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trading without any other action taken was not enough to take a director outside
the liability. 255
The judge in Byron quoted the decision of Hodgson J in Standard Chartered
Bank of Australia v Antico 256 stated that
there may be circumstances in which failure of a single director to seek to
persuade a managing director not to incur a debt, or to call a directors‟
meeting with a view to stopping the incurring of debts, or to resign, or to
seek to have the company wound up, could amount to giving authority or
consent to the incurring of a debt… 257
The reasonable steps which can be taken by directors include engaging
professional advice and subjecting the company to formal insolvency proceedings
although this does not guarantee exculpation of liability. 258 The section
specifically provides in subsection (6) that appointing an administrator is a
relevant factor to take into consideration.
10.5.3 Liability of Holding Company for Insolvent Trading by
Subsidiary under Section 588V-588X Corporations Act
2001
The same duty is imposed on a holding company under section 588V of the
Corporations Act 2001, albeit the holding company is only subjected to civil
liability. 259 The holding company is under a similar duty to prevent insolvent
trading by a subsidiary, and a liquidator has to prove the same elements as the
255 Compare with the UK decision in Secretary of State for Trade and Industry v Taylor [1997] 1
WLR 407 where the court refuse to find the director unfit under the Company Directors
Disqualification of Act 1986 when the director who knew of impending liquidation, failed to
influence the board‟s decision to continue trading and refuse to resign.
256 (1995) 131 ALR 1.
257 (1997) 22 ACSR 553 at [45]-[50].
258 See section 588H(6) of the Australian Corporations Act 2001.
259 See section 588W (1)(c) of the Australian Corporations Act 2001- the debt was wholly or
partly unsecured when the loss or damage was suffered.
289