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
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
For a discussion of the High Court's judgment which provides
the relevant background information to this case alert, please
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