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company later went into liquidation and the liquidator brought an action against the
directors for breach of duty. In this case, it was clear that the creditors‟ interests were
affected since the company went into liquidation. It is also clear at common law that
when the company is insolvent, directors have a duty to consider the interests of
creditors. 81 Directors can also be charged under criminal breach of trust if they are
found using the company‟s funds for their own purposes and not for the
company‟s. 82
Another example of directors acting in conflict of interests is when directors use the
information available to them by virtue of being directors to take up corporate
opportunities and deprive the company of the same opportunity. 83
9.3.5 Duty of Care and Diligence and Skill
Unlike the law on conflict of interest, the law in this area in the past has been very
lenient in imposing a low standard of duty of care and skill on directors. The law on
this aspect has taken the view that business involves risks and it may hamper
commerce if directors are reluctant to take the risks for fear that they may be held
liable for breach of duty. 84
The traditional approach of the law in this area is that directors will be judged on the
basis of what the ordinary person having characteristics similar to the directors in
question might be expected to have acted on their own behalf. 85 There has been a
81 Walker v Wimborne (1976) 137 CLR 1.
82 Tan Sri Tan Hian Tsin v PP [1979] 1 MLJ 73; Chang Lee Swee v PP [1985] 1 MLJ 75.
83 The Board of Trustees of the Sabah Foundations & Ors v Datuk Syed Kechik bin Syed Mohammed
& Anor [1999] 6 MLJ 497; see also the statutory duty under section 175 of the UK Companies Act
2006; sections 182-184 of the Australian Corporations Act 2001; section 132(2) of the Malaysian
Act 1965.
84 Farrar above n35 at135.
85 Re City Equitable Fire Insurance Co Ltd [1925] Ch 407.
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