CORPORATE LAW ELECTRONIC BULLETIN
Bulletin No 9, May 1998
Centre for Corporate Law and Securities Regulation
Faculty of Law, The University of Melbourne
with the support of
The Australian Securities Commission,
the Australian Stock Exchange
and the leading national law firms:
Allens Arthur Robinson Group
Blake Dawson Waldron
Clayton Utz
Corrs Chambers Westgarth
Freehill Hollingdale & Page
Mallesons Stephen Jaques
Editors: Kenneth Fong, Dr Elizabeth Boros and Professor Ian Ramsay
ACCESS TO BULLETIN
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http://www.law.unimelb.edu.au/corporat/email/aindex.htm
CONTENTS
1. RECENT CORPORATE LAW DEVELOPMENTS
(A) Company Law Review Bill Update
(B) Waterfront Dispute
(C) ALP Proposes Legislation to Support Job Security
(D) Overseas Futures Exchanges Approved
(E) Recent UK Corporate Law Reform Developments
(F) Managed Investments Bill
2. RECENT CORPORATE LAW DECISIONS
(A) Kerol Pty Ltd & Noel Ross Edge v Vergeld Engineering Pty Ltd (in voluntary liquidation), Tom Eldic & Gordon Ralph Vergelius
(B) Jageev Pty Ltd v Francis Mervyn Deane
(C) Boral Energy Resources Ltd v TU Australia (Queensland) Pty Ltd
(D) Coles Myer Ltd v Commissioner of State Revenue
3. RECENT ASX DEVELOPMENTS
(A) Demutualisation Changes
(B) Listing Rule Amendments
4. RECENT ASC DEVELOPMENTS
(A) Corporate Governance Instrument Permits Collective Action by Institutional Investors
(B) Warning on Investor Schemes
(C) Senior NSW Appointment
(D) AAT Affirms ASC Cash-Box Prospectus Refusal
5. RECENT CORPORATE LAW JOURNAL ARTICLES
6. CORPORATE LAW SEMINARS
7. ARCHIVES
8. CONTRIBUTIONS
9. MEMBERSHIP AND SIGN-OFF
10. DISCLAIMER
1. RECENT CORPORATE LAW DEVELOPMENTS
(A) COMPANY LAW REVIEW BILL UPDATE
Below is the text of a letter, released on 20 May 1998, which Senator Ian Campbell, Parliamentary Secretary to the Treasurer, has been sending to interested persons regarding the status of the Company Law Review Bill:
'I am writing to keep you informed about the Government's consideration of the Company Law Review Bill.
You will be aware that the Bill has been passed by the House of Representatives and that on 1 April 1998 the Parliamentary Joint Committee on Corporations and Securities recommended that, subject to any minor or technical amendments, the Bill be passed in its current form. Senator Murray made a minority report on the Bill raising a number of corporate governance issues.
The opposition has since indicated that it will be moving amendments to the Bill in the Senate addressing a number of corporate governance issues for listed companies. I understand that these amendments would, for example:
- Allow a single director to call a general meeting.
- Require 28 days notice to be given of a general meeting.
- Require companies to specify in notices of a general meeting a fax number to which proxies may be sent.
- For resolutions decided on a show of hands, require disclosure of how the proxies were directed to vote.
- For resolutions decided on a poll, require disclosure of the number of votes cast for, against and abstaining on the resolution.
- Require disclosure to the ASX of information disclosed to the US SEC, the New York Stock Exchange and a prescribed stock exchange.
- Require the inclusion of a management discussion and analysis in the directors' annual report to members.
- Require disclosure of the company's policy for remunerating directors and senior executives of the company, the relationship between the policy and the company's performance, and the remuneration (by component) paid to the directors and the 5 most highly remunerated officers.
Senator Murray has also indicated that he will be proposing amendments addressing similar issues.
The Government has previously indicated that it would like the Bill to commence on 1 July 1998. This would allow the Bill to commence at the same time as the proposed commencement of a number of Bills implementing recommendations of the Wallis Report and also the establishment of the Australian Securities and Investment Commission. Commencement on this date would also permit companies to take advantage of long awaited reforms including on-line company registrations and the preparation of concise financial reports.
