Why is james hardie in breach of regulations

The reputational damage to the James Hardie brand is immense. Not to mention the tsunami of adverse media coverage. The answer should be clear to even the most casual observer. Although the ethical behaviour of the officers of James Hardie was perceived through the media as one of an avaricious corporation seeking to deprive long-suffering persons with life-threatening, asbestos-related injuries from fair and just compensation, there was another ethical issue in the case. This time it was in relation to the party on the other side of the proceedings, ASIC, and how it went about the conduct of its case.

The model litigant rules require a Commonwealth litigant, such as was ASIC in this case, to act fairly in the conduct of legal proceedings. It was felt that Robb could give important evidence about the accuracy of the minutes from the relevant board meeting and also assist in establishing whether a draft ASX announcement had been before the board and approved by it. While upholding the findings of the trial judge in relation to the liability of the officers of the company, the High Court has remitted back to the NSW Court of Appeal for consideration, claims by the defendants to be excused from liability, penalty and disqualification.

Under the Corporations Act, a court may relieve a person from a liability where it appears to the court that the person has acted honestly and, having regard to all the circumstances of the case, the person ought fairly to be excused for the contravention. The James Hardie case has yet to be fully played out. By signing up you agree to our privacy policy. In the Crown's view the failure of the directors "to make any inquiries about the proposed transactions or to seek any independent confirmation that they were in the best interests of [the company] provided a sound basis for sustaining a conclusion that there was sufficient evidence of dishonesty to prove beyond reasonable doubt that each accused was guilty of the offences.

Much of the evidence dealt with the commerciality of the transactions and the resolutions. However, the prosecution did not rely so much on the fact that the transactions were uncommercial, but largely on the fact that they were "improper because they were done for the ulterior purpose of benefiting another. The Court of Criminal Appeal, through Miller J who wrote the major judgment in the case, agreed with the views of the respondents.

In his view, the High Court of Australia in R v Byrnes and Hopwood CLR made it clear that the provisions of what is now section of the Corporations Act meant that the "test of impropriety and the use of a position as an officer of a company is an objective one and does not depend on an alleged offender's consciousness of impropriety.

Rather, it consists of a breach of the standards of conduct expected of a person in the position of the alleged offender by reasonable persons with knowledge of the duties, powers and authority of the position and the circumstances of the case. Impropriety consists in a breach of the standards of conduct that would be expected of a person in the position of the alleged offender by reasonable persons with knowledge of the duties, powers and authority of the position and the circumstances of the case.

When impropriety is said to consist in an abuse of power, the state of mind of the alleged offender is important: the alleged offender's knowledge or means of knowledge of the circumstances in which the power is exercised and his purpose or intention in exercising the power are important factors in determining the question whether the power has been abused. But impropriety is not restricted to abuse of power. It may consist in the doing of an act which a director or officer knows or ought to know that he has no authority to do.

Miller J concluded by endorsing the statement of the High Court in Byrnes and Hopwood of the duties of directors, in particular of the public company, in the following terms at para : "A company is entitled to the unbiased and independent judgment of each of its directors.

A director of a company who is also a director of another company may owe conflicting fiduciary duties. Being a fiduciary, the director of the first company must not exercise his or her power for the benefit or gain of the second company without clearly disclosing the second company's interest to the first company and obtaining the first company's consent. Nor, of course, can a director exercise those powers for the director's own benefit or gain without clearly disclosing his or her interest in obtaining the company's consent.

A fiduciary must not exercise an authority or power for the personal benefit or gain of the fiduciary or a third party to whom a fiduciary duty is owed without the beneficiary's consent. The directors' appeal was dismissed. This case shows that there are some clear guidelines in our case law enabling our courts to deal with these critical issues involving directors' duties.

Providing proper evidence can be adduced and the regulators mount a prosecution in appropriate time frames, with efficient rules applying in the courts, the law can be enforced without fear or favour. Disclaimer The purpose of this database is to provide a full-text record of all articles that have appeared in the CDJ since February It is aimed to assist in the research and reference process.

The implications of the High Court's findings were outlined in our previous eAlerts on 8th May James Hardie: High Court issues warning to boards - minutes will bind you" and on 7th May James Hardie: High Court's decision poses new risks for company secretaries and general counsel". Following the High Court's findings, the issue of penalty was remitted to the Court of Appeal, which convened a hearing last August to hear submissions from all parties.

The judgment reinforces the importance of accurate continuous disclosure by listed companies. It also makes some useful observations about issues of corporate governance and company procedure, especially in relation to:. The Court of Appeal's observations provide useful guidance for corporate governance and boardroom procedures. 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.

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Learn More Accept. To print this article, all you need is to be registered or login on Mondaq. The Australian Manufacturing Workers Union welcomed the decision, but national secretary Paul Bastian said it highlighted the need for changes to corporate law. The actions that they took are still legal under corporate law and it's a shameful state of affairs where that is still the case," he said.

The court also found that former James Hardie secretary and general counsel Peter Shafron failed to discharge his duties as an officer of the company. Topics: business-economics-and-finance , corporate-governance , company-news , courts-and-trials , australia. First posted May 03, If you have inside knowledge of a topic in the news, contact the ABC.

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