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Klein, Elizabeth; du Plessis, Jean J --- "Corporate Donations, the Best Interest of the Company and the Proper Purpose Doctrine" [2005] UNSWLawJl 5; (2005) 28(1) UNSW Law Journal 69

[*] LLB (Hons) (Deakin University); B.Agr.Sc. (Hons) (University of Melbourne). We would like to thank the referees and the board review for their constructive criticism on the first draft of this article submitted for publication in the University of New South Wales Law Journal.

[**]BProc, LLB, LLM, LLD (UOFS). Professor of Law, School of Law, Deakin University, Australia.

[1] P P McGuinness, ‘Corporate Philanthropy, Government and Blackmail’ (2003) 47(6) Quadrant 2.

[2] Warren Buffett, ‘Berkshire Hathaway Inc – Shareholder Designated Contributions’ (1981), <http://www.berkshirehathaway.com/1997ar/shcontri.html> at 8 August 2004.

[3] Milton Friedman, ‘The Social Responsibility of Business is to Increase Its Profits’, The New York Times Magazine (New York), 13 September 1970.

[4] ‘Law, Values and Charity’ (2002) 76 Australian Law Journal 492, 497. A similar view was expressed by the Australian Shareholders’ Association in 2004. See Australian Shareholders’ Association, ‘Statement of Corporate Governance Principles’ (2004), [6] <http://www.asa.asn.au/PrinciplesCorpGov.asp> at 28 March 2004:

Social Policy. It is not the responsibility of business to indulge in uneconomic activities in response to urging from the government of the day. If government is convinced that a service is required, it has the structure to implement an appropriate policy, and it has the taxation system to fund it. Business should not be expected to do so on a ‘voluntary’ basis. Companies have no role as unelected and unpaid implementers of social policy

This statement is no longer available on the ASA’s website. A position statement entitled ‘Shareholders Expect’ is expressed in more moderate language, and explicitly recognises that ‘[d]irectors are elected by shareholders to oversee the management of companies in the interest of the company itself and its stakeholders’. See <http://www.asa.asn.au/PolicyStatements/ShareholdersExpectPolicy.pdf> at 10 July 2005.

See also Adolf Berle, ‘The Impact of the Corporation on Classical Theory’ in Thomas Clarke (ed), Theories of Corporate Governance: The Philosophical Foundations of Corporate Governance (2004) 45, 49–51

[5] For purposes of this article the terms ‘gratuitous (ex gratia) payments’, ‘corporate donations’, and ‘gifts’ are used synonymously.

[6] Herb Elliott, Message from the Chairman, Telstra Foundation <http://202.12.135.148/dir148/tfweb.nsf/webdocs/overview~ChairpersonMessage?opendocument> at 22 May 2005 (emphasis added).

[7] Peter Munro and Ben Wyld, ‘Business Begs for Gratitude – Not Attitude’, The Sydney Morning Herald (Sydney), 18 March 2003, 3. We acknowledge that this approach is more likely to be valid in a company such as Telstra, which is part-owned by the government, than in a public company. However, it is submitted that this attitude would not be uncommon in companies which are wholly publicly owned.

[8] David Gonski, ‘Restoring Faith: Leadership and the Bottom Line’ (Speech delivered at the Australian Institute of Company Directors, Sydney, 26 September 2003).

[9] [1883] UKLawRpCh 129; (1883) 23 Ch D 654.

[10] Ibid 672.

[11] Environics International Ltd, The Millenium Poll on Corporate Social Responsibility: Executive Briefing (1999) 2, International Business Leaders Forum <http://www.iblf.org/iblf/csrwebassist.nsf/550d4b46b29f68a6852568660081f938/852568eb00754e1085256a02003a4d9a/$FILE/MillPoll_ES.pdf> at 30 June 2005.

[12] ‘Tsunami Dead and Missing Rises to 288,828’, The Sydney Morning Herald (Sydney), 18 February 2005, <http://smh.com.au/news/asia-tsunami/tsunami-dead-and-missing-rises-to-288828/2005/02/17/1108609349540.html> at 10 June 2005.

