Groovy George Ltd ("GG") is a company that installs kitchen cupboards. These are four directors. Ann, Mark, John, and Lynn. Lynn is the managing director. Ann is a non-executive director, and a professional dancer, so she rarely attends board meetings due to her punishing training schedule. Mark is an executive director, and John is the Chief Financial Officer. Although the company has been successful currently it is facing a severe financial crisis due to several of its clients defaulting on their accounts. GG Ltd desperately needs a fresh injection of cash, and fast!

At the next board meeting, Mark proposes that GG Ltd should enter into an exclusive contract to supply cupboards to Bathroom Galore Pty Ltd, to use in their custom made kitchens.

Mark explains that bathrooms Galore Pty Ltd is a successful company, and could provide the cash that GG Ltd needs badly. However, he neglects to tell the board that Bathrooms Galore is actually owned by Mark's family, and that he owns 40% of the shares in Bathrooms Galore. Furthermore, he doesn't explain that Bathrooms Galore is also facing liquidation. His purpose in making the proposal is to save Bathrooms Galore from collapse.

John suspects that Mark is personally connected with Bathrooms Galore, however, he has not told the other directors about his suspicion. Ann is not present at the meeting because of her training, and hadn't read the proposal, but gave her approval in advance. Lynn actually falls asleep, and is anxious to finish the meeting, so only allows five minutes to discuss the proposal. (If she had taken more time then she would have discovered Mark's family connection). They all vote in favour of the proposal.

Sadly Bathrooms Galore fails to pay the RM40,000 the owe GG Ltd for the cupboards, thereby causing GG Ltd to default on a number of loans. As a result, six months later GG Ltd is placed in liquidation on the application by one of its creditors.

Are any of the directors of GG Ltd in breach of their directors' duties owed to the company? If so, what consequences might result?

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