Please use Australia Corporation Act 2001 as reference thank you

XYZ Learning Centres Ltd (XYZ), a small ASX listed company, owned and operated a large number of child care centres. Eddie was the companys chief executive officer and managing director. Prior to this, he had many years experience as chief administrator of a large public childrens hospital in Sydney. James, a director and the companys chief financial officer, has accounting qualifications and a PhD in finance. XYZs other directors, Bill, Carol and Des, are non-executive directors and merely attend the monthly board and audit committee meetings. Bill and Carol are both doctors and have been appointed to the board to provide expert medical and dietary advice. Des is a partner in a large firm of chartered accountants and is the chair of the boards audit committee. Bill and Carol are the other members of the audit committee.

At a recent board meeting attended by all the directors, except for Bill, a long-term multi-million dollar contract with Go-Foods Pty Ltd (Go-Foods) to supply and deliver nutritious cooked meals to XYZ was discussed. At the time, Carol and Des were unaware that Go-Foods prices were extremely high. While Carol was also unaware that Eddies family company owned 35% of Go-Foods shares, Des suspected (but was not certain) that Eddie had a financial interest in Go-Foods but did not mention his suspicions to the other directors. At this meeting, James reported to the board on the level of the companys current liabilities. He informed the board that XYZ had significant short-term loans that needed to be either repaid within the year or refinanced.

A decision about the long-term multi-million dollar contract was deferred to the next board meeting and James was asked to prepare a report on the financial impact of the contract for the company. A number of matters were considered at this subsequent board meeting, which was attended by all the directors. First, James inadequate but favourable report on the financial impact of the contract was accepted without discussion and the board passed a resolution that XYZ should enter into the contract. Secondly, the board considered the companys draft annual financial statements prepared by the companys accounting staff under James supervision. After the boards audit committee recommended the adoption of the draft financial statements, the directors, without further discussion, formally resolved that the financial statements complied with applicable accounting standards and presented a true and fair view of the companys financial position. None of the directors noticed that the financial statements mistakenly classified $500 million in debt as non-current liabilities. The financial statements with the incorrectly classified non-current liabilities were then submitted to the ASX in accordance with XYZs continuous disclosure obligations under the corporations legislation.

(a) Consider the position of each of the XYZ directors and advise whether they breached any of their duties under the Corporations Act 2001 (Cth). In particular, advise whether they breached their duty of care in the above circumstances.

(b) Can the directors rely on the business judgment rule?