Liability of Drago as a Director

0Running head: COMMERCIAL & CORPORATION LAW
Commercial and Corporations Law
Name of the Student
Name of the University
Author Note

COMMERCIAL & CORPORATIONS LAW
Issue 1
To determine whether the duties of a director has been contravened by Drago, Clubber
and Rocky.
Rule
The directors of a corporation are formed as agents of the company and hence, their overall
role of a company can be stated to be fiduciary in nature. The case of United Petroleum
Australia Pty Ltd v Herbert Smith Freehills [2018] VSC 3471 tends to imply that in case the
director has been employed as the overall caretaker of the business then, they are required to get
into dealings which are beneficial for the long run of the firm. The given statement can be
supported by the case Commonwealth Bank of Australia v Friedrich 1991 ACSR 1152. This case
tends to reflect that the director is responsible for the overall welfare of the firm both by the
virtue of the common law as well as Corporations Act 2001 (Cth)3 (CA)`s provisions. The law
tends to determine that, it remains the duty of a director to ensure that they are successfully able
to conduct their duties and take decisions in favour of the company and in addition to this, they
will be required to ensure that they refrain from the activities which tend to deviate them from
their duty or may lead to the impairment of the firm. This statement can be backed by the case
example of Jubliee Mines NL v Riley (2009) 253 ALR 673; 69 ACSR 6594.
1 United Petroleum Australia Pty Ltd v Herbert Smith Freehills [2018] VSC 347
2 Commonwealth Bank of Australia v Friedrich 1991 ACSR 115
3 The Corporations Act 2001 (Cth)
4 Jubliee Mines NL v Riley (2009) 253 ALR 673; 69 ACSR 659.

COMMERCIAL & CORPORATIONS LAW
The different directors of a company will be required to undertake a duty so as to ensure
that their conduct is in line of the functions which they are required to carry out and in order to
see to it that, they put their overall discretion in the right manner. Their actions need to reflect
due diligence in the workplace. The section 180(1) of the CA5, tends to provide this particular
duty of a director and the given duty has also been reflected in the case study of R v Byrnes and
Hopwood (1995) 183 CLR 5016. It has been mentioned that if a director wants to enable the
duties, then he will be required to act in accordance with the conscience as applied for a
reasonable individual under a normal circumstance. The particular statement can be supported by
the case study of the United Petroleum Australia Pty Ltd v Herbert Smith Freehills [2018] VSC
3477.
Another aspect which can be considered to be considerably important can be referred to
as the existence of good faith with respect to the actions of the different directors. As per the
duty of the good faith, it is important for a director to undertake an act in a manner which will
bring about efficient results for both the company and the employees and all their actions must
be backed by proper reasoning which will ensure that, the overall results of the operations can be
achieved. This has been provided in the 181th section of the Corporation Act8. The statement has
also been supported by the case Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982]
HCA 449
5 The Corporations Act 2001 (Cth), s. 180(1)
6 R v Byrnes and Hopwood (1995) 183 CLR 501
7 United Petroleum Australia Pty Ltd v Herbert Smith Freehills [2018] VSC 347
8The Corporations Act 2001 (Cth), s. 181
9Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44

COMMERCIAL & CORPORATIONS LAW
In addition to this, it can also considered to be very important that the directors are liable
to the firm and required to act under an obligation to restrain from engaging in any act with the
primary motive of a personal gain without any advantage to the firm. The case of Australian
Securities and Investments Commission v Project Management (Aust) Pty Ltd [2019] FCA 4710
serves as a good example of this rule.
Application
It can be largely understood that, the DEF ltd was a mining and exploration based
company in the Northern Territory and as the directors of the firm, Drago, Clubber and Rocky
had certain responsibilities towards the firm. Rocky held the position of the Chief Executive
Officer and Clubber was the chairman of the firm. Additionally, Drago held the position of the
Chief Financial officer of the organization. Hence, as mentioned previously, they need to be held
reliable for their overall activities and all their actions need to be beneficial for the firm, and
under no means they should be fair in nature. The statement can be largely supported by the case
of United Petroleum Australia Pty Ltd v Herbert Smith Freehills11.
Hence, after some initiation of the different operational activities of the firm and the sites
drilling, a geological survey had been carried out which had resulted in the testing of the mines
and it was disclosed from this that, the mines were not commercial and had little to no level of
gold deposits as present. Hence, in line of this it could be rightfully constituted from the
10 Australian Securities and Investments Commission v Project Management (Aust) Pty Ltd [2019] FCA 47
11 United Petroleum Australia Pty Ltd v Herbert Smith Freehills [2018] VSC 347