The Corporations Act, 2001 - PDF

J U B I L E E M I N E S N L V
R I L E Y [ 2 0 0 9 ] WA S C A 6 2
(Group Details: )

I N T R O D U C T I O N
The Corporations Act, 2001 (Cth) is the most important legislation for
any company in Australia.
This legislation covers nearly all the aspects of the companies and sets
out basic guidelines on how the companies are to be managed.
One of key aspects given under the quoted legislation is the director
duties. These duties have been set out under Part 2D.1 of this
legislation (Williams, Bingham and Shimeld, 2015).

I N T R O D U C T I O N
The director duties cover duty of good faith, use of position
and use of information, amongst the other duties.
Where these duties are not followed by the directors or the
officers on whom these duties are levied, both civil and criminal
liabilities can be raised for the breaching person, depending
upon the particular section being contravened (Latimer, 2016).

I N T R O D U C T I O N
This legislation not only offers punishments but also puts
forth defences where the spirit of quoted legislation is
followed, along with the words of the law.
This discussion is mainly focused on the application of
director duties as had been found in the case of Jubilee Mines
NL v Riley [2009] WASCA 62.

B A C K G R O U N D O F C A S E
Riley was a shareholder and a director of Jubilee
Company, which was basically a small listed gold
exploration company (Duffy, 2012).
Even though he had resigned from the post of
director in 1993, he continued to be a shareholder of
the company.

B A C K G R O U N D O F C A S E
During the mid part of 1994, presence of nickel was
identified while drilling was being done on a Jubilee tenement.
The managing director and geologist of the company made a
decision that the company would carry out no further
exploration at this particular tenement of company as the
focus of the company was on the gold related activities only.

B A C K G R O U N D O F C A S E
This was done without the co-directors of company being informed
or the ASX being informed of this decision, despite nickel having
being found at this tenement (Lavan, 2009).
The disclosure of drilling results was made after some years to the
ASX.
By that time, Riley had sold off his shares ignoring the nickel data.

B A C K G R O U N D O F C A S E
He then claimed to have suffered damages as a
result of the company being in contravention of the
continuous disclosure requirements with regards to
this nickel discovery.
It was contended by Riley that even though the
results of drilling did not highlight or present
commercially significant nickel resource.

B A C K G R O U N D O F C A S E
He claimed that only the resulted had been
indicated in the results but there was a lack of
potential for a further exploration of nickel being
stated.
This led to his claims in the court, which initially
were presented before the trial court and later on
were appealed (Lavan, 2009).

B A C K G R O U N D O F C A S E
This involved contentions being raised against
directors for breaching their director duties, for not
carrying out the proper disclosures (CCH Australia,
2009).

D U T I E S B R E A C H E D A N D R E A S O N S
F O R I T
Section 180: civil obligations of care and diligence
Section 181: civil obligations of good faith
Section 182: civil obligations of using the position
Section 183: civil obligations of using the information
Section 184: criminal liabilities
Section 191: disclose all the material personal interest

D U T I E S B R E A C H E D A N D R E A S O N S
F O R I T
Even though all these sections were not directly quoted in this case, the
theme of these sections were applied in this case.
This is particularly true in context of section 183 of this legislation.
For the reasons of listing rules which were applicable in this case, the
company got awareness regarding the information, which the executive
officer or the director of company reasonably came in possession of, while
they were performing the duties laid down under this legislation.

D U T I E S B R E A C H E D A N D R E A S O N S
F O R I T
Even though Crossley and Cooke were executive officers in
this case, they had the same duties, which were provided above,
as these duties are also applicable on officers of the company.
Based on this applicability, and following the listing rules, the
company was aware of the information which reasonably came
before Crossley or Cooke while they were fulfilling their duties.

D U T I E S B R E A C H E D A N D R E A S O N S
F O R I T
A convergence of the listing rules and the director duties shows that
there was a need to make the relevant disclosures to ASX as soon as
the nickel was identified.
So, the directors of ASX were required to inform ASX of not exploring
the tenement further even when there was clear presence of nickel,
owing to the focus of company on gold related activities (Jade, 2018).

D U T I E S B R E A C H E D A N D R E A S O N S
F O R I T
The continuous disclosure requirements, as were covered under the ASX Listing
Rule 3.1, coupled with the ones covered under the Corporations Act were required
to be properly fulfilled by the directors in this case (Dharmananda, 2018).
There duty of care and of good faith required them to act towards the good faith of
the company.
This was market sensitive information which had to be disclosed, and by not doing
so, neither the position held by the directors in company was properly used, nor was
the information attained by the co-directors made proper use of.

D U T I E S B R E A C H E D A N D R E A S O N S
F O R I T
Even though there was nothing to show material personal interest of
the directors in this case, the information was sensitive enough to be
disclosed before the ASX.
Owing to the position held by the directors, if they were uncertain
regarding the information being market sensitive information or not,
they were required to make reference to ASX Guidance Note 8
(Muscillo and Dawson, 2018).

D U T I E S B R E A C H E D A N D R E A S O N S
F O R I T
The directors were required to pose two key questions in this
case:
• Could this information have an impact on the decision regarding
the purchase or sale of securities of the companies at the
present market rate?
• Could the director be exposed to any action regarding insider
trading in case the purchase or sale of securities of the
companies at the present market rate as a result of this
information not having been disclosed in the market?

D U T I E S B R E A C H E D A N D R E A S O N S
F O R I T
Where any of the questions resulted in a yes, there was a need to
take the cautionary approach and adequate steps should have been
made to disclose this information before the relevant authority.
There were two broad categories in the company by not fulfilling
the continuous disclosure obligations, in terms of timely disclosure
and accurate disclosure.

