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In the UK wrongful trading law, the section clearly indicates that both subjective
and objective tests are to be applied. The court in ascertaining directors‟ liability
has to consider the general knowledge, skill and experience reasonably expected
from a director carrying out the same function as well as the knowledge, skill and
experience of that particular director in doing so. 47
In Australia, a reasonable director test is the minimum standard, which all
directors have to adhere to. Directors are absolved from liability as long as they
act as a reasonable person in a like position would have acted. In the UK, the
court will have to take into account firstly, the general knowledge, skill and
experience reasonably expected from a person occupying the same position in the
company. However, acting as a reasonable person would have does not
necessarily release directors from liability; the court must also take into account
the general knowledge, skills and experience the particular director has before
deciding on his liability. As such, in the UK directors are subjected to a much
higher test than in Australia because there is a two tier test that they have to go
through.
In New Zealand, the directors‟ own perceptions of the risk are irrelevant and they
are assessed on the objective standard of an ordinary prudent director. Due to
this, there is a possibility of the court heavily relying on the evidence of
insolvency practitioners and it may substitute its own hindsight in deciding
whether the directors‟ action is justified.
10.2.8 Defences
Australia has a list of defences available to directors and this is more
comprehensive than in the UK and New Zealand. Directors can defend
themselves from insolvent trading in a number of circumstances, namely, if at the
time debt was incurred the director had reasonable grounds to expect and did
47 See sections 214 (4) (a) and (b) of the Insolvency Act 1986.
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