White Constructions (ACT) Pty Ltd (In Liq) v White & Ors

White Constructions (ACT) Pty Ltd (In Liquidation) was the plaintiff in proceedings against the defendants, who were directors of the company. The dispute concerned allegations of breaches of directors' duties, specifically the duty to exercise powers and discharge duties with the degree of care and diligence that a reasonable person would exercise if they were a director in the company's circumstances, and the duty to act in good faith in the best interests of the company and for a proper purpose. The proceedings were heard in the High Court of Australia.

The High Court was required to determine whether the directors had breached their statutory duties under the Corporations Act 2001 (Cth) by failing to take reasonable steps to prevent the company from incurring debts when there were reasonable grounds to suspect it was insolvent, and whether they had acted in good faith in the best interests of the company and for a proper purpose in their dealings with a related entity. The court also considered the application of the business judgment rule as a defence to these claims.

The High Court, in its joint judgment, analysed the evidence concerning the company's financial position and the directors' knowledge of its insolvency. It found that the directors had failed to exercise the requisite degree of care and diligence, and that their actions were not taken in good faith in the best interests of the company. The court clarified that the business judgment rule would not apply where the directors had failed to inform themselves of the company's financial position to a reasonable extent, or where their decisions were not rationally based on proper corporate purposes. The court emphasised that the statutory duties require directors to be proactive in assessing and responding to the company's financial health.

The High Court allowed the appeal in part, finding that while certain breaches were established, the extent of the directors' liability required further consideration. The matter was remitted to the Federal Court of Australia for determination of the quantum of damages.