Corporations Law

1. Discuss the liability of Stumborg and Anderson.

Director’s duties arise under the common law and under the corporations Act. In general for a shareholder, employee or a creditor to have any legal rights of action would depend on the conduct of the directors. They may be negligent or may act for some improper purpose.

Common Directors – Stumborg and Anderson are directors of Thomas Ltd and Newmont Ltd. Directors do not breach their duties merely by being a director of another company. There is no common law and statutory probation. The law however requires that the directors should act in the best interest of each particular company Ford [9.410]. Relationship – There is no relationship between Thomas Ltd and Newmont Ltd, even if there was, it would not mean that the directors of Thomas Ltd, disregard the interest of Newmont Ltd. Each company is a separate legal entity and the directors must act in the interest of each company ANZ Executors v Ointex.

Breach of directors duties.

Each director owes fiduciary duty to the company both under the Common Law and statute. In this case Stumborg and Anderson are potentially liable for breach of these duties.

a) Duty to exercise care diligence and skill

This duty can arise out of Common Law fiduciary principles and s180 of Corporations Act. Daniels v Anderson provides a fiduciary duty of care which is complemented in statute, s180 (1). This duty requires directors to exercise reasonable care in the performance of their office. Wheeler’s Case adds to this requirement establishing an obligation to remain continually involved in company affairs.

Stumborg and Anderson have breached this duty in failing to meet the modern standard of care required of directors (Daniels v Anderson). In incorporating Newmont Ltd together with Farmers Ltd would arguably fail to satisfy the objective test that requires a director to exercise care and diligence expected if a reasonable person in the same circumstance with...