Case Analysis Company Law
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Added on 2020-04-15
Case Analysis Company Law
Added on 2020-04-15
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CASE ANALYSISIntroduction Peter JamesShafron v Australian Securities and Investments Commission (2012) HCA 18; 286ALR 612 is amongst the leading cases of present times which sets out an example of whathappens when the directors or the key officers of the company, fail to fulfil their obligationscovered under the Corporations Act, 2001 (Cth), particularly the ones given in Part 2D.1(Paolini, 2014). This part covers the duties and responsibilities of directors and other officers ofthe company. This case was the one in which the court held that there had been contravention ofthe provisions of this act and so Shafron was made liable. The case became famous as the samewas brought to the attention of the world after the scandal of James Hardie. The appeal made byShafron had also been rejected by the High Court, whereby the decision of the Court of Appealwas deemed as the correct one and hence upheld (Jacobson, 2012). This discussion wouldelucidate this case in an IRAC based style, where the arguments made by the parties would behighlighted, along with the judgment of this case. Factual BackgroundPeter James Shafron had been associated with James Hardie Industries Limited (JL) as acompany secretary and general counsel since the period of August 1998. However, he was notappointed on the post of company secretary in a formal manner till the period of November1998. In 1999, the joint company secretary for JL was brought on roll and this was DonaldCameron. During the middle of February 2011, a meeting of the board of the company was heldfor discussing and considering on the proposal which separated the company, specifically thetwo of the group companies, and this was done in the backdrop of the liability being faced by thecompany due to the asbestos issue (Boyce and Macinnis, 2012). IssueThe key issue of this case was related to the breach of duties of an officer by Shafron on the twokey claims of ASIC regarding the ASX matter and in the actuarial issue. [2]
CASE ANALYSISRuleThe Corporations Act, 2001 is a key piece of legislation in Australia which provides the dutiesfor the officers of the company and also gives them certain responsibilities, which need to befollowed in a strict manner (Armstrong Lawyers, 2007). A contravention of these duties not onlyresults in civil but criminal liabilities as well. Part 2D.1 of this act has the first section whichdeals with the duty of the officer to act in a diligent and a careful manner (WIPO, 2015). Section180(1) of this act provides that the officers of the company have to use their powers anddischarge their duties in a manner where care and diligence is shown, in such a manner whichwould be considered as reasonable by a person holding such position and was faced with similarsituation as the one faced by the officer in question (ICNL, 2017). A contravention of this section results in civil liabilities being attracted which are covered undersection 1317E of this act (Federal Register of Legislation, 2017). Through this section, the courtgets the declaration making power whereby it makes a declaration of contravention against theviolators of different sections including section 180(1) (Cassidy, 2006). Upon this declarationbeing made by the court, the ASIC attains the power of making an application for adisqualification order to be passed against the officer based on section 206C, in addition tomaking an application under section 1317G for pecuniary penalties against the violator. Thisdeclaration of contravention covers the reasons for which the breach had been construed to havebeen made (Baxt, 2007). Analysis (including legal arguments) The case revolved around the allegations made by the ASIC where they deemed Shafron as theofficer of the company, as a result of which, the duties stated under section 180(1) of theCorporations Act became applicable on him. The base of this claim was the incompetence ofShafron where he did not give the proper advice to the chief executive of JL or to the board ofthe company regarding the additional information in the matter of separation proposal, which asper the requirements of the Australian Securities Exchange (ASX), had to be disclosed. Apartfrom this, Shafron was also claimed to have failed in his duties as an officer for not providing theJL’s board the reasonable advice on the matter of the actuarial reports, on which reliance had[3]
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