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business law/Director Liability Law/ Fiduciary Duty/ Breach Of Duty Care & Loyalty

business law/Director Liability Law/ Fiduciary Duty/ Breach Of Duty Care & Loyalty
Order Description
Director Liability Law/ Fiduciary Duty/ Breach Of Duty Care & Loyalty
Q1) Ethan, Joshua and Daniel are all directors of quality sofa & bed Ltd. The company desperately
needed to purchase a warehouse. At a board meeting, Daniel successfully persuaded Ethan and Joshua
that on particular warehouse was perfect for the company and that it was worth $140,000. Ethan and
Joshua later discovered that Daniel was the owner of the warehouse and it was worth $145,000.
Daniel who is a chartered accountant, is in charge of insuring the company’s warehouse against
burglary and fire. He signed an insurance form without checking the content of its policy. The
warehouse was burgled and the company suffered a loss of $30,000. The insurance company claimed
that the insurance policy did not cover burglary and therefore refused to pay.
Ethan and Joshua recently found out that Daniel offered a cheaper price to a company’s client, Paul
Ltd, from which he obtained a personal benefit of $3,000.

Advise Ethan and Joshua as to whether Daniel breached any of his duties as a director of Quality
Sofa & Bed. Discuss duty of care and duty of loyalty Financial Crisis & Corporate Governance (250
words)

Q2, On October 25 2011, the Chairman and directors of Petrotin (a Trinidad based oil company) was
called on by the lawyers of the Ministry of the Attorney General to pay damages totalling $1.2
billion (US$190 million) within 28 days. The lawyers are alleging breach of duty of care in the GTL
project, which in September had a project cost of US$136 million and the costs have now escalated
to US$240 million. The board are accused of making decisions to continue the project by approving
33 payments related to a guarantee of the project without due diligence to determine if the company
could afford the payments or if the project can be finished on time. This decision was taken
despite enough warnings of the cost escalation dangers. The case also claims that there was no
“proper and detailed front end engineering design and clear development verification of the
process” which clearly pointed to a breach of the board’s responsibility to apply due diligence in
its handling of risk. (300 words)
What is the lesson learned from the case

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