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liability can be imposed on them whereas liability in section 9 is solely based on a
person acting on behalf of the company. 157 There is a possibility that the decision
will be subjected to review and this has been indicated in the case of Newport v
Coburn, 158 although the Court of Appeal did not go as far as to overrule Kinsman.
The decisions in relation to personal liability of corporate agents in section 9 for
misleading and deceptive also show gross incongruity with torts law. 159
9.7 Defences Available to Directors
Directors will be able to escape liability if they can show that their decisions were
made in good faith for the benefit of the company. This concept is wide enough to
cover all aspects of directors‟ duties. In addition to this general defence, directors in
Australia and Malaysia can also rely on the business judgment rule to provide them
with refuge, although this rule is only available in respect of duty of care, skills and
diligence. In respect of conflict of interest, directors will be able to keep any profits
or benefits made if they disclose the facts at the general meeting. 160 The court has to
weigh the balance between consumer protection considerations and undesirability of
imposing unexpected liabilities on employees.
Directors should not be discouraged from investing in high risk projects as long as
they can justify that their decisions are in the best interests of the company. Directors
157 Watson above n127 at 205-206; see also Peter Watts “Editorial: Directors‟ and Employees‟
Liability under the Fair Trading Act 1986 - the scope of “Trading” (2002) CSLB 77; Neil Campbell
“Editorial: Corporate (and other) agents‟ liability under the Fair Trading Act 1986” (2006) CSLB
123.
158 (2006) 8 NZBLC 101,717.
159 Trevor Ivory Ltd v Anderson[1992] 2 NZLR 517; Williams v Natural Life Health Foods Ltd[1997]
1 BCLC 131
160 See Regal (Hastings) Ltd v Gulliver [1942] 1 All ER 378; Fur Ltd v Tomkies (1936) 54 CLR 583;
Queensland Mines Ltd v Hudson (1978) 52 ALJR 399; Statute also requires directors to make
disclosure - see section 177 of the UK Companies Act 2006; section 140 of the New Zealand
Companies Act 1993; section 131 of the Malaysian Companies Act 1965; and section 191 of the
Australian Corporations Act 2001.
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