The Proceduralisation of Australian Corporate Law

Published date01 June 2015
Date01 June 2015
Subject MatterArticle
Ross Grantham*
The central hypothesis of the paper is that bit by bit and largely unnoticed Australian
corporate law has under gone a profound change. Australian corporate law, and
particularly the Corporations Act 2001 (Cth), has moved from an essentially private law,
substantive rights model, to one tha t seeks to regulate the company and those involved
in its affairs through the prescription of processes and procedures by which corporate
decisions may be made and by which the procedural cor rectness of those decisions is
assured. The paper will also seek to demonstrate, by an analysis of the change s in the
patterns of corporate case law, that this proceduralising trend has effected a
fundamental change in the nat ure of corporate law and the r ole of the courts and may
now claim to be a, if not, the principal characteristic of Australian corporate law. The
paper concludes by highlighting so me of the wider implications of this trend a nd the
risk it poses to the intellectual heart of corporate law.
The modern registered company owes its immediate creation to the legislature.
Historically, however, the nature of the corporate form and the content of what is now
known in Australia as corporate law has been very much more the work of the courts.1
It is thus the case that the decision of the House of Lords in Salomon v A Salomon & Co
Ltd2 is more often cited as the foundation of modern corporate law than are the Join t Stock
Companies Act 1844 (UK)3 or the Limited Liability Act 1855 (UK).4 It is also the case that the
building blocks of corporate law were predominantly taken from the private law. Within
the open girders of the statutory framework,5 corporate law was built out of the concepts
of contract, property, and trust. It is thus not surprising that the company was, and is still,
regarded as a fundamentally private legal and economic institution.6
* Professor of Commercial Law, T C Beirne School of Law, The University of Queensland. I am
grateful to the anonymous referees for their comments. The usual caveats apply.
1 Cf Ian Ramsay, 'Corporate Law in the Age of Statutes' (1992) 14 Sydney Law Review 474.
2 [1897] AC 22.
3 This was the first grant of a general right to seek incorporation by registration.
4 This was the first general grant of limited liability. This Act remained in force for only a few
months before being replaced by the Joint Stock Companies Act 1856 (UK).
5 Bayless Manning, 'The Shareholder's Appraisal Remedy: An Essay for Frank Coker' (1962)
72(2) Yale Law Journal 223, 245 n 37.
6 Marc T Moore, Corporate Governance in the Shadow of the State (Hart Publishing, 2013).
234 Federal Law Review Volume 43
Over the last 20 years or so, some commentators be gan to suspect that a change was
occurring in the character of Australia n corporate law. Michael Whi ncop and Mary
Keyes thought that the doctrines and a pproach of corporate law were starting to
resemble aspects of public law. 7 This trend, which they rega rded as still 'nascent and
imprecise',8 entailed both more review of corporate decision-making and t he adoption
as grounds of review of fa ctors that 'resemble those familiar from administrative law,
such as a review of the procedure of decision-making'. 9 Jennifer Hill saw the move to
put shareholders in the role of supervisors and monitors of corporate management as
part of an increasing focus on 'issu es of fairness in the decision-making process itself' as
opposed to substantive ou tcomes.10 In reviewing the Corporate Law Economic Reform
Program (Audit Reform & Corpo rate Disclosure) Act 2004 (Cth) ('CLERP 9') reforms,11 Jean
du Plessis et al12 saw the more intrusive review of corporate actions as contributing to
the creeping 'formalism' in corporate law.
The observations of these commentators and the trends they detected arose out
inquiries into a range of other substantive issues: the merits of the privatisation of public
enterprises, the ways in which we might concep tualise the role of shareh olders in
modern corporate governa nce, and the A ustralian responses to the financial crashes of
the early 2000s. The comments were also to one degree or another tentative, speculative,
and conclusory impressions of an emergent trend generalised from particular instances
discovered as part of the particular inquiry. Indeed, such are the very different questions
the commentators were exploring, the different evidence from which they deduced their
respective conclusions, the different times at which they were writing, and the complete
absence of any cross referencing or acknowledgement between them, that it is entirely
possible that each of the commentat ors was describing somethi ng completely and
fundamentally different. The incohe rent and temporally continge nt nature of corporate
law always holds out the possibility of unrelated but coincidental developme nts.13
Notwithstanding this possibility, this pa per will suggest that the observat ions of the
commentators do in fact have something in common. The central hypothesis of this
paper is, therefore, that these otherwise unrelated observations are individual dots that
may be joined to reveal a larger picture and that like the parable of the elep hant in the
7 Michael J Whincop and Mary E Keyes, 'Corporation, Contract, Community: An Analysis of
Governance in the Privatisation of Public Enterprise and the Publicisation of Private
Corporate Law' (1997) 25 Federal Law Review 51, 73.
8 Ibid 94.
9 Ibid 73.
10 Jennifer Hill, 'Visions and Revisions of the Shareholder' (2000) 48 American Journal of
Comparative Law 39, 71 and 'Changes in the Role of the Shareholder' in Ross Grantham and
Charles Rickett (eds), Corporate Personality in the 20th Century (Hart, 1998) 202.
11 Corporate Law Economic Reform Program (Audit Reform & Corporate Disc losure) Act 2004 (Cth).
12 Jean du Plessis, James McConvill and Mirko Bagaric, Principles of Contemporary Corporate
Governance (Cambridge University Press, 1st ed, 2005) 178. The same comments appear in the
second edition: Jean du Plessis, Anil Hargovan and Mirko Bagaric, Principles of Contemporary
Corporate Governance (Cambridge University Press, 2nd ed, 2011) 216.
13 Corporate law is an accretion of doctrines and principles that reflect particular
conceptualisations of the company over time. Although the dominant conceptualisation
changes over the course of history there is rarely if ever a clearing out of those doctrines that
reflected the now abandoned conceptualisation. See also Cally Jordan, 'Unlovely and Unloved:
Corporate Law Reform's Progeny' (2009) 33 Melbourne University Law Review 626, 635.

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