undue influence having an absolute acceptance and valuable consideration (Chamberlains, 2021, pg.1(3)).

Contracts are considered as fundamental part of daily lives of people such as buying food, going to work, leasing a house, sales etc. Therefore, it's true that there are varieties of contracts people enter in their daily lives but often get unnoticed. Knowingly and unknowingly, people enter into contracts for innumerable time in a day. For instance, if a person is buying candy then the person has entered into an agreement with shopkeeper. While booking any cab or restaurant services, again a contract is entered. So contract is arising with every new situation but an agreement is regarded as contract is a dependent on the way contract is entered.

Many times contracts are orally entered and thus do not necessarily need any voice or saying. For example a person is buying ice-cream from vendor of ice-cream and paying 10rs in exchange is an agreement. As boy offered to buy ice-cream and vendor accepted the offer by giving ice-cream which has created a promise. The consideration in the case is money and ice-cream.

The agreement entered between vendor and buyer of ice-cream may or may not be legally enforceable in future as it is oral agreement which may be difficult to prove and if it's legally enforceable then only it called as contract.

Question 2 - Bill Johnson is a financial analyst working for a futures investment company. Bill's job involves researching and profiling companies to determine if these companies are ideal to invest in on behalf of their clients.

Bill discovers that IBN Ltd was about to undertake a $10billion takeover of a rival company called IMF. Bill now knows the exact date that this takeover bid is about to take place, and he knows that he can't disclose this to anyone. But the temptation of making a fortune if someone knew this confidential takeover by IBN is too good to pass.

Bill tells Violet to buy shares in IMF right now! But don't tell anyone!!! Violet knows Bill very well, and she knows that Bill is a financial analyst, and he's pretty cool, and he also likes koalas and fast cars. So Violet trusts Bill and buys $5,000.00 worth of shares in the IMF.

Violet is happy, and in her excitement, she tells her friends Rupeet and Manjinder to buy shares in IMF right now... but don't tell anyone!!! Rupeet and Manjinder trust Violet and they also buy shares in IMF. Rupeet buys $2,000.00 worth, and so too does Manjinder.

A couple of days later, INB made their takeover bid on IMF, and the share prices for IMF on the stock market went up from $10.00 per share to $1,000.00 a share! Violet, Rupeet and Manjinder were all very excited that their investment went up 100 fold!

The three of them gave Bill some money as a thankyou gift!

Bill was shocked when he asked Violet who are these two. Violet explained to Bill that they were her best friends. Bill was feeling rather worried and told Violet not to tell anyone!!! Rupeet and Manjinder couldn't help themselves with all the excitement of making lots of money on the stock market that soon the Australian Federal Police (AFP) and the investigators from the Australian Securities Investments Commission (ASIC) raided the futures investment company and arrested Bill.

The AFP and ASIC also conducted a formal record of interviews with Violet, Rupeet and Manjinder, who told them, they got a hot tip from Bill!

Explain what will be the likely outcome against Bill?

Your answer addresses the relevant section/s of the Corporations Act (Cth) 2001.

Answer -

Legislation

It is the case of disclosing of insider information which is prohibited under Corporation Act, 2001. According to section 181, of Corporation act, imposes a civil duty on any officer of Company to exercise power and execute their duty for proper purpose and in best interest of Corporation.In case of officers benefitting for their self-interest instead of thinking for Company then it is breaching of duty(Premeirs.qld.gov.au, 2022, pg.1(2)). Breach of duty is a criminal offence under Corporation Act, 2001 in case if director is found to be intentionally or recklessly dishonest. Section 180 require officer to exercise reasonable care and diligence all the time while discharging duties or exercising power. Reasonable care can be understood as the care or diligence a reasonable person will exercise in same circumstances. An officer of the Company require to make reasonable judgement, does not have material interest in matter of judgement and, rationally believe exist for judgement. Further, section 183 of corporation act, 2001 has imposed a civil obligation on officer to not gain advantage from information obtained out of performing job for themselves or for others which can result in detriment to Company. Section 182 of Corporation act prohibit the officer of the Company to not to improperly use information and avail benefit for themselves or for others and will be committed with an offense of using position for self-benefit.

Analysis of Case

Bill is committed under criminal offense for misusing information and showing dishonesty to the duty of care and diligence for the job. Bill not only thought of benefitting himself but also disclosed to others about the significant information of takeover of IMF by IBN. Bill will not only compensate for the loss incurred to other investors after Violet, Rupeet and Manjinder invested and benefitted from the information and referring each other. Bill will also be liable under section 182 for misusing of position by intentionally dispersing of important and secret information of the takeover and will be disqualified from office. Bill is liable under criminal offense for giving loss to general public by having its self interest in the transaction.

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