Volume 21. No. 8

Melbourne Law School published Volume 21 Number 8 of the University of Melbourne Law School Legal Studies Research Paper Series on SSRN.

This issue includes the following articles:

Helen Anderson
Determining Secondary Liability: In Search of Legislative Coherence (846)

Australia is arguably in the midst of a legislative boom to improve recovery for creditors through the imposition of secondary liability. The aim is to overcome ‘sharp corporate practice’ by imposing liability on an outside party for the default of a primary debtor. However, recent reforms are noticeably dissimilar without apparent reason, and contribute to an incoherent approach to the law in this area. This paper makes the case for secondary liability laws which are consistent (as far as circumstances allow), intelligible, and informed by principle based on articulated policy objectives. This approach will produce benefits for both drafters and enforcers of the law.

Rosemary Langford and Ian Ramsay
Removal of Directors of Public Companies by Shareholders: When Do Companies Contract Out of the Corporations Act? (847)

When are shareholders empowered to remove directors from office? This is an important governance issue and is related to the balance of power between shareholders and directors. In the case of a public company, s 203D(1) of the Australian Corporations Act 2001 (Cth) provides that shareholders may by ordinary resolution remove a director from office. Section 203D also provides for certain due process protections for directors. For example, a director who is under threat of removal is permitted to circulate a statement to shareholders and to speak at the meeting which will vote on the removal of the director. In a series of judgments, the majority of courts have concluded that companies are able to have provisions in their constitutions that allow shareholders to remove directors but without the due process protections for directors provided by s 203D. Where companies do this, the balance of power between shareholders and directors shifts towards shareholders and away from directors. How many companies choose to have such a provision in their constitution? We endeavour to answer this question by researching the constitutions of a sample of companies listed on the Australian Securities Exchange. We focus on three issues. First, the extent to which companies in our sample have provisions in their constitutions that allow shareholders to remove directors. Second, for those companies that have such provisions, to what extent do they allow for the removal of directors by shareholders without the procedural requirements and due process protections for directors in s 203D. Third, whether the answer to the first two questions varies according to the size of the company measured by market capitalisation.

Adrienne Stone
Proportionality and Its Alternatives (848)

This paper addresses the controversy in Australian constitutional law regarding the use of proportionality analysis. At first sight, this controversy is puzzling given the widespread acceptance of proportionality in other legal systems and the High Court’s previous apparent acceptance that proportionality analysis is equivalent to established methods. Nonetheless doubts about proportionality persist To answer these questions, I consider two possible understandings of proportionality. The first conceives of proportionality as a highly substantive doctrine that has embedded within it ideas derived from constitutions with strong conceptions of constitutional rights as fundamental principles and under which the judicial role is to optimise protection of these rights. Viewed in light of Australian orthodoxy, this conception of proportionality readily gives rise to objections. The second possible understanding of proportionality lies at the opposite end of a spectrum. It holds that proportionality does not entail commitments to a novel and substantive conception of rights but is a method or conceptual tool according to which judges assess the validity of a law that burdens a constitutional requirement (which may not be a constitutional ‘right’).

If we focus on this second conception, the negative case against proportionality is weak. However, the positive case for shifting from the previous law to proportionality analysis is entirely another matter. Proportionality promises a slight increase in transparency by isolating the balancing element of the analysis. However, it is unclear how much difference this adjustment will make in practice especially in the light of distraction and confusion created by doctrinal innovation. Finally, the article considers third method: Justice Gageler’s ‘calibrated scrutiny’ and argues that this approach has the potential to provide a greater measure of clarity and predictability without sacrificing all of the benefits of proportionality. However, it need not be seen as an alternative to the proportionality method. On the contrary, the two could be reconciled and proportionality used as a manner for better development of the law.

Ying Liew
The Singaporean Court of Appeal on Proprietary Estoppel Remedies (849)

There remains much controversy as to what the remedial approach in proprietary estoppel should be, both in English law and in Singapore. Should the starting point be the fulfilment of expectations, or compensation for detriment? The recent Singaporean Court of Appeal case of Low Heng Leon Andy v Low Kian Beng Lawrence (administrator of the estate of Tan Ah Kng, deceased) [2018] 2 SLR 799 suggests that the choice of remedial approach need not be resolved as a matter of law; it may be sufficient to leave the choice to claimants. This case note provides a critique of -- and ultimately rejects -- that suggestion.

Lucinda O'Brien, Ian Ramsay and Paul Ali
The Distinctive Features of Women in the Australian Bankruptcy System: An Empirical Study (850)

According to data published by the Australian Financial Security Authority (AFSA), Australian women and men offer strikingly similar reasons for their entry into bankruptcy. Yet a more detailed analysis of AFSA’s data indicates that women and men often go bankrupt in very different social and economic circumstances. This empirical study draws upon a unique dataset, obtained from AFSA, containing the deidentified records of more than 28,000 individuals. It also draws upon a series of focus groups with the staff of three non-profit organisations, including financial counsellors and consumer solicitors. It finds that, in general, women in bankruptcy are likely to be economically disadvantaged, relative to men, as measured by income, access to wages, reliance on government benefits, real estate ownership and utilities debt. It also finds that women in bankruptcy are much more likely than men to be single with dependants, and that these women experience a greater degree of gendered disadvantage than other women in the bankruptcy system.

Lizzie Knight and Tania Voon
The Evolution of National Security at the Interface between Domestic and International law and Policy: The Role of China (851)

As China’s economy grows and the global economy is increasingly digitalised, the concept of national security is taking on increasing significance. Contrary to its quiet history, the security exception has now been invoked by different parties in ongoing disputes at the World Trade Organization. Similar exceptions exist in many international investment agreements and lie at the core of domestic jurisdictions’ regulatory frameworks for reviewing foreign investments. At the domestic level, these reviews have shifted to focus particularly on China and on a new category of ‘data’. Continued expansion of the meaning of security as a basis for rejecting foreign investment applications poses a threat to the benefits of economic integration, while allowing international tribunals to review these decisions by ruling on the meaning of this exception is likely to be counterproductive. Alternatives exist at the domestic and international levels. Domestically, a focus on evidence-based assessments and the imposition of behavioural or structural conditions as an alternative to rejecting foreign investment applications may help to mitigate security concerns. International guidelines and principles are already established to assist investors and investment agencies in this regard. Further rule reform at the international level may allow a more specific focus on agreed solutions to data concerns in place of a general acceptance of security as a catch-all response to perceived threats of foreign investment.