The Origins of Company Directors' Statutory Duty of Care

Abstract

The authors investigate the origins of company directors’ statutory duty of care. The findings of their archival research include that, contrary to what is said in some court judgments and corporate law commentaries, the first statutory duty of care in Australia, and arguably the common law world, was introduced in the State of Victoria in the Companies Act 1896 (Vic). A later version of the duty, in the Companies Act 1958 (Vic), introduced public enforcement of the duty. Although the implications of this development may not have been appreciated by those participating in the debates regarding the introduction of the 1958 Act, the authors show, through discussion of recent cases involving the statutory duty of care, how the Australian Securities and Investments Commission (ASIC) is now influencing governance standards in Australian boardrooms through the litigation it commences. ASIC is not only an active plaintiff in cases based on the statutory duty of care — using it more than private plaintiffs — but it also typically pursues a public interest agenda in these cases in terms of the remedies it seeks against defendant directors.

Keywords: directors' duties, duty of care, corporate law