Accessorial liability (Corporations Act)

Third parties who receive a benefit in connection with a breach of directors duties (e.g. ss 180-183) may be held accountable under the Corporations Act 2001 (Cth) or the common law.

Pursuant to section 79 of the Corporations Act 2001 (Cth), one can be charged with involvement in a contravention of the Act as an accessory. As such, the operation of ss 180-183 and s 79 together will impute liability on a third party who is in some recognised manner concerned with the director’s breach of duty.

Section 79 reads as follows:

A person is involved in a contravention if, and only if, the person:

(a)  has aided, abetted, counselled or procured the contravention; or

(b)  has induced, whether by threats or promises or otherwise, the contravention; or

(c)  has been in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the contravention; or

(d)  has conspired with others to effect the contravention.

At common law, the case of The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) (2008) WASC 239 affirmed four gradations of ‘knowledge’ that will be taken to establish a third party as a culpable accessory:

1. Actual knowledge;
2. Willfully shutting one’s eyes to the obvious;
3. Willfully and recklessly failing to make such inquiries as an honest and reasonable person would make;
4. Knowledge of circumstances which would indicate the facts to an honest and reasonable person.