Commercial and Corporations Law

Running head: COMMERCIAL AND CORPORATIONS LAW
Commercial and Corporations Law
Name of the Student
Name of the University
Author Note

1COMMERCIAL AND CORPORATIONS LAW
Issue 1
Whether any of duties as a directors has been contravened by Clubber, Drago and Rocky.
Rule
The directors of a company are construed to be the agents of the company and owes a
relationship of fiduciary nature towards the company. This can be supported with the case of
Lagunas Nitrate Company v. Lagunas Syndicate, [1899] 2 Ch. 3921. This implies a
relationship of trust that a director has with the company and under this, they are required to
ensure the matters that are beneficial for the company. This can be illustrated with the case of
United Petroleum Australia Pty Ltd v Herbert Smith Freehills [2018] VSC 3472. This has
been imposed by the director both by virtue of the common law as well under the provisions
of the Corporations Act 2001 (Cth)3 (CA). Under this duty the directors should ensure their
conducts to be in conformity with benefits of the company and it should by every means
refrain from indulging in any activity, which has the effect of causing impairment to the
company. This can further be supported with the case of Parkdale Custom Built Furniture
Pty Ltd v Puxu Pty Ltd [1982] HCA 444.
The directors pertaining to a company is required to ensure their conduct in the
furtherance of exercising their functions as directors to be effected of a proper purpose, it
have been carried out with utmost care and there needs to be a reflection of diligence in the
actions of the directors. This duty pertaining to the directors has been provided in section
180(1) of the CA5. This can be illustrated with the case of Australian Securities and
Investments Commission v Project Management (Aust) Pty Ltd [2019] FCA 476. The extent
1 Lagunas Nitrate Company v. Lagunas Syndicate, [1899] 2 Ch. 392
2 United Petroleum Australia Pty Ltd v Herbert Smith Freehills [2018] VSC 347
3 The Corporations Act 2001 (Cth)
4 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44
5 The Corporations Act 2001 (Cth), s. 180(1)
6 Australian Securities and Investments Commission v Project Management (Aust) Pty Ltd [2019] FCA 47

2COMMERCIAL AND CORPORATIONS LAW
of the standard relating to care that the director is required to extend while conducting his
functions as a director is to be construed with respect to the conscience of a reasonable
individual who has been subjected to the similar situation. This can be backed by the case of
Hawes v Dean [2014] NSWCA 3807.
The existence of good faith in the actions of the directors are also required to be ensured in
the conduct of the directors with respect their functions as a director in the company. This
good faith requires the director to act in a way that will guarantee the best concern with
respect to the company. All their acts are required to be carried out in pursuance of a proper
cause. Section 181 of the CA8 contains This comes in line with the case of ASIC v Sydney
Investment House Equities Pty Ltd [2008] NSWSC 12249.
The directors are under an obligation to refrain from indulging into any activity that has
the chief motive of earning personal advantage to them without effecting any advantage to
the company. This can be explained with the case of ASIC v Managed Investments Ltd & Ors
(No. 9) [2016] QSC 10910.
Application
In the instant scenario, DEF Ltd was the mining as well as exploration based company in
the Northern Territory. Its directors are Clubber, Drago and Rocky. Rocky holds the position
of the Chief Executive Officer of the company. Drago is a chairman of the company. Dragon
held the position of the Chief Financial Officer of the company. This can hold them to be the
directors of the company and they are under an obligation to guarantee their actions while
conducting the business of the company to be beneficial to the company and they should
undertake all means, which is fair to restrict any detriment being caused towards the
7 Hawes v Dean [2014] NSWCA 380
8 The Corporations Act 2001 (Cth), s. 181
9 ASIC v Sydney Investment House Equities Pty Ltd [2008] NSWSC 1224
10 ASIC v Managed Investments Ltd & Ors (No. 9) [2016] QSC 109