[13] See, eg, John Howard, Prime Minister of Australia, who stated: ‘I obviously would like to see as many big donations as possible from Australian companies – business conditions are good, many companies can afford to make significant donations and many are’: Geoff Elliott, ‘Call for Companies to Give’, The Australian (Sydney), 3 January 2005, 9.

[14] Eleven days after the tsunami struck, corporate donations were estimated to have reached A$ 16 000 000: Geoff Elliott, ‘Corporate Donations Hit $16m’, The Australian (Sydney), 7 January 2005, 7.

[15] Malcolm Maiden, ‘Tsunami: The Backlash’, The Age (Melbourne), 12 February 2005, 1.

[16] Hutton v West Cork Railway Co [1883] UKLawRpCh 129; (1883) 23 Ch D 654; Parke v Daily News Ltd [1962] 2 All ER 929. See also Part IV below.

[17] [1962] 2 All ER 929.

[18] For the application of some of these doctrines and tests in a different context, see Jean J du Plessis, ‘Directors’ Duty to Use Their Powers for Proper or Permissible Purposes’ (2004) 16 South African Mercantile Law Journal 308.

[19] H A J Ford, R P Austin and I M Ramsay, Ford’s Principles of Corporations Law (12th ed, 2004) 184, 182.

[20] Corporations Act 2001 (Cth) s 140(1).

[21] In Australia, there are even limitations to the company's power to change the constitution if such a change would give rise to a conflict of interests and advantages. See Gambotto v WCP Ltd [1995] HCA 12; (1995) 182 CLR 432. See especially immediately after the heading, ‘The test for determining whether an expropriation is valid’ (444).

[22] S C Sen, Company Actions in the Modern Set-Up (1969) 19, 22. Given the transition in Australia from ‘articles of association’ to ‘constitutions’, it is now more appropriate to refer to the doctrine as ‘the supremacy of the constitution’.

[23] (222/1998) (28 March 2000) Supreme Court of Appeal of South Africa.

[24] Ibid.

[25] See Scott v Scott [1943] 1 All ER 582; John Shaw & Sons (Salford) Ltd v Shaw [1935] 2 KB 113, 134 (Lord Green); H S Cilliers et al, Cilliers & Benade: Corporate Law (3rd ed, 2000) 87 and cases quoted there. See also The Duke Group Ltd (in liq) v Pilmer [1998] SASC 6529; (1998) 144 FLR 1. See generally L S Sealy, ‘Bona Fides and Proper Purposes in Corporate Decisions’ [1989] MonashULawRw 16; (1989) 15 Monash University Law Review 265, 272

[26] Lord v The Governor & Co of Copper Miners (1848) 41 ER 1129, 1134; MacDougall v Gardiner [1875] UKLawRpCh 111; (1875) 1 Ch D 13, 23 (James LJ); Isle of Wight Railway Co v Tahourdin [1883] UKLawRpCh 277; (1883) 25 Ch D 320, 333 (Lindley LJ); Bainbridge v Smith [1889] UKLawRpCh 85; (1889) 41 Ch D 462, 474 (Lindley LJ). This principle is firmly embedded in South African law: see Adams v North 1933 CPD 100, 108; Cooper v Garratt 1945 WLD 137, 148, 152; and cases cited in Makhuva v Lukoto Bus Service (Pty) Ltd 1987 (3) SA 376, 393–5. See generally ‘Recent Cases: Ampol Petroleum v R W Miller (Holdings)’ (1974) 48 Australian Law Journal 319.

