President's Message

I was really looking forward to hosting the Legal Profession Dinner in late November, which was due to be held during our recent lockdown and was therefore cancelled. We had more than 250 people confirmed for the dinner, providing what would have been a wonderful opportunity to see many familiar faces and celebrate what has been achieved by the profession this year. The Law Society still hopes to be able to hold a number of functions in December, so please keep an eye out for them.

Miles Crawley SC is SA’s latest judicial appointment. Mr Crawley has been appointed a District Court Judge and will serve as Deputy President of the South Australian Employment Tribunal.

Mt Crawley replaces retiring Judge Leonie Farrell, and will begin his new role on 7 December.

Mr Crawley practised as a barrister in SA from 1979 to 2009, but spent the last 10 years practising in Northern Territory, joining the independent NT bar in 2012.

Mr Crawley was Chair of the Law Society of SA’s Costs Committee from 1997 to 2009, a Member of SA’s Joint Rules Advisory Committee from 20089, and has been President of the NT Bar Association and a Director of the Australian Bar Association since 2017. He has also been Chair of the Australian and New Zealand Association of Psychiatry, Psychology and Law (NT Branch) since 2015.

Mr Crawley was appointed as Senior Counsel of the Supreme Court of the Northern Territory in 2017.

In SA, Mr Crawley practised as a barrister and solicitor, conducting more than 200 matters to judgment in jurisdictions including the Magistrates Court, District Court, Supreme Court, Full Supreme Court, Workers Compensation Tribunal, Federal Court, Industrial Relations Court and Commission, Administrative

It has been a rewarding year for me and one I will remember for a very long time. Adversity often brings out the best in people, and that is what I have primarily seen this year. Lawyers are very stoic and resourceful, so keep up the great work for your clients and the community!

Thank you for the opportunity to be your Law Society President in 2020. It has truly been a wonderful experience. I wish Rebecca Sandford, your President next she will be outstanding in the role.. B

NT barrister returns to SA as a District Court judge

year, all the very best and I have no doubt

Miles Crawley SC Appeals Tribunal, and the Coroners Court.

When Mr Crawley joined the independent bar in NT in 2012, he had practised from William Forster Chambers, appearing regularly in the Supreme Court, Court of Appeal, Federal Court, Federal Circuit Court, Local Court, Coroners Court, Administrative Appeals Tribunal, Northern Territory Civil and Administrative Tribunal, Fair Work Australia and Work Health Court.

The Law Society congratulates Mr Crawley on his appointment.

IN THIS ISSUE

14

INSOLVENCY REFORMS Introducing 'Chapter 11' insolvency laws in Australia

18

ASIC V MITCHELL High court provides guidance on directors' duties

28

HUGHES V HILL Court rejects 'Mr Darcy' defence in sexual harassment case

LESSONS FROM LOCKDOWN: WHAT THE LEGAL PROFESSION HAS LEARNED FROM COVID-19

BY MICHAEL ESPOSITO, EDITOR

On Wednesday 18 November, Premier Steven Marshall dropped the bombshell that South Australia would be going into a six-day lockdown that would be even more severe than Victoria’s.

Supermarkets were inundated with panic buyers, restaurants had to dispose of thousands of dollars’ worth of produce, shops were forced to shut, parents were again made to work with kids underfoot, aged care visits were severely restricted, and weddings and other special events were cancelled.

But most South Australians seemed to accept that, in order to contain this problematic cluster, we had to hole ourselves up for just under a week, knock the outbreak on its head and then we could go back to (relative) freedom again.

The legal profession was also significantly disrupted. Courts adjourned all but urgent matters. Lawyers were unable to access clients in prison. Property transactions were limited. The formalisation of important legal documents (some potentially prepared in urgent haste) was put on hold, and law practices were required, once again, to rapidly transfer to a working from home arrangement.

Hopefully the experience of the first wave made the second transition to the home office much smoother, but there’s no doubt a familiar feeling of anxiety would have descended on a number of practitioners worried about how this new outbreak would impact their livelihoods. For those who rely on court work, the news was a particularly nasty blow.

And then, two days into the pandemic, Police Commissioner Grant Stevens announced a fast-tracked easing of restrictions. Someone who contracted COVID-19 within the cluster had lied to contract tracers about his movements and personal circumstances. His deception, according to the Premier, plunged the whole state into an unnecessary lockdown.

By the Monday, workers could return to their offices (but were encouraged to work from home if they could). Courts reopened and re-listed previously adjourned matters. Crisis averted.

From the time the lockdown was announced at 12.30pm on the Wednesday, to when the easing of restrictions was announced less than 48 hours later, the Society had sent seven alerts to practitioners advising of operational changes affecting the legal profession due to the lockdown.

Of course, the sudden implementation of the changes resulted in some confusion among the community about what they could and couldn’t do. This is an inevitable consequence of a rapid response to an emergency.

We saw directions declared on the Wednesday be amended within hours, clarifying that people were in fact able to leave their house for reasons such as visiting vulnerable loved ones, adhering to shared parenting arrangements and caring for pets in unattended homes.

The list of workers regarded as essential expanded considerably in the space of hours, providing fascinating insight into which occupations were deemed so invaluable to society that they needed to be exempted from emergency declarations.

No doubt to the chagrin of a number of practitioners, the delivery of legal services was not classified as essential, aside from some caveats which are discussed later in this article.

A number of practitioners asked for guidance as to what situations would permit them to leave home to, for example, collect files from the office for an urgent matter.

These questions of essential duties are difficult to answer given each matter comes with its own individual circumstances and official directions can be open to interpretation, meaning practitioners often need to rely on their own discernment.

The November lockdown crystallised a number of the issues that arose out of the initial quarantine period in the first half of 2020. Let’s look at some of the lessons that have been learnt during the pandemic, and what should be done to enhance our response to the next disruptive emergency.

KEEP CALM, ADAPT & CARRY ON

This is much easier to say than do, given how disruptive and in some cases, devastating, COVID-19 has been for legal practices, but it is clear that it’s far more effective to stay cool in a crisis rather than go into panic mode. When the first wave of restrictions hit in April, there was a huge amount of uncertainty as to how lawyers would be able to continue to deliver legal services. From both a commercial perspective and access to justice perspective, the ramifications were huge.

When the initial restrictions came in, there was no guidebook for how to deal with them. All facets of the justice system, particularly the courts and correctional services, were doing the best they could to quickly adapt to this strange new world.

Some of these measures generated angst among parts of the profession, and unavoidably caused further delays in the justice system which could ill afford any more setbacks. However, courts did what they could to keep the wheels of justice turning, using technology where possible to facilitate remote hearings, and prioritising urgent matters during the period of reduced capacity.

The experience highlighted some key lessons. In a time of emergency, the starting point must be to prioritise people’s health and safety. This means following official health advice and implementing measures accordingly.

Also, when there are numerous stakeholders as there are in the justice system, it’s critical that all do their best to collaborate and support each other towards achieving the same goal, which should be to administer justice as efficiently and fairly as possible within a framework that prioritises the protection of public health.

IS THE LAW AN ESSENTIAL SERVICE?

Lawyers should take pride in the fact that they belong to a profession that fundamentally contributes to the protection of rights and liberties. They facilitate access to justice and assist the judiciary – one of the three arms of Government and therefore a cornerstone of democracy - to interpret and apply laws. It therefore may seem somewhat deflating to learn that at no point this year were lawyers deemed essential workers under SA’s emergency regulations.

