Mr & Mrs John operate a popular transport business in Darwin through a company called Food Transport. Mrs John is a director of the company and Mr John is also a director and secretary of the company. The shareholders in the company are:

Mr&Mrs John 50%; and

Mr Sam 50%.

Mrs John goes to Westside Bank where FoodTransports Pty Ltd has its accounts and asked to borrow $500,000. Westside Bank has been the companys banker for many years and the bank manager knows Mr & Mrs John reasonably well.

Mrs John tells the bank manager that she wants the money to invest in a pine plantation which would give the company substantial tax benefits. The bank manager thinks this is rather odd but makes no further enquiries and agrees to lend the money as long as it can take security over the companys major asset which is the building from which Food Transports operates from.

Mrs John obtains the loan and mortgage documents from the bank. She affixes the common seal of Food transport Pty Ltd and forges her husbands signature as secretary. The bank advances the money to Mrs Johns personal account.

Mrs John invests the money, however the pine plantation was a scam and never existed. Mrs John did not undertake any research into the pine plantation and relied solely on her friend for advice (her friend had no experience in business). Nor did Mrs John advice or husband of the loan or the investment.

Westside bank becomes aware that the pine plantation was a scam and has requested Food Transport Pty Ltd pay back the outstanding loan.

REQUIRED:

Explain whether Mrs John has breached her duty of care as a director under section 180 of the Corporations Act. Will Mrs John be able to rely on the Business Judgement Rule contained in section 180(2) of the Corporations Act?