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Directors must weigh any particular decisions in good faith and belief that any action
taken is in the furtherance of the company‟s interests in the future. 92 If they do so, it
will be very difficult for the court to find them liable for failure to consider creditors‟
interests. Case law has suggested that as long as directors have acted in good faith
they will be protected from liability even when their decisions are not in the
shareholders‟ best interests. 93 When making decisions on the issue of whether
directors have breached the duty to consider creditors interests, courts would have to
look at various aspects and balance them accordingly before making any judgment.
The courts‟ function to decide whether directors have breached their duty has also
been subjected to scrutiny. The concern is whether courts are the appropriate forum
to decide on risk-taking since judges do not have expertise in commercial matters. 94
Some decided cases, 95 however, have proved otherwise, with judges giving thought
to various considerations before making decisions. In Facia Footwear Ltd (in
administration) v Hinchliffe, 96 the court emphasized that there has not always been a
clear perimeter between acceptable risks and non-acceptable risks, hence careful
consideration is important. These cases have demonstrated that despite having to
consider various competing interests, judges are able to make fair and competent
92 Gregory V. Varallo and Jesse A. Finkelstein “Fiduciary Obligations of Directors of the Financially
Troubled Company” (1992) 48 Bus Law 239 at 243.
93 Re W & M Roith Ltd [1967] 1 WLR 432; Punt v Symons & Co Ltd [1903] 2 CH 506; Hoggs v
Cramphorn Ltd & Ors [1967] Ch 254.
94 Cheffins above n8 at 543.
95 See decisions in Nicholson v Permakraft (NZ) (1985) 3 ACLC 453; Re Welfab Engineers Ltd [1990]
BCC 600; Linton v Telnet Pty Ltd (1999) 30 ACSR 465; Brady v Brady (1988) 3 BCC 535 where
court have considered various factors and decided in favour of the directors.
96 [1998] 1 BCLC 218 at 228.
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