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Home > Qld Legal Updater > The Business Judgment Defence: Insights from ASIC v Rich

The Business Judgment Defence: Insights from ASIC v Rich


Andrew Lumsden


(2010) 28(3) Company and Securities Law Journal 164

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In Australian Securities and Investments Commission v Rich [2009] NSWSC 1229 Austin J provided the first comprehensive judicial analysis of the statutory business judgment defence in s 180(2) of the Corporations Act 2001 (Cth) . The judgment addressed important, mostly unanswered, questions for directors and officers around the use of the business judgment defence: What is a business judgment? Who bears the onus of proof? What is the relationship between the defence and the primary duty of care and diligence in s 180(1) ? What is the role of the common law business judgment rule? What does the business judgment defence require? What is the effect of the requirement for a "rational belief"? This article analyses the judgment and extracts some general guidance about how the defence can be usefully applied by managers taking defensible commercial risks.