March 2002
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In this edition:
Note: All hyperlinks below were correct at the time of publication. Generally, it is too onerous a task for us to check and update these and so if a hyperlink is no longer valid, please accept our apologies.
Proposed amendments to Corporations Act
The Government has added further provisions to the Financial Services Reform (Consequential Provisions) Bill 2002 in the Senate to make a number of technical amendments to the new hawking and insider trading provisions introduced into the Corporations Act by the Financial Services Reform Act. The amended Bill was passed by the Senate on 14 March and by the House of Representatives on 21 March and is awaiting Royal Assent. For the text of the amended Bill, see:
Corporations Amendment Regulations
There has been a yet another set of regulations (the Corporations Amendment Regulations 2002 (No. 4)) passed to amend the Corporations Regulations to give effect to the reforms introduced by the Financial Services Reform Act. The new regulations can be downloaded from:
http://scaleplus.law.gov.au/html/numrul/18/9344/top.htm
ACCC has released a guide to the rights and obligations of small businesses under the Trade Practices Act. You can download a copy from:
http://www.accc.gov.au/pubs/Publications/Business_Small/small_business/SBtheTPA.pdf
ACCC - enforcement action - misleading labelling
ACCC is cracking down on product labelling, launching an action against Cadbury Schweppes alleging that the labels on certain of its cordial products are misleading or deceptive. It asserts that the use of pictures of real fruit on the labels implies that the cordial is made from real fruit when that apparently is not the case. For details, see media release 63/02:
http://203.6.251.7/accc.internet/digest/view_media.cfm?RecordID=637
ACCC - enforcement action - overseas internet site
ACCC has successfully sued David Zero Population Growth Hughes, trading as Crowded Planet, for engaging in misleading or deceptive conduct and making false representations about the supply of oral contraceptives through an internet site run from a server in the United States. Crowded Planet sold oral contraceptives over the internet without a prescription. The web site did not disclose the health risks involved nor that the purchase of such products without a prescription was illegal in both Australia and the United States. For details, see media release 54/02:
http://203.6.251.7/accc.internet/digest/view_media.cfm?RecordID=628
ASIC - policy - market licences
ASIC has released Policy Statement 172: Australian market licences: Australian operators, dealing with a range of issues relevant to Australian operators of financial markets. A copy can be accessed in the ASIC Policy Statement page of our web site or downloaded from:
http://www.cpd.com.au/asic/ps/ps172.pdf
ASIC - policy - takeovers
ASIC has released a consultation draft of amendments to Policy Statement 25, dealing with misleading statements in takeovers. For a copy of the draft, go to:
http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/PS25.pdf/$file/PS25.pdf
ASIC - policy - class order relief from secondary sale provisions
ASIC has issued a class order (CO 02/0272) giving limited relief for an interim period of 6 months from 11 March 2002 from the extended operation of sections 707(3) and (4) of the Corporations Act. These sections require a prospectus to be lodged for certain secondary sales of securities to retail investors made within 12 months of a primary issue without a prospectus. The class order provides technical relief for secondary sales following primary issues that were exempt from the requirement for a prospectus (eg issues under certain employee share schemes and share purchase and dividend reinvestment plans). It also provides more substantive relief where information about the securities is available to the market through alternative means. To qualify for this latter relief, a notice needs to be provided to ASIC by the issuer of the securities at the time of their issue. See information releases IR 02/03 and IR 02/05:
http://www.asic.gov.au/asic/ASIC_PUB.NSF/byid/45E5225F13EFE651CA256B7500150CCA?opendocument
http://www.asic.gov.au/asic/ASIC_PUB.NSF/byid/3CDC959E32672A40CA256B7D000EB9D3?opendocument
ASIC - guidance - telephone recording during takeovers
