CASE STUDY

Dronebotics Limited (Dronebotics) is a start-up company which designs, manufactures and supplies autonomous drone systems, using automatic flying robots. The robots are programmed by software to complete tasks such as monitoring oil pipelines, inspecting equipment or surveying land and then to return to the base station. The use of the flying robots instead of humans to perform these tasks increases cost efficiencies and productivity.

Dronebotics is approached by an agribusiness, CorpGrain Limited (CorpGrain). CorpGrain wants to use the autonomous drone system to inspect towering grain silos, a task which is very dangerous for employees to perform and which requires compliance with onerous safety regulations.

Frank and Diane are executive directors of Dronebotics and Ron and Kelly are non-executive directors.Frank and Diane are entrepreneurial risk-takers and are keen to expand Dronebotics into as many different industries as possible.Frank and Diane want to enter into a contract to supply the autonomous drone system to CorpGrain.

Ron and Kelly are concerned that the current technological capabilities of the autonomous drone system would not cope with the complexity of the proposed task of inspecting the grain silos at enormous heights and that it would require considerable and costly further research to develop the appropriate software.Ron and Kelly are more cautious and use their voting power on the board of directors to commission an expert report on the feasibility of the proposed task being successfully executed by the autonomous drone system with its existing software.

Scenario A

The expert report concludes that itwould not be feasiblefor the proposed task to be successfully executed by the autonomous drone system with its existing software. Frank and Diane refuse to attend the board meeting at which the decision is taken to commission the expert report and also refuse to attend the board meeting at which the outcome of the report is discussed. Frank and Diane are subsequently given the written report to read, but neither of them read the report nor do they make any enquiries about the report of Ron and Kelly (who have read, assessed and accepted the contents of the report).

Frank and Diane are both very optimistic and are convinced that the autonomous drone system has the required capabilities to carry out the proposed task with the existing software. They are very domineering and stubborn personalities and, in the end, Ron and Kelly are persuaded to vote in favour of the proposal to enter into the contract with CorpGrain.

Have Frank, Diane, Ron and/or Kelly breached any of theirgeneral lawand/orstatutorydirectors duties? Give reasons for your answer and provide relevant statutory law and/or case law as authority for your answer.(15 marks)

Scenario B

Assume that, in the same circumstances as described in Scenario A, the results of the expert report instead indicate that the autonomous drone system in fact has the capability to complete the task required by CorpGrain and that itwould be feasibleto successfully execute the task.Dronebotics is therefore in a position to enter into a very profitable contract with CorpGrain.

All four directors vote in favour of the proposal to enter into the contract with CorpGrain for the supply of the autonomous drone system.

After purchasing the autonomous drone system, CorpGrain experiences ongoing technical difficulties with the system and is unable to use it for the inspection of its grain silos.CorpGrain states that its own expert can produce evidence that the existing software is not adequate and it intends to claim substantial damages from Dronebotics.

Discuss whether anystatutory defencescould be raised by the directors in the circumstances. Give reasons for your answer and provide relevant statutory law and/or case law as authority for your answer (10 marks)

GUIDANCE FOR ASSIGNMENT

1. Identify the directors duty which is relevant to the facts in the case study, based on the conduct of the director/s.State the name of the duty. Identify both the general law duty and statutory duty (unless only one is required in the question).

2. Analyse the duty:

a. State the principles which apply to the duty,

b. State any rules which may apply,

c. Examine the tests used to determine compliance with or breach of the duty

d. State what standard is used in certain circumstances, for example, for assessing a directors conduct or state of mind,

e. Provide authority as support for the law you have analysed, in the form of relevant case law and/or statutory law. Cite at least one case for every key principle, key statement, rule, test, etc.

3. Apply the law to the facts

a. Apply only the relevant law to the facts of the case study,

Choose only the situation/s relevant to the facts of the case study.

b. Ensure that you have applied the law to all the relevant facts in the case study, without omitting any relevant facts

c. In developing an argument for both parties, what follows below should be taken into account. The extent of detail required in dealing with defences and relief

from liability will depend on the scope of the assignment, as determined by the wording of the assignment question. If you are not specifically required by the assignment question to deal with defences and/or relief in your answer, you need only include them, or either of them, briefly and not in detail. It appears that defences relate to the issue of breach, whereas relief applies to the issue of liability.

d. Remedies and penalties will apply if the director is liable. Remedies and penalties need only be included in your answer if specifically required by the assignment question. These maybe Statutory and/or general law (common law or equitable) andcivil and/or criminal

4.Conclusion

This is the short answer to the question posed in the case study and should follow logically from the reasoning in part 3 of your answer.

REFERENCING GUIDE - AGLC

A reference in accordance with the Australian Guide to Legal Citation (AGLC) is to be provided for every quotation. All quotations must be in quotation marks