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Directors Duties Checklist Duty Of Care Notes

Law Notes > Business Associations Notes

This is an extract of our Directors Duties Checklist Duty Of Care document, which we sell as part of our Business Associations Notes collection written by the top tier of University Of New South Wales students.

The following is a more accessble plain text extract of the PDF sample above, taken from our Business Associations Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

A director or other officer of a company must exercise his/her powers and discharge his/her duties with the degree of care and diligence that a reasonable person would exercise if s/he:

* were a director or other officer of a company in the company's circumstances, and

* occupied the office held by, and had the same responsibilities within the company as, the director or officer. Civil penalty: see s. 1317E.

S 180(1) Care and diligence

1. Did the D breach their duty of care?

Common Law Duty of care

Equitable Duty of care

Consider:

* Director or officer? See s 9

*
Standard varies:

* The duty will vary according to the size and business of the particular company and the experience or skills that the director held himself or herself out to have in support of appointment to the office (Daniels v Anderson

* Elements: (1) director/officer? (2) reasonable care and diligence?
(3) causation? (4) No requirement for harm or detriment to the company. (but still balancing of foreseeable risk and benefit required for determining reasonableness).

* Balancing act: Whether a director has exercised a reasonable degree of care and diligence 'can only be answered by balancing the foreseeable risk of harm against the potential benefits that could reasonably have been expected to accrue to the company from the conduct in question' (ASIC v Vines)

* Not limited to expertise: A director appointed to a company because of special expertise in an area of the company's business is not relieved of the duty to pay attention to the company's affairs which might reasonably be expected to attract inquiry, even outside that area of expertise (Re Property Force Consultants)

* NO requirement of harm, loss or detriment The director must exercise reasonable care and skill in performing his/her duties (Daniels v Anderson). This has been extended to care, diligence and skill: reasonable care is measured by the care an ordinary man might be expected to take on his own behalf (Re City Equitable Fire Insurance).

* See balancing (ASIC v Vines) Causation:

* Common law duty:

* Were an identified negligent acts or omission of the defendant was so connected with the plaintiff's loss or injury that, as a matter of ordinary common sense and experience, it should be regarded as a cause of it (March v Stramare Pty Ltd (1991) 171 CLR 506).

* Question: Had a reasonable director in X's position exercised reasonable care and skill, would they have so acted? (Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187). Duty to exercise reasonable degree of care and skill, but not a fiduciary obligation (PBS v Wheeler; Lee J in Bell Group, but cf Daniels v Anderson and Drummond J in Bell).

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