1 10 MARKS Snowgoose Ltd owned and operated a shopping center in Byron Bay. Peter, John and Marks were the only directors of Snowgoose. Peter was appointed the managing director due to his extensive knowledge of operating shopping centers. Both John and Mark are non-executive directors. Snowgoose has a number of unrelated shareholders. Over the past few years, Snowgoose's financial position has steadily deteriorated. While Peter was aware of this, he did not pass any financial information onto the other directors. Indeed, he repeatedly told them that the company was performing wonderfully. While John and Mark were given the company's financial reports, they never looked at them closely as they assumed that the auditors or Peter would alert them to any problems. By January 2020, things had started to get dire for Snowgoose as attendance at its shopping center dropped precipitously due to a competitor opening a new shopping center nearby. Snowgoose's cash reserves were running low and Peter was post-dating cheques in order to avoid running out of money. In a few instances, cheques were presented when Snowgoose had insufficient funds and they bounced. On January 20, 2020, the manager of Snowgoose's bank - Dud Bank Ltd - called Peter and said that she would be forced to suspend the company's overdraft facilities unless the company improved its financial position. At a board meeting on February 1, 2020, Peter informed the board that he had a revolutionary idea for Snowgoose. He proposed that Snowgoose enter into leases for two more shopping centers that were located in Lennox Head. He suggested that by undertaking this transaction, revenue would increase and it would even make the company a potential takeover target. John and Mark were intrigued and told Peter to do whatever he had to do to get the transaction done. After the meeting, Peter approached a commercial leasing agent who informed Peter he had two shopping centers available for lease. The agent said the shopping centers were in wonderful condition and would be just what Snowgoose needed. Peter inspected the shopping centers with his friend Frank who is an accredited residential building inspector. Peter thought the shopping centers were acceptable and Frank said he couldn't see any structural problems with the shopping centers. On March 1, 2020, the board had a further meeting and Peter updated the board regarding the leases. Peter told the board that Snowgoose needed $4 million to place signage on the new shopping centers. Peter said he had reached an agreement with Dud Bank whereby it would loan the company $2 million and suggested Fred and Barney each contribute $1 million in return for shares in Snowgoose. John and Mark agreed. On March 5, 2020, the leases were signed, John and Mark transferred $2 million to the company and a credit agreement was entered into with Dud Bank for $2 million. The new signage was completed on March 10, 2020 and Peter arranged a grand opening scheduled for March 15, 2020. On March 13, 2020, Peter received a letter from the Ballina Shire Council saying that Snowgoose was not permitted to open the two new shopping centers as they did not have adequate fire exits and the fire sprinkler system needed to be replaced. After some preliminary investigations, Peter discovered that it would cost over $1 million to install additional fire exits and upgrade the sprinkler system. Knowing that the company was doomed, Peter transferred its last $50,000 in the company's bank account to Dud Bank because he felt sorry for Dud Bank and thought it deserved something back. He also transferred a BMW motor vehicle which was owned by Snowgoose into his name on the basis that he thought the company owed him something for all his hard work in connection with leasing the two new shopping centers. On April 20, 2020, the directors had no alternative but to place Snowgoose into voluntary administration and it was subsequently placed into liquidation. The liquidator now desires to commence an action against the directors: 1. alleging the directors for breaches of their duty of care, skill and diligence. Discuss (2 marks) 2. alleging the directors for insolvent trading. Advise (2 marks) 3. the liquidator also desires to recover the BMW motor vehicle and the $50,000 under Part 5.7B Div 2 of the Corporations Act. Advise (2 marks) 4. Will Dud Bank be able to appoint a receiver to recover the $2 million owing by Snowgoose? (2 marks) 5. What are Snowgoose's options given it is now under voluntary administration? Discuss