An eye-catching feature of the recent decisions of the High Court of Australia concerning a misleading announcement by James Hardie Industries Limited to the Australian Stock Exchange was the finding that the general counsel and company secretary, Peter Shafron, had breached his duties as an officer of James Hardie.
In 2001, the James Hardie group of companies was restructured, so that two subsidiaries carrying significant asbestos liabilities were separated from the group and a foundation established to fund compensation claims made against those separated companies. The Australian Securities and Investments Commission brought proceedings concerned misleading statements in an announcement to the ASX concerning the sufficiency of the funds available to the foundation to meet potential claims.
The High Court of Australia upheld the finding that the general counsel and company secretary was liable for breaching his duty under section 180(1) of the Corporations Act 2001 (Cth) as an officer of the company by failing to advise the CEO and the board that certain information should be disclosed to the ASX, and that an actuarial study he had commissioned to estimate potential asbestos liabilities suffered from certain critical limitations.
There is no equivalent provision to section 180(1) in New Zealand: Section 134 of the Companies Act applies only to directors (including deemed directors) but not officers. The decision may, at most, have some peripheral relevance to the circumstances in which a general counsel could be considered a deemed director under the Companies Act 1993. For instance, section 126(4) of the Companies Act precludes a person from being deemed a director to the extent that the person acts only in a professional capacity. The Shafron decision, and in particular the High Court's rejection of the argument (on the facts of that case) that Mr Shafron as a joint general counsel and company secretary acted in two separate capacities, may be relevant to this exception. Mr Shafron argued that section 180(1) should apply only to those functions he performed in his capacity as company secretary, not those he carried out as general counsel. The High Court held, however, that Mr Shafron’s responsibilities were not divisible and needed to be viewed as a whole.
Shafron v Australian Securities and Investments Commission  HCA 18