Aztec Mining Ltd is a mid-sized gold mining company listed on the ASX. Its board consists of Charlie (non-executive Chair), Rosa (CEO), John (CFO), Bill and Bob (both non-executive directors). Rosa owns 15% of the shares in Aztec. Rosa's remuneration as CEO is over $2 million per year. The constitution of Aztec provides that directors shall not be disqualified from participating in board meetings if they have a material personal interest in the subject matter of the meeting provided that they disclose their interest. The quorum for a directors' meeting is 2 directors.

Chair (Chair of Aztec) is the CEO of a large mining services company (Minco Ltd) that supplies engineering services to a range of companies, including Aztec. Charlie has previously lodged a standing notice of his role as CEO of Minco on the Register of Director Interests maintained by Aztec's company secretary. What Charlie has not told Aztec is that he has recently undertaken a management buy-out of Minco so that he will become the majority shareholder in that company. As the transaction has been published in the newspaper Charlie doesn't believe that he needs to tell Aztec.

Rosa undertakes paid consulting with Minco on projects unrelated to the business of Aztec, which are usually small in size (worth approximately $10k-$50K each) but there have been several engagements each year for the past several years and Rosa would expect that she would continue. Rosa does not tell the board about working for Minco specifically because she gave standing notice to the board when she became CEO that she would undertake consulting work in projects not directly conflicting with Aztec and which did not take up more than 4 hours per week.

Charlie, Rosa and John were recently having lunch at a popular pub in Perth when they started discussing their various other roles. Both Rosa and Charlie mentioned the extent of their work for Minco and John said "well, you must look after yourself in this economy! I fully support your work, which adds value to Aztec because of your expertise." Bill and Bob had been invited to the lunch meeting but had other commitments. Charlie sends an email to John and copies in the rest of the board after the lunch quoting what John said and says "I'm so glad to lead this supportive team".

Minco is seeking to renew its long-term contract with Aztec. Charlie knows that Minco needs this contract renewal because after the management buy-out Minco has huge debts that it is struggling to repay. The renewal includes a request for upfront payment of the first 12 months of services (which is very unusual in this industry). At the Aztec board meeting Charlie reminds the board of his role with Minco (as CEO). Charlie then says he will leave the meeting to allow the other directors to vote, but he gives his strong support to the renewal. The rest of the board approves the renewal and the advance payment. The contract renewal turns out to be a bad deal as Minco can't repay its debt levels when it loses several other large customers. Aztec loses millions on the contract and Charlie and Rosa are forced off the board by institutional activist investors. The new Chair and CEO want to take action against Charlie and Rosa for their conduct.

Have Rosa or Charlie contravened their directors' duties to Aztec? Could they rely on any potential defences?