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expect that the company was solvent or would remain solvent, 48 or has reasonable
grounds to believe and did believe the competency and reliability of the third
party‟s information that the company was solvent or would remain so. 49
Although the UK wrongful trading law does not provide for reliance on a
competent third party advice as one of the statutory defences, the courts do take
that factor into consideration when deciding directors‟ liability. The courts will
look at actions taken by directors when first confronted with the realisation that
the company was insolvent, and cases have indicated that courts are sympathetic
to directors who engaged professional advice and heeded it. In re Bath Glass
Ltd 50 the court refused to make a disqualification order against the directors on
the basis that among other actions, that they had sought and acted on the advice
of a professional accountant. In addition, they had also made regular forecasts of
the company‟s financial status and also reviewed them accordingly. 51
Nevertheless, directors who prolong liquidation and continue trading on the
advice of professional auditors or accountants will not necessarily be able to
escape liability if it turns out to be a wrong decision. 52
Likewise in New Zealand, this type of defence is not specifically mentioned in
either section 135 or section 136, although it is an exonerating factor under
48 Section 588H(2) of the Corporations Act 2001- "It is a defence if it is proved that, at the time
when the debt was incurred, the person had reasonable grounds to expect and did expect, that the
company was solvent at that time and would remain solvent even if it incurred that debt and any
other debts that it incurred at that time."
49 Section 588H (3) of the Corporations Act 2001 –„ without limiting the generality of subsection
(2), it is a defence if it is proved that, at the time when debt was incurred, the person:
(a) had reasonable grounds to believe, and did believe:
(i) that a competent and reliable person (the other person) was responsible for
providing to the first-mentioned person adequate information about
whether the company was solvent; and
(ii) that the other person was fulfilling that responsibility; and
(b) expected, on the basis if information provided to the first-mentioned person by the other
person, that the company was solvent at that time and would remain solvent even if it
incurred that debt and any other debts that it incurred at that time.‟
50 [1988] BCLC 329.
51 See also Re Douglas Construction Services Ltd [1988] BCLC 397.
52 Fidelis Oditah “Wrongful Trading” (1990) LMCLQ 205 at 208-209.
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