Stephen Haarsma conducted the High Court case of R v Byrnes (1995) 183 CLR 501, the leading authority providing interpretation of the directors’ statutory duty not to act with impropriety.
The case involved a complex situation where the director was an officer of two companies.
The High Court found that:
- there does not need to be proof that an advantage has been gained by the director or any other person or that detriment has been caused to the corporation;
- improper use can exist without a purpose to cause detriment to the corporation;
- an objective to gain advantage can exist without a purpose to cause detriment to the corporation.
The High Court also made the following significant remarks:
Impropriety does not depend on an alleged offender’s consciousness of impropriety. Impropriety consists in breach of the standards of conduct that would be expected of a person in the position of the alleged offender by reasonable persons with the knowledge of the duties, powers and authority of the position and the circumstances of the case.
Brennan, Deane, Toohey and Gaudron JJ also stated in relation to conflict of duties (at 516-517)
A company is entitled to the unbiased and independent judgment of each of its directors. A director of a company who is also a director of another company may owe conflicting fiduciary duties. Being a fiduciary, the director of the first company must not exercise his or her powers for the benefit or gain of the second company without clearly disclosing the second company’s interests to the first company and obtaining the first company’s consent. Nor, of course, can the director exercise those powers for the director’s own benefit or gain without clearly disclosing his or her interest and obtaining the company’s consent.