Role of company secretary — James Hardie case developments and implications
Former James Hardie General Counsel and Company Secretary Peter Shafron has applied for special leave to appeal to the High Court to try to reverse the findings of the New South Wales Court of Appeal. He argues that the court erred on a number of fronts, including:
- in finding that his responsibilities as Company Secretary and General Counsel fell within the scope of the duty of care and diligence imposed on him as a company officer, merely because he held the position of Company Secretary, and
- in finding that the relevant conduct was done by him in the exercise of his powers, duties, functions or responsibilities of a company secretary of James Hardie.
Should leave to appeal be granted, any further clarification by the High Court on what constitutes ‘when’ a person is acting as an officer of a company, and the standard of behaviour expected of them, may be beneficial, particularly to those whose roles require them to wear multiple hats in an organisation.
CSA considers that its company secretary Members are responsible, as officers, to undertake their responsibilities as set out in the law and under the terms, formal and informal, of their employment and their particular skills and experience.
A company secretary’s involvement in the preparation and release of any particular announcement is also likely to vary from case to case. By way of example, a company secretary may not have been involved in the making of the key decisions behind a particular document or announcement, nor have extensive background information about it, but may still take the trouble to read it (as a conscientious officer would) and ask management questions about its content or suggest that further information be included for clarity prior to arranging its lodgment.
In such circumstances, CSA would expect that a company secretary would not then be deemed to have verified the accuracy of the entire contents of the announcement, nor assumed responsibility for such a task. CSA would be very concerned if company secretaries were penalised for, and therefore, discouraged from, taking a conscientious, proactive approach.
In the James Hardie case, the company secretary had a legal background and was found to be heavily involved in relevant elements of the matter over a long period of time. The judgment was that this shaped the nature and scope of the responsibilities attached to the company secretary’s role.
A company secretary is an officer under the law, and so whether they acted as an officer in the circumstances of the James Hardie case was the relevant issue. The Court of Appeal judgment was that Mr Shafron acted as an officer of the company and was found wanting in the exercise of his particular responsibilities.
Should leave to appeal be granted, CSA hopes that the High Court recognises that the Court of Appeal judgment does not mean that every company secretary is required or able to vouch for the accuracy of each and every statement that a company makes. The role of the company secretary varies from company to company and so the responsibilities of a company secretary will naturally differ. Those responsibilities must be judged according to the high standards rightly expected of all company officers and the particular role a company secretary holds in a particular organisation.