Now under Companies Act 2006 section 174, and given the development of the common law in Re D'Jan of London Ltd, directors owe an objective standard of care based on what should reasonably be expected from someone in their position.

The company lost £1,200,000 in failure of investments and the large scale fraud of the chairman, Gerard Lee Bevan, ‘a daring and unprincipled scoundrel’.

And even in absence of exclusion clauses, in his view, ‘for a director acting honestly himself to be held legally liable for negligence, in trusting the officers under him not to conceal from him what they ought to report to him appears to us to be laying too heavy a burden on honest businessmen.’ Though he felt ‘some difficulty’ with the distinction, negligence would need to be ‘gross’ to visit liability.

A director need not exhibit in the performance of his duties a greater degree of skill than may reasonably be expected from a person of his knowledge and experience.

But I think he was entitled to rely upon the judgment, information and advice, of the chairman and general manager, as to whose integrity, skill and competence he had no reason for suspicion.

I agree with what was said by Sir George Jessel in Hallmark's Case,[5] and by Chitty J. in In re Denham & Co. 84, that directors are not bound to examine entries in the company's books.