It was the shelf stackers, truck drivers, petrol station attendants, teachers, farmers, factory workers, and, it goes without saying, health care workers among those classified as essential.

During the first wave, the Society wrote to the State Attorney General expressing the view that that the justice system is an essential service and the legal profession is critical to the continuing functions of the justice system throughout the COVID-19 pandemic. The Society noted that the demand for legal services would in a number of practice areas increase and become more urgent during the pandemic, for example in family, succession, employment, commercial, property, and criminal law.

COVID-19 has added a layer of complexity to shared parenting arrangements, it has increased the vulnerability of people in unstable and abusive relationships, it has caused huge disruption to business, led to job losses and reductions, thrown contract terms into disarray, brought about disputes between tenants and landlords, delayed criminal hearings, and increased demand for services around wills and other succession documents.

In a number of these instances, the justice system has found ways to accommodate clients in need of these services, with courts prioritising urgent matters (such as those involving at-risk children), and adjourning or diverting less critical matters, while many law practices were able to assist clients remotely. Government financial relief measures and dispute resolution directions also mitigated the need for urgent legal assistance in some instances.

In the most recent lockdown, initial advice from the authorities suggested that no practitioner could travel to their workplace under any circumstance, with that advice being added to hours later to clarify that a person could leave home to fulfill a legal requirement that involves attending a police station or "court or other premises for purposes relating to the justice or law enforcement system”.

This left the question of when it might be permissible for a lawyer to leave their home somewhat open to interpretation – perhaps deliberately so – but the courts also provided guidance by listing the types of urgent matters they would hear during the lockdown, and allowed for unspecified urgent applications to be considered by the court on a case by case basis.

Whether or not the Official Directions should be more prescriptive is open to debate, but it appears that, assuming legal services will not be considered essential in the event of another lockdown, legal practitioners should use their judgment to consider whether a matter is sufficiently urgent to warrant leaving home, and should look to the courts for guidance as to what matters the judiciary may deem essential.

TECHNOLOGICAL SOLUTIONS

Back in July, the Chief Justice wrote in the Bulletin that the legal profession had a responsibility to the public to provide legal services, and, in the context of COVID-19 restrictions, were “bound to consider more than their personal preferences when deciding how to modify their practices”. His Honour went on to say that it was necessary to “manage risks within acceptable limits in order to discharge professional responsibilities.”

An example of the courts weighing competing considerations of a legal professional’s duties and public health advice was the decision to continue to require in-person witnessing of client signatures but to temporarily allow the filing of unsworn affidavits until the document could be regularised.

In April, Law Society President Tim White wrote to the Attorney General asking if the Government would introduce regulations to allow the audiovisual witnessing of affidavits and other documents, as had been introduced NSW, Victoria, Queensland and ACT. But the

response was that no modifications would be made to the process of attesting and witnessing documents on the basis that it could still be done in a safe manner by observing social distancing, and ensuring these documents were signed in person was an important step in protecting the integrity of the documents.

SA’s restrictions were not as tight as those in other States during the first wave, and the COVID-19 threat did not loom as large, which is presumably a major reason SA did not embrace electronic signing as other states did. However, under the heavier restrictions during SA’s recent three-day lockdown, witnessing documents would have been nigh on impossible. Luckily the lockdown only lasted two business days, but what if it lasted as long as Victoria’s? It’s clear there needs to be contingency plans to deal with the signing of legal documents where physical contact is inappropriate or forbidden.

Complicating matters further is the contentiousness of electronic signing in any case. There’s certainly no consensus among legal practitioners about the extent to which we should accommodate remote signing of documents, particularly with regards to succession documents such as Wills, Advance Care Directives and Powers of Attorney.

Succession Law Committee Member Kym Jackson opined in the COVID-19 edition of the Bulletin that “it would be difficult in my view, if not impossible, to properly satisfy oneself that the testator has testamentary capacity and is not at risk of undue influence or similar without meeting that person face-to-face.”

Mr Jackson’s Pt Augusta based firm set up an outdoor meeting area with appropriately spaced seating so that faceto-face meetings could still take place. However, in circumstances where not even that is permissible, the preference for faceto-face meetings will need to be balanced against the importance of finalising legal documents in a timely manner.

Where technology really came into its own was in conducting hearings.

The staff at Work Visa Lawyers conduct their team meeting via Zoom

Applications such as WebEx or Microsoft teams were successfully used to conduct hearings, and their ability to improve efficiency has been such that they will be retained in State and Federal jurisdictions.

Of course, not all matters can appropriately be held remotely, and nor does there seem to be an appetite for completely virtual courts. Most courtroom trials, particularly jury trials, at this stage cannot be adequately replaced by virtual trials.

The diminution of audio and visual cues is one major drawback of current remote technologies, which is no real problem for several types of hearings but an insurmountable problem for others.

The Society has also invested in advanced technology to increase its remote service delivery capabilities, particularly in the delivery of continuing professional development. For most of the year the Society has held CPD sessions by webinar only, and the profession seems to have responded very positively to the flexibility that virtual seminars provide. Of course, the Society intends to offer in-person sessions when it is able to, as face-to-face contact plays an important role in fostering the collegiality of the profession, however it will continue to offer virtual CPDs for those who prefer to access these services remotely.

HAVE A PLAN

It is doubtful that many businesses had a plan for “global pandemic” in their crisis control manuals at the start of the year, but it would seem likely that most would now have a strategy in place for dealing with public health emergencies of COVID-19 level proportions. Australia has avoided the scale of devastation and disruption that many other jurisdictions have endured, and it would be rather cavalier to assume that this is the worst it’s going to get. It could have been, and may be in the future, much worse.

So, an emergency plan is essential.

Each business has its own individual needs and circumstances, but there are some helpful general resources to help businesses develop sound processes and protocols for situations akin to the COVID-19 pandemic. The Safe Work Australia website has some particularly helpful resources for businesses dealing with COVID-19. The Society has also prepared a COVID-19 Law Practice Management Information and Strategies Paper, which is available on the Society’s COVID-19 Resources Hub.

A non-exhaustive list of items to include in a crisis management plan may include: • Processes for promptly assessing and following public health directions • Processes for ensuring workers are safe and Work Health and Safety laws are observed • Assessing and mitigating risks of employees working from home (including injury risks, living arrangements of employees, mental health impacts etc) • Identifying tasks that can be performed at home/off-site and those that cannot • Processes to manage the transport of required work equipment to a worker’s home (particularly if the equipment cannot be transported in one car trip). • Ensuring there are adequate mechanisms for connectivity and communication between staff, clients/ customers and other stakeholders • Processes for communicating with stakeholders (eg clients) about any changes in the business’s operations that may affect them • Ensuring availability of appropriate health and safety products (eg PPE, sanitiser) • Ensuring workers are appropriately trained in any new processes (eg use of safety equipment, social distancing, data security) • Processes to protect sensitive data • Processes to maintain continuity of business as much as it is practicable to do so

To make working from home arrangements easier to carry out, and for several other practical reasons, firms that have not already done so could consider developing an internal e-filing system that holds all documents digitally. This may involve scanning reams of paper, but once a firm is paperless, it also becomes portable. Electronically storing documents comes with its own set of security issues, so it is vital to have good digital security protection. The Society’s Cybersecurity Risk Management Package (available to those insured under the Society’s Professional Indemnity Insurance Scheme) is a comprehensive resource to assist practitioners in keeping electronic material protected.

