Answer to legal problem questions - Essay Example

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. The court laid down mandatory duties for directors: to acquire basic standard of understanding of the company’s business; under a continuing obligation to keep informed of the company’s activities; undertake a “general monitoring” of the company’s affairs; and understand the financial status of the company.

The case of ASIC V Rich7 affirmed the decision in Daniels8 line of cases regarding the required duty of care and skill among directors. 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. 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. Facts/Issues: One of the employees of the company, Noi Dea was negligent while conducting a tour,