CREDIT WHERE CREDIT'S DUE: THE SUPREME COURT TAKE ON DIRECTORS’ DUTIES AND CREDITORS’ INTERESTS

Abstract

Mason J’s dictum in the 1976 decision of the High Court of Australia in Walker v Wimborne [1976] 137 C.L.R. 1 (at [6]-[7]) stated: “(…) the directors of a company in discharging their duty to the company must take into account the interests of its shareholders and its creditors. Any failure by the directors to take into account the interests of creditors will have adverse consequences for the company as well as for them”. Ever since, creditors’ interests potentially impacting directors’ duties during the “twilight zone” of insolvency has been a subject of interest. The theme has had many renaissances since its precursor case, with the latest being the Supreme Court’s decision in BTI 2014 LLC v Sequana S.A. and others [2022] UKSC 25. While the ruling confirms and clarifies various aspects of the rule in West Mercia Safetywear Ltd v Dodd [1988] BCLC 250 including that there is no independent duty owed to creditors and that creditors must be considered as a general body, questions such as the level of knowledge required of directors to trigger the duty remain unclear.