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confidence, a trustee who has been entrusted with company‟s money to act on its
behalf, and hence a very high standard of duty is required of them. 27 In addition, a
director can also be seen as an agent acting on behalf of the company, its principal. 28
Due to the doctrine of separate legal personality, the courts have traditionally always
held that directors owe a duty to the company. However a company‟s legal
personality is a creation of law, and in reality it comprises a web of relationships
between various parties whose interests depend on the director‟s actions. 29
Therefore, it is essential to determine whose interests, among these various
stakeholders, represent the interests of the company.
The law has always associated the company‟s interests to be that of the shareholders‟
and held that their interests represent the interests of the company. 30 Recently, the
law has begun to recognize the interests of other players in the company, including
the creditors. 31 Creditors had always been overlooked by the law in the past because
they were perceived to be outsiders who could protect their own interests. 32
employee and a professional adviser - see also Peter Loose, Michael Griffiths and David Impey The
Company Director Powers, Duties and Liabilities (10 th ed., Jordans, Bristol, 2008) at 127; Robert P
Austin and Ian M. Ramsay Ford’s Principles of Corporations law (14 th ed., Lexis Nexis
Butterworth, NSW, 2010) at [8.010].
27 See Flannigan ibid; directors‟ position in a company is in fact a fusion of several elements - an
agent, a trustee, an employee and a professional adviser- see also Loose, Griffiths and Impey ibid.
28 Ibid.
29 See discussion in Chapter 6.
30 Re Smith & Fawcett Ltd [1942] 1 All ER 542; Greenhalgh v Arderne Cinemas Ltd [1951] Ch 286.
31 The acknowledgement of duty to creditors, however, is limited to the situation where a company is
insolvent; see Walker v Wimborne (1976) 3 ACLR; West Mercia Safety Ltd (in liq) v Dodd (1988)
BCLC 250; Nicholson v Permakraft (NZ) Ltd [1985] 1 NZLR 243; Kawin Industrial Sdn Bhd (in
liquidation) v Tay Tiong Soong [2009] 1 MLJ 723.
32 Paul Halpern, Michael Trebilcock and Stuart Turnbull, “An Economic Analysis of Limited Liability
in Corporation Law” (1980) 30 Uni Toronto LJ 117 at 135; Vanessa Finch, “Security” above n9 at
641; Vanessa Finch, “Directors‟ Duties: Insolvency and Unsecured Creditor” in Alison Clarke
(Ed.), Current Issues in Insolvency Law (Stevens and Sons Ltd, London, 1991) 87.
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