The High Court rules – James Hardie Directors approved misleading ASX releaseFinancial Lines
The High Court has handed down its judgement in the long running James Hardie saga and held that 7 former directors and 1 officer were guilty of approving a misleading ASX announcement regarding the funding of asbestos liabilities. The case has important ramifications for companies, directors and their insurers in that it:
- reinforces the requirement for non-executive directors to take a diligent and intelligent interest in their independent assessment of information put to them, rather than merely relying on management “ which was also a central theme of the ASIC prosecution of Centro directors and the recently announced record shareholder class action settlement;
- highlights the probative value of approved board minutes “ absent cogent evidence to the contrary, approved minutes will be deemed to be an accurate record of events occurring;
- provides guidance on ASIC’s obligation to conduct litigation fairly “ the failure to call a prosecution witness is not necessarily unfair per se, and in any event can only result in a mis-trial rather than the impeachment of other prosecution evidence; and
- provides most useful guidance on the statutory definition of an ˜officer’. Mr Shafron (the corporate counsel and company secretary) was also found to be an officer because he participated in making decisions affecting the whole, or a substantial part, of the business of the company by reason of providing reports to the board in reliance on which board decisions were made, even though Mr Shafron did not make those decisions. In so finding, the High Court has expanded the number of executives who may be deemed to be ˜officers’ and thereby subject to the duties and obligations, including the punitive provisions, of the Corporations Act.