ASIC vs Hellicar - MBA PDF

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Running head: ASIC VS HELLICAR

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ASIC Vs Hellicar [Author] [Institution]

ASIC VS HELLICAR

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ASIC Vs Hellicar Case Introduction The case, ASIC vs Hellicar in Australia was related to the directors of James Hardie Company. The six non executive directors had crossed limit of their liabilities and breached the duties and responsibilities related to James Hardie Industries Ltd (“JHIL”). In 2012, an appeal was filed under HCA 17 that each and every director of the company has mislead the company’ shareholders and all other stakeholders by breaching their duties and limit that were considered necessary to follow under the Company's Act and Australian Stock Exchange (“ASX”). ASIC’s appeals included that the directors were liable for the shortfall of one billion dollars as the James Hardie Industries Ltd (“JHIL”) had totally funded its asbestos diseases liabilities. In 2012, Australian Securities and Investments Commission v Hellicar case included that all directors of the company were bound to attend Court ruling. The media releases also added that the company directors are fully responsible for the shortfall (Jacobson, 2012). The ASIC's appeal included complain related to the breach of director duties that they did not follow the board minutes in February meeting which was totally against the probative value of the formal board meeting criteria. Other than breach of time management responsibility, the directors do not formally record the whole meeting and what was done in that meeting. The board of directors also ignored the proper announcement of meeting and the announcement made later was totally misleading and also delayed. Therefore, it was the reason ASIC appealed high court against all these inaccuracies. The directors were held liable to submit all the contemporaneous record that was done in February meeting. James Hardie's external lawyer i.e. Mr. Robb was not involved and called by ASIC for giving evidences and facts related to the

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company to the high court. It was the reason high court took decision that there is no reason for inferring Mr. Robb because he gave all the evidences related to the directors in positive way that were in favour of the directors. Mr Robb was called by ASIC later that he had caused no unfairness. The court considered all the evidences led at the trial process and it raised all the questions related to miscarriage of justice and breach of responsibilities and duties and whether it needs a new trial. The court decided that it will be wrong to respond to no unfairness if it had accrued by discounting the cogency of facts. The court statement on the issue that either the ASIC acted like a model litigant was as under (Jacobson, 2012): "ASIC is also responsible for some duties that is necessary to took any decision on the matter of breach of duties by the directors and without deciding it is assumed that if the responsibility is imperfect, the litigant can describe the duty to conduct litigation in a fair way." Duties and Responsibilities Breached along with Reason There were some legal duties and responsibilities that were breached by the directors and an appeal related to the misleading act was filled in the high court and the court did not expressly state its endorsement related to the ASIC findings. The court stated that it is very important that all the executive and non executive directors must fulfil their individual and collective duties and responsibilities that are reinforced by the company's law. In ASIC vs Helicar case, there were many duties breached by the directors. There is some information related to what duties were breached (Gilbert & Tobin, 2012). 1. The directors did not properly assess the information of the company's assets and liabilities that was put before them in the board meeting. That is why, they failed to take particular decision related to critical strategic announcement and as a result, the company faced

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great financial shortfall. The duty was breached by the director because they blindly trusted the information and advice of the management and workers. This breach of duty was the main point of ASIC prosecution (Gilbert & Tobin, 2012). 2. The directors of James Hardie Industries Ltd (“JHIL”) did not follow the timing and minutes of meeting. Mr. Robb and Mr. Shafron were called by the high court in the case because they were the witness of the February board meeting that either the duty of following the minutes of meeting is breached or not. This issue has substantial probative value and it is vital to follow the approved meeting minutes by all the directors. The announcement and the drafts related to the minutes of meeting were not properly circulated by the directors prior to the meeting. The copy of drafts was given to the Court as evidence, but the minutes recorded in the draft announcement were untrue. The directors ignored the approved meeting minutes and announcements. Due to their negligence, the company faced big crises and hence called by the high court (Gilbert & Tobin, 2012). 3. It is also the responsibility of the directors to record issues along with their reflection accurately by taking their separate notes for the wake of giving fair information to the stakeholders of the company. In ASIC appeal, it was mentioned that the directors violated and breached the company's law by not properly recording the business event of board meeting. The directors have not taken their own notes and thus breach of duties accrued by the directors. The high court brought civil penalty proceedings over the breach of duties and given guidance On ASIC vs Hellicar case (Gilbert & Tobin, 2012). 4. The breach of duties by the directors or any other employee can affect the whole business of the company or a substantial part of the company. So, it is unfair to breach any duty.

