15/11/2005 - 21:00

Ferrier Hodgson outdoes Sir Humphrey

15/11/2005 - 21:00


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It's a shame that Jonathan Lynn and Antony Jay are not writing any more of their Yes Minister books.

It's a shame that Jonathan Lynn and Antony Jay are not writing any more of their Yes Minister books. Not just because they were a brilliant read, and made even better television, but more because Briefcase has found the raw material for another script courtesy of the comedians (sorry, accountants) at Ferrier Hodgson.

The basic building blocks for a classic exchange between the ultimate civil servant, Sir Humphrey Appleby, and the luckless target of his barbed wit, Minister Jim Hacker, can be found in a notice sent to shareholders in the failed Sons of Gwalia.

This seemingly bland eight-page report is technically a “circular to creditors”, and a perfectly normal document in the process of managing the affairs of a business that has fallen into the hands of administrators, in this case, Ferrier Hodgson.

But the difference with the latest circular is that it has also been sent to all former shareholders in Sons of Gwalia, the result of a September Federal Court case which found that some shareholders could claim they suffered a loss as a result of buying Sons of Gwalia shares while relying on alleged “misleading and deceptive conduct by Sons of Gwalia”.

Briefcase does not intend to re-run the arguments for and against the extremely interesting legal precedent of investors being treated as creditors – it merely notes that it has the potential to upset many apple carts.

What is worth noting, and passing on to the BBC or anyone else who wants to revive Sir Humphrey and Jim, is the process by which Ferrier Hodgson says it requires for a shareholder to establish his/her claim as a creditor.

The first step is to lodge a form called a “formal proof of debt or claim”. Sounds easy, so far – until you get to the devil in the detail.

Any Sons of Gwalia shareholder thinking of taking this step must also satisfy a six-point test, a process that includes the use of the word “allege” no less than eight times, surely a record even for the most fastidious legal draftsman, or civil servant.

Step one in the process is to include details of the “alleged statements or conduct which is alleged to be misleading or which otherwise founds the claim”.

In simple English, Briefcase reckons the author is trying to say: who said what, and when, and how did it induce you to buy the shares?

In effect, it means that a shareholder wanting to be treated as a creditor will be forced to pinpoint someone at Sons of Gwalia who said something, or wrote something, which triggered the decision to invest in the company – and that’s a pretty high hurdle to clear several years after the event.

Steps two to four in the Ferrier Hodgson high hurdles (Sons of Gwalia division) require the time of the trigger event, details “of why it is alleged the conduct was misleading”, details of “reliance”, which seems to be a particularly tricky question as it asks “what steps it was alleged were taken by the shareholder as a consequence of and in reliance of the conduct”.

Briefcase, in the interests of its own sanity will not attempt to provide a simple English interpretation of that last bit because it’s not sure what it really means.

For anyone who has made it past the first four steps, number five is sure to trip you. It asks for: “details of how it is alleged that the alleged conduct caused the loss which it is alleged to have been suffered” – a sentence which is surely a world record with three alleges in 21 words or, it is alleged, one in every seven words.

And, just in case you satisfy all of that legal mumbo-jumbo, there are four killer conditions that make it all seem such a waste of time because they include the need to finalise the administration process of Sons of Gwalia and to then discover if the administrators actually have “funds or assets available for distribution”; in other words, if there is any money left to pay anybody.


If the ghost of Sir Humphrey was not satisfied with the Sons of Gwalia process then he would be laughing all the way back to his grave with the process foisted on investors by the latest government rules for annual meetings.

Briefcase has attended a few this year and can report that if the objective was to make such gatherings a complete waste of time then the objective has been achieved.

The Wesfarmers meeting at 2pm on Tuesday November 8 was a classic.

More than 700 shareholders attended, only to be treated to an unbelievably boring explanation from the chairman, Trevor Eastwood, as to how the meeting would be conducted, how votes would be collected, and how questions had to be specifically related to motions.

The net result of Mr Eastwood sticking precisely to the rules, and doing his best to liven things up, was a room full of totally intimidated mums and dads who didn’t dare say a thing when the time came.

First question, after a 30-second pause, came from one of those a rent-a-view spokesmen from the Australian Shareholders Association, a mob that seems increasingly out of touch with the way the world works – and Mr Eastwood told him that.

The Wesfarmers experience convinced to Briefcase that corporate regulation has now reached a point where it is completely strangling any exchange of views between the owners of a company and its managers.

Rubbing insult into this injury is the intolerable fact that shareholders who exercise their rights and attend an annual meeting are actually worse off than those who stay at home and watch the event on broadband, while reading the chairman’s and the managing director’s addresses, which were released by the stock exchange at 1.50pm, 10 minutes before the meeting started, and 40 minutes before they were actually delivered.

The rules (let’s call it the Appleby Process) demands that market-sensitive information be as publicly available as possible. What could be more public than a general meeting of the shareholders (the owners) of a company. Answer: the Internet.

Solution to all this. Abandon annual meetings because no-one dares ask (or say) anything. Do it all over the net, skip the farce of the process and call the gathering of owners a cocktail party.


“A committee should consist of three men, two of whom are absent.” Sir Herbert Beerbohm Tree, British theatre owner.


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