Streeter V Western Areas Exploration Essay

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The leading case in the issue was the House of Lords decision in Regal (Hastings) VS Gulliver. The court examined the relation between the directors of the company -- the fiducially relationship and the liability of the director, with the court emphasizing on a construction of strict liability. (Lowry; Edmunds, 2003, p. 521) There has been the issue considered in the chancery courts, and in England and other countries where the view is also seen to be identical. For example in the case of CMS Dolphin Limited V/S Paul Maurice Simonet & Blue --Gb Limited - In The High Court Of Justice Chancery Division Royal Courts (UCC, 2001) the question of a director diverting to another company a business opportunity of his company was discussed with the relevant question of what will be the effect after resignation where the reason for the resignation is to appropriate the opportunity for the person from the company.

The implications of the judgment on secured transactions

The fallout of this case was seen in the Australian Securities and Investments Commission v Fortescue Metals Group Ltd. [2011] FCAFC 19, where the judgment showed that the important objectives of "Chapter 6CA (where'd 674 is to be found) is to ensure that there is a fully informed and therefore efficient market for listed securities." (Austlii, 2011a) Thus there has been misinformation of the trading of securities and those trading in securities had been misinformed about the affairs of the company. The court however noted that there must be a complaint that a share trader had suffered loss and even assuming that the gain or loss cannot be an issue the corporation can side step the continuance disclosure obligations and in that way the directives of the Streeter case can affect the stock holders and secured transactions.

The general law regarding corporate opportunity and the corporate opportunity principle are more applicable to the directors, and the managers of the company who will have the first hand information of the opportunities available to the company. Thus where there exists a fiduciary relationship between directors and the company, the director undertakes to act in good faith always on behalf of, and having the interests of the company uppermost in the exercise of the director's power. It also implies that the directors shall not allow their personal interests conflict with the interests of the company. The provisions are clear. The directors are accountable to his or her company for profits or benefits that may accrue from the company or elsewhere in the process of the exercise of the directorship. The only saving provision being that the shareholders of the company may ratify any action by a director even if it violates the doctrine of good faith. (Goss, Hodgekinson, 2007)

Structuring of Corporate Groups or Enterprises

The laws do not require a board of directors to be present. Directors of the company do not often participate in the process. The corporate structure thus would in future undergo a change with the disclosures that need be made in the case of not only directors but the corporate affairs. Thus the question becomes if these developments affect the future course of company laws and the way the board sees opportunities. Certainly if the board members cannot use the opportunity for their private gain they must consequent not only because of the obligatory duty cast on them but also on account of self-interest seeking to see that the company does not lose the opportunity.

These issues are more pertinent when we consider the management of a company by the board of directors -- and where the governing body -- a director of a company turns a big opportunity for the company into a private opportunity for the individual by either channeling the activity to his or her private entity or another company -- in such cases the question becomes if there is an equitable obligation to the directors that they must not use information or property that they acquire by virtue of the position as directors for the personal gain. Where the directors take up personally a business opportunity that was otherwise available to a company, they do commit a breach of duty. (Goss; Hodgekinson, 2007) Thus in future there will be changes in the way directorships with its liabilities are modified and the way the securities markets react to companies and their governance. It is also possible that the judge made laws get the status of legislated acts by amendments to the company laws.

Conclusion

The case of Streeter v Western Areas Exploration has brought to the fore the points in the earlier judgments both at Australia and overseas, right from the House of Lords decision in Regal (Hastings) VS Gulliver and CMS Dolphin Limited V/S Paul Maurice Simonet & Blue (Gb) Limited to the later deliberations in a number of cases. The Streeter v Western Areas Exploration clearly spells out what amounts to a 'diversion of corporate opportunity' and has finally set out that the directors have a duty to the company and help it in getting the benefits of the company and seeks. In a way the judgment affirms the rules of Vadori v AAV Plumbing [2010] and the directors and the provisions of the Corporations Act 2001 and the fiduciary duties of directors.

It can therefore be the reference point for the determination and future conduct of actions of the directors. Now every person who deals in a fiduciary capacity with a company are bound to adhere to the principle of putting the company interest before personal interests and this having been made mandatory, it is a turning point where those in charge of a company will not enter deals that enrich them but impoverish the company. That ensures stake holder protection. This is likely to have an impact on the board of directors and the way the companies are formed in future.

References

Austlii. 2011a. Australian Securities and Investments Commission v Fortescue Metals Group Ltd. [2011] FCAFC 19. [Online] Accessed 3 October 2011 from http://www.austlii.edu.au/au/cases/cth/FCAFC/2011/19.html

Austlii. 2011b. Streeter -- v- Western Areas Exploration Pty Ltd. [No 2] [2011] WASCA 17. [Online] Accessed 28 September 2011 from http://www.austlii.edu.au/au/cases/wa/WASCA/2011/17.html

Baxt, Bob. 2010. Remedies for oppressive behaviour: Remedies available to dissatisfied member directors of closely held or private companies. Company Director Magazine, [Online] Accessed 28 September 2011 from http://www.companydirectors.com.au/Director-Resource-Centre/Publications/Company-Director-magazine/Back-editions-2010/September/September/Directors-Counsel-Remedies-for-oppressive-behaviour

Goss, Jeff; Hodgekinson, Kate. 2007. Australia: The Corporate Opportunity Principle [Online] Accessed 28 September 2011 from http://www.mondaq.com/australia/article.asp?articleid=54462

Lowry, John; Edmunds, Rod. 2003. "The Corporate Opportunity Doctrine: The Shifting Boundaries of the Duty and its Remedies." The Modern Law Review, vol. 61, no. 4, pp: 515 -- 537.

UCC. 2001. CMS Dolphin Limited V/S Paul Maurice Simonet & Blue (GB) Limited in the…[continue]

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