The High Court's decision highlights new risks under the
Corporations Act for company secretaries and general
Any individual who is appointed to the dual role of company
secretary and general counsel will be taken to be an
"officer" under the Corporations Act, in respect
of all their responsibilities, including their responsibilities as
Any general counsel who plays a large and active part in
formulating important proposals for the board may also be taken to
be an "officer".
Any lack of due care and diligence on the part of such officers
exposes them to the risk of prosecution by the Australian
Securities and Investments Commission (ASIC) for contravention of
the Corporations Act, which may result in disqualification
and liability to pay pecuniary penalties, in addition to legal
The High Court's decision highlights significant corporate
governance issues relating to the role of general counsel and
The High Court dismissed an appeal by the former general counsel
and company secretary of James Hardie, finding that he was an
"officer" under the Corporations Act and failed
to discharge his duties as an officer of the company with the
degree of care and due diligence that a reasonable person in his
position would have exercised.
The High Court held:
it was not possible to divide the duties and responsibilities
as general counsel and company secretary, given the
"single, composite description given to the
there was no evidence demonstrating or suggesting that the
appellant performed certain tasks in one "capacity" and
other tasks in another
once the appellant is taken to be an officer by virtue of his
role as company secretary, he is to be taken to be an officer in
respect of all his responsibilities within the company,
"regardless of how or why those responsibilities came to
be imposed on that officer"
that all the tasks the appellant performed were undertaken in
fulfilment of his responsibilities as general counsel and company
secretary. Accordingly, because of his qualifications and the
position of employment, his responsibilities as general counsel and
company secretary extended to proffering advice on disclosure and
any limitations on advice procured from external advisors
the appellant should also be taken to be an officer on the
basis that he participated in making decisions of the requisite
character within the definition of "officer" for a number
of reasons, including the role he had in the ultimate act of making
a decision, the contribution he made to the making of a decision,
his level of seniority as an employee within the company, and that
his role went beyond proffering advice to the board.
Having found the former general counsel and company secretary to
be an officer, the High Court reinstated a contravention found by
the trial judge against him in relation to his failure to advise
the board on the emphatic nature of the terms of the draft
Australian Stock Exchange (ASX) announcement, and upheld two
contraventions found by the Court of Appeal in relation to his
failure to advise the board on matters relating to disclosure and
limitations in actuarial estimates.
Middletons will be holding a number of sessions to discuss the
implications of this case. A Melbourne briefing has been scheduled
for 6 June 2012 and a Sydney briefing will be held on 21 June 2012.
If you would like to attend one of these sessions, please register
your interest through the link below:
Murray Deakin, Sylvia Ng and Joni Garnham of Middletons acted
for the former general counsel and company secretary in connection
with ASIC's investigation, the first instance hearing and
appeal hearings before the Court of Appeal and the High Court of
Australia, and continue to act for him in relation to the hearing
on penalty that has been remitted back to the Court of Appeal.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
Middletons has been awarded a 2012 EOWA Employer of Choice for
Women citation acknowledging our commitment to workplace
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
We discuss whether certain clauses commonly found in ordinary commercial contracts could be considered to be penalties.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).