Instructions

• Revisit/Read HRS Ch 10–11 and 15
• Use our guidance notes and questions (below) to help you answer the Question from below
• And develop your notes

QuestionsPear Ltd (Pear) is an ASX listed company, with many corporate and retail customers in Australia and overseas. It has made headlines with Springboard, a program that addresses a key interoperability issue between Macs and PCs. Pear is due to release a new version of Springboard on Friday. On Monday morning, Pear’s CEO, Yana, receives an anonymous email claiming there is a major flaw in the code to the new version. According to the email, the new version of Springboard will transform itself into a virus that will gradually wipe the hard drive of any computer with which it has contact. The damage is irreparable and countless users will be affected. Yana immediately asks Garry, Pear’s chief software developer and an employee, to investigate. Garry reports that the concerns in the email are real. Further, it is unlikely a fix for the flaw will be found by Friday. On this basis, the board resolves to announce an indefinite delay to the update. The resolution is passed by the two non-executive directors, who have read the report but have no experience with software design. Yana votes against the delay because she is an expert and sees flaws in Garry’s report.After the announcement, Pear’s share price and sales figures drop sharply, never to recover. It turns out that that the email was sent by Garry, who has become disgruntled with Yana’s management style and has decided to move to a competitor. The non-executive directors are extensively criticized in the press as being too risk averse.Advise on any breaches of directors’ and officers’ duties under the Corporations Act 2001 (Cth). Consider, in particular, the statutory duty of care in s 180(1) and any relevant defences.

What is the issue? State in your own words.

Briefly describe the rule and the defences. Consider

Which provision of the Corporations Act creates a statutory duty of care? How would you summarise its requirements?How is the breach determined?Is there a minimum standard of care for all directors? If so, what is it?  Daniels v AWAHow relevant are the individual circumstances of a director / other officer?  ASIC v VinesIs there an objective standard of the reasonably competent company director for non-executive directors? What are the defences in ss 190, 198D, and 189 and what is their effect?Is this a poor decision that has resulted in a loss to the company? Yes/No

Is it also negligent? Explain for each director

Conclusion:  Reasonable conclusion