The Arrium Series
Welcome to issue #4 of our Arrium Series, where senior members of the Baker McKenzie team involved in the successful defence of proceedings against the former CFO, former Treasurer and other former employees of the Arrium Group, consider key issues arising in those and related insolvent trading proceedings and from the judgment handed down on 17 August 2021.1
A summary of the relevant background to the Arrium proceedings, some key terms and the key issues to be considered in this Arrium Series can be found in issue #1 here, issue #2 (which considers solvency in the context of large debts due in the relatively distant future) can be found here, while issue #3 (which considers when and how duties of care may be owed to lenders) can be found here.
Today's issue - When may company officers and employees be personally responsible for representations?
Key issues in the Lender Proceedings included whether:
- Arrium's Treasurer and Treasury and Finance team members who signed drawdown and/or rollover notices as "Authorised Officers" of Arrium entities made, and were personally responsible for, representations and warranties given to lenders by those notices.
- Arrium's CFO and Treasurer (who were also directors of Arrium borrowing subsidiaries as a requirement of their employment) were liable for inducing or procuring breaches of contract or negligence by those entities and/or had accessorial liability under the Australian Consumer Law (ACL) for procuring or directing, or otherwise being involved in, what was alleged to be misleading representations to lenders.
These are critical issues for every company officer or employee and of particular relevance to corporate Finance and Treasury teams.
Ultimately, for the reasons discussed below, the Court found that, in all of the circumstances, neither the signatories to the notices, nor the CFO or Treasurer2, were personally liable for the representations and warranties made and given to lenders.
Click here to view full alert.
1 Anchorage Capital Master Offshore Ltd v Sparkes (No 3); Bank of Communications Co Ltd v Sparkes (No 2)  NSWSC 1025
2 The plaintiffs in one of the Lender Proceedings also claimed that the Treasurer had separately made misstatements in the course of a telephone discussion with one lender. As discussed in Arrium Series issue #3 (which considers when and how duties of care may be owed to lenders), the Court did find that the Treasurer owed a duty of care in that instance but that the particular duty had not been breached
Related alerts from the Arrium Series
Australia: The Arrium proceedings - something important for everyone
Australia: The Arrium Series (#2) - Determining solvency where current debts are being paid but large debts are due in the relatively distant future
Australia: The Arrium Series (#3) - Do you owe a lender a duty of care?
Australia: The Arrium Series (#5) – Interpretation and application of Material Adverse Change clauses
Australia: The Arrium Series (#6) - Lender reliance and loss causation
Australia: The Arrium Series (#7) - Novel assessments of loss for negligence, misleading conduct and insolvent trading
Australia: The Arrium Series (#8) - Secondary debt trading - Assignments of debts and rights of recovery