1. Notable Stationery Pty Ltd is an Australian company that sells high-end stationery products. Unfortunately, sales have dropped recently. The company hires Rick Pen, a New York-based consultant, to advise it on how to increase sales. Rick is also appointed to the board of Notable Stationery as a non-executive director. Rick does not make it to Australia very often. Although the company arranges a dial-in numberso that Rick can participate by teleconference, Rick forgets to call in to most of the company's board meetings, which take place in the middle of the night New York time.
2. Rick is not that concerned, as he considers himself a marketing person who doesn't know how to run acompany. He assumes that the other directors and outside advisers will tell him whatever he needs to know.
3. When Notable Stationery issues its year-end financial statements, neither Sula, a non-executive director who is an accountant by trade, nor the outside accountants or auditors realise that the financial statements neglect to disclose that Notable Stationery has just borrowed $50 million from its bank. The error makesNotable Stationery's financial situation look significantly healthier than it actually is.
4. Discuss the potential liability of Notable Stationery's directors (Rickand Sula) under section 180 of theCorporations Act 2001(Cth), including any defences they may have access to. If appropriate to reference case law you should do so.