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Pearce asks Camac to examine the Sons of Gwalia ruling.

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The Parliamentary Secretary to the Treasurer, Chris Pearce, today announced that he has referred

issues arising from the High Court decision in Sons of Gwalia Ltd v Margaretic (the Sons of Gwalia

case) to the Corporations and Markets Advisory Committee (CAMAC) for consideration and advice.

The High Court decision in the Sons of Gwalia case has reinterpreted a longstanding provision of the

law, making it easier for shareholders to recover funds in circumstances where they acquired shares

as a result of misleading conduct prior to a company becoming insolvent.

“The ramifications of this case for companies, shareholders and creditors will need to be carefully

considered; accordingly I have asked the Corporations and Markets Advisory Committee to examine

these issues and provide a report to the Government.

“There has been considerable public commentary about the ramifications of this decision. These are

important technical issues and the Government will carefully examine the High Court decision before

responding,” Mr Pearce said.

In its judgement, the High Court noted that the new treatment of shareholder claims would reinforce a

range of investor protection measures that have been introduced in recent years. However, allowing

shareholders enhanced rights to participate in insolvency proceedings may complicate these

proceedings in some cases.

“It is important that we consider what is most appropriate to the Australian legal context,” said Mr


CAMAC is a statutory advisory committee that was established to provide advice to the Australian

Government on corporations’ and financial markets’ law and practice. Its members include business

leaders and senior academics. On 13 November 2006, Mr Pearce released a package of legislative

reforms addressing a range of issues that have previously been identified by CAMAC in this area. It is

expected that these reforms will be introduced later this year.

The Parliamentary Secretary has requested that CAMAC examine three issues:

1. Should shareholders who acquired shares as a result of misleading conduct by a company prior

to its insolvency be able to participate in an insolvency proceeding as an unsecured creditor for

any debt that may arise out of that misleading conduct?

2. If so, are there any reforms to the statutory scheme that would facilitate the efficient

administration of insolvency proceedings in the presence of such claims?

3. If not, are there any reforms to the statutory scheme that would better protect shareholders from

the risk that they may acquire shares on the basis of misleading information?

07 February 2007

Melbourne Contact: Conor O'Brien 02 6277 2088 or 0402 970 515

© Commonwealth of Australia 2000