Ross B. Grantham

A NORMATIVE ACCOUNT OF DEFENCES TO RESTITUTIONARY LIABILITY

The modern law of unjust enrichment is unique in many respects. In one sense, it is the newest and most significant development in the private law for a very long time. While it can claim ancient roots, as a discrete body of law unjust enrichment has only emerged from the long shadows of the law of contract in the last 20 years. The development and content of the law of unjust enrichment has, to a greater extent than perhaps anywhere else in the private law, been driven and shaped by academic rather than judicial influences. The law of unjust enrichment is also distinguished from the other principal heads of civil obligation in that its focus is on stripping the defendant of gains made rather than making good losses suffered by the plaintiff. Perhaps most controversially, the role or function of unjust enrichment may differ from the other principal parts of the private law in that the source of the entitlement protected is not found within the law of unjust enrichment, but in other areas of the law.

Can Directors Compete with the Company

In London and Mashonaland Exploration Co Ltd v New Mashonaland Exploration Co Ltd,l Chitty J held that a director does not breach his duties when he competes with his company, whether by directly engaging in a competing business or by holding a directorship in a competing company.2 The status of this rule is, however, a long-standing conundrum of company law. On the one hand, the decision has stood for over a hundred years, has been applied on many occasions,3 and is treated as authoritative by virtually all of the leading texts.4 On the other hand, however, it is generally regarded as anomalous and inconsistent with the fiduciary duties attaching to the office of director to avoid a conflict between the directors duty to the company and his personal interests or his duty to a third party.5 The decision of the Court of Appeal in In Plus Group Ltd v Pyke,6 has done little to resolve the conundrum. Not only did Brooke and Sedley LJJ appear to differ over the status of the Mashonaland rule, but Sedley LJ, who rejected Mashonaland and held that a director may not compete with his company, nevertheless held that the director was not liable for such competition because he had been excluded from the management of the company. The case arose out of a dispute between the two directors of the claimant company. Mr Pyke, the defendant, became ill and could no longer fully participate in the management. Thereupon, the other director, Mr Plank, took full control. On recovering from his illness, the defendant sought to resume his involvement. This was resisted by Mr Plank, who effectively excluded the defendant from any involvement in the management and operation of the company. In response, the defendant set up a separate business in direct competition with the claimant.7 The claimant instituted proceedings seeking an account from the defendant of the profits made from his business on the basis that, as a director of the claimant while competing with it, he was in breach of his fiduciary duties. The Court of Appeal unanimously held that there was no breach of duty by the defendant. However, their Lordships differed in their reasoning. In Brooke LJs view, with which Jonathan Parker LJ agreed,8 the unusual facts of the case meant

The Privatisation of Australian Corporate Law

1 Professor, Law School, University of Queensland. 2 Joan Rydon, ‘The Electorate’ in John Wilkes (ed), Forces in Australian Politics (Angus & Robertson, 1963) 184. 3 Holmdahl v AEC (No 2) [2012] SASFC 110. See Anne Twomey, ‘Compulsory Voting in a Representative Democracy: Choice, Compulsion and the Maximisation of Participation in Australian Elections’ (2014) 13 Oxford University Commonwealth Law Journal 283. 4 Josh Butler, ‘David Leyonhjelm Proposes Abolishing Compulsory Voting’, Huffington Post, 2 March 2016 (Leyonhjelm is a libertarian senator). Voluntary Voting for Referendums in Australia: Old Wine, New BottleProof exists that Law Reform Commissions can still discharge a distinct and effective role in the reform of law and legal policy. In February 2017, some months after the essays that make up this important book were presented at an Australian National University Conference, the Attorney General issued terms of reference for an inquiry by the Australian Law Reform Commission (ALRC) into the incarceration rate of Aboriginal and Torres Strait Islander peoples. Judge Matthew Myers was appointed part time Commissioner, an expert advisory panel of academics and practitioners was installed, discussion paper drawing together the findings of previous inquiries was issued in July, 149 consultations were undertaken in the community, 121 submissions were received and by December an incisive and plainly written report analysing the causes and including 35 recommendations for reducing the rate of incarceration was delivered.Anyone looking at the Corporations Act 2001 (Cth) would be justified in thinking that company law in Australia was both wholly statutory and an instrument of public regulation. Although Anglo-Australian company law may have originally grown out of the law of partnership and been built, largely by the courts, from the material of the private law, the growth over the last 30 years in the complexity, range of matters covered and sheer volume of the Corporations Act would seem to confirm the intuition that Australia’s company law is now both statutory and public. However, while there is no denying the shift in the source of company law, the particular form corporate regulation now takes is actually making Australian company law more, rather than less, private.1 Professor, Faculty of Law, Monash University. 2 R v Birmingham & Gloucester Railway Co (1842) 3 QB 223. 3 US Department of Justice, ‘Siemens AG and Three Subsidiaries Plead Guilty to Foreign Corrupt Practices Act Violations and Agree to Pay