WORK-LIFE BALANCE?

For many parents, juggling work and family responsibilities was perhaps the greatest challenge they faced during the pandemic. A great deal of effort will need to go into developing policies to support workers with school or childcare aged children in public health emergencies. In the recent lockdown, some childcare centres accepted children of non-essential workers if those workers were able to provide a written statement from their employer that they were required workers, which appears a sensible approach. Culturally, the pandemic has seemed to create a greater understanding and awareness of the pressures that work and family life place on each other, and hopefully this experience will create more accommodating and flexible workplaces in the long-term.

A number of practitioners reported on the difficulties of distinguishing work time from down time, as having one’s worksite in the same place as their private abode made it difficult to “switch off”. The Society has published an article entitled “An importance message about Wellbeing & Resilience – COVID-19” which provides some helpful tips about managing wellbeing in challenging times. GET SUPPORT

Anyone impacted by COVID-19 should not hesitate to reach out for support, whether that be professional or personal.

From a business perspective, the Federal and State Governments have established several financial relief packages. These can be complex and time-consuming to apply for, but there are resources to help businesses navigate the application processes. For example, Business SA has a Business Advice Hotline where members of Business SA can speak to workplace advisors for free. Law Society Members can also visit the Society’s COVID-19 Resources Hub for a summary of the financial relief measures currently available.

Practitioners who have any questions or concerns about their practice, such as ethical obligations or concerns about their capacity to deliver services during the pandemic, can contact the Law Society for support.

The Society also provides a range of support services, including confidential counselling with Dr Jill, a Professional Advice Service, Young Lawyers Support Group, and Lawyers Complaint Companion Service. Practitioners can visit the LawCare and Support section of the Society’s website to find out how to access these support services.

The Society also maintains a list of wellbeing and resilience resources and support services on its website. Search for “Wellbeing & Support Resources” from the Society’s home page.

CONCLUSION

As the year comes to an end and we keep our fingers crossed that we see our loved ones (in Australia) for Christmas, let’s hope the new year brings better fortunes, and that, as a profession, we look out for each other and never be afraid to ask for support. B

Get to know your next President

Rebecca Sandford will assume the role of President of the Law Society on 1 January. In this Q&A, she talks about what has led her to this point, what she’s passionate about, and how the law can respond to the numerous challenges it faces – and how those challenges can be turned into strengths.

Bulletin: Can you please give a brief overview of your career to date?

Rebecca Sandford: I began as a clerk and then a lawyer in the dispute resolution team at DMAW Lawyers, where I worked on a broad range of commercial litigation matters. I moved to HWL Ebsworth in 2016, and am currently a Special Counsel in the litigation team there, practicing primarily in intellectual property law, media, technology and privacy law, competition and consumer law, and general disputes. Outside of legal work, I have been involved with the Law Society (Council and committees) since 2011, including past roles as Chair and Deputy Chair of the Women Lawyers’ Committee, and as a member of the Gender Equity Working Group and the Mandatory CPD Regulatory Committee. I currently chair the Legal Technology Committee and am a member of the Ethics and Practice, Corporate Governance and Audit & Risk Committees. I have also sat on boards and management committees for other organisations, including the Women Lawyers’ Association of South Australia, YWCA Adelaide, Spence Club Inc, and the Flinders Law School Board of Advisors, and was a co-founder of Women At The Table, a not for profit group established to foster business, career and leadership opportunities for South Australian women by creating networks and building relationships across industries and professions in SA.

B: What drew you to a career in law?

RS: Well my parents told me that I was good at arguing from a young age, which seems to have stuck! For me the practice of law often seems like a puzzle, and I find it fascinating how different elements of fact and law can fit together to generate solutions to people’s problems. It was a close call between law and teaching (I was a swimming instructor for over 8 years before becoming a lawyer) but I went to a Flinders University open day for Law and found myself nodding along with everything that was said, decided to give it a try, and have so far found it a rewarding choice. I also love that I get the chance to deeply understand lots of different industries and businesses, without having to change careers all the time.

B: What drew you to your current workplace/area of law?

RS: I am particularly interested in intellectual property because how people and businesses stamp their mark on the world intrigues me - there’s no one universal approach that applies for everyone, bundles of different IP rights get pulled together in unique ways, and I like that it keeps me connected with my creative side too. The media work is fun and interesting, rapidly changing and has given me great insight into what goes into news and current affairs reporting, and I find the competition and consumer area rewarding too because it lets me draw on my economics background and requires a deep understanding of my clients’ businesses and the markets in which they operate.

B: Why did you nominate for Council?

RS: I nominated because I was interested in learning more about how the profession operated, and a Junior Member position on Council seemed like a great place to do that - it was only after I joined Council that I really came to understand the breadth and depth of the Society’s role. I also was - and remain - interested in representing views and interests of those who might have difficulties getting to sit at that table, and working to make it easier for them to have a seat and contribute in future.

Rebecca Sandford

B: What have you got out of being a Council Member?

RS: I attribute so much of how I work now to my involvement with the Council and the Society from the early days of my career. As a junior practitioner, to have close access to experienced practitioners from such varied practice areas and backgrounds was invaluable in shaping my approach to my own practice – often it’s easy to become focused just on the things that affect your own everyday work, but I have needed to understand a much broader range of matters affecting different aspects of practice, and of life and society in general, in order to deal with the varied issues which come before the Council, and that has meant my approach to my own practice often now involves more lateral thinking than I expect it otherwise would, which benefits my colleagues and clients. I’ve also made great friends through Council and had some interesting experiences due to my involvement with the Society, which I’m grateful for.

B: What do you see as the key challenges for the legal profession?

RS: Dealing with and supporting mental health and wellbeing in the profession will be increasingly important, especially after events in 2020 which have affected us all in some way. Different sectors of the profession will and do face different challenges, but none of us are immune - lawyers consistently rate in the top few occupations with the highest prevalence of mental health problems, and some unique factors associated with the practice of law make it more likely that lawyers will face mental health challenges when compared to other types of work. Awareness and understanding of those issues has increased over time, and the work that has been and continues to be done by the Wellbeing and Resilience Committee in this space is to be commended (as are the support services offered by the Society including Law Care and the Young Lawyers’ Support Group), but I think we can still do more to provide assistance - individually and collectively - to those dealing with mental health difficulties in the profession, and to identify contributing factors and change some of the habits and behaviours which are prevalent in legal practice but can prevent us from operating at our best.

We will also need to keep grappling with how we meet expectations of clients and the broader public whilst dealing with rapid technological change which affects how we work. The need to pivot quickly to online and remote solutions to continue delivering high quality service to clients during the COVID-19 pandemic has demonstrated how important it is for us all to have at least a basic understanding of technology to address our clients’ needs. We will have to balance retaining the positive parts of the deep traditions that guide our profession, whilst ensuring we don’t find ourselves stuck doing things in outdated ways just because that’s how they’ve always been done or we think they will be too hard to change - clients and stakeholders including the Courts are increasingly demanding different approaches to the delivery of legal services, and those who can’t or won’t adapt to those changes are likely to really struggle.

B: What do you see as the key opportunities for the legal profession?

