Risky Business
November 2009
Unfair contract terms legislation
The Federal Government introduced the Trade Practices Amendment
submissions, held two public hearings and released its report on 7
(Australian Consumer Law) Bill (Bill) into the House of Representatives
September 2009. The Committee:
on 24 June 2009. The Bill amends the Trade Practices Act 1974 (TPA)
and the Australian Securities and Investments Commission Act 2001
(ASIC Act). The Bill implements commitments made in 2008 by the
• recommended that the Bill be passed;
• recommended that the ACCC and ASIC issue a set of guidelines
on the operation of the Bill’s provisions to assist all parties to
Council of Australian Governments to introduce a single, national
consumer law – the Australian Consumer Law.
understand their rights and obligations under the new regime; and
• made no recommendation to change the proposed 1 January 2010
commencement date.
ASIC will enforce the new laws as they apply to financial products and
services and the ACCC will enforce them as they apply to all
other contracts.
Under the Bill, a term in a standard form consumer contract will
be void if the term is ‘unfair’. The supplier will carry the burden of
proving that a contract is not a standard form contract. A term will
be unfair when it causes a significant imbalance in the parties’ rights
and obligations arising under the contract and is not reasonably
necessary to protect the legitimate interests of the business. A term of
a consumer contract will be presumed not to be reasonably necessary
The Bill is back before the House of Representatives and is likely to be
passed, without any further substantial amendments, and come into
effect from 1 January 2010.
The provisions under the Bill address the substantive fairness of terms
in standard form consumer contracts. Accordingly, an adverse finding
against an organisation is likely to have significant financial and
reputational consequences and implications which extend beyond the
case of an individual complainant.
in order to protect the legitimate interests of the business, unless that
Caroline Brown, Partner
party proves otherwise.
caroline.brown@lavanlegal.com.au
The Bill was referred to the Economics Legislation Committee
Louise Tydde, Solicitor
(Committee) on 25 June 2009. The Committee received numerous
louise.tydde@lavanlegal.com.au
Cracking down on Cartels – Seminar
Thursday, 21 January 2009, 4:30-6:30pm, 1 CPD point, Legal skills and practice
Lavan Legal, The Quadrant, 1 William Street, PERTH WA 6000
A guide to the new criminal cartel laws and how corporate officers can avoid exposure to prosecution
- Caroline Brown, Partner, Lavan Legal & Sam di Scerni, Regional Director, ACCC.
In this seminar, Caroline Brown will explain the key elements of the provisions of the new criminal
cartel laws, including the nature and extent of exceptions and defences. She will discuss the things
you should do to ensure your organisation does not break the law and is ready for the new criminal
regime. Caroline will beThe
joined
by Sam di Scerni who will provide
valuable insight into the operation
Quadrant
GPO Box F338, Perth
Tel +61 8 9288 6000
of the provisions from the
perspective
of
the
regulator.
1 William Street, Perth
Western Australia 6841
Fax +61 8 9288 6001
Western
Australia on
6000
BX 600-0156
To register please contact
Calley Kempson
calley.kempson@lavanlegal.com.au
or call her
on (08) 9288 6780.
www.lavanlegal.com.au
Caroline Brown, Partner
ASIC v Centro Retail Group
On 21 October 2009, ASIC filed a civil claim in the Federal Court
ASIC also claims that the named directors and executives ‘knew that
against eight former and current directors and executives of various
the entities had very significant short-term interest bearing liabilities
entities within the Centro Properties Group and Centro Retail Group
and should have known that these liabilities were incorrectly classified
(Centro). ASIC is seeking orders disqualifying the directors and
in the 2007 financial reports’.
executives from managing companies and is also seeking pecuniary
damages of up to $200,000 for each party.
Centro is also facing class actions worth up to $1 billion from
investors who suffered from the share collapse. Centro joined its
ASIC alleges that the former directors and executives breached their
former auditors, PricewaterhouseCoopers to the class action who,
duties, particularly their duties to ensure that financial reports and
in turn, filed a counterclaim alleging that the individual directors and
market disclosures were accurate and complied with accounting
executives failed to reveal its true debt position. The class actions are
standards. This case is the first to be brought under new laws
the subject of mediation and will continue alongside the ASIC case.
which require the chief executive and chief financial officer to
personally sign off on the accounts declaring them to comply with
accounting standards.
ASIC claims that the 2006-7 financial reports for Centro and its
associated entities (the Centro Property Trust and Centro Retail Trust),
contained material mis-statements about its debt with a significant
amount (more than $2 billion) wrongly classified in its 2006-07
accounts as non-current debt, rather than current. The value of Centro
The ASIC case is scheduled to be heard in the Federal Court on
20 November 2009.
This case puts directors of other failed companies on notice. The
impacts of this case are likely to be far more wide-reaching than
ASIC’s proceedings against James Hardie. ASIC is investigating other
corporate failures and recently won a court order to freeze the assets
and seize the passport of ABC Learning founder, Eddy Groves.
shares collapsed by more than 99% from the end of 2007 after the
Michael Bruce, Partner
company admitted that this debt was in fact due to be repaid much
michael.bruce@lavanlegal.com.au
earlier. The balance sheets of Centro Properties and Centro Property
Trust at 30 June 2007 did not correctly classify $1.514 billion of
interest-bearing liabilities as current whilst Centro Retail Trust’s
Mona Gill, Solicitor
mona.gill@lavanlegal.com.au
balance sheet at 30 June 2007 did not correctly classify $598 million
of interest-bearing liabilities as current.
