May 2004
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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 Generally, it is too onerous a task for us to check and update these and so if a hyperlink is no longer valid, please accept our apologies.
The governments of Australia and New Zealand have released a discussion paper relating to the establishment of a trans-Tasman mutual recognition arrangement governing offers of securities and managed investment scheme interests. Interested parties are requested to provide any comments by 16 July 2004. For a copy of the discussion paper, go to:
http://www.treasury.gov.au/documents/827/PDF/transtasman_discussion.pdf
ASIC has released a guide on how it will administer infringement notices, a proposed new remedy for breaches of continuous disclosure laws contained in the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Bill 2003 (CLERP 9) currently before the Commonwealth Parliament and due to be enacted on 1 July 2004. For a copy of the guide, go to:
ASIC has finally released Policy Statement 178: Foreign Collective Investment Schemes, which replaces Policy Statement 65. The policy provides relief for both operators of collective investment schemes that are authorised in other jurisdictions and want to operate in Australia, and responsible entities of Australian-registered schemes that want to invest scheme property in unregistered schemes overseas. For a copy of the new Policy Statement, go to:
http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/ps178.pdf/$file/ps178.pdf
ASIC has reminded existing operators of managed discretionary account services that they must comply with the transitional arrangements under Policy Statement 179: Managed Discretionary Account Services. This includes obtaining an Australian financial services licence authorisation to provide MDA services by 10 December 2004. See Information Release IR 04-19:
http://www.asic.gov.au/asic/ASIC_PUB.NSF/byid/C3F1640A0285BC7ACA256EA1001BBA84?opendocument
ASIC has issued a class order granting relief from the requirement to hold an Australian financial services licence and from the product disclosure and hawking provisions of chapter 7 of the Corporations Act to persons providing, or advising on, debt factoring arrangements. See Information Release IR 04-18:
http://www.asic.gov.au/asic/asic_pub.nsf/byid/64ED6F83F00AB30BCA256E8A000F0722?opendocument
ASIC has published some general guidance on the application of the financial services licensing regime to providers of superannuation calculators. ASIC is of the view that the mere provision of a superannuation calculator does not mean the provider will always need an AFS licence or authorisation under the Corporations Act. See Information Release IR 04-17:
http://www.asic.gov.au/asic/asic_pub.nsf/byid/25BE6DFDFFD2000ECA256E8A0004D86A?opendocument
ASX has issued an exposure draft of proposed Listing Rule amendments to be considered in conjunction with the draft revised JORC Code (the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves). The rule amendments are proposed to take effect in August 2004. Comments are due by 30 June 2004. See:
http://www.asx.com.au/about/pdf/JORCExposureDraftMay04.pdf
A number of miscellaneous amendments have been made to the ASX Market Rules primarily to correct errors in the Rules that arose during the consolidation of the ASX and ASX Futures Business Rules and to clarify the transitional provisions. For copy of the amendments, see:
In addition, a number of miscellaneous amendments have been made to the ASX Market Rule Procedures and to the Appendices to the Procedures. See:
ASX is proposing to amend its Rules and Procedures relating to responsible executives. For an outline of the proposed changes, see:
ASX has released 3 new Guidance Notes entitled: Waivers of ASX Market Rules - Market Participants, Waivers of ASX Market Rules - Warrant Issuers and Spread of Warrant Holders and Warrant Market Making. For a copy of the Guidance Notes, go to:
Subject to regulatory approval, the SFE will be listing a New Zealand Broad Wool Futures Contract on 29 June 2004. See SFE Bulletin 21/04:
http://www.sfe.com.au/Content/bulletins/sfe/2004/sfe2004_021.pdf
SFE has issued further guidance clarifying the type and level of detail of information that must be included in the mandatory request for quote preceding the execution of Pre-Negotiated orders. See SFE Bulletin 20/04:
http://www.sfe.com.au/Content/bulletins/sfe/2004/sfe2004_020.pdf
For a review of the recent decision in Elliott v ASIC (the Water Wheel decision) and its impact on non-executive directors, see Allens Arthur Robinsons, Focus: Insolvency - May 2004:
http://www.aar.com.au/pubs/insol/foinsmay04.htm
For a discussion of possible strategies for addressing the additional risks resulting from the decision in Hanel v O'Neil to directors of corporate trustees in situations where there are insufficient trust assets to meet the trust's debts, see Mallesons Stephen Jaques, Financial Services Law Alert - 3 May 2004:
For a general discussion of recent developments in employee relations law, see Allens Arthur Robinson, Focus: Workplace Relations – May 2004:
http://www.aar.com.au/pubs/wr/fowrmay04.htm
For a summary of the Victorian Court of Appeal's reversal of the decision in State of Victoria v Schou, concerning the reasonableness of an employer requiring an employee to work at the office rather than from home, see Blake Dawson Waldron, Industrial Relations and Employment Client Alert - May 2004:
http://www.bdw.com.au/publications/irca/irca11-5-2004.pdf
For a summary of the superannuation measures in the recent Federal budget, see Blake Dawson Waldron, i-on-FSR - May 2004:
http://www.bdw.com.au/publications/i-on-super/i-on-super11-05-04.pdf
For a guide on the requirements of the new Superannuation Safety Amendment Act 2004, see Blake Dawson Waldron, i-on-FSR - May 2004 (#2):
http://www.bdw.com.au/publications/i-on-super/i-on-super120504.pdf
For a summary of a significant change in interpretation by ASIC on the provisions in the constitutions of registered managed investment schemes dealing with the transaction costs' component used in calculating the issue and withdrawal price of units, see Allens Arthur Robinson, Focus: Funds Management - May 2004:
