In-house counsel and company secretaries have important roles to play in ensuring their organisations do not mislead the public, Federal Court Justice Berna Collier told a breakfast seminar hosted at Cooper Grace Ward on Tuesday.
Collier was analysing the implications from the James Hardie decision after 10 former executives and directors of James Hardie were found guilty in April of breaching their duties.
The executive and directors approved a press release that claimed the asbestos compensation trust was "fully funded". The company later said it faced a black hole of $800 million and a NSW Government inquiry in 2004 found the shortfall could be $2 billion.
The Australian Securities and Investments Commission (ASIC) asked the Federal Court on Monday to ban former Hardie chief executive Peter Macdonald from managing a company for 16 years and to ban former directors for a period of five years.
The regulator also asked that Hardie's former general counsel, Peter Shafron, be banned from management for eight years and fined $320, 000 to $450,000.
David Grace, a partner at Cooper Grace Ward who attended Collier's speech, said the James Hardie case had generated enormous public interest because "of the serious adverse effect of the asbestos-related diseases that have badly hit so many of our fellow Australians".
For in-house counsel and company secretaries, Grace said, the importance of preparing the contents of minutes and ensuring that the board signs them off in a timely manner was highlighted by Collier's analysis of the case.
"There was quite lengthy discussion over the breakfast over the importance of getting a complete form that has reasonable detail and is signed within that 30-day period and there was discussion that, for many companies, that had some practical difficulties," he told Lawyers Weekly.
"But, nonetheless, it is important in the context of persons' memories [to get] draft minutes out for the board members to consider within a reasonably short time of the board meeting, so they can make comment or contributions to the accuracy of the minutes, whilst the proceedings are reasonably clear in their minds. Because the longer these things are allowed to lapse, the riskier it gets."
Directors also needed to consider the content of draft announcements and ensure that any disclosure was accurate. In-house counsel and company secretaries could also help with this process, said Grace.
"The other important matter for in-house counsel and company secretaries who are involved in ASX-listed companies is they need to write clearly and accurately [so that] the message that is given to the ASX and, therefore to the public, does not overstate the truth of matters, which, indeed, was a real problem in what was said with the ASX announcement [about the funding of the asbestos trust] in the James Hardie case," he said.
Defence counsel Richard Lancaster, who is representing former general counsel Shafron and all the non-executive directors, argued in court on Monday that his clients should go unpunished under the rarely used provisions in the Corporations Act that allow full exoneration in cases where there was no finding of dishonesty.
ASIC's counsel, Tony Bannon SC, said "the board and management have been found seriously wanting" and urged Justice Ian Gzell to reject defence arguments that negative publicity surrounding the case was ample punishment.
Justice Gzell reserved his decision.
- Sarah Sharples