Graphic Technology Ltd (GT Ltd) is a large public company involved in the marketing and development of web based graphic design technology. It has developed unique graphic design systems and its products have been largely sought after by the television and cinema marketing industries.

The board of directors of GT Ltd is comprised of Marco the managing director, who holds no real experience in graphic design but has had extensive experience in public relations; Leo a director who is also the company's principal graphic designer; Faye a director and the marketing concepts manager and Troy a non-executive director and the company's finance manager. There are in addition a number of shareholders, who were the original investors in the company.

At a board of directors meeting in May 2007 the directors discussed the possibility of diversifying the company's business activities to include modular web-based teaching programs for primary school students in the areas of literacy and numeracy. Faye was delegated the task of investigating the potential for such programs in schools. Troy was to collaborate with Faye and work on the cost analysis of such programs. A joint report was to be presented to the board by September 2007. Troy was regularly absent from board meetings including the May 2007 meeting. He was notified by internal memo of the board's directive.

Faye was particularly interested in the company's plans for diversification. She had a sister Kate who was involved in education. In fact Kate ran Top Grades Pty Ltd (TG Pty Ltd) a company involved in providing tuition programs for primary school children requiring scholastic assistance in maths and literacy. Faye was also a major shareholder in TG Pty Ltd. Without carrying out a feasibility study Faye sets out to convince Troy that the development of the maths and literacy programs should be contracted out to TG Pty Ltd at an over inflated rate. Troy, keen to leave for a three month holiday overseas, fails to carry out a cost analysis of any sort. His contribution to the joint report, as submitted to the board, indicated the most cost effective way to diversify the company's activities to web based modular teaching programs was to engage the services of TG Pty Ltd. Troy suspected Faye had connections to the company but failed to disclose his suspicions to the board.

At the board of directors meeting in September 2007 it is resolved, in Troy's absence, that a contract be entered into with TG Pty Ltd. By April 2008 it becomes apparent that TG Pty Ltd simply cannot produce the programs required. As a result GT Ltd losses $1M (one million dollars) and for the first time in five years dividends cannot be paid to shareholders.

• With respect to the events as outlined above, discuss fully whether each of the directors have breached their respective directors' duties.