RS: Our challenges also present us with great opportunities to shift the ways we have historically worked to better support our clients, our colleagues and our profession into the future. The practice of law teaches us to think in creative problem-solving ways, and to quickly assess and make use of new information, which are useful skillsets when it comes to adapting to change. Everything I’ve done over the last decade in working with the Society has also shown me that lawyers can be some of the most passionate and giving people, and tend to be incredibly hardworking and generous in support of a good cause - knowing that, I have great faith that we will continue to identify and offer innovative solutions in response to our challenges.

B: What do you think the Society should be advocating for to increase opportunities and improve the standing of the legal profession?

RS: In addition to the changes that are currently being discussed locally and nationally to address sexual harassment, bullying and discrimination in the profession, I also believe we need to keep actively working to increase all forms of diversity in the profession, particularly in our leadership - doing so means we can bring different perspectives to decision making, connect with and show the many varied faces and experiences of legal practice, and ensure our leadership is genuinely representative of the profession and broader society.

The Society has also been advocating in recent years for mandatory CPD on mental health, wellbeing and resilience - this would increase education on this important topic, and help promote and embed positive changes so lawyers can improve and better maintain their mental health (and healthier lawyers are better able to create and take advantage of opportunities).

B: What advice would you give to practitioners who are interested in serving or improving the legal profession?

RS: Please get involved in whatever way you can! It’s immensely rewarding and beneficial to do both personally and for the profession, and your contribution will be appreciated. For example the Society has over 30 special interest committees, and numerous panels and support services, so there are many ways that you can meet and work with colleagues across the profession to improve the practice of law (and of course there are many other great organisations and bodies that you can support too). In my experience it helps to have a good understanding of your own strengths and interests, and to work with things you are passionate about and people you connect well with - you’ll get far further with things that light you up than by sinking time into something you think you “should” do but which causes extra stress or doesn’t bring satisfaction. Also, getting involved doesn’t always have to mean taking on a huge commitment - even a few hours can make a big difference, to you and to the cause or organisation you’re assisting.

B: What are some of your interests outside of the law?

RS: I am an enthusiastic supporter of South Australian businesses, especially our great hospitality offerings, so a favourite way to spend an evening or a weekend is exploring our local markets, restaurants, bars, wineries, distilleries and cafes (subject to restrictions these days of course)! I also practice yoga, love to watch movies and read something other than Council papers whenever I can, and enjoy getting back in the pool for a few laps as well. B December 2020 THE BULLETIN

Bullying, sexual harassment and discrimination in the legal profession: What is the Society doing about it?

AMY NIKOLOVSKI, CHAIR, EQUALITY DIVERSITY AND INCLUSION COMMITTEE & SA REPRESENTATIVE, LAW COUNCIL OF AUSTRALIA EQUAL OPPORTUNITY COMMITTEE

Amy Nikolovski reflects on how the legal profession has responded to the scourge of sexual harassment to date, announces funding for a new training package, and explains the National Action Plan on dealing with sexual harassment, which all law societies have signed up to.

The Society has acknowledged the systematic problems within the profession with respect to bullying, sexual harassment and discrimination.

In 2018 the Society conducted a Bullying, Sexual Harassment and Discrimination survey, the results of which were concerning. As a consequence of the outcome of that survey a Bullying, Harassment and Discrimination Working Group was formed.

The Working Group was made up of senior practitioners across the profession including a member of Bar Council, in order to make recommendations as to how to deal with these systematic issues.

As a consequence, the Working Group (of which I was Chair), made the following recommendations that were adopted by Council on 3 December 2018: 1. Consider (on behalf of Council) and action applying for a Law Foundation grant to fund the initiatives of the

Working Group; 2. Assess appropriate educational content and tools - engage with Dr

Niki Vincent (Equal Opportunity

Commissioner) on how best to proceed with educating the profession; 3. Report to Council following the meeting with Dr Niki Vincent for

Council to consider an external report to be commissioned as to what processes and practice can be put into place to assist the profession (funding to be sought as part of the Law

Foundation grant); 4. Agitate for a mandatory CPD unit on Bullying, Discrimination and

Sexual Harassment and Well-being and Resilience to be included in the prescribed number of units for practitioners to complete; 5. The President/Chair to engage directly with the SA Bar Association (the

President) to discuss the outcomes and proceed as a profession as a whole; 6. Facilitate a meeting with the respective heads of each jurisdiction to get them on board in addressing the issue, noting complaints of bullying from the bench and Bar table; 7. The Society combine all available resources on one easily accessible webpage (available to all of the profession not just Members) and then alert the profession to its existence; 8. Council considers reengaging with the Law Council/Conference of

Law Societies regarding a potential

Modern Award to cover practitioners (noting complaints of non-payment, underpayment etc. included in the commentary in the survey); 9. These recommendations be included in the Society’s 2019 Strategic Plan and followed up at 12 months, 3 years, 5 years and 10 years respectively; 10. Agitate the Legal Practitioners

Education Admission Council (LPEAC) for amendment to LPEAC Rules to include a requirement for compulsory attendance at Bullying, Discrimination and Sexual Harassment training on re-entering the profession after absence, similar to the current Risk Management and Trust Account Refresher Courses.

The Society is pleased to confirm that as a result of ongoing advocacy all of these recommendations have now been met.

The Society’s Council adopted Guidelines for Bullying, Discrimination and Harassment on 4 November 2019, which have been promulgated to the profession and are included on a dedicated page for Bullying and Harassment in the Workplace, on the Society’s website. The site also includes information about the Society’s support programs including the Practitioner Advice Service and Young Lawyer’s Support Group. Members of these two panels recently participated in a training program that included how to assist those who contact them in relation to bullying, sexual harassment or discrimination matters.

LPEAC has decided that it will make it mandatory for practitioners to include one Continuing Professional Development point relating to Bullying, Discrimination and Sexual Harassment within the 10 Mandatory CPD points, making South Australia the first State or Territory to announce same. LPEAC is currently working to amend the MCPD Rules to effect this.

The Law Foundation has approved a grant to for the development of educational content and tools by the Office of the Equal Opportunity Commissioner. The amount of the grant was unfortunately for an amount less than the cost advised by the Equal Opportunity Commissioner for doing so. An alternative proposal to the Law Foundation for a substantially similar project within the approved amount is being developed. The Society is of the strong view that the training and tools must be available to all of the profession (not just Society Members) at no cost to them.

In addition to the being able to deliver

these results the Society has participated and delivered the following this year: 1. LSSA Forum: “Sexual Harassment within the legal profession in the era of the #metoo movement”, delivered by

Amy Nikolovski, 13 February 2020; 2. CPD: “National Inquiry into Sexual

Harassment, spotlight on the Legal

Profession”, delivered by Kate Eastman

SC, chaired by Amy Nikolovski, 2 June 2020 (free CPD); 3. Participated in the National Round

Table into Sexual Harassment in the

Legal Profession hosted by the Law

Council of Australia, LSSA attendee

Amy Nikolovski, 8 July 2020; 4. CPD: “Sexual Harassment in the

Legal Profession”, delivered by Kate

Eastman SC, Jane Needham SC, Legal

Profession Conduct Commissioner

Greg May and Amy Nikolovski, 8

September 2020 (free CPD); 5. Participated in the Flinders Law

Students’ Association Panel on Sexual

Harassment in the Legal Profession,

Panel Members: Amy Nikolovski,

Rebecca Sandford (President-Elect),

Hon Justice Judith Hughes and Mark

Ferraretto (lecturer at Flinders), 8

September 2020; 6. Next Steps Seminar Series:

“Maintaining Integrity at Work”,

Adelaide Law School, Panel Members,

Hon Chief Justice Kourakis, Amy

Nikolovski and Will Snow.

