Peter has been a non-executive director of Snappy Robots Ltd (SR) since 2007. Peter is inexperienced, but was appointed as a director because he is the son in law of a major shareholder of SR. While he is not very experienced, Peter has finished his Bachelor of Commerce degree, majoring in Accounting, and has been working as an accountant for the last three years.
Several years ago, SR decided to acquire Wealthy Ltd, a company specialising in making robotic limbs for human use. Peter, as director, considered this to be a very profitable opportunity for SR. In forming this opinion, Peter had read a lengthy report (over 300 pages long) that was written by SR's Chief Financial Officer. Because Peter was busy studying for his CPA exams, he did not notice that the report indicated (at page 257) that the company was experiencing a decline in sales of robotic limbs. Also contained in the report (at page 165) was a recommendation that SR obtain an independent verification of the robot technology before proceeding with the acquisition.
Peter did not seek an independent verification of the value of the technology. In fact, Peter only read the first few pages of the report which suggested that Wealthy, generally, appeared to be in a strong financial position, and on that basis convinced the other board members (mainly due to his relationship with the major shareholder) to go ahead with the acquisition of Wealthy.
The acquisition proves to be a financial disaster and the robotic limb technology was significantly overvalued. As a result, SR becomes insolvent. A liquidator has now been appointed and has suggested that Peter has breached his duty as a director.
Advise Peter whether he has breached his duty under s 180, including whether there are any defenses that he can argue.