In IR 02/04, ASIC has provided general guidance on the requirements introduced by the Financial Services Reform Act for bidders and targets to record telephone conversations with holders of target shares about the takeover bid. See:
http://www.asic.gov.au/asic/ASIC_PUB.NSF/byid/0272AE5E12F7D1D3CA256B750017C715?opendocument
ASX - proposed amendments to Business Rule 1A
ASX has released a public consultation paper on proposed amendments to Business Rule 1A to allow participating organisations to use their internal risk measurement models to calculate their position risk requirements for regulatory capital purposes. See circular 113/02 and the accompanying consultation paper:
http://www.asx.com.au/pdf/Blue%20Circular_113_02.pdf
http://www.asx.com.au/pdf/Consultation_Paper_February_2002.pdf
ASX - new SEATS auction algorithm
ASX is introducing a new algorithm for all SEATS auctions. For a copy of the relevant circular (129/02) and of the amendments to the Business Rules giving effect to the new auction system, go to:
http://www.asx.com.au/pdf/Auction_Algorithm_blue_circular.pdf
http://www.asx.com.au/pdf/Algorithm_Rule_Amendment.pdf
ASX - Listing Rule amendments
ASX has also released a package of listing rule amendments which took effect on 11 March 2002 consequential upon the introduction of the Financial Services Reform Act. For details, see:
http://www.asx.com.au/ListingRules/chapters/Letter.shtm
SFE - minor amendments to FSR transitional Business Rules
Since the issue of Bulletin 17/02, SFE has made some minor amendments to the transitional Business Rules introduced for the Financial Services Reform Act. For details, see Bulletin 26/02:
http://www.sfe.com.au/Content/bulletins/sfe/2002/sfe2002_026.pdf
Proposed amendments to the Consumer Credit Code significantly change the advertising provisions for fixed term consumer credit products and require credit providers, finance brokers and linked suppliers to provide consumers with schedules of comparison rates for all fixed term consumer credit products offered. See Allens Arthur Robinson, Focus: Banking & Finance - March 2002:
http://www.aar.com.au/publications/fofinmar02.htm
No doubt as a reaction to the Enron saga, BP has announced that it will cease making any political donations. Its CEO has stated that it will engage in political debate, stating its views and encouraging the development of ideas, but it will not fund any political activity or any political party. Other companies should be considering their policies in this regard. See The Corporate Library, News Brief for the week commencing 27 February 2002 (summarising an article in The Globe and Mail, 1 March 2002):
http://www.thecorporatelibrary.com/news/02_27_02.html
For a good summary of recent developments in ER law (especially the discussion of the decisions in Bastion v PricewaterhouseCoopers regarding overseas secondment arrangements and Burrows and Giardini v Commissioner of Police reinstating two police officers who had been dismissed for internet abuse), see Blake Dawson Waldron, IR Bulletin – March/April 2002:
http://bdw.com/publications/ir/ir032002.pdf
And for a discussion of 3 cases where dismissals for internet or email abuse have been upheld, see Gadens, Workplace Relations Update - March 2002:
http://www.gadens.com.au/docushare/dscgi/admin.py/Get/File-1464/WR_March_2002.pdf
A reminder that as a result of the Financial Services Reform Act, issuers and sellers are now required to confirm various transactions relating to securities involving retail investors. See Clayton Utz, Confirmations of Securities Transactions, 25 March 2002:
http://www.claytonutz.com.au/issalert/A_02/020325.htm
For a critique of the new hawking provisions introduced by the Financial Services Reform Act prohibiting offering to sell or issue financial products during or because of unsolicited meetings or conversations, see Clayton Utz, Financial Services Reform Act – Legislative flaws jeopardise day to day business practices:
http://www.claytonutz.com.au/media_srch2.asp?rec_id=215
A further warning that with the introduction of the Financial Services Reform Act, retail lenders need to examine every agency or distribution agreement they have with a general insurer to consider whether they ought to operate these require re-negotiation, in particular to determine whether they should have their financial services licence extended to cover insurance products or should be operating as a corporate authorised representative of the insurer. See Blake Dawson Waldron, Retail Finance Bulletin – March 2002:
