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of causation similar to torts in assessing the amount of damages. The court said that
the wide discretion given in section 214(1) is intended to enable allowance to be
made for questions of causation and to avoid unjust results. 172 The court uses the ‗but
for‘ test in order to establish whether there is a link between the director‘s action and
the indebtedness which is going to be imposed on him or her.
In Nippon Express (New Zealand) Ltd v Woodward, 173 the court emphasized the link
between the director‘s conduct and the loss incurred by the company, though
creditors may have also contributed to the damage. The duty to the company is owed
by the director and not by the creditors. The law expects the director and not the
creditor to be the company‘s keeper and not to cause substantial risks which could
result in claims against the company. The court, without disregarding the principle
of contributory negligence, held although there was evidence to show that the
plaintiff creditor‘s action also caused damage to the company, the duty was not owed
by the plaintiff to the company.
In relation to fraudulent trading, the court in Morphitis v Bernasconi and others 174
concluded there must be some nexus between the loss caused to the company‘s
creditor from the trading, and the contribution sought from the party who has
breached the section. In this aspect, the remedy awarded to the applicant would
depend on the nature of the dishonest act, for example, whether it causes the person
to misappropriate the company‘s assets, the amount of the contribution is equal to
the value of assets misapplied. If, for example, the person‘s act leads to a claim
against the company by those defrauded, such as a creditor, the relief should reflect
the amount which would diminish the assets available for distribution to creditors
generally.
172 Re Produce Marketing Consortium (No 2) [1989] BCLC 520, 553; See also Re Brian D Pierson
[2001] BCLC 275.
173 (1998) 8 NZCLC 261,765 at 261,777.
174 [2003] Ch 552 at 578.
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