Australia: directors, calculated risks and the duty of care and diligence

The Federal Court of Australia gave judgment last month in Australian Securities and Investments Commission v Mariner Corporation Ltd [2015] FCA 589. Amongst the matters considered by the trial judge, the Hon Justice Beach, was the duty of care and diligence imposed on company directors by section 180 of the Corporations Act 2001. With regard to the role of directors, Justice Beach observed (para. [452], emphasis in the original):

... one expects management including the directors to take calculated risks. The very nature of commercial activity necessarily involves uncertainty and risk taking. The pursuit of an activity that might entail a foreseeable risk of harm does not of itself establish a contravention of s 180. Moreover, a failed activity pursued by the directors which causes loss to the company does not of itself establish a contravention of s 180".