Australian Securities and Investments Commission v Hellicar

Facts

The directors of James Hardie Industries Limited approved a press release in February 2001 announcing the establishment of a compensation fund for asbestos disease victims, representing the fund as fully funded when it was not. ASIC commenced civil penalty proceedings against the non-executive directors, alleging they had approved the press release at a board meeting, relying principally on board minutes recording that approval. The directors contended they had not approved the press release in the terms released to the market.

Issues

1. Whether the Court of Appeal erred in holding that the minutes of the board meeting were insufficient, without corroboration, to establish that the directors approved the press release. 2. Whether the directors contravened s 180(1) of the Corporations Act 2001 (Cth) by failing to exercise care and diligence in approving a misleading press release. 3. The proper evidentiary weight to be accorded to board minutes as contemporaneous corporate records.

Holding

The High Court held by majority that the Court of Appeal had erred in requiring corroboration of the board minutes, and that the minutes constituted admissible and sufficient evidence that the directors had approved the press release; the directors had contravened s 180(1) of the Corporations Act 2001 (Cth).

Ratio decidendi

Board minutes, as contemporaneous records required by law to be kept, are competent and ordinarily sufficient evidence of the resolutions and business transacted at a meeting; a court is not entitled to require corroboration of such minutes as a precondition to acting on them, and a director who approves a misleading public statement without taking reasonable steps to verify its accuracy contravenes the statutory duty of care and diligence under s 180(1) of the Corporations Act 2001 (Cth).

Obiter dicta

The plurality observed that the obligations imposed on directors by s 180(1) are not reduced merely because a director relies on management or advisers; a director must bring an independent and inquiring mind to material information placed before the board, particularly where the subject matter is of significant public importance and financial consequence.

Significance

Hellicar is a leading Australian authority on the evidentiary status of board minutes and the standard of conduct required of non-executive directors under s 180(1) of the Corporations Act 2001 (Cth); it confirms that non-executive directors cannot shelter behind minutes that they later seek to disavow, and significantly raised the standard of diligence expected of directors approving public disclosures.

Key authorities

• ASIC v Adler ASIC v Adler (2002) 42 ACSR 80considered
• AWA Ltd v Daniels AWA Ltd v Daniels (1992) 7 ACSR 759considered
• Daniels v Anderson Daniels v Anderson (1995) 37 NSWLR 438considered
• ASIC v Maxwell ASIC v Maxwell (2006) 59 ACSR 373cited
• Re City Equitable Fire Insurance Co Ltd Re City Equitable Fire Insurance Co Ltd [1925] Ch 407considered