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The difficulty of maintaining separate entity is evident when the particular subsidiary
transaction benefits the whole group. 109
In Charterbridge Corporations v Lloyds Bank Ltd, 110 Pennycuick J applied a
standard of a reasonable director in the same position while in Equiticorp Finance
Ltd (in liq) v Bank of New Zealand, 111 the judges preferred the traditional approach
on directors‟ duty that if the directors fail to consider the interests of a relevant
company, then they have acted in breach of their duty. However, if the transaction is
seen to be in the interests of the company if objectively viewed, then no consequence
will flow from that breach.
In Pascoe Ltd (in liq) v Lucas, 112 the court decided that the principle in Walker v
Wimborne 113 did not apply in circumstances where the shareholders unanimously
decided that the company should act in certain ways. In other words, a director of a
wholly-owned subsidiary can act on the demand of the parent company provided that
the subsidiary company in question is solvent and the shareholders are acting intra
vires and in good faith. 114 The decision of the case is similar to the provisions in
109 Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 11 ACSR 642; Charterbridge
Corporations v Lloyds Bank Ltd(1969) 2 All ER 1185; In Linton v Telnet Pty Ltd (1999) 30 ACSR
465, the court applied the test in Charterbridge and held that even if the directors have failed to
consider the interests of a particular company‟s creditors, there would be no breach of duty if other
companies in the group have obtained derivative benefits from the directors‟ act.
110 (1969) 2 All ER 1185.
111 (1993) 11 ACSR 642.
112 (1993) 11 ACSR 642 at 387.
113 (1976) 3 ACLR 529.
114 Robert Baxt “The South Australian Full Court confirms the ability of directors of wholly-owned
subsidiaries to act in the interests of their holding company: do we need section 187 of the
Corporations Law?” (2000) 18 C&SLJ 223 at 224.
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