...Forgiving a Director’s Breach of Duty: A review of recent decisions By Steven Wong1 1 Senior Associate, Corrs Chambers Westgarth, Perth. The author can be contacted at steven.wong@iinet.net.au. 4980429v3 Forgiving a Director’s Breach of Duty: A review of recent decisions Introduction Amid fears of a global recession, directors may well be concerned that their conduct will be scrutinised should they be involved in a corporate collapse. Honest directors risk becoming embroiled in litigation and face “the associated reputational damage and the potential for ultimate financial ruin”2. A director must make commercial decisions. These decisions often involve some form of commercial risk and are sometimes made on the basis of limited information. It would be unjust to hold directors personally liable for a breach of duty, regardless of the situation. Section 1318 of the Corporations Act 2001 (Cth) (Corporations Act) provides some protection for company officers3 against the consequences of a breach of duty in limited circumstances4. The section confers a discretionary power on courts, which reads: If, in any civil proceeding against a person to whom this section applies for negligence, default, breach of trust or breach of duty in a capacity as such a person, it appears to the court before which the proceedings are taken that the person is or may be liable in respect of the negligence, default or breach 2 John Story, Chairman of Suncorp and Tabway quoted in the article...
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...A++PAPER;http://www.homeworkproviders.com/shop/ba-260-week-6/ BA 260 WEEK 6 BREACH OF DUTY BA 260 WEEK 6 BREACH OF DUTY, In the case of the Mississippi Beef Plant case, duty of loyalty was breached. Mr. Hall duties and obligation were to get the beef plant built and running based on the $22 million budget he estimated. This did not happen and initial estimated price rose to $55 million dollars upon completion. In this situation, the issue of self-interest arose in the form of Mr. Hall paying his family member nearly $45,000 dollars to act as a consultant on the project. Secondly, as a means of providing and supporting his family, and maybe for financial gain, Mr. Hall also gave $269,000 or fraudulent obtained grant money to other family members. To make matters worse, Mr. Hall also had the construction company building the beef plant to pay him a 1% consulting fee totaling $173,130 and allegedly had the same construction company to perform nearly $20,000 in work on his personal home. According to the article, nearly $270,000 in false invoices were submitted to the Mississippi Development Authority and Community Bank for equipment and other items and demanded more than a $87,000 payment for several other miscellaneous items. In the end, the plant only functioned for several months and shortly afterwards, Mr. Hall defaulted on the $35 million loan and the bank and the state were unable to sell the property. In the situation, Mr. Hall had a responsibility as a director...
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...BA 260 WEEK 6 BREACH OF DUTY, A+ Graded Tutorial Available At: http://hwsoloutions.com/?product=week-7-consideration Visit Our website: http://hwsoloutions.com/ Product Description BA 260 WEEK 6 BREACH OF DUTY, In the case of the Mississippi Beef Plant case, duty of loyalty was breached. Mr. Hall duties and obligation were to get the beef plant built and running based on the $22 million budget he estimated. This did not happen and initial estimated price rose to $55 million dollars upon completion. In this situation, the issue of self-interest arose in the form of Mr. Hall paying his family member nearly $45,000 dollars to act as a consultant on the project. Secondly, as a means of providing and supporting his family, and maybe for financial gain, Mr. Hall also gave $269,000 or fraudulent obtained grant money to other family members. To make matters worse, Mr. Hall also had the construction company building the beef plant to pay him a 1% consulting fee totaling $173,130 and allegedly had the same construction company to perform nearly $20,000 in work on his personal home. According to the article, nearly $270,000 in false invoices were submitted to the Mississippi Development Authority and Community Bank for equipment and other items and demanded more than a $87,000 payment for several other miscellaneous items. In the end, the plant only functioned for several months and shortly afterwards, Mr. Hall defaulted on the $35 million loan and the bank and the state were...
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...The objective of this essay is to explore the three situations in which it can be difficult to determine whether it was the defendant’s breach of duty that caused the damage in negligence, or whether it was a ‘novus actus interveniens’. Primarily this essay will address the first situation which is called Natural or “instinctive” intervention. Secondly this essay will identify the second intervention which is called intervening act of a third party. Finally this essay the will explain the third intervention which is called act of the claimant. To understand the role of these three principles the assignment will look at the different cases and the different decisions that have been decided. The first section will describe the Natural (or “instinctive”) intervention and look into the cases that have used this principle. Natural intervention is one of the forms of novus actus interveniens and is used when an unforeseeable natural event has occurred. A natural event will break the chain of causation when it causes damage simply because breach of duty has placed the claimant or their property in a position where the damage can be caused. One case which this principle was used is Carslogie Steamship Co v Royal Norwegian Government. The House of Lords and they decided the defendants were only liable for such loss of profits suffered by the defendants’ wrongful act. They determined that the heavy weather was an unforeseeable natural event and that the damages that were caused to...
