Question

Hoping to make his flight on time, Tom (the CEO of ABC Pty Ltd) signed a stack of paperwork on his desk without reading what he was signing. Unfortunately, one of the documents he signed authorised a high-risk investment which caused shareholders to lose millions of dollars.

Required:

(a) With reference to CA s 180, how does the court decide whether a director acted with care, skill and diligence?

(b) Analyse whether Tom breached his duty of care to the company.

(c) Analyse whether Tom qualifies for a defence under the business judgment rule. You must refer to relevant law

Answer 1

Answer:A

The court has to be satisfied by the directors and convinced that while signing the contract he had taken all the care and diligence and mischief was beyond his control and due process in the board meeting taken and no material interest of directors vested .

Then after convincing by Director the court will decide whether the director has cared and taken dilligence while acting as director .

Answer: B

True , Tom Breached his duty Towards company . Section 180 mandates directors being trustee of company property to take Reasonable care, exercise dilligence, skills in acting for the company good faith .

He Signed documents ithout reading was negligent in the companies business by him is the Breach of duty .

Answer: C

yes, if he has no conflict of interest with the business transacted.

The rule establishes a presumption that directors' decisions are based on sound business judgment, and it prohibits courts from interfering in business decisions made by the directors in good faith and in the absence of a conflict of interest.

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