This chapter focuses on the extent of a director’s civil liability for breach of fiduciary duty and the liability of third parties involved in some way in that breach of duty. The discussion considers liability for misapplying trust assets and the recovery of secret profits, commissions, and bribes. The chapter addresses the extent of the liability to reinstate the trust assets, to account for profits made, and to pay equitable compensation for loss caused by the breach of duty. There is also an account of the liability of third parties in dishonest assistance and knowing receipt. The chapter considers potential mitigations for directors in the form of equitable allowances, the scope for limitation defences, the role of indemnity provisions and insurance cover, and the possibility of applying to the court for relief.
Chapter
14. Directors’ liabilities for breach of duty
Chapter
11. Duty of care, skill, and independent judgment
In addition to their fiduciary obligations, directors are subject to duties of care, skill, and diligence. This chapter discusses the statutory standard of care, skill, and diligence which is an objective standard as set out in CA 2006, s 174. The section does not indicate the content of the duty, however, which is a matter for the case law. The issues of concern revolve around the extent to which directors need to be informed to carry out their duties and the extent to which they can delegate to others and then rely on that delegate. There is also a related duty in s 173 to exercise independent judgement rather than blindly follow the instructions of others, which is also discussed in the chapter.