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...Former Los Angeles Clippers Owner’s Breach of Fiduciary Duty Claims A tort is a violation of a duty imposed by the civil law (Beatty, Samuelson, & Bredeson 2013). A business tort, also called an economic tort, usually involves unfair practices that result in improper interference with a business contract (Beatty et al., 2013). Purpose of article This article is about the court case between former Los Angeles Clippers owner Donald Sterling and the National Basketball Association (NBA). Mr. Sterling filed a civil suit against the NBA and the commissioner for breach of fiduciary duty claims after the commissioner banned him from the NBA and fined him $2.5 million dollars (Unger, 2014). Mr. Sterling is seeking damages of more than $1 billion. The author is writing the article to discuss in detail, the complaints brought forth by Mr. Sterling. Did the NBA and Mr. Silver in fact owe Mr. Sterling the fiduciary duties listed on the complaint because of a breach of contract (Unger, 2014)? Thesis of the article The thesis of the above article is that Mr. Sterling must prove there was an existence of a fiduciary relationship with the defendant, misconduct, and damages that were caused by the NBA fiduciary’s breach (Unger, 2013). Key Points/facts The key point evident in the article is the private conversation between Mr. Sterling and his then girlfriend Vivian Stiviano. Vivian Stiviano recorded the conversation between her and Mr. Sterling without his knowledge. Mr. Sterling...
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...certain elements need to be present so that a reasonable measure of success can be ensured in the outcome. Elements of Negligent Tort Negligence is the omission to do something, which a reasonable man, guided upon those considerations which regulate the conduct of human affairs would do or doing something, which a prudent, and reasonable, man would not do’ The essential elements of negligent tort are 1) Duty of reasonable care, 2) Breach of duty of care, 3) Breach was actual, and proximate cause of injury .Tort is what is in the tort books but only thing holding it together is their binding’, hence to win a negligence case, plaintiff must prove each of three elements. Duty of reasonable care: According to Negligence law, normally members of society should behave in ways that avoid the creation of unreasonable risks of harms to others. The standard for assessing such conduct is called µreasonable care standard and in most cases the duty to exercise reasonable care, serves as the relevant duty for the purpose of a negligence claim’s first element . Breach of duty: This is the second element of negligent tort, which requires plaintiff to establish that defendant failed to act as a reasonable person would have acted, thus negligent law’s focus on...
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...Introduction - Director’s duties Even though the law recognizes corporations as separate and distinct entities from the owners, it nevertheless recognizes that corporations act through people. Such people are referred to as directors and manage the activities of a corporation. In Lennard’s Carrying Co. v. Asiatic Petroleum Co. Ltd, the court observed that directors are the directing mind and will of the company. Accordingly, directors of a company act for and behalf of the company, and as such owe several duties to the company. These duties are at common law and also statutorily provided for. In the U.S., there is no single statute codifying these duties, and as such states are given the latitude to legislate on the issue (Clarke, 2007). Majority of other commonwealth contries however have a codified statute dealing with such issues. From a general perspective and subject to state law, director’s duties at common law apply to all states. It is imperative to note that these duties are owed to the company and not to the owners or shareholders. In Percival v. Wright, the court held that directors are not agents of the shareholders, but rather agents of the company as a whole. Importantly also, these duties also bind any person lawfully authorized by the directors, to act on behalf of their behalf. At common law, the duties of directors fall into two categories: the duty of care and skill in the conduct of the affairs of the company; and fiduciary duties of good faith and loyalty...
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...17) I) Unconditional vs. Conditional Duties A) Unconditional Duty – duty to perform is absolute. It doesn’t depend on anything but the passage of time. B) Conditional Duty – a duty that depends on the occurrence or nonoccurrence of some other event. 1) Condition Precedent – a future event, the occurrence of which gives rise to a duty to perform Failure of condition occurs when the condition precedent did not occur, thus failure to perform is not considered a breach. The party must use their best effort. a) Based on Satisfaction i) Express Condition Precedent of personal satisfaction – one party’s duty is conditional on being personally satisfied A) Objective Test 1. “Reasonable Person Standard” – would a reasonable person be satisfied? a. Based on mechanical fitness and suitability for a particular thing B) Subjective Test 1. Actual Personal Satisfaction a. Based on aesthetics, taste, comfort ii) Satisfaction of Third Party – a duty is conditioned on some third party being satisfied with performance A) The third party must be acting in good faith 2) Concurrent Conditions – each party’s duty is conditioned on the other party showing up willing to perform 3) Condition Subsequent – a future event, the occurrence of which discharges the duty to perform 4) Express Condition ...