Accordingly, for some of the measures proposed by the opposition, particularly those for which the Government has previously indicated its position, any reconsideration of the issues by the Government could involve a deferral of the Senate's consideration of the Bill until later in 1998 and therefore a later commencement date.
The Government is considering amendments to the Corporations Law in relation to directors' duties as part of the Corporate Law Economic Reform Program. The Parliamentary Joint Committee on Corporations and Securities is currently undertaking an inquiry into draft legislation exposed for public comment as part of this initiative.
Any measures changing the rules concerning corporate governance would require careful consultation with the interested parties to ensure that the changes appropriately balance the competing interests.
In the interest of achieving early passage for the Company Law Review Bill, I would prefer that the proposed amendments be considered in the context of the Parliamentary Joint Committee on Corporations and Securities hearings on the Corporate Law Economic Reform Program draft legislation. This course has the advantage of giving all the interested parties an opportunity to consider the proposals and the text of any draft amendments to the Corporations Law.
Yours sincerely
Senator the Hon. Ian Campbell'
(B) WATERFRONT DISPUTE
(Contributed by Nicholas Le Mare, Solicitor, Corrs Chambers Westgarth)
Editor's Note: A major seminar on the legal issues arising from the Waterfront Dispute will be held in Melbourne on 24 June 1998; see Item 6 of this Bulletin for details.
(a) Background
Prior to September 1997, the companies within the Patrick Stevedoring Group (Patricks) which owned the stevedoring businesses also employed the unionised workforce and held significant assets.
In September 1997, Patricks implemented a restructure whereby the functions of employing its unionised workforce and owning its stevedoring business were divided into different companies. The stevedoring businesses and assets previously held by the employer entities were transferred to other companies within the Patricks Group. In addition, the employer entities entered into various labour supply agreements with the owner entities to supply Patricks with labour. As a consequence, the labour supply agreements became the major asset of the employer entities.
Significantly, the labour supply agreements were terminable by the owner entities without notice in circumstances of industrial action. Also, the details of the corporate restructure were not made known to Patricks' employees or the Maritime Union of Australia (MUA).
In late 1997 and early 1998, Patricks' employees engaged in industrial action, most notably at Melbourne's No 5 Webb Dock.
On 6 April 1998, the MUA and the Patricks' employees formed the view that Patricks was about to dismiss its entire unionised workforce. As such, on 6 April 1998, the MUA and the employees applied to the Federal Court for interlocutory orders to prevent Patricks from dismissing its unionised workforce until such time as the matter could be heard in full.
The Court listed the hearing in relation to the interlocutory orders for 8 April 1998.
Meanwhile, on 7 April 1998, the owner entities, in response to the spate of industrial action, terminated the labour supply agreements with the employer entities. As the major asset of the employer entities was lost, they were placed into administration on the ground that they were insolvent. Late in the same evening, Patricks published a press release indicating that all displaced employees would be eligible to receive their full leave and redundancy entitlements. Also on 7 April 1998, the owner entities entered into new arrangements with other entities affiliated with the National Farmers Federation (NFF) to provide non-unionised labour.
(b) Justice North's Decision At First Instance
The essence of the application made by the MUA and the employees before Justice North was to preserve the pre-7 April 1998 position pending determination of the matter at a full trial of an alleged illegal conspiracy to perform an illegal act in breach of the Workplace Relations Act.
The respondents to the application were the employer and owner entities, other group companies, their holding company, the NFF affiliated companies, the directors of the various companies, the Commonwealth of Australia and the Minister for Industrial Relations, Mr Peter Reith.
In deciding whether to grant temporary relief, Justice North had regard to two issues:
- whether the MUA had raised a serious question to be tried; and
- whether, on the balance of interests, it was appropriate that temporary orders be made.
In relation to the first issue, the MUA alleged, among other things, conduct in breach of section 298K(1) of the Workplace Relations Act. Under section 298K(1):
'An employer must not, for a prohibited reason, or for reasons that include a prohibited reason, do or threaten to do any of the following:
- dismiss an employee;
- injure an employee in his or her employment;
- alter the position of an employee to the employee's prejudice.'
The prohibited reasons are set out in section 298L. Under section 298L:
'Conduct referred to in subsection 298K(1) is for a prohibited reason if it is carried out because the employee:
- is, has been, proposes to become or has at any time proposed to become an officer, delegate or member of an industrial association; or
- is entitled to the benefit of an industrial agreement or an order of an industrial body; or
- in the case of an employee who is a member of an industrial association that is seeking better industrial conditions - is dissatisfied with his or her conditions.'
