The duty of the director towards the corporation had been clarified more clearly by the Court in the year 2012 in the case Shafron v Australian Securities and Investments Commission (2012) 286 ALR 612. The role of an officer under section 9 of the Corporations Act had been stated in this case. The dual roles played by the plaintiff who is the officer under section 9 of the Corporation Act and the extent of responsibility of an officer in the Corporation. It can be said that due care and with the diligence in section 180(1) of under the Corporations Act objectives had been examined by the court in this case. The reasons for which section 180(1) of due care and diligence had been coming into contravention had been clarified. It has given rise to the legal issues that have been discussed. The relevant law relied on by the judge to decide the case accordingly. The court by considering the arguments of the plaintiff and the respondent in the case by measuring the relevance of section 180(1) provided the decision in the case.
James Hardie group has the holding company called James Hardie Industries Limited. In the year 1998 in the month of August, Mr Shafron had been appointed as a general counsel and the company secretary of the JHIL. However, he is appointed as company secretary in the formal manner in November 1998. Mr David Cameron has also appointed by the company on the position of company secretary with Mr Shafron. Mr Cameron role was mainly administrative. Mr Shafron is the senior executive of JHIL among the other executives.
The board of directors in the year 2001 there are asbestos claims that had been made against the James Hardie Group established the medical research and compensation foundation to manage and pay out the claims. The ASX draft had been approved by the Board for public release in relation for the foundation had been established. The plaintiff, in this case, had been found in contravention of section 180(1) of due care and diligence. Mr Shafron had failed to recommend the board of directors of JHIL about some data about the partition that has been required to reveal to Australian Stock Exchange. Mr Shafron had also failed to give the opinion on the actuarial statement upon which the board had relied to predict asbestos-related liabilities were significantly limited in its scope. In failure to give this advice ASIC had found plaintiff to be in the contravention of section 180(1). He has not done his role as a company secretary with due care and diligence. This other officer had done this duty if he has the same responsibilities as of Mr Shafron. Whereas, Mr Shafron said that, his main role is to give advice as a general counsel. His main responsibility is of general counsel and not as company secretary. His role as company secretary is limited to an extent in the company as by circumstances he is the company secretary. Therefore, the liability of section 180(1) of due care and diligence does not apply on his role of company secretary. These both roles as general counsel and company secretary had separate duties that cannot be combined together.
The major legal issues that had risen in this case due to the failure of the officer Mr Shafron to obey the duties and obligation towards the corporation. Thus, the major legal issue had risen due to the plaintiff found to be in the contravention of section 180(1) of due care diligence of the Corporations Act. The duty of care with the diligence not only lies towards the directors but also to the officer of the organisation. Mr Shafron is the officer under section 9 of the Act and has the dual responsibilities of both as company secretary and the general counsel. Thus, Mr Shafron makes important pronouncements and due to that, it affects the company trade at a very large scale. Mr Shafron denied all these claims and stated that he has very limited duties as the company secretary and disagreed that he is associated to his co-secretary Mr Cameron, whose work was mainly administrative. He stated that in the parting offer he had not contributed that is required to reveal to the Australian Stock Exchange. He has also not took part in the proclamation made by the board and not violated any obligation in relation to the actuarial statement on which the board is dependent. All these activities have raised the legal issues and these activities had been found to be doubtful.
There is no proof by Mr Shafron had done one task in one capacity and another task in another capacity. Hence these duties can be separated or not in accordance with section 180(1) of due care and diligence that been examined by the tribunal. If both these duties been separated then also the duty of care and diligence lies with the officer of the organisation. As the officer who holds the duty under section 9 of the Corporations Act cannot be a term that as limited responsibility. Hence, in this case under section 180(1) of the Corporation says that Mr Shafron had the responsibility to save the company from all the legal risks and to give proper advice to the company to prevent from raising the legal issues. Mr Shafron has failed to comply with his duty towards the organisation. The legal issue of the ASX statement and the actuarial statement had not been raised if he has worked with due care and diligence.
