Jenna, James and Jock are the directors of All Things Green Pty Ltd a nursery and landscape supplies centre. All Things Green Pty Ltd conducts its business from premises north of Adelaide. Unfortunately, Jock has recently contracted a serious illness. As a result of this, he isnt able to devote as much of his time to the business as usual. Neither Jenna nor James has a good understanding of company finances and dont realise that the company is facing liquidity issues. As a result of this, All Things Greens continued ability to pay its creditors becomes an issue. Jenna and James dont wish to impede Jocks recovery in any way and decide not to worry him with their problems, but to implement their own strategies to enable the business to keep up with its obligations to creditors. They are hoping to buy the company some time until business picks up again, by getting a loan from the bank to satisfy some of their creditors. Jock is recovering in hospital when this occurs, and he is not aware of the new loan that they made. James and Jennas inability to interpret the companys financial records means that they dont realise the seriousness of their predicament. Jenna therefore doesnt think twice about using some of the funds obtained from the bank to purchase an expensive company car for her own use. This causes further cash flow problems. Unfortunately, things go from bad to worse - due to an oversight on James part, the irrigation and sprinkler system isnt maintained properly and a large number of plants in stock die just before spring. To add to James and Jennas concerns, a competitor opens up shop just a couple of kilometres away from All Things Green. The competitor is closer to the city than All Things Green and succeeds in taking away much of All Things Greens business. The much-anticipated spring pick-up that Jenna and James were relying on never happens. All Things Green Pty Ltd is eventually wound up by court order on the basis of its insolvency.

Which of the following statements are incorrect?

(i) Jenna, James and Jock are likely personally liable on the basis of a breach of their duty to prevent insolvent trading.

(ii) Jenna and James will be able to rely on their lack of experience/knowledge in regard to financial records and statements as a defence, should an action be brought against them on the basis of having breached their directors duties.

(iii) As Jock is the only executive director, he is the only director who is subject to general law and statutory directors duties.

(iv) Jenna and Jock would be able to use the fact that they relied on Jock to make most of the key decisions in the company as a defence (s 189 of the Corporations Act 2001(Cth)), should an action be brought against them on the basis of having breached their directors duties

(v) Jock will be able to rely on his illness as a defence against a potential claim on the basis of a breach of his duties as director to prevent insolvent trading.

Select one:

a. All the statements are incorrect.

b. (ii), (iii) and (iv).

c. (ii) and (iv).

d. (iii).

e. (i), (ii), (iii) and (iv).