FlyAnywhere & Co is a leading low budget airline in Australia. It is listed on the ASX and has a massive capital base, with more than 1,000 employees around Australia. The directors of the company are well known figures in Australia, and all have held important positions in companies before joining FlyAnywhere & Co as directors.

Recently, in a daring business venture of expansion, the company bought a new fleet of aircrafts for considerable amounts from two major aircraft manufacturers, hoping to make a big come- back in the industry after suffering severely from the pandemic.

Before the said expansion took place, the directors were given considerable amount of information on the aircrafts prior to their purchase. There were many discussions and meeting at the board level. These were then followed up by some serious investigations being carried out by financial experts hired by FlyAnywhere & Co before the final deal was sealed.

However, despite all these efforts and investments, it now transpires that the company paid too much for the aircrafts they acquired in the expansion plan. The purchase has resulted in a significant outflow of capital. It turned out to be a bad decision now that the financials come to light. There is quite some discontent from the shareholders who have seen the value of their shares plummet. These shareholders believed FlyAnywhere & Co shouldnt have been that ambitious in that particular venture of expansion.

a). What might be the liability of the directors for the purchase of the aircrafts, a decision which now appears to have been a bad decision for the company? Your answer should include what directors duties are involved in this matter and the relevant sections of the Corporations Act regarding these directors duties. (9 marks)

b). What defence(s) are available to the directors for what turns out to be not a good business decision? Discuss on the justification on the defence(s) available. (9 marks)