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Directors’ Duties

Directors’ Duties

Principles and Application

By Rosemary Teele Langford

CONTENTSREVIEWSSUPPLEMENTS

Directors’ Duties: Principles and Application outlines key fiduciary and statutory duties of Australian company directors, with detailed reference to the position in the United Kingdom. It is addressed to academics, students and practitioners and resolves complex issues, as well as giving practical guidance on the characteristics and application of general law and statutory duties. In so doing it provides critical analysis of the scope and content of fiduciary duties in general and resolves a patent clash between prevalent modern equity theory and Australian corporate law jurisprudence as concerns directors’ duties.

Particular focus is given to the duties that have traditionally been characterised as fiduciary. These are the duties to avoid conflicts and profits, to act in good faith in the interests of the company and for proper purposes, to retain discretions and to disclose information. The duty of care is also examined and the book demonstrates why this duty is different to other key duties. This issue has been the subject of contention and is significant for remedial purposes. The book demonstrates the central and foundational nature of the duty to act in good faith in the interests of the company.

The book also outlines the statutory duties in the Corporations Act 2001 (Cth) which correspond to the general law duties, as well as the consequences of breach of the statutory and fiduciary duties of directors and the significance of fiduciary classification. Extensive examination of the position in the United Kingdom is provided, which is of direct relevance to the analysis of the Australian position and also to the interpretation of English law.

The book therefore provides certainty for practitioners, academics and students in the organisation and application of key directors’ duties, presenting a clear structure for such organisation and application. Its outline and resolution of the contours of the fiduciary concept are also of direct relevance to scholars and practitioners in the areas of Equity and Trusts.


CONTENTS

Foreword by Robert Baxt AO
Preface
About the Author
Acknowledgments
Permissions Acknowledgments
Table of Cases
Table of Statutes
Table of Abbreviations

Introduction
Directors’ Fiduciary Duties
Shift in Australian Fiduciary Theory
The Bona Fide Rule
The Fiduciary Nature of the Bona Fide Rule
The Conflicts and Profits Rules
The Proper Purposes Rule
The Duties to Retain Discretions and to Disclose
The Duty of Care
Remedies
Comparative Evaluation
Conclusion

Index


REVIEWS

[T]his is a thoughtfully constructed monograph, which addresses with great precision, detail and clarity a dimension of directors’ duties that is often acknowledged and yet increasingly under-explored as (in the UK for example) attention shifts towards the operation of the codified duties and the shareholder/stakeholder debate. It bears testament to Dr Langford’s extensive practical and research experience in this field. Although it is difficult to imagine a title that more accurately captures the purpose of the text, the neutrality of the current one might lead prospective readers to approach it with the mistaken impression that it provides an exposition of directors’ duties. It is certainly a rewarding read for researchers and practitioners interested in the development of Australian corporate law or its degree of similarity with English law in this area. Read review...

Blanca Mamutse, Journal of Business Law, 2015, 7

Many years ago, Lord Nottingham refused to define fraud, saying that, as fraud was infinitely various, if he did so, it would merely lead to arguments as to what fell exactly within the definition.
         The same problem occurs with breach of duties of care and fidelity by company directors.
         This compact book of 208 pages tries to reconcile the authorities on the subject, particularly those which have attempted some definitions. The author notes that there appears to be a sharp divide between principles of general equity as to fiduciary duties and corporate law cases on the subject. However, theoretically, directors are fiduciaries in the ordinary sense of the word. … The book shows that there are considerable theoretical problems in clearly stating the law in a way that would cover all cases of corporate fraud. Read full review...

Peter W Young, Australian Law Journal, June 2015

Directors’ Duties is structured in such a way as to bring the reader along as the argument builds momentum. 
… It is of great assistance in gaining an understanding of the modern evolution of fiduciary duties in general and those that relate to directors in particular. … Practitioners will find the author’s discussion of fiduciary duties particularly useful as the remedial differences between a statutory and fiduciary breach may have significant consequences for their clients. Read full review...

Nicolas Kirby, Bar News, Autumn 2015

This text is a comprehensive discussion of the principles of fiduciary relationships and the nature of fiduciary duties in the context of duties of Australian company directors. The author provides detailed insights into equitable theory and corporate statutory law. Useful references are also provided with various interesting case studies.
          The author critically analyses the current fiduciary duties of directors including the bona fide rule, the proper purposes rule, the conflicts rule and the profits rule. … the author highlights the importance that directors understand their fiduciary obligations, which can differ from the statutory regime. Read full review...

