The Legal Nature of the Duty of Care and Skill
DOI:
https://doi.org/10.17159/1727-3781/2017/v20i0a1202Keywords:
Duty of care and skill, executive directors, Non-executive Directors, Contract, Delict, Concurrence of ClaimsAbstract
Section 77(2)(b) of the Companies Act 71 of 2008 (“the Act”) provides that a director of a company may be held liable based on the common law principles relating to delict for any losses or damages which the company suffer due to a breach of the duty of care in skill in terms of s76(3)(c), losses due to a breach of a provision of the Act not mentioned in section 77 and losses due to the contravention of any provisions of the memorandum of incorporation (“MoI”) of the company. This article poses the question whether the legislature was correct in formulating the legal nature of the duty of care and skill as well as the liability of directors for losses flowing forth from any breach of the company’s MoI as delictual. The article will attempt to show that basis for liability is not necessarily delictual in nature but it could be argued that the basis could also be contractual.
Downloads
References
Bibliography
Literature
Alexander "GmbHG"
Alexander L "GmbHG" in Schwerdtfeger A (ed) Gesellschaftsrech 3rd ed
(Heymann Verlag Köln 2015) 511-1166
Assman, Lange and Sethe "Law of Business Associations"
Assmann HD, Lange B and Sethe R "The Law of Business Associations"
in Reimann M and Zekoll J (eds) Introduction to German Law 2nd ed
(Kluwer The Hague 2005) 143-177
Blackman, Jooste and Everingham Commentary on the Companies Act
Blackman MS, Jooste RD and Everingham GK Commentary on the
Companies Act (Juta Cape Town 2002-)
Bouwman 2009 SA Merc LJ
Bouwman N "An Appraisal of the Modification of the Director's Duty of
Care and Skill" 2009 SA Merc LJ 509-534
Cassim et al Contemporary Company Law
Cassim FHI
et al Contemporary Company Law 2nded (Juta Cape Town
Cilliers and Benade Maatskappyereg
Cilliers HS and Benade ML Maatskappyereg (Butterworths Durban 1968)
Cilliers and Benade Company Law 2nd ed
Cilliers HS and Benade ML Company Law2nded (Butterworths Durban
Cilliers, Benade and De Villiers Maatskappyereg 3rd ed
Cilliers HS, Benade ML and De Villiers SWL Maatskappyereg 3rd ed
(Butterworths Durban 1977)
Cilliers, Benade and De Villiers Maatskappyereg 4th ed
Cilliers HS, Benade ML and De Villiers SWL Maatskappyereg 4th ed
(Butterworths Durban 1982)
Cilliers et al Corporate Law Cilliers HS et al Corporate Law 2nd ed
(Butterworths Durban 1992)
Delport et al Henochsberg on the Companies Act
Delport P et al Henochsberg on the Companies Act 71 of 2008
(LexisNexis Butterworths Durban 2011-) (SI 11 2015)
Ezzamel and Watson "Wearing Two Hats"
Ezzamel M and Watson R "Wearing Two Hats: An Analysis of the
Monitoring and Control Functions of Non-executive Directors" in Keasey K,
Thompson S and Wright M (eds) Corporate Governance: Economic,
Management and Financial Issues (Oxford University Press Oxford 1997)
-79
Habersack et al"Band 4/2 §§92-94"
Habersack M et al"Band 4/2 §§92-94" in Hirte H, Muelbert PO and Roth M
(eds) Aktiengesetz 5th ed (De Gruyter Berlin 2015) 1-407
Havenga 2000 SA Merc LJ
Havenga M "The Business Judgement Rule –Should We Follow the
Australian Example?" 2000 SA Merc LJ 25-37
Henochsberg and Fairbairn Henochsberg on the Companies Act
Henochsberg ES and Fairbairn WJG Henochsberg on the Companies Act
nd ed (Butterworths Durban 1963)
Hüffer Aktiengesetz