In dealing with the alleged breach of section 298K(1), Justice North found that there was a serious question to be tried that one reason why Patricks implemented the corporate restructure and entered into the labour supply agreements in September 1997 and then appointed administrators on 7 April 1998 was that the employees were members of a union and that Patricks wanted to dismiss them and employ non-unionised labour.
Justice North also found that there was a serious question to be tried that there was a conspiracy by the employer companies and other respondents to perform an unlawful act, in particular to breach section 298K(1).
In dealing with the second issue, Justice North had regard to a number of factors. These included:
- the relevant company accounts for the years ended 30 September 1995 and 1996 showed significant after-tax profits;
- although the employees had engaged in industrial action at various docks in late 1997 and early 1998, the MUA proffered an undertaking that if temporary orders were made, the MUA would not take further industrial action;
- although the owner entities had entered into onerous labour supply agreements with other entities to provide non-unionised labour, there was provision in at least one such agreement that could apply to prevent a party from incurring liability where failure to perform obligations was caused by an injunction granted by the Court;
- although an injunction, if granted, would have the effect of requiring the employer entities to carry on business, and do so whilst insolvent (thus imposing significant personal liability upon the Administrators), the MUA proffered an undertaking that the MUA would not hold the Administrators personally liable for the employees' wages during the course of administration; and
- although Patricks alleged that employees could be compensated with damages, the effect of not granting the interlocutory orders would be to deny the employees the possibility of reinstatement, given that the passage of time and events to the full hearing would make this remedy 'practically impossible'.
On the balance of the above factors, Justice North granted the following Orders:
Order 1 - the owner entities were restrained from acting upon the purported termination of the labour supply agreements with the employer entities;
Order 2 - the labour supply agreements were to be regarded as remaining on foot;
Order 3 - the labour supply agreements could not be terminated without first giving 14 days written notice to the MUA;
Order 4 - the owner entities were prevented from acquiring labour services from any other source;
Order 5 - the companies in administration were restrained from doing anything that would result in the termination of the Patricks employees;
Order 6 - other companies in the Patricks Group were prevented from disposing of their assets other than in the normal course of business; and
Order 7 - the MUA was granted leave to proceed against the companies in administration.
(c) Appeal to the Full Court of the Federal Court
On 23 April 1998, the Full Court of the Federal Court granted Patricks leave to appeal against the Orders of Justice North but proceeded to uphold Justice North's Orders in their entirety.
(d) Appeal to the High Court
Patricks subsequently sought leave to appeal to the High Court, and on 4 May 1998, the High Court handed down its decision.
With respect to the terms of the September 1997 restructure, the High Court found that the security of the employer entities' businesses was made 'extremely tenuous' and, as a result, ' the security of the employees' employment was altered to their prejudice'. The High Court then noted that the reasons given by Patricks for the restructure were not inconsistent with the reasons alleged by the MUA, and on this basis, there was a serious issue to be tried.
In relation to the terms of the Orders, the High Court, by a majority of 6-1, upheld Justice North's Orders, though in a modified form.
The most significant modification to Justice North's Orders made by the High Court majority was the variation of Orders 2, 3 and 5 and the insertion of a new Order 5A. Orders 2, 3 and 5 were made subject to Order 5A. Order 5A provides that Orders 2, 3 and 5 are made without prejudice to the powers of the Administrators during the period of administration.
In practical terms, the insertion of Order 5A allows the Administrators increased flexibility in their application of Justice North's Orders. Specifically, the implementation of Orders 2, 3 and 5 is made subject to the rights and duties of the Administrators under the Corporations Law.
The insertion of Order 5A has a number of practical implications. For example, under the Corporations Law, an administrator is required to act in the best interests of the company under administration. On this basis, the Administrators would not be obliged to continue to employ all of the pre 7 April 1998 unionised workforce. If it is in the best interests of the companies under administration to effect redundancies, the Administrators can do so provided the same are implemented in accordance with applicable law. Applicable law in this context would mean consultation with the MUA and decisions on redundancies and the quantum of redundancy payouts to be in accordance with relevant industrial instruments and the Workplace Relations Act.