Gillfillan & Ors v Australian Securities & Investments Commission [2012] NSWCA 370

I refer to earlier postings.

The end result for the Australian directors was a reduced fine of $25,000.00 and disqualification until 30 April 2013, whereas the American directors were fined $20,000.00 and disqualified until 31 December 2012. Prominent in this was the overseas directors participated by telephone and did not have the text of the draft ASX announcement.

However, the penalty aside the decision is important in relation to the statements about the role of directors on boards and in particular that each person must vote in a way that accurately records their position.

Barrett JA made comment that:

8. Value is often attached to collegiate conduct leading to consensual decision-making, with a chair saying, after discussion of a particular proposal, “I think we are all agreed on that”, intending thereby to indicate that the proposal has been approved by the votes of all present.

9. Such practices are dangerous unless supplemented by appropriate formality.

10. The aim is not to consult together with a view to reaching some consensus, although it may well be, as a practical matter, that such consultation facilitates the making of the decision that is ultimately required. The aim is rather that the members of the board should consult together so that individual views may be formed and the individual will of each member may be made known in a clearly communicated way.

11. The culmination of the process must be such that it possible to see (and to record) that each member, by a process of voting, actively supports the proposition before the meeting or actively opposes that proposition; or that the member refrains from both support and opposition. And it is the responsibility of an individual member to take steps to ensure that his or her will is expressed in one of those ways.

Otherwise, the decision is of relevance in relation to technology used to facilitate the tyranny of distance so often faced in Australia, in particular, the dangers of not being able to refer to documents. Special care needs to be taken in this respect as it will not absolve directors of their duties.

Brisbane Barrister – David Cormack

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