Amaca Pty Limited (Under NSW Administered Winding Up) v Booth & Anor; Amaba Pty Limited (Under NSW Administered Winding Up) v Booth

The High Court of Australia considered appeals from the Supreme Court of New South Wales concerning claims brought by liquidators of Amaca Pty Limited and Amaba Pty Limited against Mr. Booth and another party. The liquidators sought to recover damages for alleged breaches of directors' duties, specifically concerning the companies' involvement in the manufacture and sale of asbestos-containing products. The core of the dispute revolved around whether the directors had acted with due care and diligence in managing the companies' affairs, particularly in light of the known risks associated with asbestos.

The central legal issues before the High Court were whether the directors had breached their statutory duty to exercise reasonable care and diligence under section 180(1) of the Corporations Act 2001 (Cth) and, if so, whether the liquidators had established causation for the alleged losses. The court also had to consider the application of the business judgment rule as a defence to the alleged breaches.

The High Court, in its joint judgment, analysed the evidence concerning the directors' knowledge of the dangers of asbestos and their decision-making processes. It was held that the directors had failed to discharge their duty of care and diligence by not adequately responding to the increasing awareness of the health risks posed by asbestos. The court found that the business judgment rule did not apply because the directors' decisions were not made in good faith for a proper purpose, nor were they informed. The court emphasised that directors have a positive duty to inform themselves about the company's business and the risks involved, and that a failure to do so, particularly in circumstances where significant risks are known or ought to be known, constitutes a breach of duty. The court also addressed the issue of causation, finding that the breaches had caused loss to the companies.

The High Court allowed the appeals, setting aside the orders of the Supreme Court and remitting the matter to the Supreme Court for further determination of the quantum of damages.