The Case Study of Shafron V ASIC-Free-Samples-Myassignmenthelp

Question: Discuss about the Case Study of Shafron V ASIC. Answer: Case introduction The case of Shafron v ASIC (2012) is in relation to the extent of the duty of care and diligence in relation to the Corporation Act 2001 (Cth) Section 180(1) and how such duties have to be complied with by the officers of a corporation. These questions had to be considered by the High Court of Australia in relation to an appeal made to it by the appellant Mr. Peter Shafron, who was the ex- company secretary and general counsel of the James Hardie Industry Limited. The appeal was made because the court of appeal found that the appellant had breached section 180(1) of the CA. the appeal made by Mr Shafron had been unanimously rejected by the high court and importance guidance was provided by it. It was provided by the court that the obligation of the company secretary who has special skills is not limited to the only role of a company secretary within the company (Armstrong 2012). When a person gains a duty as he is a officer through participation in a decision which is significant for the company even in case they do not participate in the decision making. The extent to the indulgence of a expert advisor would or would not eradicate the responsibilities of the officers of the company.The appointment of the defendant had been bone by the company in the position of general counsel and company secretary. Until 1998 November no formal appointment had been made by the company. David Cameron had been appointed as the joint company secretary of the company in the same month next year. In the year 2001 February, a meeting had been held to make a proposal of dividing the group of companies by separating two companies from the group which had major asbestos liabilities (Hargovan 2012). It had been argued by the appellant that the duties which are vested in a company secretary are restricted to secretarial responsibilities only and could not be extended to the functions of a general counsel which included providing advice to the company in relation to the disclosure obligations to ASX and the accuracy of the report. The plaintiff sought to limit his functions as a company secretary that they should be equal and consistent to the responsibilities of joint company secretary appointed by the company in this case whose functions were limited to mainly administrative functions. It was further submitted by appellant that he did not have any part to play towards the decision making related to the proposal of separation, this is because the capacity of making such decision was totally vested in the board of directors, and the appellant was not one of them. In addition it had been provided by the appellant that even if he was an officer the duties related to the two issues had not be violated by him under the section (Scott 2012). The duties breached by the directors It was alleged that the defendant had violated section 180(1) of the CA by not being able to provide advice to the chief executive if the company or the board of directors of that company in relation to specific extra knowledge in relation to the proposal of separation which needed to be informed to the Australian Securities exchange (ASX). In addition the duty was contravened by not being able to provide advice in relation to a actual report which the board of the company had relied upon towards considering the proposal of separation. The information that the report does not state superimposed inflation, which would have been present in a proper report, was not provided to the board. The duties which have been set out through the section not only include the directors but also the officers of the company in broad sense company secretaries are also covered by the provisions of the section. On two distinct bases the court of appeal of NSW had found that Mr. Shafron can be considered as an officer under the provisions of the section. Firstly as the defendant was the company secretary of the company in context and secondly he was deemed as a person who had been participating in the decision making process of the company wholly or substantially. Section 180(1) provides that any officer or director of the company has to base their responsibilities towards the company on the principles of care and diligence (Armstrong 2012). The decision of the court Decision related to the application if section 180(1) only to secretarial responsibilities In the words of the majority it had been provided by the court that it was greatly to be doubted that the appellant was able to discharge some of his duties as the company secretary and the other duties in the capacity of the general counsel. As provided by Heydon J it is impossible to put the responsibilities of the appellant into watertight compartments marking one as company secretary and the other as general counsel. No evidence had been provided in relation to the argument that a few task were done by the appellant in the capacity of a company secretary and the other as a general counsel. In addition the duties of a company secretary in a certain company are matters of fact; the testimony provided by Mr Cameron about his functions did not show that functions of the appellant as a company secretary were in the same way administrative. It was then considered by the court that or not in case the roles of the appellant could be divided the outcome of the decision would be affected. It was noted by the court that the section sets the extent of care and diligence through the references of the office held and the duties in relation to the company of an officer. It was provided by the court that the text responsibilities in relation to the section subpart (b) relates only to the real duties of an officer and not only the legal duties of a person holding the position of a company secretary. The high court agreed to the decision of the court of appeal that it was within the areas of responsibility for the appellant to provide advice to the company relating to the ASX issue as it was related to a legal matter which a company secretary is expected to know and raise having a legal background. In addition the providing of advice in relation to the completeness of the report was also judged by the court within the scope of the responsibilities of the appellant as he been involved closely with modeling of cash flows which highlighted the report and