There are certain laws that had been found to be in a contravention by Mr Shafron in this case. Mr Shafron is the officer under the Corporations Act. He plays a dual role in the company as general counsel and the company secretary. These both roles come under the officer under section 9 of the Corporations Act. The judge in deciding the case has taken into consideration the role of an officer in the organisation and the extent of a liability of the officer in the organisation. It is the relevant law that had been used by the court in deciding the case. Mr Shafron had failed to provide an ASX statement on the partition offer to the board of directors of the organisation. He had also failed in providing the actuarial statement on which the board of directors are dependent. Hence, in failing in his duties he had been found to be in the contravention of section 180(1) of the Corporations Act. Mr Shafron had been found to be in the violation of his duties that he has not done his work with due care and diligence. The major laws in this section that had found to be in contravention is section 180(1) of the Corporations Act. It is the law that had been examined by the court whether Mr Shafron as stated that he has limited liability as company secretary and his both roles can be segregated. The court in deciding the case took the reference of other case laws where directors had breached the section 180(1) of the Corporation Act. Hence, in deciding the case the court has investigated and examined both Shafron and respondent arguments.
The NSW court of appeal had found after listening to the arguments of Mr Shafron. He had been found to be in violation of section 180(1) of Corporations Act. Mr Shafron had raised some issues that had been explained by the court and provided the decision. Mr Shafron had been found to be the officer under section 9 of the Corporation Act. His role as Company Secretary comes under the obligation of an officer under section 9. Mr Shafron had not done his duties with due care and diligence; he has failed in providing the information on the ASX statement and failed to provide an opinion of the actuarial on which the board had relied. Mr Shafron than moved his appeal to the high court. He has submitted although that he has found to be in the contravention of section 180(1) of due care and diligence of the Corporations Act as the company secretary and not as the general counsel. The actions on which ASIC had charged against him were not in his competence. His competence as general counsel and he is not a secretary of the JHIL. In conclusion, he wants to convey that he has a limited liability towards the JHIL as company secretary as his main role is of general counsel. These both roles duties under section 180(1) are different and that can be isolable. The high court had rejected this argument by stating that both roles of company secretary and the general counsel under section 9 is an officer of the Corporations Act cannot be segregated. It is not possible that the tasks done by the plaintiff are in one capacity and the other task in another capacity. Mr Shafron role is not limited to the company secretary or the general counsel but his role is beyond that role. As an officer of the organisation, he has the duty to save the company from all the legal risks. It is also the duty of Mr Shafron to advice the company and gives proper opinion on the ASX statement on the partition of the company. Mr Shafron had not provided any evidence that he has not been included in the meeting or part of the meeting. He had failed in providing an opinion on the actuarial statement upon which the board had relied to predict asbestos related liabilities was significantly limited in its scope. The High Court also rejected the responsibilities in reference to his co-secretary Mr Cameron, whose work was mainly administrative. Mr Shafron is the senior executive of the JHIL and therefore he has certain obligations towards the corporation. He has the responsibility to work with due care and diligence, therefore liable for the breach of section 180(1) as he has not worked with due care and diligence towards the JHIL. The high court had rejected the appeal of Mr Shafron and upheld the case.
Conclusion
It can be concluded from the verdict that Mr Shafron had violated the section 180(1) in which the duty with care and with diligence defined in the Corporations Act. Mr Shafron had worked with due care and diligence and hence held liable. Mr Shafron who had been defined by the court is an officer given under section 9 of the Corporation Act. Mr Shafron who has played role as general counsel and the other role of company secretary and these roles cannot be separated. It cannot be defined as one task in done in one capacity and the other is done in another capacity. Therefore, it is concluded in this case that Mr Shafron responsibilities is not limited in relation to care and diligence towards the JHIL. The officer liabilities are not only limited to the legislative but also the responsibilities hold by the officer in the office held. It is said from the case that there is need for the officers and directors of the organisation must that standard care is required in section 180(1). To show proper care and diligence and other organisation should also take a lesson from this case that how the violation of duties can affect the organisation.
References
Australian Securities and Investments Commission v Hellicar [2012] HCA 17.
Australian Securities and Investments Commission v Macdonald (No 11) (2009)
Corporations Act s 180(1)(b).
Corporations Act, s 198A
Corporations Act, s 9
Morley v Australian Securities and Investments Commission (2010) 274 ALR 205 at 378 [894].
Shafron v Australian Securities and Investments Commission (2012) 286 ALR 612
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