The Society has also • provided commentary to countless radio stations and news media including most recently the High

Court’s announcement of its investigation of allegations made against former Justice of the High

Court, Hon Dyson Heydon AC

QC. • published articles in the Bulletin, including in December 2019 a report on the results of the survey mentioned above; a President’s Message by Tim White in August 2020 reporting on work being done; and in November 2020 an article by the Legal Profession Conduct Commissioner on the sexual harassment complaints process.

SO WHERE TO FROM HERE?

On 26 November 2020 the Parliamentary Inquiry into harassment into the legal profession was launched, with the Inquiry set to be completed by February 2021.

The Society will not be sitting on its hands awaiting the outcome of the Inquiry, as we have and continue to acknowledge that there is a problem with bullying, sexual harassment and discrimination in the legal profession.

The Society in conjunction with the Equal Opportunity Commissioner’s Office will begin the delivery of a tailored CPD program and will continue to participate on the national stage with our involvement with the Law Council of Australia’s National Action Plan.

The Society is fully supportive of and will work with other Law Societies to implement the National Action Plan which includes: 1. Advocating for reform of the Federal

Sex Discrimination Act; 2. Supporting the work of the Australian

Human Rights Commission, in particular advocating for the key recommendations of its Respect@

Work Report, namely recommendations 14, 16, 17, 20, 21, 26 and 40; 3. Driving cultural change in the legal profession, through the development of a national model sexual harassment policy; a centralised source of information and suite of educational tools; amendment to the professional

conduct rules; and driving change through the facilitation of a consistent complaints process across all jurisdictions; and 4. Supporting the need for a Federal

Judicial Conduct Commissioner, noting that the South Australian Judicial

Conduct Commissioner the Hon.

Ann Vanstone QC, has no power over federal jurisdictions).

The ongoing important work of the Society in this space will continue and I know it will also be a major objective of our incoming President Rebecca Sandford as it was in my Presidential year. Rebecca is representing the Society on the Courts’ Respectful Behaviours Working Group.

Although there is a lot more to be done within the profession, I am encouraged that bullying, sexual harassment and discrimination is being called out by many, including those in positions of power, none more powerful than Chief Justice Kiefel. In her recent statement relating to the conduct of the Hon Dyson-Heydon she said “We’re ashamed that this could have happened at the High Court of Australia. We have made a sincere apology to the six women whose complaints were borne out. We know it would have been difficult to come forward. Their accounts of their experiences at the time have been believed”.

This statement was powerful in that it not only acknowledges the victims, but confirmed that they were believed, often one of the impediments to standing up and calling out harassment.

I am also pleased to see that the behaviour is being addressed in our Law Schools, to ensure that our next generation of lawyers know that what has been seen to be a systemic issue within the profession is not acceptable behaviour and they shouldn’t accept it. B

A TALE OF TWO SYSTEMS - CHAPTER 11 AND THE INSOLVENCY REFORMS

SEAMUS BRAND, ASSOCIATE, LIPMAN KARAS & TRAVIS SHUEARD, ASSOCIATE, CHARLTON ROWLEY

Much has been written about the Corporations Amendment (Corporate Insolvency Reforms) Bill 2020 since Josh Frydenberg announced “the most significant reforms to Australia’s insolvency framework in 30 years” on 24 September, 2020.1 Mondaq described it as “a significant shift from the current ‘creditor-in-possession’ regime to a ‘debtorin-possession system’”,2 the Victorian Chamber of Commerce deemed the reforms a way for “small business to dig their way out of debt rather than calling in administrators”,3 and the Australian Restructuring, Insolvency and Turnaround Association (ARITA) published a practice alert summarising the proposed reforms and raising their own various concerns.4 The readily accepted narrative is that the Federal Government’s changes are based on the United States’ Chapter 11 Reorganization regime. However, there has been far less discussion on what this actually means and whether the US regime should actually be considered a standard to aspire to.

In this article, we begin with a brief description of what Chapter 11 is and what its goals are. We will then move to consider whether Chapter 11 is seen to be successful in the US and conclude by examining whether the proposed changes can accurately be described as “based on” Chapter 11.

WHAT IS CHAPTER 11?

A corporate restructuring or “reorganization” (to borrow the US term) was once described as a:

“[A] combination of a municipal election, a historical pageant, an anti-vice crusade, a graduate-school seminar, a judicial proceeding, and a series of horse trades, all rolled into one - thoroughly buttered with learning and frosted with distinguished names. Here the union of law and economics is celebrated by one of the wildest orgies in intellectual history. Men work all night preparing endless documents in answer to other endless documents, which other men read in order to make solemn arguments.”5

It is with the above in mind when we consider the US Chapter 11 bankruptcy laws and their clear intent to bring order to what is otherwise a chaotic period in a company’s lifecycle.

The United States Federal Code is a consolidated piece of legislation compiling US Federal law into one place. The Code is first divided into Titles and then each Title is further divided into Chapters. Title 11 of the US Code covers bankruptcy and, confusingly, Chapter 11 of that Title is entitled “Reorganization.”6 It is this Chapter that the reforms are said to be based upon.

To file for Chapter 11, a debtor or creditor files a Chapter 11 petition with the bankruptcy court serving the debtor’s domicile, which supervises the reorganization.7 A company which files for Chapter 11 is assigned a committee representing the interests of creditors and shareholders. The committee works with the company and develops a restructuring plan to reorganise the business, reduce its debt, and return to profitability. The debtor has 120 days to file its reorganization plan and 180 days to obtain acceptance of the plan by 2/3rds of creditors,8 although this can be (and often is) extended.9 Once the plan is confirmed, the debtor is discharged for debts before the confirmation and is bound by the provisions of the reorganization plan.10

Chapter 11 was designed “to reduce holdout problems and to facilitate a timely and value maximizing reorganization.”11 Similar to Australian counterparts, it achieves this by allowing for an automatic stay of proceedings against the company filing for Chapter 11 protection,12 creating a classification (or priority) of creditors,13 and requiring two-third majority voting

rules.14 It is similar to administration, in that it is an attempt to reorganise, restructure and save a company before liquidation becomes necessary, but it differs materially in its “debtor-inpossession” model, in that the company remains in control of the business and is usually appointed the trustee for the duration of the reorganization. The debtor is required to prepare a plan for the reorganization of the company, culminating in the repayment of creditors and the ongoing running of the company, similar to voluntary administration but avoiding the disruption and expense of engaging an administrator.15

DOES CHAPTER 11 WORK?

Whether the Chapter 11 laws work is a matter of much debate, both in the US and abroad. The conventional wisdom is that Chapter 11 reorganizations mostly fail before they even have a chance to implement a plan. Empirical studies undertaken in the 1990s determined that (at that point) more than 8 out of every 10 Chapter 11 cases failed before a plan of reorganization could be put in place.16 In many cases, it is simply a strategic decision by the debtor-in-possession to delay the inevitable.

Further, Heron, Lie and Rodgers found that firms who undergo a Chapter 11 reorganisation might reduce their debt burden, but would nonetheless emerge with higher debt ratios than what was typical in their respective industries.17 Whereas there is a degree of certainty of assets in a liquidation, a Chapter 11 reorganization lacks such certainty and often results in various classes of creditors haggling and negotiating to maximise the size of their respective claims. This often causes post-reorganization structures overburdened with debt because of claimholders who refuse to give up on their claims, resulting in greater debt by the time the liquidator is appointed.

