Question 3. Director's Duties (10 marks)

DOC Ltd is a listed Australian company which sells and installs surgical equipment to Australian hospitals, nursing homes and medical Time left

The composition of the Board of Directors of DOC Ltd is as follows:

Christine Healey, Chair

Michael Dillon, Managing Director

Colin Farrell, Chief Financial Officer

Neil Edwards, Non-Executive Director

Naomi Eade, Non-Executive Director

Noah Elms, Non-Executive Director

At a recent board meeting attended by all the directors the following matters were discussed: item 1. A long- term multi-million-dollar contract with HP Pty Ltd to supply nursing home equipment to DOC Ltd.

Farrell provided an inadequate but favourable report on the financial impact of the contract. The report was accepted without discussion and the board resolved that DOC should sign and seal the contract document.

Note: The following information subsequently became known in relation to this contract. The prices of the equipment supplied by HP Pty Ltd were well above market price. Dillon's family company owns 35% of HP Pty Ltd's shares. No declaration of interest was made by Dillon. Elms suspected (bu was not certain) that Dillon had a financial interest in HP Pty Ltd but did not mention his suspicions to the other directors.

Item 2: Farrell reported to the board on the level of the company's current liabilities. He informed the board that DOC had significant short-term loar that needed to be either repaid within the year or refinanced.

"Item 3: The board considered the company's draft annual financial statements prepared by the company's accounting staff under Farrell's supervision. After the board's audit committee recommended the adoption of the draft financial statements, the directors, without further discussion formally resolved pursuant to Corporations Act 2001 (Cth)s 295(4)(c) that the financial statements complied with applicable accounting standards and presented a true and fair view of the company's financial position.

Note: The following information subsequently became known in relation to the adoption of the accounts. The financial statements incorrectly classified $500 million in debt as non-current liabilities. The financial statements with he incorrectly classified non- current liabilities were then submitted to the AX in accordance with DOC's Corporations Act 2001 (Cth) 674(2) continuous disclosure obligations.

Your Task:

(i) Consider the potential liability for breach of director's duties under the Corporations Act 2001 (Cth) for the following directors:

Michael Dillon

Noah Elms

Naomi Eade

(ii) To what extent if any can the above directors rely on defences contains in s 180(2) and/ors 189 of the Corporations Act 2001 (Cth).