The Proceduralisation of Australian Corporate Law

450 Million in Combined Criminal Fines’ (Press Release, 15 December 2008). Improving the Effectiveness of Corporate Criminal Liability: Old Challenges in a Transnational World1 Lecturer, Business School, Charles Darwin University; PhD candidate, School of Politics and International Relations, ANU. This research is supported by an Australian Government Research Training Program (RTP) Scholarship. 2 Australian Council of Social Service (ACOSS), Inequality in Australia 2015: A Nation Divided (Sydney, 2015) 8, www.acoss.org.au/wp-content/uploads/2015/06/Inequality_in_Australia_ FINAL.pdf (viewed 24 April 2016). 3 Factor income is the income arising from the factors of production – land, labour and capital. For the changes in shares over time, see Australian Bureau of Statistics (ABS), ‘Income at Current Prices, December Quarter 2015’ in ABS, 5206.0 – Australian National Accounts: National Income, Expenditure and Product, Dec 2015, www.abs.gov.au/ausstats/ abs@.nsf/Latestproducts/ 5206.0Main%20 Features 4Dec%2

COMPANY DIRECTOR’S PERSONAL LIABILITY IN TORT

The central hypothesis of the paper is that bit by bit and largely unnoticed Australian corporate law has undergone a profound change. Australian corporate law, and particularly the Corporations Act 2001 (Cth), has moved from an essentially private law, substantive rights model, to one that seeks to regulate the company and those involved in its affairs through the prescription of processes and procedures by which corporate decisions may be made and by which the procedural correctness of those decisions is assured. The paper will also seek to demonstrate, by an analysis of the changes in the patterns of corporate case law, that this proceduralising trend has effected a fundamental change in the nature of corporate law and the role of the courts and may now claim to be a, if not, the principal characteristic of Australian corporate law. The paper concludes by highlighting some of the wider implications of this trend and the risk it poses to the intellectual heart of corporate law. The modern registered company owes its immediate creation to the legislature. Historically, however, the nature of the corporate form and the content of what is now known in Australia as corporate law has been very much more the work of the courts.1 It is thus the case that the decision of the House of Lords in Salomon v A Salomon & Co Ltd2 is more often cited as the foundation of modern corporate law than are the Joint Stock Companies Act 1844 (UK)3 or the Limited Liability Act 1855 (UK).4 It is also the case that the building blocks of corporate law were predominantly taken from the private law. Within the open girders of the statutory framework,5 corporate law was built out of the concepts of contract, property, and trust. It is thus not surprising that the company was, and is still, regarded as a fundamentally private legal and economic institution.6

The Doctrinal basis of the rights of company shareholders

T HE attribution of the tortious actions of a director to the company will operate to render the company liable. Does that attribution also operate to exclude the normal presumption that the director is liable for his own acts? Commonwealth courts have accorded primacy to the rules of company law and answered this question in the affirmative ( Trevor Ivory Ltd. v. Anderson [1992] 2 N.Z.L.R. 517; Sealand of the Pacific v. Robert C. McHaffie Ltd. (1974) 51 D.L.R. (3d) 702). In England, the decision of the House of Lords in Williams v. Natural Life Health Foods Ltd. [1998] 1 W.L.R. 830 seemed to suggest that the answer would be no. In Standard Chartered Bank v. Pakistan National Shipping Corpn. (Nos. 2 and 4) [2002] UKHL 43, [2002] 3 W.L.R.1547 their Lordships have made this explicit: directors remain liable for their own wrongs.