Peter Shafron, the former General Counsel and Company Secretary
of James Hardie has been granted special leave to appeal to the
High Court in respect of the two remaining contraventions of the
Corporations Act found against him by the Court of
The High Court will now be called upon to consider and clarify
two significant issues in Australian corporate governance,
the test as to who constitutes an "officer" within
the meaning of the Corporations Act; and
the scope of a general counsel and company secretary's
duties and responsibilities under the Corporations
The High Court also granted the Australian Securities &
Investments Commission (ASIC) special leave to
appeal against the Court of Appeal's findings in favour of the
The grant of special leave to Mr Shafron paves the way for the
High Court to clarify:
when a person should be taken to be acting as an
"officer" of a company within the meaning section 9 of
the Corporations Act
whether a person acting as general counsel should be taken to
be an officer
the scope of the office of "company secretary" for
the purposes of the Corporations Act
the standard of care and diligence expected of an officer
if and to the extent that any officer owes a duty under section
180(1) of the Corporations Act to provide legal advice to the Chief
Executive Officer or the board, how, and to what extent does the
retainer of competent external lawyers by the company affect or
discharge that duty.
Further, the granting of special leave to ASIC means the High
Court will also deal with the question of whether in civil penalty
proceedings regulators such as ASIC are obliged to call material
witnesses pursuant to an obligation of fairness and, if so, the
scope and the consequences of non-compliance.
Background to the application for special leave
The appeals by Mr Shafron, Mr Morley and ASIC stem from the 17
December 2010 decision of the Court of Appeal (comprising Spigelman
CJ, Beazley JA and Giles JA) which reached the following
ASIC had failed to discharge its burden of proof in
establishing that the non-executive directors had considered and
approved the draft ASX announcement at the relevant Board meeting.
The failure by ASIC to call material witnesses who were in
attendance at the relevant February 2001 Board meeting and made
amendments to the draft ASX announcement, was one of a number of
factors found to have undermined the cogency of ASIC's case
leading the Court to find that ASIC had not discharged its burden
of proof. The Court of Appeal upheld the appeal by the
non-executive directors and quashed the penalty and
disqualification orders made against them.
Mr Shafron's appeal against the trial judge's findings
were allowed in relation to the draft ASX announcement, but
dismissed in relation to the need to consider whether disclosure of
certain information on the Deed of Covenant and Indemnity
(DOCI) was required.
part of ASIC's cross-appeal was successful in securing the
surprising finding that Mr Shafron had breached his duty under
s180(1) of the Corporations Act by failing to advise the Board that
an actuarial estimate of James Hardie's asbestos liabilities
prepared by Trowbridge did not take into account "superimposed
inflation", and a prudent estimate would have.
Mr Morley's appeal against the trial judge's finding of
contravention was dismissed but his penalty and disqualification
period was reduced.
Middletons acted for Mr Shafron in connection with
ASIC's investigation, the first instance hearing and appeal
hearing before the Court of Appeal, and continues to act for Mr
Shafron in relation to his appeal to the High Court of
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