[27] See especially Hoole v Great Western Railroad Co [1867] UKLawRpCh 112; (1867) LR 3 Ch App 262, 268, 275 (Lord Cairns LJ); Bond v Barrow Haematite Steel Co [1902] UKLawRpCh 9; [1902] 1 Ch 353, 368 (Farewell J); cases cited in Australian Metropolitan Life Assurance Co Ltd v Ure [1923] HCA 29; (1923) 33 CLR 199, 217 (Isaacs J); Shuttleworth v Cox Brothers & Co (Maidenhead) Ltd [1927] 2 KB 9, 23–4 (Scrutton LJ); Re Smith & Fawcett Ltd [1942] Ch 304, 306 (Lord Greene MR); Hogg v Cramphorn Ltd [1967] Ch 254, 268 (Buckley J); Wayde v NSW Rugby League Ltd [1985] HCA 68; (1985) 180 CLR 459, 469 (Brennan J). See also Sealy, above n 25, 277; Robert Baxt, ‘Second Guessing Directors’ Decisions on Takeovers – A Mixed Message from the New South Wales Court of Appeal’ (1990) 8 Company and Securities Law Journal 26, 27.

[28] [1974] UKPC 3; [1974] AC 821, 832.

[29] Ibid. See also Wayde v NSW Rugby League Ltd [1985] HCA 68; (1985) 180 CLR 459, 469–70 (Brennan J); Harlowe ’s Nominees Pty Ltd v Woodside (Lakes Entrance) Oil Co NL [1968] HCA 37; (1968) 121 CLR 483, 493 (Barwick CJ, McTiernan and Kitto JJ).

[30] (1989) 16 NSWLR 260.

[31] Ibid 281. See also Harlowe ’s Nominees Pty Ltd v Woodside (Lakes Entrance) Oil Co NL [1968] HCA 37; (1968) 121 CLR 483, 493 (Barwick CJ, McTiernan and Kitto JJ): ‘Directors in whom are vested the right and duty of deciding where the company’s interests lie and how they are to be served may be concerned with a wide range of practical considerations, and their judgment, if exercised in good faith and not for irrelevant purposes, is not open to review in the courts.’

[32] See Ford et al, above n 19, 214.

[33] Corporations Act 2001 (Cth) s 198A.

[34] See below Part VI(D).

[35] In this article ‘proper purpose’ is taken as being synonymous with ‘permissible purpose’. Conversely, ‘improper purpose’ and ‘impermissible purpose’ are used synonymously. See further du Plessis, above n 18 and Colin Baxter ‘Ultra Vires and Agency Untwined’ (1970) 28 Cambridge Law Journal 280 for a comprehensive analysis of the various ways in which powers can be exercised in a company law context, with particular reference to older cases decided in this area.

[36] Cilliers et al, above n 25, 146. See also J T Pretorius et al, Hahlo ’s South African Company Law through the Cases – A Source Book (6th ed, 1999) 292; M S Blackman, ‘Companies’ in W A Joubert and J A Faris (eds), The Law of South Africa – Volume 4, Part 2 (1996) 8; Robert Baxt, Keith Fletcher and Saul Fridman, Corporations and Associations: Cases and Materials (9th ed, 2003), 365; J R Birds ‘Proper Purposes as a Head of Directors’ Duties’ (1974) 37 Modern Law Review 580, 581.

[37] Advance Bank Australia Ltd v FAI Insurance Ltd (1987) 9 NSWLR 464, 482–3 (Kirby P). The Court concluded that in this case the directors’ primary purpose was not to act in the best interest of the company and to inform the shareholders, but to secure the re-election of the chairman and the other retiring directors (482–3, 487, 496). The reference to Peel v London and North Western Railway Co [1906] UKLawRpCh 153; [1907] 1 Ch 5 is interesting (482). In that case the directors were successful in defending their decision to use company funds to solicit proxies in support of their view on what was in the best interest of the company regarding a management decision.

[38] Darvall v North Sydney Brick & Tiles Co Ltd (1989) 16 NSWLR 260, 336 (Clarke JA). See also Lee Panavision Ltd v Lee Lighting Ltd [1992] BCLC 22, 30 (Dillon LJ).

[39] Pine Vale Investments Ltd v McDonnell & East Ltd (1983) 1 ACLC 1294. See Tony Steel, ‘Defensive Tactics in Corporate Takeovers’ (1986) 4 Company and Securities Law Journal 30, 43–4.

