Top 4wd Pty Ltd is a company that provides elite 4wd vehicles to tourist travelling Australia. Top 4wd Pty Ltd has four directors Ross, Rungson, Paul and Barry. Ross has been appointed the managing director. Paul is appointed as a non-executive director. Paul is qualified chartered accountant, and the board refers to him for his accountancy skills. The company maintained a good profit for the first three years of operation but has recently experienced an increase in cost causing some financial strains on the company.

Barry, a professional race car driver, rarely attends board meetings as he is often away at race meetings. When Barry gets a break from his race car drive schedule he will often take one of the company's 4wd vehicles to explore remote Australia with his family. With board approval Rungson has recently negotiated a new 4wd equipment supply contract with a Thailand based company. Rungson failed to disclose that the major shareholder of this supply company is his family. Ross suspects that Rungson has an interest in this company but has failed to advise the board.

Despite the decline in the company's financial position, Barry proposed to the board that they should expand into building race cars. Ross questions whether the company has the financial capacity to fund such a large expansion of their business. The board delegate to Paul the task to investigate the financial returns on Barry's proposal.

Paul sets out to investigate the financial returns of Barry's proposal and prepare a report for the Board to be delivered a next month's board meeting. Paul gets sidetrack during the month with other commitments and the day before the board meeting prepares a report based solely on information provided by Barry. The report recommends the expansion proposal be accepted. It later turns out the report is misleading as it has missed a number of costs involved in the expansion. At the board meeting the directors are in a hurry to get through a number of items and the proposal is considered as the last item on the Agenda. The directors spend less than five minutes discussing the report and agree to accept the proposal. During the Board meeting Paul notes the company is struggling to pays its debts as they fall due; however the Board all agree to place an equipment order of $500,000 relating to the new business expansion. Barry was not at the meeting as he was with his family in remote Australia again using one of the company's 4wd vehicles.

Three months later the company is placed into liquidation by one of its Creditors.

Advise the Liquidator on the following

(a) Have any of directors breached their director's duties? (25 marks)

(b) If any director duties have been breached what are the consequences (10 marks)