Randy and Mandy were directors of Made in the Dark Pty Ltd, a company that produced and supplied mushrooms to local retailers. The mushroom farm that they operated out of was a family-owned property and business handed down from generation to generation.

Mandy felt quite constrained by this traditional business and wanted to start offering creative products that give the business a more edgy clientele. Mandy started secretly testing and growing magic mushrooms in a retired mushroom shed and did not tell Randy. After Mandy had her first crop of magic mushrooms, she got Fred, the site manager to secretly pack the magic mushrooms and distribute them to some newer customers who were interested in supplying them at their health retreats.

Mandy was being paid $2,000 per box of magic mushrooms as opposed to $50 a box of the usual button mushrooms, they supplied to their usual clientele. Mandy recorded on the books that her magic mushroom customers were paying $50 per box and the Invoice stated that the mushrooms were also button mushrooms. That meant that Mandy was keeping a profit of $1,950 per box of mushrooms she sold. Fred, the site manager was secretly keeping a few boxes of the magic mushrooms and selling them for $1,500 cash when Mandy and Randy weren't around.

Randy felt that Mandy had been working a lot harder than usual and would volunteer to work on weekends so he could spend more time with his wife and kids. Randy began to enjoy the reduced workload and let Mandy take over whilst he increased his family holidays and WFH days. Mandy let Fred hire more people and soon the mushroom sheds were producing 50% of their stock as button mushrooms and the other 50% magic mushrooms.

One afternoon, whilst Randy was in Bali on a family holiday, he noticed some breaking news headlines reporting that Made in the Dark Pty Ltd had been shut down with Mandy and Fred being arrested for illegally producing and selling magic mushrooms. Randy was in shock and disbelief.

Advise Randy and Mandy and Fred whether they breached any directors duties.