Notwithstanding the above, there is also the issue of the “debtor in possession” preparing the plan for restructuring – whereas independent external administrators (nominally) have the impartiality to determine when a company should be liquidated, the “debtor in possession” has a clear interest in keeping the company alive, regardless of whether it is productive to do so.

However, the benefits of the US Chapter 11 laws are also apparent: the automatic stay of proceedings and claims against the company is the most obvious, but other benefits are not as widely known in Australia. For example, “debtor in possession” financing allows a business to obtain financing to provide the business with liquidity to assist with its reorganisation. The US bankruptcy courts can grant lenders incentives to provide finance to debtors, such as “super priority” liens over assets that are pledged to other

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lenders. This process has created its own pocket industry of finance.

Another advantage is the opportunity under section 363 of the US Bankruptcy Code to clear claims, liens and other liabilities which may otherwise prevent a sale of the business – this incentivises potential purchasers of the business, providing more imaginative exit routes for companies under Chapter 11.

Further, there are benefits for the existing management to retain control; familiarity with the business’s operations allow for a degree of efficiency in restructuring. Many companies hire special financial advisors or turnaround management consultants to assist in the restructuring – indeed, significant creditors may demand this as requirement for their cooperation.

ARE THE PROPOSED REFORMS TRULY CHAPTER 11?

There are key similarities between the proposed insolvency reforms and Chapter 11, the most obvious being that both follow debtor-in-possession models which permit the company to continue trading throughout the process. Similarly, both require the production of a Restructuring Plan designed to address the company’s debts and be approved by its creditors. Unsecured and some secured creditors are also prevented from taking action against a company availing itself of both procedures. However, the Australian model substantially differs from the US precedent.

Most notable is the role of the Small Business Restructuring Professional, a form of “quasi-administrator” who assists the company in developing its plan (for a flat fee) and then, if the plan is approved, is kept on to assist in its administration. The approval of the plan is also a key difference, requiring only a 50% endorsement by creditors to the US 2/3rd approach. There are also safeguards preventing the use of the Australian restructuring process more than once every seven years which do not apply to Chapter 11.

Finally, the Australian restructuring process is available only to companies with liabilities of $1 million or less. There is no such restriction on the US process which, famously, allowed corporate titans like Enron and Lehman Brothers to avail itself of the protection despite limited chance of a successful restructuring.18 Whether or not this is desirable is open to debate, given that both General Motors, United Airlines and K-Mart all successfully utilised Chapter 11 to continue trading, despite their respective financial turmoil.19

The proposed reforms appear to be an attempt to emulate Chapter 11 but to leave behind the aspects of it which create the most risk: the lack of any restriction on which companies are entitled to the process and the lack of any independent advisor in charge of developing the restructuring plan. However, the proposed reforms will still present some of the risks inherent in Chapter 11. The $1,000,000 liability threshold potentially allows for more complex entities closer to the threshold to manipulate the restructuring process as a means of phoenixing.20 Finally, the adoption of a mere 50% of creditors to implement a plan creates an entirely new risk that does not exist in Chapter 11: that a number of less sophisticated and optimistic creditors will approve a plan that more seasoned but fewer in number creditors would reject, prolonging a company’s collapse and ultimately increasing its liabilities.

Ultimately, the proposed reforms are, at least in principle, an Australian emulation of Chapter 11, manipulated to fit into an existing and vastly different corporate law and insolvency framework. Industry concerns with the model are best summarised by ARITA’s submission to the Federal Treasury, including a grave concern that these changes are rushed and do not embody the spirit of insolvency reforms long advocated by ARITA.21 While it may be said that the economic onslaught of COVID-19 has made the need for a restructuring framework that is friendlier to SMEs than voluntary administration more apparent, to do so by emulating another country’s system without thoroughly interrogating and addressing that system’s shortcomings would be a missed opportunity. B

Endnotes 1 Josh Frydenberg & Michael Sukkar ‘Insolvency reforms to support small business recovery’ (Media Release, 24 September 2020) <https:// ministers.treasury.gov.au/ministers/joshfrydenberg-2018/media-releases/insolvency>. 2 Mitchell Waters, ‘Australia: Sweeping changes to insolvency laws proposed’, Mondaq (online, 28 September 2020) <https://www.mondaq. 3

4

5

6

7

8 9 10 11

12 13 14 15 16

17 18

19

20 com/australia/insolvencybankruptcy/988750/ sweeping-changes-to-insolvency-lawsproposed>. ‘Insolvency law changes to save small businesses on the brink of collapse’, Victorian Chamber of Commerce (Web Page, 24 September 2020) <https://www.victorianchamber.com.au/newsmedia/all/2020/09/new-insolvency-laws-forsmall-business>. Practice Alert: Key points on insolvency reforms to support small business’, Australian Restructuring, Insolvency and Turnaround Association (Practice Alert, 24 September 2020) <https:// www.arita.com.au/ARITA/News/Practice_ alerts/Practice_Alert__Key_points_on_ insolvency_reforms_to_support_small_business. aspx?WebsiteKey=b816b009-db48-41fc-b61c3a924dda6f0f>. Harvey R Miller and Shai Y Waisman ‘Does Chapter 11 Reorganization Remain a Viable Option for Distressed Business for the TwentyFirst Century?’ (2004) 78 American Bankruptcy Law Journal 153 quoting Thurman Arnold, The Folklore of Capitalism (1937), 230. The authors employ the US spelling for the purposes of clarity of expression, albeit reluctantly. ‘Chapter 11 – Bankruptcy Basis’ United States Courts (Web Page) <https://www.uscourts.gov/ services-forms/bankruptcy/bankruptcy-basics/ chapter-11-bankruptcy-basics>. 11 U.S.C. § 1121. 11 U.S.C. § 1121(d). 11 U.S.C. § 1141(d)(1) Randall A. Heron, Erik Lie and Kimberly J Rodgers ‘Financial Restructuring in Fresh-Start Chapter 11 Reorganizations’ (2009) Financial Management 727, 730. 11 U.S.C § 362. 11 U.S.C § 507. 11 U.S.C § 1126. 11 U.S.C § 1123. See National Banker, Review Commission, Bankruptcy: The Next Twenty Years 610-612 (1997); Ed Flynn, Administrative Office of the US Courts, Statistical Analysis of Chapter 11 (1989); however, see Elizabeth Warren & Jay L Westbrook, “The Success of Chapter 11: A Challenge to the Critics” (2009) 107 Michigan Law Review 603, 626 where they characterise that Chapter 11 cases often move faster than what is commonly believed. Heron, Lie and Rodgers, above n 11, 730. Katy Stech Ferek, ‘Fed Says Lehman Brothers Chapter 11 Case is Costliest In History’ Wall Street Journal (Online) 16 January 2019 <https://www.wsj.com/articles/fed-sayslehman-brothers-chapter-11-case-is-costliest-inhistory-11547673357>. Maya Dollarhide, ‘Chapter 11’, Investopedia (Webpage, 26 May 2020) <https://www. investopedia.com/terms/c/chapter11. asp>. John Winter, Submission to Treasury, (12 October 2020) <https://www.arita.com.au/ ARITA/News/Submissions/Submission__ Insolvency_reforms_to_support_small_ business__.aspx>. Ibid.

