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She was educated at Roedean and the University of Sussex. A product of the political and cultural upheavals of the 1960s, Goodbody regarded herself as a radical and a revolutionary who was involved in the feminist movement. She was a member of the Communist Party of Great Britain.
Very early in her theatrical career, she adapted and staged Dostoyevsky's Notes from the Underground. This production won an award at the National Student Drama Festival and eventually transferred to the West End. As a result of her success, in 1973 she was offered a position with the Royal Shakespeare Company, where she was signed up as an assistant to Trevor Nunn for his season of Shakespeare's Roman plays. She became an associate director, in charge of the Company's The Other Place studio theatre, in the following year. She thus became the first ever female director to work at the RSC.
Her productions in Stratford (King John, Trevor Griffiths' Occupations) were noted for their radical content. In 1974, Goodbody played an instrumental role in establishing The Other Place. It was put forth as an alternative to the traditional Royal Shakespeare Theatre and became highly regarded for its challenging versions of canonical plays.
At The Other Place, Goodbody staged King Lear (1974) and Hamlet (1975). Of the latter, The Times theatre critic Irving Wardle wrote: "an astounding revelation of the most excavated play in the world, ranking with Peter Brook's A Midsummer Night's Dream as the key classical production of the decade". Goodbody was also associated with the Women's Movement and was a founder member of the Women's Street Theatre Group.
Goodbody committed suicide in April 1975, aged 28. The National Student Drama Festival named a directorial award in her honour. Pam Gems created the character of "Fish" in Dusa, Fish, Stas and Vi in memory of Goodbody.