[40] Australian Metropolitan Life Assurance Co Ltd v Ure [1923] HCA 29; (1923) 33 CLR 199, 215–16, 220 (Isaacs J). See generally R C Nolan, ‘The Proper Purpose Doctrine and Company Directors’ in Barry Rider (ed), The Realm of Company Law: A Collection of Papers in Honour of Professor Leonard Sealy – SJ Berwin Professor of Corporate Law at the University of Cambridge (1998) 23 ff.

[41] Australian Metropolitan Life Assurance Co Ltd v Ure [1923] HCA 29; (1923) 33 CLR 199, 219 (Isaacs J); Ngurli Ltd v McCann [1953] HCA 39; (1953) 90 CLR 425, 445 (Williams ACJ, Fullagar and Kitto JJ). See further cases quoted in Blackman, above n 36, 187. See also Ross Parsons, ‘The Director’s Duty of Good Faith’ [1967] MelbULawRw 1; (1967) 5 Melbourne University Law Review 395, 425.

[42] Ngurli Ltd v McCann [1953] HCA 39; (1953) 90 CLR 425, 439, 440 (Williams ACJ, Fullagar and Kitto JJ); Hogg v Cramphorn Ltd [1967] Ch 254, 268, 269 (Buckley J); Howard Smith [1974] UKPC 3; [1974] AC 821,834 (Lord Wilberforce); Lee Panavision Ltd v Lee Lighting Ltd [1992] BCLC 22, 29 (Dillon LJ); Re a Company (no 00370 of 1987); Ex parte Glossop [1988] 1 WLR 1068, 1076–77 (Harman J); Kirwan v Cresvale Far East Ltd (in liq) [2002] NSWCA 395; (2002) 44 ACSR 21, 56 (Giles JA). See also Cilliers et al, above n 25, 146–7; Nolan, above n 40, 12–17.

[43] See Bamford v Bamford [1970] Ch 212 and Hogg v Cramphorn Ltd [1967] Ch 254. These cases are considered by K W Wedderburn ‘Going the Whole Hogg v Cramphorn?’ (1968) 31 Modern Law Review 688 and ‘Recent Cases: Ampol Petroleum v R W Miller (Holdings)’, above n 26. See generally Hannes v MJH Pty Ltd (1992) 10 ACLC 400, 409–10 (Sheller JA). See also Michele Havenga, Fiduciary Duties of Company Directors with Specific Regard to Corporate Opportunities (LLD thesis, University of South Africa, 1995) 67–8.

[44] See McGuire v Ralph McKay Ltd (1987) 5 ACLC 891, 894 (Murray, Gobbo and Southwell JJ).

[45] Howard Smith [1974] UKPC 3; [1974] AC 821.

[46] See further du Plessis, above n 18, 3 19–20.

[47] McGuire v Ralph McKay Ltd (1987) 5 ACLC 891, 895 (Murray, Gobbo and Southwell JJ). The Court referred to things incidentally following on the decision of the directors under attack (the issuing of shares) as ‘a by-product of the issue (of shares)’.

[48] See also McGuire v Ralph McKay Ltd (1987) 5 ACLC 891, 893–6 (Murray, Gobbo and Southwell JJ) for a comprehensive discussion of the various tests applied by the Australian and English courts in this regard and Macanie (London) Ltd v Cook & Watts (1967) CLY 482 (Goff J), as referred to in Havenga, above n 43, 67 fn 89.

[49] See Regal (Hastings) Ltd v Gulliver [1942] 2 AC 134, 153 (Lord Macmillan).

[50] Hindle v John Cotton Ltd (1919) 56 Sc LR 625, 630–1 (Isaacs J), as quoted with approval in Australian Metropolitan Life Assurance Co Ltd v Ure [1923] HCA 29; (1923) 33 CLR 199, 220 and Howard Smith [1974] UKPC 3; [1974] AC 821, 835 (Lord Wilberforce).

[51] Pine Vale Investments Ltd v McDonnell & East Ltd 1 ACLC 1294, 1303 (McPherson J).