The Quadrant
1 William Street, Perth
Western Australia 6000
GPO Box F338, Perth
Western Australia 6841
BX 600-0156
Tel +61 8 9288 6000
Fax +61 8 9288 6001
www.lavanlegal.com.au
ASIC v Lindberg
On 19 October 2009, civil penalty proceedings brought by ASIC against
ASIC’s counsel Mr O’Brien said that by 2003 ‘alarm bells were
Andrew Lindberg (Lindberg), the former managing director of AWB
ringing’ and ‘red flags were waving’ and while Lindberg had plenty of
Ltd (AWB), began in the Victorian Supreme Court. The proceedings are
opportunity and the means at his disposal to investigate the nature of
one of the biggest and most high-profile commercial cases heard
the Fees and put an end to them, he did not.
in Australia.
ASIC is seeking declarations that Lindberg breached the Corporations
Whilst civil penalty proceedings were initiated against six former
Act 2001, the imposition of pecuniary penalties and disqualification
directors and officers of AWB in late 2007, the proceedings against the
from managing a corporation.
five other defendants were stayed in November 2008.
Following revelations in court that ASIC intends issuing further
The civil penalty proceedings concern AWB contracts with the Iraqi
proceedings against Lindberg, these proceedings are to be adjourned.
Grain Board under the United Nations Oil-for-Food Program, which
The proposed further proceedings are likely to focus on Lindberg’s
contained payments for purported inland transportation fees (Fees),
involvement in the Tigris transaction (a secret deal in which AWB
and Lindberg’s role in allowing AWB to make these payments to Iraq.
agreed to assist a former senior executive of BHP to recover a
The Fees were made to Alia, a Jordanian company partly owned by
questionable US$8 million debt from Iraq, via the UN Oil-for-Food
the Iraqi Ministry of Transport and were in breach of UN sanctions on
Program), Project Rose (AWB’s internal inquiry into the Fees) and the
trade with Iraq.
Volcker Inquiry (the investigation which, in October 2005, revealed
ASIC alleges that Lindberg breached his fiduciary duties to AWB under
the Corporations Act 2001 because he:
corruption in the UN’s Oil-for-Food Program).
Lindberg’s solicitors have sought that these proposed further
• knew, or ought to have known, about the AWB contracts that
included the Fees;
• had obligations to make reasonable inquiries to ensure that AWB
complied with obligations under UN sanctions upon trade with Iraq;
• was aware, or ought to have been aware, that the Fees were not
genuine; and
• knew, or ought to have known, that the Fees were, or were likely
to be, contraventions of the UN sanctions.
proceedings be permanently stayed and Justice Robson has said
that he will not hear any witnesses until Lindberg’s solicitors have
made their arguments on this application. A decision on Lindberg’s
stay application is unlikely to be made until late next month and,
if unsuccessful, Lindberg’s solicitors are likely to seek that the two
proceedings be heard together.
David Sanders, Corporate Counsel
david.sanders@lavanlegal.com.au
ASIC alleges that through this conduct Lindberg brought AWB into
Matthew Knox, Senior Associate
serious disrepute, damaged AWB’s share price and its commercial
matthew.knox@lavanlegal.com.au
standing in the US market, and precipitated the loss in 2007 of AWB’s
monopoly rights to export Australian wheat.
The Quadrant
1 William Street, Perth
Western Australia 6000
GPO Box F338, Perth
Western Australia 6841
BX 600-0156
Tel +61 8 9288 6000
Fax +61 8 9288 6001
www.lavanlegal.com.au
James Hardie Industries NV – appeal
On 23 September 2009, James Hardie Industries NV lodged an appeal
For a complete discussion of Justice Gzell’s decision, see the August
against the declarations and orders which Justice Gzell made against
2009 edition of Lavan Legal’s Risky Business.
it in a decision handed down in the Supreme Court of New South
Wales on 27 August 2009. The other defendants with the exception
of CEO Peter Macdonald, have also lodged appeals against Justice
Gzell’s decision.
The appeal is set down for April 2010 and is expected to take
three weeks.
David Sanders, Corporate Counsel
david.sanders@lavanlegal.com.au
In Justice Gzell’s decision:
• James Hardie was fined $80,000 for breaches of continuous
disclosure rules; and
Cameron Bill, Solicitor
cameron.bill@lavanlegal.com.au
• the former James Hardie board members who are appealing
the decision, were fined between $30,000 and $75,000 and
disqualified from managing companies for between 5 years and
7 years for breaching the Corporations Act 2001, when making
misleading statements about the adequacy of an asbestos
compensation fund and a corporate restructure in 2003.
David Sanders Corporate Counsel, B Juris, LLB, B Com
David is Corporate Counsel in the Corporate Services Group.
David’s experience is in the area of corporate and commercial law including mergers and acquisitions advice
(including Takeovers Panel representation), corporate finance, managed investment schemes, ASX and
ASIC compliance and investigations, shareholder meetings and disputes and general commercial advice
and documentation.
Prior to joining Lavan Legal, David was a Practice Executive at Bennett & Co.
Areas of expertise
• Mergers, acquisitions and restructures • Corporate finance
• Shareholder disputes • ASIC Investigations
• Corporations Act and ASX Listing Rules compliance • Takeovers Panel
• Managed investment schemes • General commercial law
Quadrant
GPO Box F338, Perth
Direct Tel: 08 9288 6906TheEmail:
david.sanders@lavanlegal.com.au
1 William Street, Perth
Western Australia 6000
Western Australia 6841
BX 600-0156
Tel +61 8 David
9288 6000
Sanders, Corporate Counsel
Fax +61 8 9288 6001
www.lavanlegal.com.au