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27/06/17

Case Updates - June 2017


Board Chairperson held to be a ‘worker’ with standing to apply for a stop bullying order from the Fair Work Commission: In application by Adamson [2017] FWC 1976

A recent decision of the Fair Work Commission means that boardroom disagreements and behaviours may now be the subject of scrutiny and, where appropriate, stop bullying orders, by the Fair Work Commission.  Boards should ensure that they have a clear understanding of anti-bullying laws and that there are appropriate policies in place to regulate their conduct.

Mr Adamson, who was the Chairperson of the Executive Board of the Anangu Pitjantjatjara Yankunytjatjara Inc (APY), made an application for a stop bullying order under section 789FC of the Fair Work Act 2009 (Cth) (FW Act).  Mr Adamson claimed that he was bullied by the Deputy Chairman of the Executive Board and the General Manager.

Ultimately, Commissioner Hampton did not issue an order because Mr Adamson was not re-elected as Chairperson, and there was therefore no risk that he would ‘continue to be bullied at work’ as required under section 789FF(1)(b)(ii) of the FW Act.

However, Commissioner Hampton did make a preliminary finding that Mr Adamson was a ‘worker’ within the meaning of the FW Act (which is defined by reference to section 7 of the Work, Health and Safety Act 2011 (Cth) (WHS Act)) and therefore eligible to bring the application.  In so finding, Commissioner Hampton noted that:

  • according to the explanatory memorandum for the WHS Act, the broad definition of  ‘worker’ rather than ‘employee’ recognises the changing nature of work relationships and ensures that protection is extended to all types of workers; and
  • the list of examples of workers in section 7(1) of the WHS Act (which did not expressly include a director), was not intended be exhaustive, and the fact that Mr Adamson’s role did not fit neatly into one of the listed examples was not decisive.

Rather, the essential question was whether Mr Adamson, as Chairperson, was “carrying out any work in any capacity “for APY and in this regard, Commissioner Hampton found that:

  • the activities undertaken by Mr Adamson in attending to the duties of Chairperson of APY represented work in a literal and contextual sense;
  • as Chairperson, Mr Adamson could be directed to act for and on behalf of the Executive Board provided he is acting in accordance with a resolution of that Board;
  • without such resolution, Mr Adamson was unable to give directions to APY staff or make or implement any decisions (other than calling meetings); and
  • Mr Adamson received relatively significant additional remuneration and expense payments (which exceeded cost reimbursement) as Chairperson which, while not decisive, was consistent with the work being undertaken for APY.

Further, Commissioner Hampton noted that while Mr Adamson may not be considered to be a ‘worker’ in the traditional sense of the difference between a manager/employer and a worker, the context in which the expression is used here is different.


When will a single director have implied actual, or ostensible, authority to bind a company?: Colin R Price & Associates Pty Ltd v Four Oaks Pty Ltd [2017] FCAFC 75

This case provides some useful analysis and application of the law of implied actual, and ostensible, authority for a single director to bind a company. It reinforces the importance of the relevant circumstances and in particular, any acquiescence by the other directors (which must be evidenced by words or conduct) and any reliance on such acquiescence by the other party.

This case arose out of a dispute between a syndicate of investors who had interests in a property development project owned by the Twentieth Green Unit Trust, of which Twentieth Green Pty Ltd (TG) was the trustee.  Among the issues on appeal was whether certain payment authorities (Payment Authorities) purportedly signed on behalf of Grovan Pty Ltd (Grovan) (one of the unit holders) by one director Mr Price (but not his wife and co-director) were binding in circumstances where there was no express authority for Mr Price to sign alone under the constitution or by board resolution.

Ultimately it was not necessary to decide the issue (due to the Court’s findings that it was otherwise unconscionable in the circumstances for TG to rely on the Payment Authorities).  However, Rares, Murphy and Davies JJ in the Full Federal Court made the following observations and findings in relation to the lack of implied actual, or ostensible, authority of Mr Price to sign the Payment Authorities for Grovan:

  • ordinarily, where a company has more than one director, a single director’s normal power is to bind the company only by joining with other directors in a resolution of the board;
  • an implied grant of authority can result from acquiescence in a course of behaviour by persons who have actual authority to delegate (provided there is also evidence of a communication by word or conduct of the individual directors’ respective consents to one another and to the agent);
  • the following pointed away from a conclusion that Mrs Price impliedly authorised Mr Price to enter into the Payment Authorities:
    • they fell outside the ordinary course of business for Grovan (they required it to agree to pay 100% of the future liabilities of the project builder in circumstances where it only had a 10% interest in the project and none of the other unit holders took on similar obligations);
    • they were entered into at a time when Mr Price was suffering significant financial and emotional stress and dealing with other personal issues, and
    • Mrs Price’s evidence was she was not aware of the Payment Authorities until these proceedings and had she been, she would have urged Mr Price not to sign them;
  • the following evidence did not establish that Mrs Price stood by and acquiesced in Mr Price representing that he was able to bind Grovan on his signature alone:
    • Mr Price’s attendance at investor meetings alone and the fact that he signed all Grovan correspondence alone (which did not show that he had any power beyond a director);
    • the fact that Mr Price alone signed the accounts for Grovan (which was very different to entering into the Payment Authorities and in any case, the Directors’ Declarations accompanying the accounts stated that they were made in accordance with a board resolution);
  • the fact that the first Payment Authority was drafted by TG to require execution by both Mr and Mrs Price showed that TG gave some thought as to who was required to execute the First Payment Authority.  Further, the failure of TG to explain why Mrs Price’s signature was not insisted upon (in circumstances where Mr Price revealed his personal difficulties just before the first Payment Authority was drafted) suggested that TG did not enter into the Payment Authorities with the understanding that Mr Price had power to bind Grovan alone.  Nor did it rely on any acquiescence by Mrs Price in the conduct of Mr Price;
  • apparent or ostensible authority may exceed implied actual authority but in the absence of some representation by the company, an ordinary individual director does not have ostensible authority to bind the company; and
  • the Court was not satisfied that TG in fact relied upon any representation that Mr Price had apparent or ostensible authority to execute the first Payment alone. Had it done so, Mr Power, as a director of the company, would have drawn the first Payment Authority to require only Mr Price’s signature.

Many thanks to Nicholas Doyle, graduate, for his assistance with this summary.


Unfair but reasonable scheme goes to shareholders: In the matter of Blackgold International Holdings Limited [2017] FCA 602

This case illustrates the preference of the Courts at a first scheme hearing to leave the question as to whether the scheme should be approved to be dealt with by shareholder discussions at the scheme meeting or the second court hearing, even where the expert has formed the view that the scheme is reasonable but not fair.

Blackgold International Holdings Limited (Blackgold) applied for leave under section 411(1) of the Corporations Act 2001 (Cth) to convene a meeting to approve a proposed scheme of arrangement between Blackgold and its shareholders with consideration of 4 and a half cents per share.

In considering whether there was anything obvious about the scheme which would, if the requisite majorities were achieved, preclude the Court from making final orders at the second hearing, Siopsis J noted that there was an unusual feature of this particular scheme.  This was because the expert report from BDO Finance (WA) Pty Ltd (BDO) stated that, in the expert’s opinion, the scheme was reasonable but not fair.

BDO based its opinion that the scheme was not fair on the following:

  • prior to the announcement of the scheme, Blackgold's share price had been about 2 cents per share but trading in Blackgold’s shares had been, and was at the relevant time, very thin; and
  • based on BDO’s independent assessment of the value of Blackgold’s underlying assets by reference to discounted cash flow analysis and the attendant assumptions and projections, BDO’s view was that the lowest value for Blackgold’s shares would be 7.4 cents and the highest would be 36.7 cents per share.

However, factors that led BDO to conclude that the scheme was nonetheless reasonable (and in the best interests of shareholders) included:

  • the risks associated with carrying out coal mining in China (including the manner in which China is now seeking to regulate coal mining and the fact that at least one of Blackgold’s licences may not be renewed); and
  • the fact that, given the thin share trading, the scheme may offer the opportunity for Blackgold shareholders to realise cash which they might not otherwise be able to do.

Siopsis J cited the observations of French J in Re Foundation Healthcare (2002) 42 ACSR 252 that the question of whether an arrangement warrants court approval is generally to be answered when the scheme returns to court for the second hearing (and not at the first hearing), and that the probability is that any questions as to whether any interests are adversely and unfairly affected will arise at the scheme meeting and/or final court approval stage.

Siopsis J concluded that the BDO report did not warrant the Court coming to the view that the scheme was so obviously unfair or unreasonable that it should not be allowed to go to a meeting, and it will always be open to an objecting shareholder to make submissions opposing approval at the second hearing.


Full Federal Court clarifies the fault position for civil proceedings post Gore v ASIC: ASIC, in the matter of Whitebox Trading Pty Ltd v Whitebox Trading Pty Ltd [2017] FCAFC 100

The Full Federal Court has held that it is not necessary for ASIC to prove fault according to Chapter 2 of the Criminal Code in civil proceedings relating to certain breaches of the Corporations Act. 

In this case relating to an alleged a contravention of the market manipulation provisions of the Corporations Act 2001 (Cth), ASIC asked the Federal Court to clarify the law following its decision in Gore v ASIC [2017] FCAFC 13 in February this year,  Before Gore, ASIC had acted on the basis that it was only necessary to prove Criminal Code fault elements in criminal proceedings. However, in Gore, the Court considered that ASIC had to prove Criminal Code fault elements to obtain civil remedies in relation to breaches of the Act (i.e. the offering of securities without a current prospectus). 

ASIC has reported that the Full Federal Court agreed with its submissions and held that Chapter 2 of the Criminal Code is not engaged in, and does not apply to, proceedings brought for a contravention of a civil provision, including a civil penalty provision.

See ASIC’s media release dated 21 June 2017. 

 

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