[52] See du Plessis, above n 18, 323–4 and discussion below, Part III(F).

[53] Saul Fridman ‘An Analysis of the Proper Purpose Rule’ (1998) 10 Bond Law Review 164, 165–6, 179.

[54] Hindle v John Cotton Ltd (1919) 56 Sc LR 625, 630–1. See generally Sealy above n 25, 276. At 278, Sealy explains the consequence of this approach succinctly: ‘It may still be true, in principle, that “business decisions are for business men”, and not a matter for review by the courts, but for judges of sufficiently robust disposition that principle is not the deterrent that it may once have been.’ See also Fridman, above n 53, 166.

[55] The substantial or primary purpose test is a more exact measure than the best interest of the company test. Thus, it is submitted that it is a slight overstatement to argue that ‘the requirement that directors act for a proper purpose adds little to the more general rule that directors must act in the best interest of the company’. See Fridman, above n 53, 182.

[56] As to the meaning of the phrase ‘best interest of the company as a whole’, see Pretorius et al, above n 36, 293, but as Parsons points out ‘the concept remains miserably indeterminate’: Parsons, above n 41, 396. It is submitted that it is still the case: see Kirwan v Cresvale Far East Ltd (in liq) [2002] NSWCA 395; (2002) 44 ACSR 21, 56 (Giles JA). We would respectfully agree with Young CJ’s observation in Kirwan v Cresvale Far East Ltd (in liq) [2002] NSWCA 395; (2002) 44 ACSR 21 that ‘[i]t is of no real use to regurgitate the numerous utterances of past courts on this topic’. See also Fridman, above n 53, 90; Re a Company (no 00370 of 1987; Ex parte Glossop [1988] 1 WLR 1068, 1076; Sealy, above n 25, 269–71.

[57] Howard Smith [1974] UKPC 3; [1974] AC 821, 835 (Lord Wilberforce). In Re Halt Garage (1964) Ltd [1982] 3 All ER 1016, 1039 (read with 1038) Oliver J observed that under certain circumstance ‘a test of benefit to the company’ (also understood as ‘the benefit of the shareholders as a whole’) ‘would be largely meaningless’.

[58] Mills v Mills [1938] HCA 4; (1938) 60 CLR 150, 164 (Latham CJ) as quoted with approval in Howard Smith [1974] UKPC 3; [1974] AC 821, 835 (Lord Wilberforce); McGuire v Ralph McKay Ltd (1987) 5 ACLC 891, 894 (Murray, Gobbo and Southwell JJ). See also Whitehouse v Carlton Hotel Pty Ltd [1987] HCA 11; (1987) 162 CLR 285, 290 (Mason, Deane and Dawson JJ). See generally Brian Galgut et al (eds), Henochsberg on the Companies Act (5th ed, 2004) 466: ‘Where directors act in breach of [the duty to act only under available powers] it is irrelevant whether they believe they do so in the interest of the company’. The ‘bona fide for the benefit of the company as a whole’ test was also pertinently rejected in Gambotto v WCP Ltd [1995] HCA 12; (1995) 182 CLR 432, 444 (Mason CJ, Brennan, Deane and Dawson JJ): ‘In the context of a special resolution altering the articles and giving rise to a conflict of interests and advantages, whether or not it involves an expropriation of shares’.

[59] Howard Smith [1974] UKPC 3; [1974] AC 821, 834 (Lord Wilberforce); Hogg v Cramphorn Ltd [1967] Ch 254, 267 ff (Buckley J); Whitehouse v Carlton Hotel Pty Ltd [1987] HCA 11; (1987) 162 CLR 285, 289–90 (Mason CJ, Deane and Dawson JJ); Southern Resources Ltd v Residues Treatment & Training Co Ltd (1990) 8 ACLC 1151, 1164 (Jacobs ACJ, Prior and Mullighan JJ); Lee Panavision Ltd v Lee Lighting Ltd [1992] BCLC 22, 29– 30 (Dillon LJ). See also Galgut et al, above n 58, 467–8; Steel, above n 39, 31. It is submitted that Blackman, above n 36, 7 states the principle too widely when he argues that directors will ‘still be guilty of acting for an improper purpose’ (emphasis added). At least a ‘self-interest’ is required and where there is no such self-interest the improper or impermissible purpose must be primary or substantial – see discussion in the body of this article below.

