In the case of Dorchester Finance Co Ltd vs. Stebbing (1989) BCLC 498, a company brought an action against its three directors for alleged negligence and misappropriation of the company's property. The company (Dorchester Finance) was in the money lending business and it had three directors, S, H and P. Only one S, was invoived full time with the company; the other two were non-executives who made only rare appearances. There were no board meetings. S and P were qualified accountants and H, although not an Accountant, had a large amount of accountancy experience. S arranged for the company to make some loans to persons with whom he appears to have had dealings. In the loan making process he had persuaded P and H to sign blank cheques that were subsequently used to make the loans. The loans did not comply with the Moneylenders Acts and they were inadequately secured. When the loans turned out to be irrecoverable, the company brought its action against the directors.

The Court held that all three directors were liable to pay damages. S, as an executive director, was held to be grossly negligent. P and H, as non-executives, were held to have failed to show the necessary level of skill and care in performing their duties as non-executives, even thoughit was accepted that theyhad actedin good faithat all times.

a) What are the different types of directors reflected in this case study? What are their roles and responsibilities? What are the special characteristics that differentiate them?

(15 marks)

b) What are the pertinent corporate govermance issues that can be depicted from this case study?

(15marks)

c) Did the Court make the correct decision? Give reasons.