Bumblebee Pty Ltd is an Australian mineral and resources company. Bumblebee's directors are Donagh, Adrianna and Viggo. Donagh is the managing director. Adrianna is a well-known mineralogist and miner and has a PhD specialising in the geology of gold deposits. Viggo used to work for a large multinational investment firm.

Bumblebee has approximately $150 million in the bank and is looking to acquire new mining tenements. A mining tenement is basically a claim, lease or license to undertake exclusive mining operations in an area for a certain period. ASCO Pty Ltdapproaches Bumblebee offering to sell it some tenements that ASCO holds.

Bumblebee hires Radiant Earth Pty Ltd, a geology firm, to conduct a survey of ASCO's tenements to see if there is enough gold to support a profitable mining operation. Radiant Earth informs Bumblebee's directors that while it specialises in geological surveys, it has never undertaken an assessment for a potential gold mine. Despite this disclosure, Radiant Earth proceeds with its survey and prepares a report for the board.

Adrianna is the only Bumblebee director who reads the report. But since she's so busy, she focuses on the summary, which says there is gold in the tenements. Unfortunately, Adrianna doesn't read footnote 38 on page 23, which says that while gold ore is present, geographical and topographical issues with the location of the tenements mean it would be virtually impossible to remove the ore to process it.

Donagh asks Adrianna if she thinks the tenements are good value. Adrianna says that she has looked at the report and "everything looks perfect". The board proceeds to pass a resolution approving the purchase of ASCO's tenements for $50 million.

Soon, Bumblebee discovers that the gold cannot be mined from the tenements due to the issues explained in Radiant Earth's expert's report, and Bumblebee has to sell the tenements at a huge loss for the company. Now the shareholders of Bumblebee are furious; there are rumours that they will demand the removal of

Required:

(a)Did any of the directors of Bumblebee breach their duty under s 180(1) of the Corporations Act or the general law equivalent?

(b)Discuss potential defences available to the directors.

ANSWER USING IRAC METHOD