There is 1 question in this section. The

question is worth 20 marks. You must

answer following the IRAC method. All

answers must be supported by relevant

provisions of the Corporations Act 2001

(Cth).

Question C1

Bumblebee Pty Ltd is an Australian mineral

and resources company. Bumblebee's

directors are Donagh, Adrianna and Viggo.

Donagh is the managing director. Adrianna

is a well-known mineralogist and miner and

has a PhD specialising in the geology of

gold deposits. Viggo used to work for a

large multinational investment firm.

Bumblebee has approximately $150 million

in the bank and is looking to acquire new

mining tenements. A mining tenement is

basically a claim, lease or license to

undertake exclusive mining operations in an

area for a certain period. ASCO Pty

Ltd approaches Bumblebee offering to sell

it some tenements that ASCO holds.

Done

Bumblebee hires Radiant Earth Pty Ltd, a

geology firm, to conduct a survey of

ASCO's tenements to see if there is enough

gold to support a profitable mining

operation. Radiant Earth informs

Bumblebee's directors that while it

specialises in geological surveys, it has

never undertaken an assessment for a

potential gold mine. Despite this disclosure,

Radiant Earth proceeds with its survey and

prepares a report for the board.

Adrianna is the only Bumblebee director

who reads the report. But since she's so

busy, she focuses on the summary, which

says there is gold in the tenements.

Unfortunately, Adrianna doesn't read

footnote 38 on page 23, which says that

while gold ore is present, geographical and

topographical issues with the location of

the tenements mean it would be virtually

impossible to remove the ore to process it.

Donagh asks Adrianna if she thinks the

tenements are good value. Adrianna says

that she has looked at the report and

"everything looks perfect". The board

proceeds to pass a resolution approving the

purchase of ASCO's tenements for $50

million.

Soon, Bumblebee discovers that the gold

cannot be mined from the tenements due to

the issues explained in Radiant Earth's

expert's report, and Bumblebee has to sell

the tenements at a huge loss for the

company. Now the shareholders of

Bumblebee are furious; there are rumours

that they will demand the removal of

Required:

1. Did any of the directors of Bumblebee

breach their duty under s 180(1) of the

Corporations Act or the general law

equivalent?

2. Discuss potential defences available to the

directors