4.1 Introduction

The focus of the previous chapter was on the most relevant legal case factors on which courts base their legal decisions in directors’ liability litigation. The cases included in the study could, it might be argued, be divided into relatively ‘unproblematic cases’ and more ‘complex cases’. The unproblematic cases involved cases in which a director’s ‘subjective bad faith’ was predominantly evident. In these relatively unproblematic cases, the directors were deemed to be personally liable. The outcomes of the ‘complex cases’ in the study were less straightforward and could involve either a confirmation of a director’s personal liability or a dismissal of the claim. Complex cases in which courts find directors to be personally liable may be understood to indicate that the directors apparently ‘lacked good faith’. Complex cases where courts refuse to hold a director personally liable may be interpreted as reaffirming the ‘good faith’ underlying the director’s conduct (see Chapter 3, Figure 1).

The object of this Chapter 4 is to analyse court cases involving directors who are deemed to act in ‘bad faith’ (i.e. directors displaying ‘subjective bad faith’ and ‘lack of good faith’) but who also invoke discharge provisions. In these specific court cases, directors rely on the protection of a discharge in an attempt to avoid their personal liability for ‘bad faith’ actions. The study reveals that courts are unwilling to allow discharge by means of a shareholders’ resolution to cover such ‘bad faith’ actions.

This research was conducted in 2015.