Case study on Australian Securities and Investments Commission v Hellicar.
In 2001, the James Hardie Group of Companies went for a restructure of its business to overcome its asbestos liabilities. The two subsidiaries of the Group gad huge asbestos liabilities. The two subsidiaries were separated from the James Hardie Group through the restructuring of the business. A Medical Foundation was also established to compensate the asbestos claimants. In the Board meeting of the Group held in 2001, a draft announcement was approved and it was proposed that the Medical Foundation would have sufficient amount of funds to compensate the asbestos claimants. In the next day, a final ASX announcement was made. However, the draft announcement was found to be false, as the Medical Foundation established by the Group did not have sufficient amount to meet the compensation of the asbestos claimants (Scott 2012).
The primary issue involved in the case was that whether the Directors by approving the draft announcement had made a breach of Section 180(1) of the Corporation Act, 2001 or not?
The trial court i.e. the Supreme Court of New South Wales decided the case in favour of ASIC and held that the Directors by approving the draft ASX announcement had made a breach of its duty to act with care and diligence as required under Section 180(1) of the Act. The Court of appeal reversed the judgment of the Supreme Court of NSW and decided the case against the ASIC. The ASIC further appealed in the High Court (Dean et al. 2014).
There were three main defences raised by the Directors in the high Court. Firstly The Directors argued in the case that they had not approved such draft announcement and they made an amendment in such draft announcement and therefore they could not be held liable for breaching Section 180 (1) of the Act. Secondly, then Directors argued that the Minutes of the Board Meeting could not be relied upon as it was not accurate. And thirdly, the Directors contended that the ASIC had failed to call Mr Robb, the James Hardie Group’s principle legal advisor, to give evidence in the trial. Mr Robb was present in the Board’s meeting and by failing to call him; the ASIC had breached its duty to litigate the case fairly.
The High Court gave the following judgment:
1. The draft ASX announcement was misleading and false and therefore the Directors had actually caused a breach of their duty to act with due diligence and acre.
2. The minutes of the record could be relied upon because of the reason that since some parts of Minutes were inaccurate, it did not necessarily mean that the entire minutes were unreliable.
3. The Court held that the failure of calling Mr. Robb in the trial did not have any effect on the case as the evidence likely to have been given by of Mr. Robb could not have done any favour to the Directors (Spender 2014).
Atkin, D. and Cheilyk, D., 2015. Jumping at shadows-shadow and de facto directors. Governance Directions, 67(8), p.491.
Dean, G., Clarke, F. and Egan, M., 2014. Corporate capers, accounting and governance reform. Governance Directions, 66(9), p.541.
Haberly, D. and Wójcik, D., 2014. Tax havens and the production of offshore FDI: an empirical analysis. Journal of Economic Geography, p.lbu003.
Hampton, M.P. and Christensen, J., 2002. Offshore pariahs? Small island economies, tax havens, and the re-configuration of global finance. World Development, 30(9), pp.1657-1673.
Jones, C. and Temouri, Y., 2016. The determinants of tax haven FDI. Journal of World Business, 51(2), pp.237-250.
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