t Pauls suggestion, a proposal for Vineyard Ltd to acquire the plastic wine cork manufacturing businesses owned by Lauries Corks Pty Ltd for $50 million was an agenda item at Vineyard Ltds board meeting a few months ago. At the meeting, because it was late in the day and all the directors were anxious to leave, Adam allowed only 10 minutes for Barbara to present a business plan for the proposed acquisition. Jonathans financial report on the impact of the acquisition was tabled at the board meeting but he was not allowed to speak or answer questions. After a few minutes discussion, the directors approved the acquisition and Barbara subsequently signed a contract to buy the business on behalf of Vineyard Ltd.

2.3. Subsequently, the board discovered that Jonathans financial analysis had obvious mistakes and that therefore the $50 million purchase price was grossly excessive. Unfortunately, this discovery was made only after Barbara signed the purchase of business contract on behalf of Vineyard Ltd. The board was also unaware that Pauls family company owned most of the shares in Lauries Corks Pty Ltd.

2.4. Assume that

a. Vineyard Ltd completed the $50 million purchase of business from Lauries Corks Pty Ltd; and

b. The purchase of the business proved to be a financial disaster for Vineyard Ltd with the result that the shareholders replaced the whole board with new directors.

2.5. Advise the new directors of Vineyard Ltd whether its former directors breached any of their duties in relation to the decision to purchase the business from Lauries Corks Pty Ltd. Your answer should also consider whether the directors are able to rely on the business judgment rule or any other defences to avoid liability.