The New South Wales Court of Appeal has determined the penalties for former non-executive directors of James Hardie Industries Limited in relation to their approval of a false and misleading draft ASX announcement concerning the establishment of the Medical Research and Compensation Foundation in February 2001.
Justice' Barrett's judgment has also clarified certain matters relating to board procedure, having regard to the fact that the non-executives were, on 3 May 2012, found by the High Court to have approved a false and misleading draft ASX announcement that was tabled at a board meeting, in circumstances where:
- the non-executives had no recollection of approving the draft ASX announcement
- the minutes of the relevant board meeting stated that the draft ASX announcement was tabled and approved and
- two non-executives who attended the meeting remotely, via the use of technology, have been found liable.
The matters clarified by Justice Barrett are:
- each director must vote in such a way that enables a specific and accurate recording of their particular position in relation to proposed resolutions and
- each director must expressly consent to the use of technology to facilitate remote attendance at board meetings and the technology must be sufficient to allow full participation in the meeting by the remote attendees, which would include reviewing any documents that may be tabled at a meeting.
As referred to above, on 3 May 2012, the High Court delivered a judgment confirming that the Supreme Court had correctly found the non-executives liable for negligently approving a false and misleading ASX announcement. In so doing, it remitted the proceedings back to the Court of Appeal to determine the non-executives' original appeals in relation to the severity of the penalties imposed on them by the Supreme Court. Those appeals were not determined by the Court of Appeal in the first Court of Appeal hearing because the Court of Appeal found in favour of the non-executives on the question of liability.
The Court of Appeal has now made Orders banning the non-executives from managing corporations for a period of approximately 2 years and 3 months and requiring them to pay pecuniary penalties of $25,000.
These penalty Orders supplant the original Orders of the Supreme Court, namely: banning orders of five years; and pecuniary penalty orders of $30,000, which were found to have been made in error and too severe.
For a discussion of the High Court's judgment which provides the relevant background information to this case alert, please click here.
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