Katie Innes, Ethos, ACT Law Society, March 2015

Dr Langford's work is a review of the Australian context but it has value for anyone interested in the position of directors under common law jurisdictions: first, since it is also a comparison of the stance of the English Companies Act 2006 with the Australian position; secondly, because of the increasing cross-feed in juridical thinking in common law jurisdictions. The thought that lies behind the writing is detailed and it demands (and repays) close attention.
          The book is helpfully set out, assembling the evidence section by detailed section, reviewing the arguments and then achieving an overall conclusion. Much of the argument is highly technical, directed to and for lawyers rather than, say, the student of governance (without a legal background) or company directors. The treatment of the subject is very thorough and comprehensive; the legal argument–which I would not presume to criticise–is clear and consistent, even to a layman. Read full review...

Stephen Bloomfield, International Company and Commercial Law Review, 2015

Dr Langford’s monograph analyses a number of complex and foundational issues relating to director’s fiduciary duties in a clear but deeply considered fashion. Dr Langford deals first with contemporary Australian fiduciary theory before considering in more detail each of the specific duties imposed on directors. In this analysis, Dr Langford gives particular focus to the central and foundational nature of the duty to act in good faith in the interests of the company and, in so doing, is critical of the view that the duties to avoid conflicts and profits are the only remaining fiduciary duties. In considering these issues, Dr Langford also analyses the relationship between the various fiduciary duties and the equivalent statutory rules.

Queensland Law Reporter – 19 December 2014 – [2014] 49 QLR

Dr Langford has written an incisive and convincing account of the fiduciary obligations of company directors. This is a complex area of corporations law, as the recent Bell Group litigation has demonstrated, but Dr Langford provides a masterly account of its governing principles.

Professor Emeritus Michael Bryan, Melbourne Law School, The University of Melbourne

The subject of directors’ fiduciary duties has taken on its own mantle: one that nowadays looms large over both company law and insolvency law. While perhaps 20 or so years ago all seemed settled by the case law, the modern courts in both Australia and the UK have been confronting a burgeoning caseload. The result is that contemporary judges have taken the opportunity to revisit traditional equitable principles and have overlaid them with nuances in ways not anticipated by their chancery precursors. Indeed, this development recently moved Moses LJ in the Court of Appeal of England and Wales to remark that it made ‘one almost nostalgic for the days when there were inflexible rules, inexorably enforced by judges …’ Dr Langford’s book is therefore very timely. It gives the reader a thorough, stimulating and scholarly treatment of what by any measure has become a very complex body of law. The work focuses primarily on the common law fiduciary duties of directors, but also provides excellent treatment of their statutory duties. Dr Langford’s excellent analysis will, without doubt, inform the current debate on this important topic. The book deserves to occupy a central place on the bookshelves of judges, practitioners, policy-makers and academic commentators.

Professor Emeritus John Lowry, University College London

Dr Langford has written an excellent analysis of directors’ duties that will be invaluable to legal practitioners, judges, regulators, academics and others with an interest in the important topic of directors’ duties. The book is the culmination of many years of scholarly work by Dr Langford and reflects her deep understanding of developments in fiduciary duties. The book examines in detail the key duties to act in the best interests of the company, to act for a proper purpose, to avoid conflicts, to retain discretions, to disclose and to exercise reasonable care. The book also deals with remedies for breach of duty and draws helpful comparisons with UK law. A notable feature of the book is the detailed analysis the author provides of key court judgments. The book advances our understanding of directors’ duties and, in particular, our understanding of the relationship between the various duties considered in the book and the relationship between corporate law jurisprudence and fiduciary theory. Dr Langford is to be commended for her authorship of this impressive book.

Professor Ian Ramsay, Harold Ford Professor of Commercial Law and Director of the Centre for Corporate Law and Securities Regulation, Melbourne Law School, The University of Melbourne


SUPPLEMENTS

Foreword by Robert Baxt AO


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Published 29 September 2014
Publisher The Federation Press
Hardback/240pp
ISBN 9781862879737
Australian RRP $125.00
International Price $115.00
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Law - Company & Securities
Law - Corporations
Law - Equity & Trusts
Law - Remedies


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