Australian Securities and Investments Commission v Hellicar & Ors; Shafron v Australian Securities and Investments Commission

The High Court of Australia considered appeals from the Full Federal Court in proceedings brought by the Australian Securities and Investments Commission (ASIC) against James Hardie Industries Ltd (JHIL) and its directors, and against Mr Shafron, the former company secretary and general counsel of JHIL. ASIC alleged contraventions of the Corporations Act 2001 (Cth) by JHIL and its directors in relation to misleading statements made about the company's financial position and its ability to meet its future liabilities, particularly concerning asbestos-related claims. ASIC also alleged contraventions by Mr Shafron in relation to his duties as an officer of the company.

The central legal issues before the High Court were whether the directors and Mr Shafron had contravened specific provisions of the Corporations Act, including those relating to misleading or deceptive conduct and the duties of officers. The court was required to determine the scope of liability for misleading statements made in the context of corporate restructuring and the adequacy of the information provided to the market and ASIC. Furthermore, the court had to consider the application of the business judgment rule and the standard of care and diligence expected of company directors and officers in such circumstances.

The High Court, in a joint judgment, clarified the principles governing liability for misleading or deceptive conduct under the Corporations Act. It held that the directors and Mr Shafron had contravened the relevant provisions by making misleading statements about JHIL's financial position and its capacity to meet future asbestos liabilities. The court rejected arguments that the statements were merely forward-looking or protected by the business judgment rule, finding that the directors and Mr Shafron had failed to take reasonable steps to ensure the accuracy of the information provided. The court emphasised the importance of full and frank disclosure by companies and their officers, particularly when dealing with significant contingent liabilities.

The High Court allowed ASIC's appeals in part, finding that the directors and Mr Shafron had contravened the Corporations Act. The matter was remitted to the Federal Court for the determination of penalties and other remedies.