Corporations Law News March 2009
The Courts give a vote of confidence to directors
2 recent cases reflect the Courts' concerns ensuring that the rights and interests of company directors as individuals are not subsumed by public interest concerns.
In Re AWB Ltd [2008], directors of the Australian Wheat Board were impugned for breaching statutory duties pursuant to sections 180 & 181 of the Corporations Act, rendering them liable to both criminal and civil proceedings. It was initially proposed that civil action against the defendant directors be brought first and criminal proceedings second.
However, the defendants contended that this would amount to ‘double jeopardy', since publicity surrounding the civil proceedings had the potential to influence jurors empanelled for the criminal trial. The court accepted this concern as well as accepting the director's concerns that they would incur unnecessary costs in defending both sets of proceedings, since the civil trial would be stayed as soon as the criminal proceedings were begun pursuant to section 1317N of the Corporations Act.
In Bell IXL Investments Ltd v Life Therapeutics Ltd and Ors (2008), the Court was asked to consider whether or not company shares were issued by directors honestly, appropriately and in the best interests of the company. A large proportion of shares had been issued to another company whose interests were reflected in those of the board of directors, in order to stymie the efforts of an associated shareholder company to have the board replaced.
The Court found for the directors in refusing to hold that the shares had been issued for an improper purpose. In effect, the Court took the view that the appropriateness of the decision to issue shares, in terms of its impact on the company, was best left to the discretion and particular expertise of the directors.