Business and Corporate Law | Shafron v ASIC Case Study
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Added on 2019-11-19
Business and Corporate Law | Shafron v ASIC Case Study
Added on 2019-11-19
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SHAFRON V ASIC2ContentsIntroduction.....................................................................................................................................3Background of the Case...................................................................................................................3Duties and Responsibilities Breached..............................................................................................4Analysis of the Court Decision.........................................................................................................5Implications and Conclusion............................................................................................................7References.......................................................................................................................................9
SHAFRON V ASIC3IntroductionPeter JamesShafron v Australian Securities and Investments Commission (2012) HCA 18; 286ALR 612 or the case of Shafron v ASIC is a case which was brought out after the James Hardiescandal came to the attention of the authorities, which shook the world for the level ofbreaches conducted in this scandal. Shafron v ASIC was a case in which the officer was held forbreaching his officer duties as are provided under Part 2D.1 of the Corporations Act, 2001 (Cth),herein referred to as CA. This section not only imposes certain obligations over the directors ofthe company, but on the officers as well. And the case of Shafron v ASIC threw light on themanner by which the company’s officer is made liable for breaching these duties (Jacobson,2012).In order to give their ruling in this case, the court looked into the facts of the case, which havebeen summarized below, and concluded that there was indeed the breach of section 180(1) ofthe CA (Sainty, 2012). The appeal which was made by Shafron was also rejected by the HighCourt in a unanimous manner and the decision of the Court of Appeals was upheld. Thisdiscussion would focus on the background off this case, the duties which were contravened,and the court’s decision to understand the implications of this case, before drawing theconclusion. Background of the CasePeter James Shafron was working with James Hardie Industries Limited, herein referred to asIndustries since Aug 1998 on the post of general counsel and company secretary. Though, theappointment of Shafron as a company secretary was not formally undertaken till Nov 1998. Thejoint company secretary of Industries was appointed a year later and the name of this personwas Donald Cameron. In Feb 2011, the Board of Industries met for discussing and for taking intoconsideration, the proposal for Industries separation, particularly of its two group companies,
SHAFRON V ASIC4and the company owed key liabilities due to the asbestos issues faced by the group (Boyce andMacinnis, 2012).The claim which was made in this case was that the officer of the company, i.e., Shafronbreached his duties covered under section 180(1) of CA. The reason given for this contraventionwas stated as the failure of Shafron in advising the chief executive of Industries, and its board inthe matter of the additional information which was related to the separation proposal, andwhich was required to be properly disclosed to ASX (Australian Securities Exchange). This wasnot the only reason for holding the officer responsible. The other reason was the failure of theofficer in providing the Industries Board regarding proper advice on the actuarial report, whichthe board of the company relied when they decided on the matter of separation proposalwhere the superimposed inflation was not covered. The reason for this contravention was thereasonableness requirement, whereby a reasonably prepared report would have properlyhighlighted the truth, instead of superimposed inflation. This super inflation shows the claimscosts which were born on yearly rate, and this particular rate was a lot high in comparison tothe rate of inflation. Hence, the officer duties which were claimed to have been contravened byShafron were related to the actuarial and ASX issue (Kemp Strang Lawyers, 2012).Duties and Responsibilities BreachedAs has been stated in the introductory segment, the directors and the other officers of thecompany have been granted certain responsibilities and duties by the CA, which have to bestrictly followed (References Armstrong Lawyers, 2007). The very first duty which is coveredunder this part is the duty of acting in a diligent and in a careful way by these individuals (ICNL,2017). Under section 180(1) of CA, the directors and the other officers of the company havebeen given the responsibility of using their powers, as well as, discharging their obligations, insuch a way where diligence and care is depicted, as an individual deemed as reasonable wouldundertaken when holding the same position as the person in question and in the similarsituation as the individual in question was in (WIPO, 2015).
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