[60] See Ford et al, above n 19, 358 fn 1, but note the incorrect reference to Sealy’s article (the reference should have been to ‘Mon ULR’, not ‘MULR’). Cf Sealy above n 25, 267–8. For earlier views on this issue, see Birds, above n 36, 583. At 580–1, Birds gives an excellent summary of the different doctrines at play in this area.

[61] Corporations Act 2001 (Cth) s 1072G (replaceable rule).

[62] Sarah Worthington, ‘Directors’ Duties, Creditors’ Rights and Shareholder Interventions’ [1991] MelbULawRw 5; (1991) 18 Melbourne University Law Review 121, 122–3 and 123–4; Nolan, above n 40, 3, 7–13. See also Paul Redmond, Companies and Securities Law: Commentary and Materials (3rd ed, 2000) 439–40; J H Farrar ‘Abuse of Power by Directors’ (1974) 33 Cambridge Law Journal 221, 221, 224; Havenga, above n 43, 65; Franz J Ranero, ‘Managed Investment Schemes: The Responsible Entity’s Duty to Act for Proper Purposes’ (1999) 17 Company and Securities Law Journal 422, 425, 427.

[63] Ibid.

[64] [1932] All ER 889.

[65] Parke v Daily News Ltd [1962] 2 All ER 929, 942.

[66] Ibid.

[67] A-G v Great Eastern Railway Co [1880] UKHL 2; (1880) 5 App Cas 473.

[68] Corporations Act 2001 (Cth) ss 124, 125. Further discussion of the issue of ultra vires is beyond the scope of this article. See generally Ross Grantham, ‘Ultra Vires: Gone but Not Forgotten’ (1993) 10 Australian Bar Review 233.

[69] See above n 66 and accompanying text.

[70] Parke v Daily News Ltd [1962] 2 All ER 929.

[71] Hutton v West Cork Railway Co [1883] UKLawRpCh 129; (1883) 23 Ch D 654, 672 (emphasis added).

[72] Ibid 666 (emphasis added).

[73] Ibid 654, 666.

[74] Mills v Mills [1938] HCA 4; (1938) 60 CLR 150.

[75] This has been described as the ‘sheep’s clothing principle’ by Melvin Eisenberg, ‘Corporate Conduct That Does Not Maximise Shareholder Gain: Legal Conduct, Ethical Conduct, the Penumbra Effect, Reciprocity, the Prisoner’s Dilemma, Sheep’s Clothing, Social Conduct, and Disclosure’ (1998) 28 Stetson Law Review 1, 14. See, eg, AAT Case V18 (1988) 88 ATC 197.

[76] Charterbridge Corporations Ltd v Lloyds Bank Ltd [1970] Ch 62, 74.

[77] (1 876) 24 WR 754.

[78] [1888] UKLawRpCh 145; (1888) 40 Ch D 170, 172 (North J).

[79] Ibid

[80] [1921] 1 Ch 259

[81] Hutton v West Cork Railway Co [1883] UKLawRpCh 129; (1883) 23 Ch D 654, 673.

[82] [1991] 2 Qd R 360.

[83] The expressions ‘interests of the company’ and ‘best interests of the company’ appear to be used interchangeably, which is consistent with there being no significant difference between them. See, eg, Whitehouse v Carlton Hotel Pty Ltd [1987] HCA 11; (1987) 162 CLR 285.

[84] Corporations Act 2001 (Cth) s 181.

[85] This point is made by Julian Blanchard, ‘Honesty in Corporations’ (1996) 14 Company and Securities Law Journal 4, 7.

[86] Charterbridge Corp Ltd v Lloyd’s Bank [1970] Ch 62, 75 (Pennycuick J).