http://www.bdw.com.au/publications/retail/retail032002.pdf
For a summary of the Broadcasting Services Amendment (Media Ownership) Bill 2002 introduced into the Federal Parliament on 21 March 2002, see Clayton Utz, Proposed changes to cross media and foreign ownership rules for commercial television, radio and newspapers, 27 March 2002:
http://www.claytonutz.com.au/issalert/A_02/020327.htm
For a discussion of the decision in Tamsco Ltd v Franklins Ltd, holding that it was not unreasonable for a landlord to refuse consent to an assignment of lease where the trading ability of the proposed assignee was inferior to that of the assignor, see Allens Arthur Robinson, Focus: Leasing - March 2002:
http://www.aar.com.au/publications/folmar02.htm
For a general update on recent developments in takeovers law, see Blake Dawson Waldron, Takeovers Legal Update – March 2002:
http://www.bdw.com.au/publications/takeovers/takeovers032002.pdf
For a general summary of recent developments in the trade practices area, see Clayton Utz, Competition Law Issues - March 2002:
http://www.claytonutz.com.au/comp/comp0203.htm
Corporations - related party transactions
In ASIC v Adler [2002] NSWSC 171, the NSW Supreme Court has held that HIH, one of its wholly owned subsidiaries and various directors had contravened the related party provisions of Chapter 2E of the Corporations Act and the financial assistance provisions of Part 2J.3 when that subsidiary advanced $10 million to a trust controlled by entities associated with one of the directors and part of that amount was used to purchase shares in HIH. The directors also breached their statutory duties as directors of HIH. The full text of the judgment is available at:
http://cclsr.law.unimelb.edu.au/judgments/states/nsw/2002/march/2002nswsc171.html
Corporations - action by shareholders for loss to company
In Milfull v Terranora Lakes Country Club Limited [2002] FCA 178, the Federal Court has confirmed that shareholders may only bring an action for a personal loss that is separate and distinct from the company's loss and cannot claim for a diminution in the value of their shares because that is merely a reflection of the loss suffered by the company and in those circumstances the company is the appropriate applicant. The full text of the judgment is available at:
http://cclsr.law.unimelb.edu.au/judgments/states/federal/2002/march/2002fca178.html
Financial Markets - market manipulation
In R v Manasseh and Austin [2002] NSWCCA 27, the NSW Court of Criminal Appeal has quashed a conviction for market manipulation based on sections 998(5) and (7) of the Corporations Law (no change in beneficial owner), because the Crown had failed to identify the person who was the beneficial owner of the shares before and after the transaction in question. The court clarified a number of aspects of the law, including that the defendants could be charged even though they were not the beneficial owners of the shares bought and sold (they had placed the orders to buy and sell on behalf of share trading companies). The full text of the judgment is available at:
http://cclsr.law.unimelb.edu.au/judgments/states/nsw/2002/february/2002nswcca27.html
Takeovers - meaning of "transaction" and "acquisition"
The Full Federal Court has rejected an appeal against a decision holding that an agreement between two shareholders holding more than 40% of the target to use a corporate vehicle to make a joint bid for the target, coupled with an agreement not to accept the takeover offer and to retain their shares, was a breach of section 615 of the Corporations Law. The agreement was a "transaction" pursuant to which the two shareholders acquired a relevant interest in each other's shares. See Edensor Nominees Pty Ltd v Australian Securities & Investments Commission [2002] FCA 307:
http://cclsr.law.unimelb.edu.au/judgments/states/federal/2002/march/2002fca307.html
Torts - occupier's liability - indoor cricket
The High Court has narrowly rejected an appeal against a decision holding that the occupiers and managers of an indoor cricket facility were not negligent in failing to provide protective helmets and to warn of the specific risk of eye injury. Particular regard was given to industry practice and the rules of game, which forbade the wearing of helmets, and the obviousness of the risks involved. See Woods v Multi-Sport Holdings Pty Ltd [2002] HCA 9:
http://www.austlii.edu.au/au/cases/cth/high_ct/2002/9.html
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