Hüffer U Aktiengesetz10thed (Beck Verlag München 2012)
Ihrig and Schäfer Rechte und Pflichten des Vorstands
Ihrig H-C and Schäfer C Rechte und Pflichten des Vorstands(Otto
Schmidt Verlag Köln 2014)
IoDSA King Report
Institute of Directors in Southern Africa King Report on Governance for
South Africa(IoDSA Sandton 2009)
Keay Directors' Duties
Keay A Directors' Duties 2nd ed (Jordan Publishing Bristol 2014)
Lin 1996 Nw UL Rev
Lin L "The Effectiveness of Outside Directors as a Corporate Governance
Mechanism: Theories and Evidence" 1996 Nw UL Rev 898-976
Loubser 1997 Stell LR
Loubser MM "Concurrence of Contract and Delict" 1997 Stell LR 113-150
Loubser and Midgley Law of Delict in South Africa
Loubser M and Midgley R (eds) et alThe Law of Delict in South Africa 2nd
ed (Oxford University Press Cape Town 2012)
Midgley and Van der Walt "Delict"
Midgley JR and Van der Walt JC "Delict" in Joubert WA (ed) The Law of
South Africa 2nd ed (LexisNexis Butterworths Durban 2005) Vol 8(1)
Naude Regsposisie van die Maatskappydirekteur
Naude SJ Die Regsposisie van die Maatskappydirekteur, met Besondere
Verwysing na die Interne Maatskappyverband (Butterworths Durban 1970)
Spindler "§93 Sorgfaltspflicht und Verantwortlichkeit der
Vorstandmitglieder"
Spindler G ""§93 Sorgfaltspflicht und Verantwortlichkeit der
Vorstandmitglieder " in Götte W and Habersack M (eds) Muenchener
Kommentar zum Aktiengesetz3rded (Beck Verlag München 2008) 536-
Wellhöfer, Peltzer and Müller Die Haftung von Vorstand Aufsichtsrat
Wirtschaftsprüfer
Wellhöfer W, Peltzer M and Müller W Die Haftung von Vorstand
Aufsichtsrat Wirtschaftsprüfer mit GmbH-Geschäftsführer (Beck Verlag
München 2008)
Case law
Australia
Daniels v Anderson 1995 16 ACSR 607
England
Dorchester Finance Co Ltd v Stebbings 1989 BCLC 498 (Chancery
Division)
Equitable Life Assurance Society v Bowley 2004 1 BCLC 180; 2003
EWHC 2263 (Comm)
In Re Brazilian Rubber Plantations and Estates, Limited 1911 1 Ch 425
In Re City Equitable Fire Insurance Company Limited 1925 Ch 407
Re Cardiff Savings Bank 1892 2 Ch 100
Re Denham & Co 1884 25 Ch 752
Germany
BGH 21.4. 1997 II ZR 175/95
South Africa
Barlows Manufacturing Co Ltd v RN Barrie (Pty) Ltd
4 SA 608 (C)
Cohen v Segal 1970 3 SA 702 (W)
Fisheries Development Corporation of South Africa Ltd v Jorgensen 1980
SA 156 (W)
Holtzhausen v ABSA Bank Ltd
2 All SA 560 (SCA)
Lillicrap, Wassenaar and Partners v Pilkington Brothers SA (Pty) Ltd 1985
SA 475 (A)
Pinshaw v Nexus Securities (Pty) Ltd 2002 2 SA 510 (C)
Legislation
Australia
Corporations Act, 2001
England
Companies Act, 1926
Companies Act, 1948
Companies Act, 2006
Germany
Aktiengesetz
Gesetz betreffend die Gellschaften mit beschränkter Haftung
South Africa
Companies Act 61 of 1973 Companies Act 71 of 2008
Internet sources
FRC date unknown https://www.frc.org.uk/Our-Work/our-key-
activities.aspz
Financial Reporting Council date unknown
Guidance on Board Effectivenesshttps://www.frc.org.uk/Our-Work/our-ke-activities.aspz
accessed 15 January 2016
IoD 2004 http://www.iod.com/influencing/policy-papers/corporate-
governance/director-and-auditor-liability
Institute of Directors 2004 Directors and Auditors Liability
http://www.iod.com/influencing/policy-papers/corporate-
governance/director-and-auditor-liabilityaccessed 15 January 2016
Published
Issue
Section
License
Copyright (c) 2017 Richard Arno Stevens
This work is licensed under a Creative Commons Attribution 4.0 International License.
.png){kind=spacer}