Question 2

Ken, Jerry and Tom are directors of Amazing Food Pte Ltd (Amazing Food). Tom is an executive director, while Ken and Jerry are non-executive directors of the company. Amazing Food’s core business is manufacturing and supplying gourmet sausages and meat to high-end supermarkets and restaurants in Singapore. Because of competition and increasing costs of supplies due to various trade wars between the countries, it has become increasingly difficult to earn profits by just relying on gourmet sausages and meat.

At a board of directors’ meeting, Tom suggested that the company diversify into canning locally found “Batang Fish”, as there seemed to be an increasing trend to find sustainable food source with low footprint in Singapore. Tom did a five-minute presentation on “Batang Fish” and emphasised that the company would be a pioneer in this industry in Singapore. Ken and Jerry were impressed and excited to be pioneers in this industry, and they voted to invest $1 million into this project. Amazing Food engaged Atlanna Pte Ltd to rear the fish in a fish farm in a neighboring country.

Unfortunately, the “Batang Fish” project turned out to be a commercial failure and caused a great financial loss to the company. It turned out that the waters where the Batang Fish was being reared were contaminated with mercury and the fish in that region showed high mercury content. As a result, the Batang Fish was unfit for human consumption.

It was later discovered that there was a report warning of high mercury content in the waters where the Batang Fish was being farmed. If proper research was done or experts were asked, Tom would have been aware of the report.

It was also discovered that Tom’s wife owned Atlanna Pte Ltd. However, this fact was not disclosed to the board of Amazing Food at the time when the contract was awarded to Atlanna Pte Ltd.

(a) Describe the directors’ duties imposed on Ken and Jerry with respect to their decision on the “Batang Fish” project. Analyse whether Ken and Jerry had breached these duties. Can they rely on any defences?

(b) Explain if Tom had breached any director’s duty in relation to the contract with Atlanna Pte Ltd. In your answer, explain briefly how he might avoid breaching director’ duties, if any, in the future.