D U T I E S B R E A C H E D A N D R E A S O N S
F O R I T
The lack of this disclosure was what allowed Riley
to raise this claim (Muscillo and Dawson, 2018).
Even though the matter of director duty was not
directly addressed in this case, this is the basis for
claiming a breach of director duties in this matter.

A N A LY S I S O F D E C I S I O N G I V E N B Y
C O U R T
As a result of the continuous disclosure obligations, the plaintiff in the
case of Riley v Jubliee Mines NL (2006) 59 ACSR 252 was awarded 1.8
million as damages for the losses which resulted from the failure in
complying with the continuous disclosure requirements (Coffey, 2010;
Blakiston and Chandler, 2006).
Though, with the present case, 2009 saw the ruling of the previous
decision being overruled by the court.

A N A LY S I S O F D E C I S I O N G I V E N B Y
C O U R T
Martin CJ, in the appeal case, held that the announcement made by the
company in context of all the pertinent information relating to nickel data was
not something which had the probability of influencing the individuals who
would invest in the securities in common manner, while they were making the
decision regarding the purchase or sale of the shares of company.
To put it more simply, the court did not consider that this information was
such which could fulfil the criteria or requirements of materiality (North, 2010).

A N A LY S I S O F D E C I S I O N G I V E N B Y
C O U R T
When the case was at trial, Riley was successful and the court stated
that the nickel results had to be disclosed, which resulted in the
aforementioned stated damages being awarded to Riley.
On this, Jubilee appealed, and this appeal was successful. The court
held the view that the obligation of the company in context of
disclosure had to be evaluated with regards to the actual intentions and
not that of the supposed intentions of the company.

A N A LY S I S O F D E C I S I O N G I V E N B Y
C O U R T
Apart from this, the court held that the company was not under the obligation of
making the disclosures after the drilling results were attained at the very least.
Further, till the time such drilling results resulted in the position of the company or
any other party being altered, or where the company did decide to undertake the
exploratory drilling work, there was no need of making the drilling results
disclosures.
Only when these presumed conditions turned into actual intentions, was the
company required to disclose the drilling results (Lavan, 2009).

I M PA C T O F T H I S C A S E
This is an important case as this case provides that the shareholders
who seek to recover the losses which are raised as a result of the
continuous disclosure obligations being breached, they have to show or
establish the importance of undisclosed information to the company.
Further, this has to be assessed in context of the intents of the
directors of such company and have to be significant information for a
prudent shareholder of the company.

I M PA C T O F T H I S C A S E
Even though this can be treated as a surprising result, yet it does reflect upon
the present state of law.
Particularly in context of officers and directors of the companies, this decision
provides comfort.
Where the officers or directors of the company do not consider the information
presented before them as major or significant towards the operations of the
company, their decision would be given proper due consideration (Lavan, 2009).

C O N C LU S I O N
This case predominately revolved around the directors not making disclosure
regarding the nickel which was found during exploration activities, as they wanted
to focus on the key business of the company, which was of gold exploration.
This resulted in the shareholder of the company raising a case against the company
for breaching the continuous disclosure requirements.
However, the decision given by the court in this matter, particularly the one during
the appeal from the trial court decision, proves that the breach of director duties,
would not have been established before the court.

R E F E R E N C E S
Blakiston, M., and Chandler, D. (2006) Damages Awarded to Former Shareholder for Negligent, Delayed Disclosure. Australian Resources & Energy LJ, 25, 344.
CCH Australia. (2009) JUBILEE MINES NL v RILEY, Supreme Court of Western Australia, Court of Appeal, 18 March 2009 . [online] Available from:
https://iknow.cch.com.au/document/atagUio1506654sl216007758/jubilee-mines-nl-v-riley-supreme-court-of-western-australia-court-of-appeal-18-march-2009 [Accessed 11/05/18]
Coffey, J. (2010) Regulatory Challenges In Enforcing Securities Law: The Fyffes And Fortescue Cases. Journal of the Australasian Law Teachers Association , 3.
Corporations Act, 2001 (Cth)
Dharmananda, B. (2018) Market Disclosure Obligations And Directors’ Duties . [online] Available from: http://www.wabar.asn.au/images/Market%20Disclosure%20Obligations%20and
%20Directors'%20Duties%20(Brahma%20Dharmananda).pdf [Accessed 11/05/18]
Duffy, M. (2012) Testing Good Securities Disclosure: Tales of the Reasonable Investor. Monash University Law Review, 38(2).
Jade. (2018) JUBILEE MINES NL -v- RILEY [2009] WASCA 62. [online] Available from: https://jade.io/article/91142 [Accessed 11/05/18]
Jubilee Mines NL v Riley [2009] WASCA 62
Latimer, P. (2016) Australian Business Law 2016. 35th ed. Oxford: Oxford University Press.
Lavan. (2009) Continuous disclosure obligations - what is 'material' depends on the disclosing entity's intentions . [online] Available from:
https://www.lavan.com.au/advice/corporate_services/continuous_disclosure_obligations_what_is_material_depends_on_the_disclosin [Accessed 11/05/18]
Muscillo, M., and Dawson, L. (2018) Continuous disclosure - lessons from Forge Group Limited . [online] Available from: http://www.findlaw.com.au/articles/5412/continuous-disclosure---lessons-from-
forge-group-l.aspx [Accessed 11/05/18]
North, G. (2010) A call for a bold and effective corporate disclosure regulatory framework. Company and Securities Law Journal, 28, 340.
Riley v Jubliee Mines NL (2006) 59 ACSR 252
Williams, B. R., Bingham, S., and Shimeld, S. (2015) Corporate governance, the GFC and independent directors. Managerial Auditing Journal, 30(4/5), pp. 324-346.