Case Summary

ASIC v PFS Business Development Group Pty Ltd [2006] VSC 192

Company law; directors’ duties; duty of care and diligence

Facts: PFS Business development Group (PFS) was a group of eleven companies that offered financial services of various types. ASIC sought declarations and other orders against the group on various grounds, one of which was a breach by the directors of their duty to ensure that the companies were properly managed. Specifically, it was established that the directors had:

  • failed to ensure timely payment to employees
  • allowed companies in the group to trade while insolvent
  • failed to ensure that proper books and records of company transactions were kept
  • not complied with taxation requirements; and
  • generally mismanaged the PFS group.

Issue: On these facts, had the directors of PFS breached their statutory duty of care and diligence?

Decision: The directors had breached their duty of care and diligence.

Reason: The facts showed that the directors had not exercised a reasonable degree of care and diligence in the management of the companies. According to Hargrave J (at [330]) ‘the management of the PFS Group was a complete shambles’.