Development program helps redress gender imbalance at the Bar

Females make up over 50 per cent of legal practitioners in South Australia however very few pursue a career as a barrister. The Step Up to the Bar program is an equal opportunity initiative of the Chief Justice of South Australia and the South Australian Bar Association aimed at bridging the gender divide at the Independent Bar and judiciary.

The program is a 12 month full time opportunity for female legal practitioners to gain experience within the higher court jurisdictions prior to pursuing admission to the Independent Bar of South Australia.

The participant will be appointed within Chambers of the Supreme Court of South Australia. They will gain experience program participant and started at the Court in July, 2019.

I have largely worked in areas of commercial, taxation and regulatory litigation and was keen to develop my skills in other practice areas. I had the opportunity to work on some landmark judgments and other complex matters across both the criminal and civil jurisdiction and have since developed an interest in expanding my practice in other areas including estate litigation, employment and migration law.

I was originally considering whether it may be more beneficial to spend another year in my previous role before commencing at the Bar and spoke to the previous participants about the opportunity which helped confirm that my decision was the right one. Despite feeling a bit out of my depth when a Supreme Court Justice would ask my views on a matter, I found the experience incredibly rewarding. I learnt so much from all the and exposure to complex legal cases and will work closely with the judiciary and an appointed Judicial Mentor.

RECRUITMENT AND SELECTION

To be eligible for the Step Up to the Bar Program, the applicant must: • be a female legal practitioner with an interest to pursue a career with the Independent Bar of South

Australia; • have demonstrated legal competence and expertise; • have approximately five years postadmission experience; • be admitted to the Supreme Court of

South Australia; judicial officers I worked with across the District, Supreme and Federal Courts who were more than willing to give up their time to provide mentoring, some very useful lessons in how to be a good advocate, and most importantly anecdotal experience about what life at the Bar really involves. Having predominantly worked in government, it also gave me the invaluable opportunity to further build my networks.

Since finishing the Program in June I have joined the Independent Bar at Anthony Mason Chambers and have not looked back, often reflecting on the skills I developed during my time at the Court. The collegiality at the Bar is second to none and I have had great support from those within and outside my chambers as well as from my judicial mentors. I would strongly encourage any female practitioner considering pursuing a career at the Bar to apply to undertake the Program and more than happy to discuss my experiences with anyone who is interested. B have a current and unrestricted practising certificate; have a National Police Check.

Applicants are required to submit the following: 1. Cover letter 2. Up-to-date curriculum vitae 3. Copy of current and unrestricted practising certificate.

Applications should be sent to dianne.mifsud@courts.sa.gov.au by 26 February, 2021.

For more information, please contact: Dianne Mifsud, Executive Assistant to the Chief Justice,

Step up to the Bar program an invaluable opportunity

BY MARISSA MACKIE, ANTHONY MASON CHAMBERS

Iwas the third Step Up to the Bar

dianne.mifsud@courts.sa.gov.au B

ASIC V MITCHELL SERVES UP GUIDANCE ON DIRECTORS’ DUTIES

ALLIE UMOFF, SENIOR ASSOCIATE & KATIE WALSH, ASSOCIATE, LIPMAN KARAS

The recent judgment by Beach J in ASIC v Mitchell (No 2) offers helpful guidance on the role of the chairperson, the extent to which boards can rely on the judgment and expertise of management and the scope of the business judgment rule.

The judgment arose out of a high profile legal battle over the $200 million broadcast agreement between Seven Network Holdings (Seven) and the peak tennis body, Tennis Australia Ltd (Tennis Australia). ASIC alleged that Mr Stephen Healy, the former chairperson of the Tennis Australia Board,1 breached various statutory directors’ duties under the Corporations Act 2001 (Cth) (the Act) in the course of negotiations between Tennis Australia and various networks (including Seven) in respect of the Australian Open broadcast rights.

In the midst of the negotiations with Seven, the then-CEO of Tennis Australia, Mr Steven Wood, chose not to provide certain information to the board, which related to the other potential bidders for the broadcast rights. Mr Healy was also aware of this information and ASIC alleged that as chairperson, Mr Healy had a responsibility to disclose this information to the full board and that in failing to do so, Mr Healy breached his duty of care and diligence under s 180(1) of the Act.2

In defence of his conduct, Mr Healy contended that he was entitled to rely on Mr Wood’s judgment in respect of what information would be of assistance to the board at the relevant time, as Mr Wood was charged with managing the broadcast right negotiations and was accordingly best placed to make that judgment.3

In finding that ASIC had not made out any of its allegations of breach against Mr Healy, Beach J provided directors and chairpersons with useful direction in how to approach their roles and appropriately discharge their duties to their organisation.

DUTIES OF THE CHAIRPERSON

As Beach J observed, the Act does not make any express reference as to the role or functions of the chairperson.4 Accordingly, chairpersons have previously had to turn to academic commentary and soft law principles for guidance, such as the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations. It is important to understand the proper scope of the role of the chairperson because their duty of care and diligence under s 180(1) of the Act is to be determined by reference to not only statutory responsibilities, but also any other responsibilities they might have within the corporation, regardless of how those responsibilities come to be imposed.5

Justice Beach provided a comprehensive overview of the overarching powers and responsibilities of chairpersons, including: • presiding at board meetings and exercising procedural control;6 • setting the agenda items for board meetings, although this can be done in consultation with the CEO;7 • ensuring the board has sufficient information to allow it to meaningfully consider, discuss and decide on the agenda items, which may also be done in consultation with the CEO;8 • managing the board to ensure sufficient time is allowed for the discussion of complex or contentious matters, including arranging meetings outside of board meetings if necessary;9 • ensuring board members work effectively together and that their skill sets and personalities complement one another;10 • facilitating the effective contribution of each director;11

• ensuring workable, productive and harmonious relations between the directors, the board and executive management, including dealing with any disrupters on the board;12 • defining, and ensuring that the board sets and implements, the corporate culture and corporate governance structure of the organisation;13 • assisting to identify new directors, induct new directors, ensure the continuing education and development of each director, and generally monitor the performance of the board, its members and committees;14 • ensuring there is appropriate communication with members, and that the interests and concerns of members are taken into account;15 and • playing a public relations role in representing the board and the organisation to outside parties.

Further, Beach J identified matters specific to the particular organisation and the particular chairperson that would need to be considered in understanding the chairperson’s role in any given case. Those matters include:16 • the actual structure and allocation of responsibilities within the organisation

which inform that organisation’s expectations of its chairperson; • the normative corporate practices which should have been in place within the organisation; and • any representations or undertakings by the chairperson regarding what they would do or what personal skills or qualities they would bring to the role.

Despite the enumerated list of responsibilities set out above, Beach J observed that the position of chairperson carries no greater authority than that of an ordinary director, even though the power and authority to manage board meetings may mean the chairperson has greater responsibility for the performance of the board as a whole.17 Indeed, the responsibilities unique to the chairperson can be seen to be procedural and facilitative in nature, aimed at enhancing the effectiveness of the board as a whole, rather than directed to giving any greater powers to the chairperson in any substantive matters.

