QLD Suing Former Company Director for Negligence?

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6 April 2015
Hi all, I have a former director of my LTD company who resigned some months ago. I have found out that while he was a company director he did not set up our business insurance policy properly.

I was told that it was taken care of, but I had some property damage that I made a claim for, and was eventually informed that this vital equipment was not covered in the policy for no other reason that our insurance broker was not told it needed to be included... A VERY basic screw up that was completely and utterly avoidable by way of a couple of extra words spoken to the broker. I don't wish to provide too much information publically, but damage bill was around $6500. If you need more information on this, please message me.

I am wondering whether anyone can inform me whether the company is able to sue this former director for his negligence? Since company directors have a responsibility to act in the best interest of the company and not be negligent in his duties. The loss of this equipment has caused a significant loss of income due to our financial position not allowing replacement of the equipment immedia

What would I need to do in order to a) define and b) prove his negligence?

Thanks in advance!


Under the common law duties of directors, the standard of care required of directors is very low. Therefore a a director must be grossly or culpably negligent in order to be liable for any loss suffered by the company. Similarly the Corporations act sets the statutory standard of care by reference to a person in “a like position” requiring subjective comparison.

In addition, the business judgement rule exists to provide a safe harbour for directors to protect them from personal liability for negligence to the company. It states that where a director makes honest, informed and rational business judgements on behalf of the Company, they should be free of personal liability arising from that judgement. Courts are reluctant to review the decisions of directors exercised in good faith and honestly.

Therefore, for something such as an oversight when arranging insurance - provided there is no malicious or dishonest intent, I don't know whether you would be able to establish a breach of duty on behalf of the director. I would seek legal advice based on your particular circumstances if you are concerned.
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