Australian company directors' duty of care
5 September 2011
Professor Jennifer Hill
The Centro Properties Group case shows that there are shades of difference in the principles to be applied at the liability and penalty stages of a trial, write Professor Jennifer Hill and Dr Robert Austin.
In an article for The Conversation, they assert the Federal Court ruling in the Centro Properties Group case in June has been viewed by many as significantly raising the legal bar in relation to Australian company directors' duty of care.
Yet the penalties imposed on Centro's executives and directors last week were described by some media commentators as too lenient.
How can we explain this apparent gap in severity between judgment and the penalty? A close examination of Justice John Middleton's judgments in this case provides some answers.
Dr Robert Austin
In proceedings brought against Centro's directors and financial officer, the Australian Securities and Investments Commission (ASIC) alleged that the directors had breached their duty of care and diligence- and their duty to ensure compliance with financial reporting laws- by failing to detect major errors in Centro's financial statements.
Justice Middleton agreed, and ruled that the directors failed to exercise due care and diligence.
But while the liability judgment found that the managing director and non-executive directors had all breached their duties of care and diligence, the recent penalty judgment distinguishes between them in terms of the penalty outcomes of those contraventions.
Contact: Greg Sherington
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