Securities and Investments Commission System †MyAssignmenthelp.com

Question: Discuss about the Securities and Investments Commission System. Answer: Introduction The High Court of Australias Full Bench gave a landmark decision in the year of 2012 through ASIC v Hellicar Ors [2012] HCA17, which is amongst the famous Jamie Hardie cases. In this case, the decision given by the Court of Appeal of NSW in Shafron v Australian Securities and Investments Commission [2012] 286 ALR 612 and Morley v Australian Securities and Investments Commission [2010] NSWCA 331, were overturned (Czoch and Whalebelly, 2012). Through the case of ASIC v Hellicar, the seven non-executive directors of JHIL, i.e., James Hardie Industries Ltd, along with the general counsel/ company secretary of the company, were held to have contravened the duties they owed by being the officer or the directors of the company (Gunning and Heller, 2013). This particular breach was held with regards to the release of the misleading announcement to the ASX, i.e., the Australian Stock Exchange (Floro and Meikle, 2012). This decision provides a better understanding towards the duties of the ASIC, i.e., Australian Securities Investments Commission, towards initiating proceedings as per the governing legislation of the Corporations Act, 2001. These are also significant with regards to the duties which are held by the executive and non executive directors, along with the management below the board level and also provide clarity to the definition of an officer as per this act (Australasian Legal Information Institute, 2012). ASIC v Hellicar (2012) The ASIC, in 2007 initiated civil proceedings against seven of the ex non-executive directors, the general counsel/ company secretary and three ex executive directors of JHIL, for the contravention of section 180(1) of this act. A contention was made by the ASIC that each of these individuals had failed in exercising the due diligence and care, which was necessary, regarding the release of information to the share market. And undertaking these activities resulted in the contravention of provisions of this act, and an ultimate breach of the duties which they owed (Czoch and Whalebelly, 2012). It was held by the SC of NSW that there was a breach on part of the seven directors as they approved the announcement to ASX, which conveyed in a misleading manner, that a trust had been formed for funding the claims regarding the asbestos-related disease and that there would be a sufficiency in funds, for meeting the current, as well as, the future claims (Time Base, 2012). It was held afterwards that this fund was not adequately funded and the value of such shortage was $1.5 billion. JHILs general counsel, along with the post of company secretary was held by Shafron. It was claimed that even he had contravened the Corporations Act, as he did not advice the board in an adequate manner with regards to the announcements, as these were expresses in vague terms. Furthermore, there was also possible shortcoming with the economic advice, as well as the modeling advice which Shafron gave to the board of the company (Czoch and Whalebelly, 2012). Fines, along with disqualification orders were passed by the judges in the year of 2009 for breaching various provisions of the governing act by the officers and the directors. An appeal was made by some of the directors to the Court of Appeal of NSW and they submitted that the primary judge should have refrained from holding the draft ASX announcement, which had been contested by the ASIC, to be tabled, along with being approved at the board meeting which took place in February, which in reality had been both tabled and approved (Hill and Thomas, 2015). It was held by the Court of Appeal of NSW that the ASIC had not fulfilled the burden of proof, provided that the board minutes of this February meeting where the resolution was recorded regarding the ASX announcement, which comprised of a range of imprecision regarding the other matter, which required the answering on their precision in general, and also specifically with regards to such announcement. This was along with the failure in providing the burden of proof regarding the witnesses which the ASIC called, as they were unable to recall the events in an accurate manner, regarding the tabling of resolution (Czoch and Whalebelly, 2012). A duty of fairness was held to have been owed by the ASIC as per Court of Appeal and this was analogous to the one owed by a Crown Prosecutor, which was breached by not calling Robb, who was the lawyer of JHIL, who was also an attendant to the held meeting and preparer of the board minutes. The cogency of the evidence of ASIC was diminished by failing to call Robb. Against this decision of the Court of Appeal, an appeal was made by ASIC to the High Court (Jacobson, 2012). The Court of Appeal of NSW held that Shafron had acted in the capacity he had, i.e., the capacity of an officer, either under section 9(a) of this act as a company secretary, or as an individual who participated in decision making at the relevant times, which affected either whole or a substantial part of JHILs business as per section 9(b)(i) of this act, and he had also contravened the duties as being an officer. The Court of Appeal specifically held that Shafron had breached