The Legal Nature of the Duty of Care and Skill

Richard Arno Stevens

Abstract


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.


Full Text:

PDF

References


Bibliography

Literature

Alexander "GmbHG"

Alexander L "GmbHG" in Schwerdtfeger A (ed) Gesellschaftsrecht 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 2nd ed (Juta Cape Town 2012)

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 Law 2nd ed (Butterworths Durban 1973)

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) 54-79

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 2nd ed (Butterworths Durban 1963)

HüfferAktiengesetz

Hüffer U Aktiengesetz 10th ed (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 al The 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 Aktiengesetz 3rd ed (Beck Verlag München 2008) 536-629

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 1990 4 SA 608 (C)

Cohen v Segal 1970 3 SA 702 (W)

Fisheries Development Corporation of South Africa Ltd v Jorgensen 1980 4 SA 156 (W)

Holtzhausen v ABSA Bank Ltd 2005 2 All SA 560 (SCA)

Lillicrap, Wassenaar and Partners v Pilkington Brothers SA (Pty) Ltd 1985 1 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 Effectiveness https://www.frc.org.uk/Our-Work/our-key-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-liability accessed 15 January 2016




DOI: http://dx.doi.org/10.17159/1727-3781/2017/v20i0a1202

Refbacks

  • There are currently no refbacks.


Copyright (c) 2017 Richard Arno Stevens

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.