The statutory duty of care and diligence under s 232(4) of the Corporations Law (now s 180(1) of the Corporations Act 2001) is of a generally similar character to the common law duty and does not require a higher order of negligence. The duty is owed to the corporation. A CFO who continues to rely on a subordinate's estimates without taking proactive steps to verify them may breach the duty where there are warning signals — including tight margins for error, adverse trends in claims, and repeated warnings from auditors — that would have led a reasonable person in that position to investigate. The honesty defence under ss 1317JA and 1318 involves a value judgment that may attract a less restrictive standard of appellate review than House v The King, but relief will not be granted where the contraventions are serious.
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