QUESTION 4 (15 Marks)

Mistry Ltd is a public company listed on the Australian Securities Exchange. The company is engaged in a variety of primary production businesses, including dairy products, cotton, wool and beef production. The company has appointed eight non-executive directors and three executive directors.

Norman is one of the non-executive directors and he was invited into this role as he had extensive farming experience. As the board meetings of the company are always held in Sydney and Norman is based in regional NSW, he does not attend board meetings regularly. However, Norman regularly reads the relevant documents distributed in advance of board meetings. He finds the accounting and financial content in the documents are too technical. Norman considers that understanding these documents does not fall within his area of expertise but plays a role in the company as a trouble shooter when dealing with stock and farming.

Mark is the managing director of the company but has not revealed to the board that the cotton division of the company has been underperforming for some time. Production and budget figures for the division have not been included in the documents for board meetings for at least six months. Mark has also concealed from the board that because of pest infection, the plantings of the company's cotton farms have been substantially ruined. Mark has not taken much initiative to stop the spread of the disease. Mark has also caused the company to purchase a number of rural properties at a substantial overvalue and some of these properties have been purchased from a farming partnership in which he invested in.

Advise Mistry Ltd, if Norman and Mark will be liable to the company for a breach of directors' duties under the Corporations Act 2001 (Cth).