James Hardie High Court decision - the importance of company minutes

Australian Securities and Investments Commission v Meredith Hellicar & Ors [2012] HCA 17

Decision

Today the High Court held that seven non-executive directors of James Hardie Industries Ltd (JHIL) breached their duties as directors of the company by approving the company's release of a misleading announcement to the Australian Stock Exchange (ASX).

While there are many important issues in the judgment, one crucial ruling is a powerful example of the important evidentiary role that minutes of meetings play.

The High Court has emphatically stated that the minutes will be deemed to be a true record of the events that have transpired at a meeting, so long as there is no evidence to the contrary.

Therefore, all meeting participants must take measures to ensure that accurate and adequate minutes are taken and that inaccuracies are corrected before the minutes are ratified.

Meeting minutes provide solid evidence

Crucial to the High Court’s finding that the directors had breached their duties in approving the misleading announcement, was that the minutes of the board meeting, confirmed at a subsequent board meeting, recorded the tabling of a draft ASX announcement and its approval by the board.

The minutes of the board's meeting were a formal record (subsequently adopted by the board as a correct record) of what had happened at the meeting.  That record was created and adopted close to the time of the events in question.  The minutes were evidence of the truth of the matters recorded – in particular, that a draft ASX announcement was tabled and approved.

The existence of certain errors in the minutes did not render the meeting minutes useless, as a source of evidence, to find that the board had approved the misleading announcement.

ASIC’s duty of ‘fairness’: no obligation to bring evidence in addition to meeting minutes

The directors had also argued that ASIC’s case was undermined because it had failed to call JHIL’s solicitor, who had attended the meeting and supervised the preparation of the draft minutes for the meeting, to give evidence that the draft announcement was tabled and approved.  This was said to be contrary to ASIC's obligation of ‘fairness’.

However, the High Court was of the opinion that ASIC did not have to call JHIL's solicitor as a witness to satisfy this obligation.

For further information please contact:

Iain Freeman
Partner
(08) 9288 6759
iain.freeman@lavan.com.au