1 Minh owns and operates a Bun Cha (noodle soup) restaurant in Hanoi, which has been incorporated as a proprietary company, Bun Minh Pty Ltd (Bun Minh). Minh is the sole director and shareholder of Bun Minh. Bun Minh served very hot (over 100 degrees Celsius) Bun Cha to a customer, Phuong. This caused Phuong to suffer severe burns on her face and throat, which required surgery. Phuong sues Bun Minh for $2 million Australian Dollars for medical expenses and pain and suffering. Minh knows that Bun Minh cannot possibly pay the damages to Phuong if the company loses the lawsuit, and that Bun Minh will go out of business and lose all of its assets. One week after the lawsuit is filed; Minh transfers all of the assets of Bun Minh to Bun Minh 2 Pty Ltd in exchange for $1. Bun Minh 2 Pty Ltd is a newly created company Minh formed two days earlier. Bun Minh does into liquidation two months later. Applying Australian law, advise Phuong what, if anything, she can do about this situation. Question 2 Tax Smart Pty Ltd (\"Tax Smart\") specialises in providing advice on taxation related issues to Australian companies. Tax Smart's three directors are Edward, Matilda and Krishan. Theo has recently joined the Company as a Senior Tax Adviser. However, due to Theo's management experience, Tax Smart has always intended for Theo to also occupy the position of Company Secretary which is currently vacant. In fact, on some documents lodged with ASIC, Theo appears as the Company Secretary. Unfortunately, Tax Smart has not convened a Board Meeting to officially appoint Theo as it has been very busy with tax returns assessment and filing for its clients. Krishan has heard about newly developed tax preparation software called Super Tax V7.0 within his professional circle. Everybody in the circle claims the software works wonders and recommends it to him. Krishan contacted Genius IT Ltd (\"Genius IT\") who invented the software and said Tax Smart wanted to buy a multi-user licence for the software. When Genius IT enquired who had authority to sign the licence contract, Krishan responded that he as a Director and Theo as Company Secretary have authority to sign the contract. Edward and Matilda are not happy with the contract as industry review of the software shows that it is inefficient, tax assessments produced by it contain a lot of mistakes, resulting in inaccurate tax liabilities. They now claim the contract is invalid due to Theo's lack of authority to sign the contract. Advise Genius IT on grounds that it can rely on to enforce the contract, focusing only on statutory grounds. 1. Explain the difference between a member's derivative rights and personal rights. Answer: See p. 352: A member may bring a derivative action with leave of the court under Part 2F.1A to correct a wrong that has been done to the company. A member must bring a personal action to challenge a wrong done to her or him personally under the general law, contract or Part 2F.1. It is not always clear whether a wrong has been done to the company or to a member personally or whether the act or omission complained of involves a wrong to both the company and a member or members. Question 1 A company has $1,000,000 in excess funds: 2. list the procedures by which these funds could be distributed to the shareholders; and 3. explain why the company would prefer to distribute the funds as a dividend in preference to the other procedures. Question 2 George, Harry and Ian are the only shareholders and directors of No-Waste Furniture Pty Ltd (No-Waste) which makes and sells furniture from recycled hardwood. They each have 1,000 shares in No-Waste. George runs the workshop which makes the furniture while Harry and Ian jointly run the business side of the company. The business has been very successful and it is clear that No-Waste needs to upgrade its office equipment. On Harry's strong recommendation, NoWaste agrees to buy a new \"state of the art\" computer system from AceComputers. Harry says this is the most suitable system available and will make it much easier to expand the business. Harry does not tell Ian and George that he and his sister control AceComputers. Ian knows that Harry has an interest of some kind in AceComputers but does not ask for any details and does not mention this to George. Early last year, No-Waste was approached by Top Timber Pty Ltd (Top Timber), suggesting that the two companies enter into a joint venture to recycle a very large quantity of timber from a big inner city demolition project. After a lengthy discussion, George, Harry and Ian decided that No-Waste did not have the facilities to handle such a large amount of timber and rejected the proposal. Shortly afterwards, Ian, acting on his own behalf, and Top Timber formed a new company which successfully recycled the timber from the demolition project and made a very large profit. George has recently married Clare. Clare thinks that No-Waste is badly run and George, who is not interested in business matters, is happy to agree to transfer half his shares in the company to her. Without giving any reasons, Harry and Ian refuse to register the transfer of the shares to Clare. George and Clare have found out about Harry's interest in AceComputers and Ian's involvement in the project with Top Timber. They seek advice on the following matters: i Have either Harry or Ian breached their fiduciary duties or any provisions of the Corporations Act in respect of the contract with AceComputers? 3 marks ii Has Ian breached his fiduciary duties or any provisions of the Corporations Act in entering into the project with Top Timber? Has No-Waste any claim to the profits he has made? 3 marks iii Is there anything Clare (and George) can do about Harry and Ian's refusal to register the transfer of the shares to Clare? 2 marks iv What, if anything, should Ian have done to ensure that he did not breach any of his duties as a director in entering into the project with Top Timber? 2 marks