In Australian Securities and Investments Commission v Healey Middleton J found against the directors of Centro Properties Limited.  It is a very long and detailed decision which provides an excellent summary of the obligations of directors.

Facts

ASIC alleged that the approval of the consolidated financial accounts of Centro Property Limited. Centro Property Trust and Centro Retail Trust for the financial year ending 30 June 2007 contravened sections 180(1), 344(1) and 601FD(3) of the Corporations Act 2001. Those contraventions included failing to disclose $1.5billion of short term liabilities of Centro Property and $500 million of Centro Retail by classifying them as non current liabilities and failing to disclose guarantees of short term liabilities of an associated company of about US $1.75 billion that had been given after the balance date (see [24] for a detailed summary of the issues).  Middleton J found that those matters were well known to the directors or, if not well known to them, should have been [11] & [23].

Middleton J found, at [8], the directors failed “..to take all reasonable steps required of them, and acted in the performance of their duties as directors without exercising the degree of care and diligence the law requires of them.”  His consideration of the facts with respect to each director is found at ([289] – [532]).  It is too extensive to comment upon here.  The focus of this post is on the legal principles enunciated by Middleton J.

Decision

Middleton J highlighted the consequences of the breaches and why they are significant when he said, at [10]:

This proceeding is not about a mere technical oversight. The information not disclosed was a matter of significance to the assessment of the risks facing CNP and CER. Giving that information to shareholders and, for a listed company, the market, is one of the fundamental purposes of the requirements of the Act that financial statements and reports must be prepared and published. The importance of the financial statements is one of the fundamental reasons why the directors are required to approve them and resolve that they give a true and fair view.

Principles

Middleton j restated the obligations and responsibilities of a director as: Read the rest of this entry »

The Attorney General introduced the Cybercrime Legislation Amendment Bill today. His press release gives a good precis of its contents stating:

Attorney-General Robert McClelland said the Government’s Cybercrime Legislation Amendment Bill 2011 sets the legislative framework to enable Australia’s accession to the Council of Europe Convention on Cybercrime – the only binding international treaty on cybercrime.

The Convention provides systems to facilitate international co-operation between signatory countries, as well as establishing procedures to make investigations more efficient, including:

• empowering authorities to request the preservation of specific communications (with access subject to a warrant in Australia);
• helping authorities from one country to collect data in another country;
• establishing a 24/7 network to provide immediate help to investigators; and
• facilitating the exchange of information between countries.

To date, over 40 nations have either signed or become a party to the Convention, including the United States, United Kingdom, Canada, Japan and South Africa.  Over 100 nations are also using the Convention as the basis to strengthen their legislation to combat the threat of cybercrime. The Government’s Bill makes three key changes:

1. Preservation – Read the rest of this entry »

Last Friday Gardiner AsJ in White Family No 1 Pty Ltd v Organic Brands Pty Ltd & Anor considered grounds for winding up a company on just and equitable grounds.

Facts

In 2006 Ms Smith and Ms White agreed to establish a new business, through a corporate entity, which would sell organic skin and body products produced by an entity controlled by Ms Smith.  A company was duly incorporated in 2007 with Smith and White each being a director and having five of the ten issued shares.  Over the next 2 years the relationship deteriorated markedly and, as at the application date, the affairs of the company was in disarray. There has been no formal meeting of directors and no tax return filed. The company ceased trading in August/September 2010.

Decision

The Court has a very wide discretion under section 461(1)(k) of the Corporations Act to wind up a company on just and equitable grounds [12].  Gardiner AsJ cited the relevant elements giving rise to jurisdiction, as extracted from the House of Lords decision in Ebrahimi v Westbourne Galleries Limited, as being one or more of the following:

(i) an association formed or continued on the basis of Read the rest of this entry »

In Cohen v State of Victoria Nos 3 (“Cohen”) Forrest J ordered indemnity costs against solicitor for the plaintiff, Oldham Naidoo, arising out of the application by the defendants in Cohen v State of Victoria No 2 which resulted in the proceedng being struck out as an abuse of process (which I reviewed here).

Facts

The relevant conduct upon which the court exercised its discretion is set out at [5]:

(a) the issuing of the proceeding on 24 December 2008 in the name of Dr Cohen without obtaining his instructions or authorisation to do so;

(b) the maintenance of the claim (for nearly two years) in the name of Dr Cohen without any communication to him advising that he was the named representative plaintiff and therefore the subject of a number of obligations including that imposed by s 33ZD of the Supreme Court Act 1986 (Vic);

(c) the incurring of a number of costs orders against Dr Cohen – none of which were brought to his attention;

(d) the making of an allegation in the statement of claim central to Dr Cohen’s “claim” which, upon any reasonable investigation, was demonstrably false.

Decision

Principles

The key issues for consideration was whether there should be an award of costs against a legal practitioner acting without the authority of the client and, if so, whether to grant those costs on an indemnity rather than a party/party basis. In support of the former proposition Forrest J referred to the English  case of Fricker v Van  Glutten where his honour Read the rest of this entry »

On 3 June Hargrave J made an interim ruling as to the further conduct proceedings in Director of Consumer Affairs Victoria v Scully & Ors (No 2) (Scully).  It is an important decision in considering the approach the court should take to civil prosecutions brought by the Director of Consumer affairs under the Fair trading Act.

Facts

The proceedings relate to two schemes promoted by Scully and others designed to allow consumers with financial problems to acquire their own home without a deposit or finance from banks or financial institutions in the short term [8].  The Director brought an action under sections 9, 11 and 12 of the Fair Trading Act in the public interest and representing the interests of certain individuals who participated in the schemes.  There were no pleadings and Associate Justice Daley dismissed an application to order a statement of claim [10 at footnote 1].

On 10 May 2011 the trial was adjourned, part heard, until 26 July 2011. The court called the parties back because of concerns as to the course the trial was taking.  His Honour was concerned that since the proceedings had been issued the nature of the allegations were contained across and originating motion, numbering 50 pages but drawn in broad terms, voluminous affidavit material, running to 11,000 pages over 26 volumes, and written outline of submissions which was at “..a high level of generality” [10]. As a consequence the court was reliant upon the Director and his legal representatives to identify his case, which the did not occur in the first four days of trial [11]. His Honour was quite critical of the assistance provided by the Director (see [15]) saying “..the Court requires significantly greater assistance from the Director than has been provided to date.”

The court was of the view that pleadings were necessary to define the many issues in the case and avoid possible injustice to the defendants ([3] – [4]).

Decision

Pleadings

At [26] the Court cited Mason and Gauldron’s statement in Banque Commerciale SA v Akhil Holdings Ltd that the function of pleadings “..is to Read the rest of this entry »

The common refrain when one talks about the need for privacy rights are “If you have nothing to hide then you have nothing to worry about.”  This of course reverses the onus on a persons/state’s rights to view or access one’s private information.

The Chronicle of Higher Education inWhy Privacy Matters Even if You Have ‘Nothing to Hide’ is an excellent review of the argument and the appropriate rebuttal.