Law the duty of care is present under both common law

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Law: The duty of care is present under both common law and statute.Common Law duty of care:Daniels v Anderson(1995) 37 NSWLR 438: In this case, the NSW Court of Appeallargely agreed with Rogers CJ analysis of the modern duty of care and diligence(inAWA v Daniels(1992) 9 ACSR 383). Executive directors owe an objective duty ofcare toward the company.However, in relation to the subjective view of a director'sduties, Sheller and Clarke JJA considered that although a board comprised directorswith different areas of experience and backgrounds, the duty ofeach director(executive or non executive) went beyond that of representing a particular field ofexpertise. The Court of Appeal considered that all directors in a company should:become familiar with the business of the companyknow how the business was runensure the board had the means to audit the managementto satisfy itself thatit was being run properly, andattend as many board meetings necessary to carry out its functions properly.Thus theDanielscase clearly established that the duty of directors was to be assessedobjectively, and ignorance, inexperience or delegation that is not reasonable will notbe a defence. Their Honours also stated that the duty will vary according to the sizeand business of the particular company and the experience or skills that the directorheld themselves out to have when they took the appointment.Statutory duty of care:The statutory duty of care and diligence can be found under s180(1).It is very similar to the common law duty of care, skill anddue diligence.Vines v ASICnoted that the statutory standard does not involve ahigher threshold than the common law negligence.The court will apply an objectivetest and check if a reasonable person would act in the same way as the directors.Inmaking this decision, the court will consider a number of factors such as the expertiseof the director and the manner in which the responsibilities are distributed in thecompany.In deciding what a reasonable person would do, the court may consider themagnitude and probability of the risk and any conflicting responsibilities thedefendant may have.
The primary difference between these duties relate to the consequences of breachingthe duties rather than the content of the duties (see below: Consequences of breach ofthe duties). However a breach of the duty of care will not leadThere are a number of defences that may be relied on by a director if they are sued fora breach of duty of care under both common law and statute and they are thefollowing:- Delegation:190(2): The directors may use the delegation defence if two elementsare there and they are:* The directors believe on reasonable ground that the delegate is exercising his dutiesproperly; and* The directors believed on reasonable ground and in good faith and after makingproper inquiries that the delegate was competent and reliable.

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