sections pertaining to the directors and officers duties, as they failed in giving the advice to the board and to the CEO by failing to discharge their duties and exercising their powers with diligence and a degree of care, which would be exercised by a reasonable individual in a similar position (Czoch and Whalebelly, 2012). An appeal was made by Shafron to the High Court, where he argued that the ASIC alleged omissions were the omissions in the performance in his role as a general counsel, and not as the JHIL s company secretary. And he claimed that he was not an officer of the company so the provisions of the act did not apply to him (Bradman and Less, 2012). Duties Breached A civil obligation has been imposed through section 180 of the Corporations Act, 2001 (Cth). This obligation has been put over the officers and the directors of an organization. The provisions of this section relates to the duty to act in a diligent way and with care (Australasian Legal Information Institute, 2017). As per subsection 1 of this section, the directors, along with the other officers of a company, have a responsibility of discharging their duties, in addition to the exercise of the authority given to them, in a way, which depicts diligence and care (WIPO, 2015). This has to be done in a manner, as would have been done by a reasonable individual, if such reasonable individual was the officer or the director of the company in the given circumstances, and this reasonable individual occupied the office which was held by such officer or director and also had the same responsibilities (Federal Register of Legislation, 2017). A contravention of section 180(1) of this act gives the power to the court to make a declaration of contravention (Cassidy, 2006). In this particular case, i.e., the case of ASIC v Hellicar, when an appeal was made by ASIC to the High Court, the judgment given by the Court of Appeal of the NSW was overturned, regarding the failure of ASIC in satisfying the burden of proof regarding the tabling and approving of the draft ASX announcements at the board meeting held in February. It was held by the High Court that the board minutes had to be always considered as a formal record of the occurrences at the board meeting. Hence, they are evidence to the truth of all the issues which have been recorded in it. This was with particular reference to the ASX announcement being both tabled, as well as, approved (Garnaut, 2015). The submission of the respondent regarding the inherent unreliability of the board minutes, due to these being prepared before the board meeting held in February and these containing certain inaccuracies, were out rightly rejected by the High Court. It was also held by the High Court that it was far too great a coincidence for none of the individuals who were present in the Board meeting which held in April, where the board minutes were adopted by the board, to notice that there was a resolution contained in the minutes of February and stating that they had no knowledge regarding such a resolution being passed. On the case of respondent, the High Court was of the view that this was a glaring blunder, and it was even worse than something which can be termed as a blunder as the recording of a significant resolution took place, which in actuality, never occurred (Czoch and Whalebelly, 2012). This was coupled by the evidence to prove the fact that the draft ASX announcement had been circulated at the meeting, in as much as the discovery on part of Robb, along with the files of a large shareholder in JIHL, i.e., BIL Australia Pty Ltd, in which there was a close association of the two of the non-executive directors, who were there at the board meeting (Czoch and Whalebelly, 2012). A similar view was taken by the High Court of the ASX announcement in itself, whereby it was noted that even though there had been certain differentiations amongst the draft which was held to have been tabled at the meeting, the draft announcement was described properly as being textual, instead of being substantive, and that these contained misrepresentations. It was stated by the High Court that whether an announcement which was published later or the deed which was executed later, is the document which had to be approved by the board, needs to be determined by more than just literal comparisons amid the text. The errors and slips can easily be corrected. And that in some of the cases at least different and better wordings could be adopted. In this case, the fact that mere small changes were made, would could at the worst establish that no more than the ones who created them, had the authority of doing so, and in this particular case, did not show that this draft announcement had n ot been approved (Czoch and Whalebelly, 2012). It was also noted by the High Court that the announcement which was circulated later on, where not at all protested or demurred by the individuals in questions, regarding the terms of this announcement. The same were held to have been consistent with the fact that the draft announcement had been approved, as was held in the findings. With regards to the findings of the Court of Appeal of NSW regarding the failure in calling Robert resulted in the diminishing of cogency of the evidence of the ASIC, while ASIC admitting that there had been a