Gilgamesh Ltd ("the company") based in Melbourne builds tennis courts for hotels in the Asia Pacific Region. The company has three directors - Ishtar, Quetz and Merlin (the Board). The company's constitution provides that any contract for goods or services over $10,000 must be signed by a Director and another person authorised by the Board for that purpose.

Ishtar was appointed as the Chief Executive Officer by the Board because she is a tennis grand slam champion and regularly organises functions where clients meet sport stars. When Ishtar travelled to Sydney, she stayed in the executive suite in the Hilton hotel where she entertained her celebrity friends. When asked at the end of her 10 day stay how she wished to pay the $30,000 account, Ishtar produced her business card which reads "Ishtar Lopez - Tennis Grand Slam champion and Ambassador/CEO of Gilgamesh Ltd' and said the company would pay. The other Directors were not aware of Ishtar's hotel stay until they received the account. Quetz is willing to allow the company to pay for the invoice but Merlin refused, arguing the shareholders would be unhappy if they hear about Ishtar's frivolous spending.

a)Advise the Directors whether the company is liable to pay the $30,000 hotel account under theCorporations Act 2001(Cth).

Despite the company's lack of profits and cash reserves, Quetz decides the company should expand into building swimming pools but fails to review the financial accounts. At the next board meeting Merlin asks how the company can afford $500,000 to expand into pools. Quetz replies "we haven't built a tennis court for 11 months and the company can barely pay the staff, so we have to try something new!!"

Quetz then assured Merlin if the expansion is successful, the company will be able to pay the debt and that "everything will turn out fine." Merlin then agrees with Quetz for the company to borrow another $500,000. Ishtar was absent at the meeting as she went to compete in the US Open. The expansion was unsuccessful and the company later folded.

b) Using theCorporations Act 2001(Cth), advise whether the following directors can be personally liable for the $500,000 loan, and if any defences can be used to escape personal liability:

i) Quetz

ii) Merlin

iii) Ishtar