[87] Ibid.

[88] Parke v Daily News Ltd [1962] 2 All ER 929, 942 (Plowman J).

[89] See above Parts II(B), II(C).

[90] See above n 11, above n 13 and accompanying text.

[91] Corporations Act 2001 (Cth) pt 5.7B.

[92] See Pine Vale Investments Ltd v Mc Donnell & East Ltd 1 ACLC 1294, 1303 (McPherson J). Some suggestions as to factors that a court may take into account are made below, Part VI(E).

[93] Cf Re Smith & Fawcett Ltd [1942] Ch 304.

[94] [2002] NSWSC 171; (2002) 168 FLR 253.

[95] Ibid 414 (emphasis added).

[96] See, eg, Howard Smith [1974] UKPC 3; [1974] AC 821; Pine Vale Investments Ltd v McDonnell & East Ltd 1 ACLC 1294; Corporations Act 2001 (Cth) s 181.

[97] See above Part II(B).

[98] Hutton v West Cork Railway Co [1883] UKLawRpCh 129; (1883) 23 Ch D 654, 668.

[99] Ford, above n 19, 345–6.

[100] Provident International Corporation v International Leasing Corp Ltd [1969] 1 NSWR 424, 440.

[101] Walker v Wimborne [1976] HCA 7; (1976) 137 CLR 1, 7 (Mason J); Kuwait Asia Bank EC v National Mutual Life Nominees Ltd [1991] 1 AC 187; Addstead Pty Ltd (in liq) v Liddan Pty Ltd [1997] SASC 6727; (1997) 70 SASR 21.

[102] See also William Heath, ‘The Corporations Law, Section 181: A Two-Edged Sword’ (2000) 18 Company and Securities Law Journal 377, 379; Sealy, above n 25, 269; J D Heydon, ‘Directors’ Duties and the Company’s Interests’ in P D Finn (ed), Equity and Commercial Relationships (1987) 120.

[103] Whitehouse v Carlton Hotel Pty Ltd [1987] HCA 11; (1987) 162 CLR 285 (Mason CJ, Deane and Dawson JJ).

[104] As discussed in the next section.

[105] See, eg, the controversy over whether shareholder approval should have been obtained for corporate donations to relief efforts following the December 2004 tsunami in Asia: ABC Radio, ‘Shareholders’ Association Opposes Corporate Aid Donations’, AM, 7 January 2005, <http://www.abc.net.au/am/content/2005/s1278328.htm> at 13 February 2005. The ASA later issued a clarifying statement: see Peter Gosnell, ‘Backdown over Corporate Donors’, The Daily Telegraph (Sydney), 8 January 2005, 5.

[106] See obiter in Kinsela v Russell Kinsela Pty Ltd (in liq) (1986) 4 NSWLR 722,730 (Street CJ), which is cited with approval in ANZ Executors & Trustee Co Ltd v Qintex Australia Ltd [1991] 2 Qd R 360 (McPherson J). Cf Whitehouse v Carlton Hotel Pty Ltd [1987] HCA 11; (1987) 162 CLR 285. Further discussion of this point is beyond the scope of this article. See generally M A Kerrell, ‘Does Shareholder Ratification of Directors’ Actions Raise More Problems Than it Solves for Those Taking a Third Party Corporate Guarantee?’ (1994) 24 Queensland Law Society Journal 33, 42.

[107] Nick Tabakoff, ‘Generous to a Fault: A New Approach to Corporate Philanthropy Could Revolutionise How Donations are Made in the Event of Future Disasters’, The Bulletin (Sydney), 25 January 2005.

[108] See McGuinness, above n 1.

[109] See above Part II(C).

[110] Corporations Act (2001) (Cth) sub-ss 23 3(d), (e).

[111] See Norman Bowie, ‘The Purpose of the Corporation’ in Tom Beauchamp (ed) Ethical Theory and Business (2nd ed, 1983) 91.