general duty to act in a fair manner, it was held by the High Court that There was a failure on part of the Court of Appeal in identifying the source of any duty to call out specific evidence, along with the lack of ascertaining the source of rule, which was stated to be applicable in case of breach of the duty; Even if it is deemed that there was an existence of such a duty, it could be fairly expected that the remedy would be in the ASIC being directed by the primary judge to call a witness or to stay the proceedings, till the time the same was done by ASIC; or in case the trial went to the judgment stage in the appellate court, o consider if the miscarriage of justice required a retrial; and A solution regarding the unfairness could not be found in needing the cogency of the evidence which was brought forward and which was somehow discounted (High Court of Australia, 2012). The reliance of the Court of Appeal on Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8, regarding the unexplained failure in calling the evidence giving the court the right to draw an inference to the opposing party in a comfortable manner, where the inference was present on evidence, and the approach taken in Blatch v Archer (1774) 1 Cowp 63 at 65 [98 ER 969 at 970], regarding the evidence to be weight as per the proof which it was in the power of to have produced by one side, were rejected by the High Court. The case of ASIC was not dependent upon inference, and instead on the direct evidence which was found in the minutes to the board meeting held in February (Scott, 2012). Hence, the decision of the primary judge that the general counsel/ the company secretary, along with the non-executive directors had breached section 181(1) of the Corporations Act, 2001 was restored by the High Court of Australia (Austin, Standen and Reynolds, 2012). References Austin, R., Standen, M., and Reynolds, C. (2012) The High Court decides the James Hardie case. [Online] Minter Ellison. Available from: https://www.minterellison.com/files/Uploads/Documents/Publications/Alerts/NA_20120509_JamesHardieDecision.pdf [Accessed on: 06/05/2017] Australasian Legal Information Institute. (2012) Australian Securities and Investments Commission v Meredith Hellicar Ors ([2012] HCA 17) Case Summary [2012] HCASum 17 (3 May 2012). [Online] Australasian Legal Information Institute. Available from: https://www3.austlii.edu.au/au/other/HCASum/2012/17.html [Accessed on: 06/05/2017] Australasian Legal Information Institute. (2017) Corporations Act 2001. [Online] Australasian Legal Information Institute. Available from: https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/ [Accessed on: 06/05/2017] Bradman, P., and Less, J. (2012) James Hardie Directors Approved Misleading ASX Release. [Online] Wotton + Kearney. Available from: https://www.wottonkearney.com.au/downloads/case%20note%20-%20james%20hardie%20directors%20approved%20for%20misleading%20asx%20release.pdf [Accessed on: 06/05/2017] Cassidy, J. (2006) Concise Corporations Law. 5th ed. NSW: The Federation Press. Czoch, K., and Whalebelly, R. (2012) Australia: The James Hardie Decisions: ASIC v Hellicar Ors [2012] HCA17; Shafron v ASIC [2012] HCA 18. [Online] Mondaq. Available from: https://www.mondaq.com/australia/x/176336/Directors+Officers+Executives+Shareholders/The+James+Hardie+Decisions+ASIC+v+Hellicar+Ors+2012+HCA17+Shafron+v+ASIC+2012+HCA+18 [Accessed on: 06/05/2017] Federal Register of Legislation. (2017) Corporations Act 2001. [Online] Federal Register of Legislation. Available from: https://www.legislation.gov.au/Details/C2013C00605 [Accessed on: 06/05/2017] Floro, A., and Meikle, K. (2012) The decision: ASIC v Hellicar Ors. [Online] Lexology. Available from: https://www.lexology.com/library/detail.aspx?g=c02498f5-ec3a-4514-af79-0d8982db328a [Accessed on: 06/05/2017] Garnaut, B. (2013) ASIC V Hellicar and the Meaning of Acting as the Model Litigant: Thursday 14 February 2013. Adelaide SA: Law Society of South Australia. Gunning, P., and Heller, N. (2013) High Court cases from 2012 what do you need to know?. [Online] King Wood Mallesons. Available from: https://www.kwm.com/en/au/knowledge/insights/high-court-cases-from-2012-what-do-you-need-to-know-20130401 [Accessed on: 06/05/2017] High Court of Australia. (2012) Australian Securities and Investments Commission. [Online] High Court of Australia. Available from: https://eresources.hcourt.gov.au/downloadPdf/2012/HCA/17 [Accessed on: 06/05/2017] Hill, J.G., and Thomas, R.S. (2015) Research Handbook on Shareholder Power. Northampton, MA, USA: Edward Elgar Publishing. Jacobson, D. (2012) ASIC v Hellicar: Liability Of Company Directors (James Hardie). [Online] Bright Law. Available from: https://www.brightlaw.com.au/asic-v-hellicar-liability-of-company-directors-james-hardie/ [Accessed on: 06/05/2017] Scott, D.P. (2012) Shafron v Australian Securities and Investments Commission (2012) 286 ALR 612. University of Tasmania Law Review, 31(2). Time Base. (2012) ASIC v Hellicar Others James Hardie directors lose to ASIC in High Court. [Online] Time Base. Available from: https://www.timebase.com.au/news/2012/AT169-article.html [Accessed on: 06/05/2017] WIPO. (2015) Corporations Act 2001. [Online] WIPO. Available from: https://www.wipo.int/wipolex/en/text.jsp?file_id=370817 [Accessed on: 06/05/2017]