A recent decision by the NSW Court of Appeal concerning parties making claims against directors and officers provides some certainty for directors and insurers with regard to the proceeds of D&O policies.
The Australian Competition and Consumer Commission (ACCC) and Federal Court have recently demonstrated that they will take a strong stance against businesses that use unfair terms in their standard form consumer contracts.
An earlier judgment that suggested that directors may be unable to rely on Directors’ and Officers’ (D&O) liability insurance to fund defence costs has been reversed. The overturned decision had effectively prevented directors accessing a single policy, intended to cover both defence costs and claims for damages, where a civil claim (e.g. a class action by shareholders) was held to have first priority over the insurance money.
Following closely on the heels of the High Court’s recent decision in Forrest v ASIC, ASX announced on 17 October 2012 the release for consultation of a new draft Guidance Note 8 on continuous disclosure. Guidance Note 8 was last updated in June 2005.
At the Council of Australian Governments (COAG) meeting on 25 July 2012, all States agreed that the Personal Liability for Corporate Fault – Guidelines for Applying the COAG Principles should apply when drafting future legislation.
Recent events, such as the Queensland Rugby Club going into liquidation and Darrell Lea entering into voluntary administration, have shown that Australian companies are not immune from the fall-out from the difficult global economic environment.
On 3 May 2012 the High Court dismissed the appeal of Peter Shafron, the former company secretary and general counsel of James Hardie Industries Limited (JHIL) in the decision of Shafron v Australia Securities and Investments Commission [2012] HCA 18.
On 3 May 2012 the High Court held that the seven non-executive directors of James Hardie Industries Limited (JHIL) had breached their duty to exercise care and diligence, by approving the release of a misleading announcement to the ASX. This decision overturns the finding of the NSW Court of Appeal.
On 3 May 2012 the High Court concluded the James Hardie cases when it overturned the finding of the NSW Court of Appeal, and held that seven non-executive directors of James Hardie Industries Limited (JHIL) contravened their obligations under the Corporations Act 2001 (Cth) (Act).
A decision of the New Zealand High Court last year cast doubt on whether directors could rely on D&O policies to fund their defence costs. It was held that civil claimants held the priority interest in Directors’ and Officers’ liability cover (D&O) under a statutory charge, and could prevent company directors from accessing the insurance funds to pay defence costs.
On 13 February 2012 the ACCC provided an update on its use of new powers to issue infringement notices to business.
The business judgment rule is a defence to breach of the statutory duty of care and diligence in section 180 of the Corporations Act. The Australian form of the rule is found in section 180(2) Corporations Act 2001 (Cth) and was derived from a common law doctrine of the United States.