RESPECTIVE ROLES OF THE BOARD AND THE EXECUTIVE

In considering whether Mr Healy had discharged his responsibilities with respect to determining the amount and quality of information to be put before the board to deal with any one or more agenda items, Beach J had regard to the specific role and responsibilities of Mr Wood as CEO, as outlined in Mr Wood’s employment agreement, and the respective roles of the board and CEO as outlined in Tennis Australia’s annual report.18

Justice Beach held that, in performing his role as chairperson and a director of Tennis Australia, Mr Healy was entitled to take into account Mr Wood’s role as CEO and to act on the basis that, in the absence of good reason to suggest to the contrary, Mr Wood was adequately discharging his duties.19

While noting that the chairperson was not entitled to completely delegate to the CEO the function of determining the amount and quality of information to be put before the board, Beach J held that Mr Healy could and should consult with Mr Wood on that issue and was entitled to rely on Mr Wood’s judgment if satisfied that it had been exercised appropriately.20

SECTION 189: RELIANCE ON OTHERS In defence of his reliance on Mr Wood’s judgment, Mr Healy invoked

s 189 of the Act, which establishes a presumption of reasonableness in respect of a director’s reliance on the professional or expert advice of others if that reliance is made in good faith and after having made an independent assessment of the information or the advice. Beach J held that:21 independent assessment requires no more than that the director, having listened to and assessed what his colleagues have said, must bring his own mind to bear on the issue using such skill and judgment as he may possess. Further, there must be evidence that he in fact relied on the information provided.

After considering the evidence of both Messrs Wood and Healy on the issue, Beach J held that Mr Wood had appropriately exercised his judgment regarding what information to provide to the board and Mr Healy had reasonably relied on that judgment.22

SECTION 180(2): BUSINESS JUDGMENT RULE

In obiter, Beach J considered the operation of the business judgment rule contained within s 180(2) of the Act.

The question of who bears the evidentiary and legal onus to establish the four elements of s 180(2) is one that has plagued Courts since the provision’s beginning. Beach J expressed the strong view that it is the defendant who bears the onus of proving these matters, and voiced his disagreement with any single judge decisions to the contrary.23 In the opinion of Beach J, the fact that the statutory criteria are within the ‘purview, personal knowledge of and proof by the defendant’ suggests that the statutory intention is that the defendant bear the evidentiary and legal onus.24 Justice Beach also noted his view is strengthened by the fact that s 180(2) creates a presumption, necessitating that the defendant establish the criteria to enliven that presumption.25

Justice Beach agreed with Austin J’s interpretation in ASIC v Rich (2009) 75 ACSR 1 that the questions of whether the director has informed themselves about the subject matter of the judgment to the extent that they reasonably believe to be appropriate and whether they rationally believe that the judgment is in the best interests of the company, are to be determined by reference to what the director knew and not by reference to what they ought to have known.26

However, Beach J commented that, if he were required to consider the issue (which he was not), he ‘very much doubt[ed]’ that Mr Healy’s decision to include or not include information to be provided to the board would fall within the statutory definition of ‘business judgment’ in s 180(3) of the Act (‘any decision to take or not take action in respect of a matter relevant to the business operations of the corporation’).27 Although Beach J’s comments on this issue are only obiter and are not fully reasoned, they indicate a potentially narrower scope for the business judgment rule than may have otherwise been thought to be the case based on the expansive language in the statute itself. While not many decisions have yet directly considered this application of the business judgment rule, Beach J’s obiter is generally consistent with the comments made in other decisions where the issue has been raised. Justice Beach’s comments in this regard serve as a useful reminder to chairpersons (and directors) in their approach to similar decisions, that the scope of protection available under the business judgment rule may not be as broad as the language in the statute otherwise suggests.

CONCLUSION

Justice Beach’s judgment will likely be well-received by directors as offering a remedy to the previous lack of guidance as to the duties and responsibilities of a chairperson by providing a comprehensive overview of such responsibilities, including confirming that chairs are entitled to rely on the expertise and opinions of executive management in discharging their duties. It further clarifies that the requirement that directors conduct an ‘independent assessment’ of the information or advice they are relying on requires no more than the director, having listened to and assessed what their colleagues have said, bringing their mind to bear on the issue using their own skill and judgment.

Similarly, the decision provides useful clarity and guidance with respect to the statutory business judgment rule contained within s 180(2) of the Act. It confirms that the legal and evidentiary onus of establishing the requirements of s 180(2) rests upon the director seeking to invoke the rule, and it offers a valuable reminder that the scope of the rule may not be as broad as the language in the statute otherwise suggests. B

Endnotes 1 ASIC also brought claims for breach of duty against Mr Harold Mitchell, the former vice president of the Tennis Australia board, but those claims are not relevant to the issues discussed in this note. 2 Australian Securities and Investments Commission v

Mitchell (No 2) [2020] FCA 1098 at [1177] per

Beach J. 3 Ibid at [1446]-[1447]. 4 Ibid at [1399]. 5 Ibid at [1406] (quoting Shafron v Australian Securities and Investments Commission (2012) 247 CLR 465 at [18]). 6 Ibid at [1409]. 7 Ibid at [1410]. 8 Ibid at [1411]. 9 Ibid at [1412]. 10 Ibid at [1413]. 11 Ibid. 12 Ibid at [1414]-[1415]. 13 Ibid at [1416]-[1417]. 14 Ibid at [1418]. 15 Ibid at [1419]. 16 Ibid at [1421]-[1424]. 17 Ibid at [1409]. 18 Ibid at [1137], [1142]. 19 Ibid at [1138]. 20 Ibid at [1166]. 21 Ibid at [1459]. 22 Ibid at [1447]-[1464]. 23 Ibid at [1435]. 24 Ibid. 25 Ibid. 26 Ibid at [1437]-[1439]. 27 Ibid at [1441].

Young lawyers relish chance go have face to face fellowship at Premium Dinner

PATRICK KERIN, LYNCH MEYER LAWYERS

facebook.com/YLCSA

The annual Young Lawyers’ Premium Dinner for 2020 was held on Tuesday, 27 October, 2020 at the relatively new Bambini Cucina on Peel Street. The intimate crowd of around 45 attendees enjoyed a night of networking, socialising and fantastic food; as well as an informative and humorous speech from our special guest, the Honourable Justice Chris Bleby.

Hand sanitiser was graciously supplied upon entry, with attendees then participating in informal and sociallydistanced networking before the entrée was served. Justice Bleby then spoke, conveying several key lessons about what the judiciary expects or assumes of young lawyers, at what his Honour mused was an apposite time given his relatively recent appointment to the bench. His Honour regaled the attendees with several stories spanning the course of his career to date, in a humorous and relatable manner, demonstrating his Honour’s characteristics which make him so well regarded not only as a legal personality.

Main courses were subsequently served with most opting for Bambini’s famous gnocchi.

Ben Clarke (left), Vanessa Camerlengo, Giorgia Maiorana and Ashlee Wachtel

Special thanks to Justice Bleby for taking the time out of his busy schedule to speak to young members of the profession, and for mingling with all attendees. In particular, his Honour was required to sit late on the evening of the dinner owing to a jury which had been out for almost a week in the trial of Freddy Quimby. For those of you playing at home, the jury was ultimately unable to determine whether it is pronounced “chowdah” or “chowder”.

The Young Lawyers’ Committee would also like to thank all of the attendees who supported the event and purchased all of the tickets quicker than toilet paper in Australia in April, 2020; Bambini Cucina for hosting and for their excellent hospitality; as well as our major sponsor Burgess Paluch Legal Recruitment. B