Case Study: Analysis of Director's Duties in Growfast Pty Ltd

This case study examines the responsibilities of directors within Growfast Pty Ltd, a wholesale nursery facing financial difficulties. The analysis focuses on the actions of Rose, a non-executive director, and whether her conduct during a board meeting violated her duties under common and statutory law. The study explores the general duties of a director, including acting in good faith, avoiding conflicts of interest, and exercising care, diligence, and skill in decision-making. It also references Section 180(1) of the Corporations Act 2001, which mandates the exercise of care and due diligence. The case argues that Rose breached her duties by agreeing to a proposal without proper evaluation, especially given her initial concerns, thereby failing to meet the required standard of care. The conclusion emphasizes the importance of thorough due diligence and highlights that Rose should have considered alternative options before agreeing to the proposal. The case study references legal texts and provides a comprehensive assessment of the director's responsibilities within the context of the provided scenario.

CASE ANALYSIS

 Growfast Pty Lid has three directors who are
also the only shareholders (Sam, Peter,
Rose)
 Since six months, company has been facing
competition
 Sam locates a new premises and calls board
meeting for approval of buying
 Rose is reluctant while Peter does not
understand the financial implications
 Company purchases the new land but
profits remain low leading to chances of
bankruptcy
Case Summary

 Key issue is to determine if Rose as non-
executive director is in violation of the
following duties.
◦ Duties of directors bestowed under common or
general law
◦ Statutory duty to care and conduct due diligence
as highlighted in Corporations Act 2001
Issue

 General law duties of a director
◦ Act in good faith
 Using powers for proper purpose
 Avoid conflict of interests
 Retain discretionary powers
◦ Deploy care, diligence and skill when taking
decisions
 Statutory Law
◦ Section 180(1) – Directors should discharge duties
and exercise power with care with due diligence
Relevant Rule

 Conduct of Rose during the board meeting
highlights that even though Rose was suspicious
about the proposal but she still agreed without
additional evaluation leading to current crisis.
 Breach of general duty to deploy care and due
diligence along with statutory duty under s 180-1.
 She should have not agreed and considered
possible alternatives before concluding the best
proposal for the company
Application

 Rose is in the breach of the following
◦ General duty of deploying care, diligence and skill
when taking decisions
◦ Statutory duty of care and due diligence (s. 180-
1)
 To avoid the breach adequate due diligence
should have conducted by Rose before any
final decision especially when she felt being
rushed by Sam.
Conclusion

 Cassidy, J. (2013). Corporations Law Text
and Essential Cases (4thed.). Sydney:
Federation Press.
 Ciro, T. & Symes, C. (2013).Corporations
Law in Principle (9thed.). Sydney: LBC
Thomson Reuters.
References