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...defendant to refrain from doing something" (p.1). This paper will give two scenarios of two different torts. The first tort will be Breach of Fiduciary Duty. The paper will also show how Breach of Fiduciary Duty can be avoided and how the situation could have been avoided. The second tort will be Injurious Falsehood. This paper will also show how Injurious Falsehood can be avoided and how the situation could have been avoided. Breach of Fiduciary Duty Corporation A files for bankruptcy. The directors of the corporation recommend what seems to be a good restructuring plan. The plan relies on maintaining the current business contracts for the success of the corporation. The reconstruction was formulated under false pretenses. After authorization of the plan, the directors of the corporation proceed to reroute the business contracts that would have permitted Corporation A to effectively reorganize to Corporation B. Corporation B is completely owned by the directors of Corporation A. Because of the directors take over of Corporation A's business contracts, the reformation of the Corporation A falls short. This is a blatant Breach of Fiduciary Duty. According to "U.S.legal" (2001-2012), fiduciary duty is defined as "an obligation to act in the best interest of another party. For instance, a corporation's board member has a fiduciary duty to the shareholders, a trustee has a fiduciary...
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...person a duty of care; and 2.They breach the duty of care; and 3.Their breach causes the other person to suffer reasonably foreseeable harm 1. DUTY OF CARE RELATIONSHIP - between parties, does one owe a duty of care to other? Doctors owe DOC to patients AN EXISTING RELATIONSHIP BETWEEN PARTIES WHERE THE DEFENDANT HAS ASSUMED RESPONSIBILITY FOR THE PLAINTIFF – DUTY OF CARE OWED. TAME V NEW SOUTH WALES [2002] PG. 188 – Established relationship between defendant and plaintiff – duty of care owed NO RELATIONSHIP - REASONABLE FORESEEABILITY - To establish a duty of care, at the time of the incident it was reasonably foreseeable that the defendants conduct could cause harm to someone in the plaintiffs’ position. DONOHUE V STEVENSON [1932] PG. 186 – Manufacturers owe a duty of care to consumers. If harm to the plaintiff wasn’t reasonably foreseeable, the defendant will not owe a duty of care BOURHILL V YOUNG [1943] PG. 186 or Only needs to be shown that some kind of harm to someone in the plaintiffs position could be caused by the defendants conduct. Reasonable person foreseen possible harm CHAPMAN V HEARSE [1961] PG. 187 – chain reaction – possible harm – owed duty of care to cherry SALIENT FEATURES OF THE CASE PG.187/88 – Court will consider relationship of parties and other features of the case and then compare those features of other cases where a duty of care exists. - SULLIVAN V MOODY [2001] PG. 187 – Does a doctor owe a D.O.C to a parent of a patient? – No. 2. BREACH OF THE...
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...* Duty of care and dillgence – statute law – s180 * S588G imposes a duty upon directors to prevent their company trading whle it is insolvent . s588G requires directors to be continually monitoring the financial status of their coy (* only apply to directors) * S181 – duties to act in good faith in the interest of coy and for a proper purpose * S 191 – duties to avoid conflicts of interest * S182&S183 – not to make improper use of position or information (* apply to employee) * S9 – define officer of coy- have management responsibility relation to a coy in financial difficulties * Generally the duty will be owed to the members as a collective whole (not a minority) that should be considered by directors: * Generally there will be no duty owed to individual shareholders; The director needs to have been in direct and close contact with the individual member so that the director caused the member to act in a certain way which turned out to be detrimental to them: Here, the facts are similar to Brunninghausen v Glavanics, where a fiduciary arose to the individual. In that case there were only 2 shareholders (both were directors also), and B convinced G to sell their shares and resign as director so that B could act on an offer of sale (unknown to G). An individual fiduciary duty was found because G was the company, aside from B, and G relied on B for information about the company. Our situation is similar in that [reasons] and therefore [director]...
