Australian Securities and Investments Commission v Hellicar

The Australian Securities and Investments Commission (ASIC) brought proceedings against directors and officers of James Hardie Industries Limited (JHIL) for alleged contraventions of section 180(1) of the Corporations Act 2001 (Cth), which requires individuals to act with the degree of care and diligence that a reasonable person in their position would exercise. ASIC alleged that the directors contravened this section by approving a draft announcement to the Australian Stock Exchange (ASX) that was materially similar to a misleading announcement subsequently released. ASIC also alleged that the company secretary and general counsel contravened section 180(1) by failing to advise the board that the draft announcement was misleading. The central dispute revolved around whether the directors had indeed approved the draft announcement and the cogency of the evidence presented by ASIC, particularly board minutes, to prove this approval.

The High Court of Australia was required to determine several key legal issues. Firstly, it had to consider whether the minutes of a board meeting, which recorded the tabling and approval of the draft ASX announcement, constituted sufficient evidence to prove the directors' approval, especially given subsequent approvals of the minutes and the fact that all directors had received them. Secondly, the Court had to assess whether ASIC owed the respondents a "duty of fairness" in its conduct of the litigation, and if so, whether ASIC breached this duty by not calling the corporation's solicitor, who had supervised the preparation of the minutes and attended the board meeting. Finally, the Court needed to determine the proper consequence of any such breach of a duty of fairness, specifically whether it should lead to discounting the cogency of ASIC's case.

The High Court reasoned that the board minutes, having been confirmed and signed as a correct record, were prima facie evidence of the matters they recorded. The Court found that the trial judge's assessment of the evidence, including the "correlation evidence" between statements made at the meeting and the draft announcement, was preferable due to the advantage of having observed the witnesses. The Court also addressed the alleged "duty of fairness," concluding that there was no unfairness in ASIC's conduct in not calling the solicitor, and that the absence of protest from the directors after the minutes were confirmed also weighed against their arguments. The Court ultimately found that the Court of Appeal had erred in overturning the trial judge's findings regarding the approval of the draft announcement and the cogency of the evidence.

Consequently, the High Court allowed the appeals, set aside the orders of the Court of Appeal, and remitted the matters to the Court of Appeal for determination of issues relating to penalty and relief from liability, as well as costs.