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03-068 Landmark decision on chairman’s duties
Justice Austin of the NSW Supreme Court today refused an application by Mr John Huyshe Greaves, the former Chairman of One.Tel, to strike out the claim brought against him by the Australian Securities and Investments Commission (ASIC) in the One.Tel civil penalty proceedings.
‘This is a landmark decision that explores the legal responsibilities of company Chairmen’, ASIC Chairman, Mr David Knott said.
‘ASIC believes that Chairmen have responsibilities beyond those of other directors. Generally, those responsibilities relate to overseeing adequate processes to enable the Board to properly and effectively discharge its supervisory role.
‘We argued that those responsibilities include such things as:
- the general performance of the Board;
- the flow of financial information to the Board;
- the establishment and maintenance of systems for information flow to the Board;
- the public announcement of information;
- the maintenance of cash reserves and Group solvency; and
- making recommendations to the Board as to prudent management of the Group.
‘After a comprehensive review of existing legal authority, academic texts, and expert evidence Mr Justice Austin has concluded that ASIC had made out a reasonably arguable case. On that basis he dismissed the application by Mr Greaves to have the proceeding against him struck out’, Mr Knott said.
ASIC commenced proceedings against Mr Greaves and three former officers of One.Tel, in December 2001. ASIC alleges that Mr Greaves breached his duty to exercise the standards of care and diligence required by the law of a company Chairman.
ASIC is seeking banning orders and compensation of $93 million against the four defendants.
Mr Greaves applied to strike out the claim on the basis that the duties of a Chairman were not, at law, as extensive as ASIC wished to establish.