Business Judgement Defence - Safe Harbour for Directors

In Australian Securities and Investments Commission v Mariner Corporation Limited [2015] FCA 589 the statutory business judgment defence was successfully invoked by directors for the first time.  Beach J held:

“After all, one expects management including the directors to take calculated risks. The very nature of commercial activity necessarily involves uncertainty and risk taking.  The pursuit of an activity that might entail a foreseeable risk of harm does not of itself establish a contravention of s 180. Moreover, a failed activity pursued by the directors which causes loss to the company does not of itself establish a contravention of s 180”.

For an analysis of the history and purpose of the provision and also its inter-relationship with the renaissance of corporate social responsibility concepts, see:

Wilson, “Corporate Social Responsibility & the Business Judgment Rule”, (2012) 38 Monash University Law Review 148.