http://www.aar.com.au/pubs/pdf/fmres/fofmmay04.pdf
For a more detailed discussion of the Full Federal Court decisions in Pratt Holdings Pty Ltd v Commissioner of Taxation (summarised below), see Mallesons, Legal Professional Privilege - May 2004:
The Privacy Commissioner, in conjunction with the Australian Institute of Company Directors, has published a guide entitled A Guide for Directors - Privacy and Boards: What You Don't Know Can Hurt You. For a copy of the guide, go to:
http://www.privacy.gov.au/publications/privacydirectors.pdf
For a more detailed discussion of the High Court decision in Commissioner of Taxation v Hart (summarised below), see Freehills, The Commissioner v Hart: A Unanimous Judgment for a Split Loan Scheme - 31 May 2004:
For an outline of the indirect tax changes announced in the 2004 Victorian budget, see Deacons: Taxation Update - April 2004:
http://www.deacons.com.au/Upload/NewsUploads/News568.pdf
In Flinders Diamonds Ltd v Tiger International Resources Ltd [2004] SASC 119, it had been found by the court at first instance that an agreement or understanding by the appellants to remove the directors of the respondent company and replace them with their own nominees gave one of the appellants the authority to vote the other appellants' shares and infringed chapter 6 of the Corporations Act because that took the first mentioned appellant's voting power above the 20% takeovers threshold. The court also found that the appellants, having become associates and failed to file a substantial shareholder notice, had infringed those requirements in chapter 6 as well. The trial judge ordered that the shares held by the appellants be vested in ASIC and that ASIC dispose of those shares for the best price reasonably attainable. On appeal, the Full Court of the SA Supreme Court affirmed the findings of breach but set aside the trial judge's order and re-vested the shares in the appellants. It found the trial judge's orders were punitive rather than remedial, noting that "the provisions of chapter 6 of the Corporations Act are not intended to render directors of a company immune from the legitimate scrutiny of and control by shareholders" and that "incumbent directors are not entitled to be placed in some kind of cocoon, immune from having to face a group of hostile shareholders, nor should remedies available to a court necessarily enable incumbent directors to acquire or retain control of the company indefinitely". The judgment can be viewed at:
http://cclsr.law.unimelb.edu.au/judgments/states/sa/2004/april/2004sasc119.htm
In Rothschild & Sons v St Paul International Insurance Company [2004] NSWSC 359, a former employee brought proceedings against the plaintiff under section 106 of the Industrial Relations Act 1996 (NSW) alleging unfairness in an employment contract in so far as it applied to the events leading up to the termination of his employment. The plaintiff claimed an indemnity in respect of the proceedings under a "Wrongful Employment Practice" insurance policy issued by the defendant insurer and sought an advancement of defence costs. The defendant initially admitted partial liability under the policy but then retracted that admission and denied coverage. It was held that the nature of the claim by the former employee, even though couched in terms of unfairness, fell with the definition of a "claim" for a "wrongful employment practice", as defined in the policy. The judgment can be viewed at:
http://cclsr.law.unimelb.edu.au/judgments/states/nsw/2004/april/2004nswsc359.htm
In Pratt Holdings Pty Ltd v Commissioner of Taxation [2004] FCAFC 122, the Full Federal Court unanimously held that privilege can attach to documents prepared by a third party at a client's direction and returned to the client to then give to a solicitor, provided the client had the dominant purpose of using them to obtain legal advice. The judgment can be viewed at:
http://www.austlii.edu.au/cgi-bin/disp.pl/au/cases/cth/FCAFC/2004/122.html
In a first for Australia, Channel 7 has successfully sued under section 98 of the Privacy Act (Cth) to prevent a union, seeking to enlist opposition to the making of certified agreement, from using a company phone list to poll employees via a call centre on the basis that this infringed the national privacy principles. The judgment in Seven Network (Operations) Limited v Media Entertainment and Arts Alliance [2004] FCA 637 can be viewed at:
http://www.austlii.edu.au/au/cases/cth/federal_ct/2004/637.html
In Commissioner of Taxation v Hart [2004] HCA 26, the High Court unanimously held that a so-called split loan facility (where money was borrowed in part to purchase a principal place of residence and in part to refinance an investment property and repayments on the loan were applied solely in satisfaction of the former in order to maximise the allowable deductions on the latter), infringed the anti-avoidance provisions in Part IVA of the Income Tax Assessment Act 1936. The judgment can be viewed at:
http://www.austlii.edu.au/au/cases/cth/high_ct/2004/26.html
A reminder of the breadth of the prohibitions in sections 52 (misleading and deceptive conduct) and 55 (misleading the public) of the Trade Practices Act. In Australian Competition & Consumer Commission v Cadbury Schweppes Pty Ltd [2004] FCA 516, Cadbury Schweppes was found to have breached both of those sections and section 53 (false representations about goods) through the labelling of two of its cordial products. Its banana mango flavoured cordial used the words 'banana mango' in large print, pictures of bananas and mangoes and a 'Go Bananas' motif on its label. Its apple kiwi flavoured cordial concentrate used the words 'apple kiwi' in the name of the product and pictures of cut kiwi fruit on the label. The Federal Court found the labelling would convey to some reasonable potential purchasers the impression of real fruit having been used in the ingredients, which was not the case. The Court rejected Cadbury Schweppes's contention that the use of the phrase 'flavoured cordial' was sufficient to overcome any effect the depiction of real fruit might have. The judgment can be viewed at:
http://www.austlii.edu.au/cgi-bin/disp.pl/au/cases/cth/federal%5fct/2004/516.html
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