Reference no: EM133492278

Heavy Equipment Specialist (HES) was a full-service heavy equipment sales and service company with locations in Newcastle, Brisbane and Albury. HES had three directors, namely Matthew (Chief Financial Officer), Luke (Managing Director and Head of Sales) and John (a heavy equipment specialist and compliance head). The company had 12 shareholders. In December 2020, the company's warehouse in Brisbane was destroyed by fire damaging nearly $3,000,000 worth of heavy equipment, among other properties. Amidst the catastrophic event, HES paid its directors worth $100,000 each as a Christmas bonus. Matthew was authorised to engage a construction company to carry out the necessary repair to the damaged warehouse. He decided to engage 'Ultimate Construction' (UC) owned by his brother-in-law. Matthew solicited from UC a 10% secret commission of the total cost of the project. Meanwhile, the Fire Investigation Report showed that the fire stemmed from an electrical fault. It turned out that there was a failure to regularly check and maintain the lighting and electrical system. John as the Compliance Head oversaw this pivotal task. In March 2021, due to the significant financial losses caused by the fire incident, Luke approached the Manager of WestBank (WB) and expressed interest to apply for a business loan. After a series of negotiations, WB eventually approved the company's business loan application. Not long thereafter, it was discovered that Luke forged several financial documents, and it was further revealed that HES had been insolvent since November 2021.

Explain whether any directors had breached their duties, whether any valid defences applied and the possible consequences and penalties that a court could impose if any of the directors were found to be liable? Support your answer with reference to statutory and case law.