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has the necessary skills as well as experience, and uses them in a manner
considered as reliable. This section also imposes a duty on directors to monitor
and supervise in order to ensure that the third party fulfils his or her
responsibility.
In addition, a director has a burden of taking affirmative action 252 once
information is supplied, for he or she cannot depend solely on the third party‟s
information. A director must weigh the information given as a whole and must
judge the company‟s status for himself or herself with a degree of certainty.
10.5.2.6.3 Absent from Management
If a director is absent from making decisions due to illness or good reason, he or
she has succeeded in raising one of the defences under section 588H(4). The
words 'illness or other good reason' is wide and could be subjected to many
interpretations. Hence, the court should ensure that the interpretations display the
purpose of the section which is to protect creditors by preventing insolvent
trading. It should also be noted that over the years, the legislature has imposed a
greater burden on directors in order to make them more responsible and
accountable, and judicial interpretations should not undermine this philosophy.
10.5.2.6.4 All Reasonable Steps to Avoid Incurring Debts
This defence is based on the defence „took all steps‟ in the UK. Therefore, just as
in the UK, directors have to take positive action in order to depend on the
section. 253 The point was highlighted by Simos AJA in Byron v Southern Star
Group Pty Ltd 254 who decided that mere objection to the company‟s continuing
252 Metropolitan Fire Systems Pty v Miller(1997) 23 ACSR 699 at 711-712.
253 See also Robert Baxt “Does the Director Protest Too Much? When Protesting May Not be
Enough to Escape Liability Under the Insolvent Trading Provisions of the Corporations Law”
(1997) 15 C&SLJ 197.
254 (1997) 22 ACSR 553.
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