Australia: NSW Court of Appeal on corporate governance and care and diligence

The New South Wales Court of Appeal gave judgment last Friday in Morley v Australian Securities and Investments Commission (No 2), Shafron v Australian Securities and Investments Commission (No 2) [2011] NSWCA 110, further James Hardie litigation: see here. There is much of interest in this decision regarding the disqualification of directors and the circumstances in which directors should be relieved from liability for breach of duty under Sections 1317S and 1318 of the Corporations Act (2001).

Amongst the decisions reached by the court was the rejection of the argument that two individuals (a former director and former secretary/general counsel of a public company) should be relieved from liability under Section 180 ("care and diligence") of the Corporations Act (2001), the court stating: "Proper corporate governance and business activity depend on business leaders adhering to standards not only of honesty but also of care and diligence..." (para. [52]).