What Are The Pros And Cons Of Asic V Doyle & Anor

• an order to compensate for loss (s 1316H)

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 a company from the conduct in question’ (ASIC v Doyle & Anor).

DEFENCES IN CASES OF BREACH OF DUTY

Directors can raise the following defences if a breach of the duty of care is alleged:

1. reliance on a decision made by another person

2. delegation of decision-making power to another person

3. application of the business judgment rule

1. RELIANCE ON OTHERS

Decisions made for the company should be informed decisions. Consequences should be carefully considered, and, if needed, pro- fessional advice should be sought before the pros and cons of each option are weighed up.

Asking for an expert opinion is vital when directors lack the competence and necessary knowledge to make a well-informed decision.

But reliance on an expert opinion must be made only if it is proper to do so in the circumstances. It may be inappropriate on the part of the director and a breach of his or her duties if the director ‘know(s), has reason to know or should have known’ by the exercise of reason- able care and diligence that such opinion is not correct or inaccurate (ASIC v McDonald).

When is reliance on others appropriate? The Act (s 189) allows directors to rely in good faith on information or advice given by a person other than a director. A director’s reliance on the information or advice is generally assumed to be reasonable unless it can be shown otherwise.

A director might rely on information, or professional or expert advice, from:

• an employee the director reasonably thinks is reliable

• a professional adviser or expert

• another director or