[112] See, eg, the National Australia Bank’s donation of $100,000, which represents 0.0003% of its annual profit of A$3.5 billion: Don BoredWalk and Greg Bowyer, Two Takes on Australian Corporate Donations (2005) Crikey Daily <http://crikey.com.au/////articles/2005/01/05-0003.html> at 14 February 2005.

[113] See, eg, Zoe Taylor, ‘The Debate’, The Daily Telegraph (Sydney), 8 January 2005, 22.

[114] Fiona Carruthers, ‘Give and Take of Corporate Donations’, Australian Finanical Review (Sydney), 8 January 2005, 18.

[115] Their actual motivation may have been slightly different (more self-interested) than they have chosen to imply in their public relations statements.

[116] Hutton v West Cork Railway Co [1883] UKLawRpCh 129; (1883) 23 Ch D 654, 672 (Bowen LJ).

[117] See, eg, Ean Higgins, ‘Costello Takes Aim at Hardie’, The Australian (Sydney), 25 June 2005, 11.

[118] The terms of reference of the review by the Corporations and Markets Advisory Committee are set out in a letter from the Parliamentary Secretary to the Treasurer, Chris Pearce, dated 23 March 2005. See Reference in Relation to Directors’ Duties and Corporate Social Responsibility (2005) Corporations and Markets Advisory Committee <http://www.camac.gov.au/CAMAC/camac.nsf/byHeadline/Whats+NewDirectors'+duties+and+corporate+social+responsibility?openDocument> at 9 July 2005. The Parliamentary Joint Committee on Corporations and Financial Services is independently investigating similar issues. See Inquiry into Corporate Responsibility: Terms of Reference (2005) Parliamentary Joint Committee on Corporations and Financial Services <http://www.aph.gov.au/Senate/committee/corporations_ctte/corporate_responsibility/tor.htm> at 10 July 2005.

[119] United Kingdom, Department of Trade and Industry, Company Law Reform, Cm 6456 (2005) 16.

[120] Department of Trade and Industry Company Law Reform White Paper: Frequently Asked Questions (2005) <http://www.dti.gov.uk/cld/doc31.doc> at 9 July 2005.

[121] Except to the extent that the company is established for purposes other than the benefit of its members: see Company Law Reform Bill 2005 (UK) B3(1).

[122] Company Law Reform Bill 2005 (UK) B3(3).

[123] Company Law Reform Bill 2005 (UK) B1(1).

[124] Company Law Reform Bill 2005 (UK) B3(4).

[125] Company Law Reform Bill 2005 (UK) B3(2).

[126] Stephen Bartholomuesz, ‘If There’s No Bar to Responsible Boards, New Plans Could Backfire’, The Age, (Melbourne), 6 April 2005, 15.

[127] See above Part IV.

[128] See Ford, above n 19, regarding the trend towards greater intervention by the courts.

[129] Colleen Ryan, ‘The Hard Yard’, Australian Financial Review (Sydney), 27 June 2003, 18.

[130] Commonwealth of Australia, HIH Royal Commission, The Failure of HIH Insurance (2003) [6.2.13].

[131] Fiona Buffini, ‘HIH Puts Corporate Largesse in Spotlight’, Australian Financial Review (Sydney), 30 April 2003, 3.

[132] See generally ASX Corporate Governance Council, Principles of Good Corporate Governance and Best Practice Recommendations (2003) <www.shareholder.com/visitors/dynamicdoc/document.cfm?documentid=364&companyid=ASX> at 24 May 2005.

[133] See above n 80 and accompanying text.

[134] HIH Royal Commission, above n 130.

[135] A comprehensive discussion of the duty to avoid a conflict of interest is beyond the scope of this article. See generally Darvall v North Sydney Brick & Tiles Co Ltd (1989) 16 NSWLR 260; North-West Transportation Co Ltd v Beatty (1987) 12 App Cas 589.

[136] Re HIH Insurance Ltd and HIH Casualty and General Insurance Ltd [2002] NSWSC 171; (2002) 168 FLR 253, 414 (Santow J); HIH Royal Commission, above n 130.

[137] See above n 15 and accompanying text.