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...Part A a) The issue of this question is that whether Charles should pay for the damaged milk tins or not. To begin with, we should discuss the elements of contract first. They are offer, acceptance, consideration, intention, mutuality, capacity and legality. In this case, we are focusing on the offer, acceptance, intension and capacity. The milk tins displayed by the supermarket are considered as a display of goods but not an offer in order to invite the buyers to make an offer. It is one of the examples of Invitations to treat so that this display of goods is a statement made to others inviting them to make an offer. Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401 is the case to explain this concept. An invitation to treat is when someone invites other else to make him an offer. As a result, the buyer is the offeror and the supermarket is offeree. Once the buyer made an offer, there must be an acceptance to form a contract. That means if the buyer agree to buy, the seller agree to sell, then it will be a bilateral contract. The consideration of buyer is the goods and the consideration of seller is the payment. The definition of consideration is found in Dunlop Pneumatic Tyre Co Ltd v Commonwealth (1954). The contract will only become an offer when the person accepts the customer’s offer. In this case, Charles didn’t make an offer to buy the milk, so whatever reaction the supermarket has, even force Charles to buy, it can’t be...
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...In the essay given, it identifies fiduciary duties of directors as the main issue. There are a few consequences of breaching fiduciary duties. Under general law, a failure to disclose a conflict of interest rendered the transaction voidable at the option of the company. Aside from rescinding the contract, the company can seek to obtain a range of remedies such as an injunction to stop the breach of duty continuing, a constructive trust over assets acquired arising from the breach of duty, an account of profits to strip away gains made by the breach of the duty or equitable compensation. For contraventions of the statutory duties, both ss182 and 183 are civil penalty provisions under s1317E. Therefore, breach of these provisions may result in a declaration of contravention being made by the court and thereafter ASIC may apply for a pecuniary penalty order (s1317G) and/or a disqualification order (s206C) and/or compensation for the company (s1317H). A serious contravention of ss182 or 183 which is dishonest or reckless may result in a criminal liability under s184 (2). This action may be taken by ASIC and/or the Commonwealth Director of Public Prosecutions. The word ‘fiduciary’ has its roots in the Latin word fiducia, which means trust or confidence. A fiduciary duty is a legal duty to act solely in another party’s interest. Parties owing this duty are called fiduciaries. The individuals to whom they owe a duty to are called principals. Fiduciaries may not profit from their...
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...They owe the other person a duty of care; and b.) They breach the duty of care; and c.) Their breach causes the other to suffer reasonably foreseeable harm -Even if all 3 elements are established, defences still apply (know these) i.e.) Voluntary assumption of risk and contributory negligence Owing a duty of care -duty of Care established if relationship fall within one of the ‘established categories’ of duty of care -Established categories= doctor teacher manufacturer, etc -If the relationship does not fall within established categories, PI must establish that two tests are satisfied: a.) was it reasonably foreseeable that the Def’s conduct could cause harm to someone in the PI’s position? b.) are the salient feature of case, consistent with existence of duty of a care ? Salient features could include: who has control, who is vulnerable Knowledge and experience of parties; moral or ethical standards. -See Donoghue v Stevenson [1932] AC 562 Breaching the duty of care -Look to civil liability legislation – Civil liability Act -A person will not breach their duty to take precautions against a risk of harm unless: 1. The risk was foreseeable 2. The risk was not insignificant 3. In the circumstances, a reasonable person in the position of the person would have taken the precautions For 3 both the probability that the harm would occur if care were not taken and the likely seriousness of the harm are considered. The breach causes the other to suffer...
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...to grow economically. It ranges from unreasonably high productivity standards and hazardous working environment that make worker to become vulnerable to risk to t heir mental and physical health. The ultimate outcome is unhealthy workforce that is relatively less productive than the relaxed and contented workforce. The business entrepreneurs and the workers alike are faced with the problem of continuous work related stress and thus the policies and decisions are hence regulated by the law. To this end, the common law duty of care is a provision that was designed to hold employers liable for psychiatric related illness that employees suffer and more specifically illness arising because employees are made to work under stressful conditions. This paper is aimed to critically evaluate the common law duty of care and its effectiveness with respect to psychiatric related illness as a result of working under stressful condition. The establishment of the common law of duty towards workers has enhanced employers to provide good working conditions to lower psychiatric related illness due to workers stress. The claims in the psychiatric injury bin the work place context have not been restricted to involvement of the plaintiff being injured or witnessed the death injury of another. These claims include to circumstances such as less traumatic but still damaging and stressor that arise in the workplace like bullying and work stress (Butler, 2006). The work place stress is perceived as problematic...
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