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

The High Court of Australia considered appeals and cross-appeals in proceedings brought by the Australian Securities and Investments Commission (ASIC) against Mr Shafron and two companies, Citigroup Pty Ltd and CitiFinancial Finance Australia Ltd. ASIC alleged that Mr Shafron, in his capacity as company secretary and general counsel of Citigroup, and subsequently as general counsel of CitiFinancial, had contravened provisions of the Corporations Act 2001 (Cth) by failing to exercise his powers and discharge his duties with the degree of care and diligence required. The dispute centred on Mr Shafron's alleged involvement in the preparation and dissemination of a misleading media release concerning the company's financial performance.

The High Court was required to determine, among other things, whether Mr Shafron had contravened section 180(1) of the Corporations Act by failing to exercise his duties with the requisite care and diligence. This involved considering the scope of his responsibilities as company secretary and general counsel, and whether his actions or omissions in relation to the media release fell below the standard expected of a reasonable person in his position. The Court also had to consider the extent to which the knowledge and actions of other individuals within the companies could be attributed to Mr Shafron, and whether the companies themselves had contravened the Act.

The Court's reasoning focused on the nature of the duties owed by Mr Shafron in his dual roles. It was held that the duties of a company secretary, while distinct from those of a general counsel, were nonetheless significant and required a reasonable degree of care and diligence. The Court found that Mr Shafron had failed to exercise the necessary care and diligence in his role as company secretary, particularly in relation to his oversight of the preparation and approval of the media release. This failure was found to be a contravention of section 180(1) of the Corporations Act. The Court also found that the companies had contravened the Act due to the conduct of their officers.

The High Court allowed ASIC's appeal in part, finding Mr Shafron liable for contravening section 180(1) of the Corporations Act in his capacity as company secretary. The appeals by Mr Shafron and the companies were dismissed. The matter was remitted to the Federal Court for the determination of penalties.