Answer to legal problem questions - Essay Example

The test for breach of duty of care was objective. S180 on the civil penalty provision (ASIC V Rich3) and damages (Deputy Commission on Taxation V Clark4) are the potential remedies for NatureWorld. Application: In the case at bar, DD, WW and SS, being directors of NatureWorld, must exercise care and diligence under Section 180, which states that a director or other officer of the corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise.

Here, all three executive directors failed to exercise the standard of care and diligence required under the law. In the case of AWA V Daniels5, the court decided to tighten-up the director’s duties in Australia and deviate from the old common law duty. While in the case of Daniels V. Anderson6 involving similar facts, Daniels counter-sued by alleging that the Board failed to discharge their duty of care and diligence. The Court held that auditors and executive directors are liable in negligence since they had no mechanism in place allowing the directors to monitor the audit which contributed to failure to report the irregularities.

Further, it ruled that the test for the breach of duty of care was objective. . While the case of Clark9 held that there is a “core, irreducible requirement” of involvement among directors in the management of the corporation which prohibits “sleeping or passive directors”. Applying these cases, the suit filed by the auditor against DD, WW and SS shall prosper for failure to exercise the standard of care and diligence required under S180. Their negligence caused damage to NatureWorld for failure to monitor the financial condition of the company and to conduct a “general monitoring” of the company’s affairs.

Remedies: The Corporation should file a case against the auditor, DD, WW and SS, as executive directors for breaching the standard of care and diligence required under S180, which provides a civil liability provision, for the damage incurred by the corporation brought about by such breach. QUESTION 2 Facts/Issues: One of the employees of the company, Noi Dea was negligent while conducting a tour, which caused serious injuries to one party, thus incurring medical expenses amounting to $330,000.

Based on tort, the corporation is secondarily liable to the victim for the acts committed by its employee under the concept of “vicarious liability”. Law: NatureWorld is liable under the principle of corporate liability in tort, which a breach of a common law duty, or a statutory duty which results to an injury. This shall give rise to the civil right of the injured party to file an action for damages. In the decided case of Lord Grace V Smith10, Armagas Limited V Mundogas, S.A.11, and Bugge V Brown12, the Court ruled that employers are secondarily liable applying the “doctrine of agency” or “respondeat superior”, wherein the employer shall be liable for the acts of its employees or subordinates in