thus was liable to raise with the boards the shortcomings of the model. Therefore, it was adjudged by the court that responsibilities of the appellant as a company secretary of the company were adequately broad to underpin a conclusion that the duties of an officer were owed by him towards carrying out the responsibilities. The findings related to the interpretation of participation in decision making The wide view taken by the court in relation to the appellants responsibilities with respect to the position of company secretary, it was totally unnecessary to take into account the question whether the appellant was an officer based on the fact that a person taking part in the decision making which affect the overall or predominant part of the functions of the company. However it was provided by the court that the appellant was based on this fact was an officer. The argument provided by the appellant that in order to be participate in the decision making process a person has to be a decision maker was not accepted by the court. It was taken into account by the court that the appellant was a senior executive of the company. And although a decision had been made by the board in relation to the proposal of separation, the appellant played a major role towards structuring the proposal as a senior executive who were working of the project with the help of eternal advisors and had been the part of the proposal and in addition crossed the extent of merely proffering information and advice to the board. This meant that the appellant had participated in the decision making along with the fact that duties were owed by him in form of an officer of the company (Hcourt.gov.au 2017). It was emphasized by the court that not mere participation in a decision of a company is enough to make a person an officer of that company as according to the statutory provisions the decision has to be affecting the whole or substantial part of the companys business. It was provided by the high court against the decision of the court of appeal its findings in relation to this test were not accurate. The decision related to the alleged breach of duty by the appellant The final argument of the appellant had also been rejected by the high court that he did not contravene the duties imposed on him by the section. With respect to the issue of ASX it was submitted by the appellant that he had the right to bases his activities on the companys lawyer in relation to raising the need for the extra disclosure requirements. However the argument of the appellant was totally rejected by the court and it failed. It was provided by the court that even if the company retained such solicitors regarding the separation proposal it did not impliedly or expressly relive the appellant form the duties which were imposed on him (Hogan 2012). With respect to the actuarial report an argument was made by the appellant that he did not possess adequate and expert actuarial information and thus was not able to determine what rules for superimposed inflations had to be considered. This argument was also not accepted by the court and the same had also failed on the part of the appellant. This is because the court determined that the appellant had knowledge in relation to the fact that the cost in relation to the claims was comparatively increasing very fact to the rate of inflation along with the knowledge that if this fact is not taken into consideration it would likely have a substantial effect with respect to the soundness of the actuarial report. It was further added by the court that the duty of the appellant was not associated with suggesting a proper provisions but to let the board know that a proper provision has not been undertaken. Thus the appeal by Mr Shafron was rejected by the federal court. Relevance and impact of decision to corporation law in Australia The initial relevance of the case comes from the issue which the court did not have much difficulties in deciding which is that even if a person is not a director or secretary of the company he can be a officer of the company if he participates in the decision making process if the company of significant importance. Thus the case clearly changes the thinking that if a person is not an official decision maker he cannot be an officer of the company. In addition the court provides that only because the senior executives are not the ultimate decision makers of the company they cannot evade the liability under section 180(1) and the fact that they are a decision influencer, promoter or urgers is sufficient to prove their liability. In addition the case signifies that company secretaries having special skills and training in any discipline would be expected to use such skills in relation to the functions of the company even if a dual title is provided to the secretary. Finally the point which can be derived through this case by the corporations is that the using of advice provided by external advisors is not adequate itself to relieve a person from the duty under section 180(1). It is thus necessary to prove that the brief of the advisor covered a particular question. It is the duty of officers to ensure that the advices provided by external advisors are consistent with the facts of the case (Hargovan 2012). References Adams, M., 2012. Lessons for non-executives from James Hardie.Keeping Good Companies,64(5), p.263. Armstrong, D.M., 2012. Guidance for general and corporate counsel: Reflections on James Hardie.Commercial Law Quarterly: The Journal of the Commercial Law Association of Australia,26(2), p.19. Barber, F., 2014. Indirectly directors: Duties owed below the board.Victoria U. Wellington L. Rev.,45, p.27. Corporation Act 2001 Hargovan, A., 2012. Company officers in the judicial spotlight.Keeping Good Companies,64(6), p.365. Hargovan, A., Dual Role of General Counsel and Company Secretary: Walking the Legal Tightrope in Shafron v ASIC(2012).Australian Journal of Corporate Law,27, p.112. Hcourt.gov.au, (2017). [online] Available at: https://www.hcourt.gov.au/assets/publications/judgment-summaries/2012/hcasum18_Shafron_v_ASIC.pdf [Accessed 25 Aug. 2017]. Hogan-Doran, J., 2012. Practice Note SC Eq 11.Bar News: The Journal of the NSW Bar Association, (Winter 2012), p.20. Scott, P.D., 2012. Shafron v Australian Securities and Investments Commission (2012) 286 ALR 612.U. Tas. L. Rev.,31, p.155. Shafron v Australian Securities and Investments Commission [2012] HCA 18