Tropical Gardens Pty Ltd (Tropical) operates a wholesale nursery growing and selling garden plants in Darwin. Peter, Paul and Mary are the only shareholders and directors. Peter manages the companys day-to-day operations. Paul, who has no formal education, is in charge of the nursery. Mary is a nonexecutive director who is not actively involved in the management of the company. Tropical has been very profitable until recently however, six months ago, a competing business opened nearby and since then profits have dropped considerably. Peter thinks that Tropical should move to larger premises in a different area. Without consulting the other directors he starts looking for new premises and he decides the first place he inspects is perfect although the price is more than Tropical can comfortably afford. Peter does not think this will be a problem, because he expects that profits will recover immediately as there is no competition in this area. Peter calls a board meeting and tells Paul and Mary that moving will solve all the companys problems and that the property he has seen is perfect for Tropical. He says they will have to act quickly as there is another interested purchaser. Peter does not tell Paul and Mary that he only looked at this one property. He is so enthusiastic that both Paul and Mary agree to the proposal even though Mary is doubtful, feeling that they are being rushed into making a decision without being given time to consider other alternatives. Paul agrees to Peters proposal without really understanding the financial implications. Tropical purchases the new premises but, because of continuing dry weather, the profits remain low. Mary is becoming worried about her obligations as a director, especially if the financial position deteriorates any further.

REQUIRED: (a) Advise Mary about:

(i) her position in respect of any breaches of her general law or statutory duty of care and diligence as a director;

(ii) whether her decision to agree to the purchase of the new premises would be protected by section 180(2); and

(b) Advise Peter as to his position in respect of any breaches of his duty of care to the company,

(c) What is the rationale of the business judgment rule? Does it allow directors too many opportunities to avoid the consequences of poor business decisions?