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The board of directors’ meeting was held, but the in-house counsel was failed to settle many things and extended the board decision to equivalent preparatory tasks that were necessary for the decision making. Thus, according to the corporation act, the decision making should not be extended to the people who are not deemed to take part in decision making. In fact, the board of directors were not taking their responsibility of decision making and putting all burden on management that they were not able to manage situation by taking bold decisions (Gilbert & Tobin, 2012). Analysis of the High Court Decision and Reasons of the Decision After looking at the ASIC vs Hellicar case and all its facts that how the directors breached their duties and responsibilities and held responsible for penalty and liability for damaging to the company's business in detail, it is very easy to analyse the whole case and court decision on the appeal filled by ASIC considering the Australian Stock Exchange and corporation act. The NSW court stated the decision that the ASIC is totally failed to give proper information, witness and evidences against the directors for the breach of duties. It was again challenged and overturned in high court by ASIC. The decision statement that the company has properly drafted ASX announcement and completely followed the approved standards and code of conduct in February meeting, was challenged in high court. The minutes of meeting, formal record of own notes against what happened during the meeting and announcements were tabled and approved. These were the key factors that court asked to give. It is also analysed that the court called Mr. Robb and Mr. Shafron as a witness because they were the two people other than the board of directors who witnessed what happened in the meeting and how duties and responsibilities were breach. However, Mr. Robb gave all the evidences in favour of company and its directors (TimeBase, 2012).

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Court properly judged that the minutes were inaccurate, confusing and unreliable as they were made before the meeting day. The high court taken detailed information that someone from the board of directors has taken the same minutes of February meeting to the April meeting that can never be a coincidence. It was the breach of duties that uncased resolution that was in February meeting notes was taken as it is to April meeting. The high court stated in its decision that recording of a resolution that is not approved and took place by the board of directors in February meeting in next meeting is a big blunder. The high court considered the fact that the ASX announcement is circulated and distributed in the JIHL meeting and also called the two directors who were closely associated. Mr. Robb did all those things that were related to his interest and ignored the overall company's benefit. The court personally viewed the draft to see how things are tabled in the board meeting. The court gave statement over the ASIC appeal that the draft was textual instead of substantive (TimeBase, 2012). The court made its statement in decision making that any deed and related circulation is executed later. In addition, the draft announcement, which is published and is approved by all the directors of the company, is considered a real comparison among the texts. The court ordered to correct and recheck all the slips and errors. The court states that small changes in the board meeting are very important for the company that can make it financially strong. The court said that there was no authority with the directors to misguide other stakeholders of the James Hardie Industries Ltd (Norton Rose Fulbright, 2012). The approved announcement was challenged and protested by none executive members of the company to its terms. Cogency of ASIC'S appeal and evidences provided to the court were enough for the directors to held for penalty and general obligation to act as unfair per se. The court given the decision that as proper source is not identified while delivering services to the fop

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any and there is no formal call given for the fulfilment of duties by the company directors. It is also stated by the court that there is no proper rules and criteria applied, if the responsibility or duty has been breached. The court rejected that if any limits are crossed by the directors there must be a witness who has to face the court and give statement against the breach of duties by directing ASIC to do so as it has filled the appeal in the court. The case of ASIC vs Hellicar was trial again in high court and strong evidences were required that whether breach of duties and miscarriage of justice had been actually accrued. It is analysed that the court stated that there is no solution or null and void hypothesis that unfairness per se has been accounted for cogency of whether evidences related to the facts were somehow discounted (Norton Rose Fulbright, 2012). The court felt more comfortable if the petitioner of the case gave strong evidences that weighed according to the breach of duties. The unexplained and weak evidences can give favour to the opposite party so ASIC does not relied upon the inference and given clear proof of the company last meeting minutes as evidence to the court. Mr. Robb expected that he had falsely recorded the minutes of February meeting and the same with an unapproved resolution were included in the April meeting and he has personally attended the meeting to do so. The court held Mr Robb responsible and charged him civil penalty. All the other directors that were directly involved in this misleading and shortfall faced by the company are considered subject to the liabilities and penalties (Norton Rose Fulbright, 2012). Mr. Shafron was released free from any penalty or charge as there was no evidence predominately against him related to the misuse of authority, breach of duties, ignoring responsibilities and many other facts. So, it is concluded that the court’s decision was fair and not in favour of ASIC or the board of directors only. It was properly judged and analysed that it is

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considered as breach of duty if only one aspect of the case of the issues of company is considered and other is ignored. (Norton Rose Fulbright, 2012).

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References

Gilbert & Tobin. (2012). The decision: ASIC v Hellicar & Ors. Lexology. Retrieved from http://www.lexology.com/library/detail.aspx?g=c02498f5-ec3a-4514-af79-0d8982db328a

Jacobson, D. (2012). ASIC V Hellicar: Liability of company directors (James Hardie). Bright Law. Retrieved from https://www.brightlaw.com.au/asic-v-hellicar-liability-of-companydirectors-james-hardie/

Norton Rose Fulbright. (2012). The James Hardie Decisions: Australian Securities & Investments Commission v Hellicar & Ors [2012] HCA17; Shafron v Australian Securities & Investments Commission [2012] HCA 18. Retrieved from http://www.nortonrosefulbright.com/knowledge/publications/66582/the-james-hardiedecisions-australian-securities-investments-commission-v-hellicar-ors-hca17-shaf

TimeBase. (2012). ASIC v Hellicar & Others – James Hardie directors lose to ASIC in High Court. Retrieved from https://www.timebase.com.au/news/2012/AT169-article.html...