At FWPL, Mario remains concerned about the level of dissent and discontent Jason is stirring up among the Galli grandchildren. He decides to contact Simon and offer to acquire Simon’s shares in FWPL. As managing director, Mario knows there is a good chance that the company will soon enter into a distribution agreement with a major retailer in the United States that will greatly enhance the value of the business. He believes now is the right time to make an offer for Simon’s shares, before the deal is finalised and announced.
Mario knows that, as a director of FWPL, he owes duties to the company. But does he owe any duties to Simon in these circumstances?
JV Mine Pty Ltd is 50% owned by GML. In 2009, GML was approached by QMNE Ltd, the other shareholder in JV Mine, to make a further major investment in JV Mine, to enable it to develop a new copper mine. The then directors of GML delegated to others, including a geologist, the task of obtaining the technical information about the amount of copper that might be able to be mined. The report prepared for the directors indicates that the proposed investment in the mine should be very successful. Queried by his fellow directors about the optimistic forecasts, Mr Chester (who has a geology qualification) assures them that all appears to be in order. However, some of the information has been negligently prepared. This means that, when the directors rely on the report and invest GML’s funds in the mine, the investment will not be as successful as the report indicates.
Have the directors of GML (or any of them) breached their duty of care?