Bruce and Lee are the only shareholders and directors of Ninja Computers Pty Ltd, a two-dollar company that operates a computer stores in Sydney. Bruce and Lee share management of the company. Bruce is the managing director, which also involves responsibility for the company's finances (because he worked for several years as an accountant with a large firm). Lee manages the company's staff, business marketing and client relations. Lee knows very little about finance but is a good people person. Lee has complete trust and confidence in the ability of Bruce to manage the business, given the background and experience of Bruce.

On 1 July 2017, Lee received a telephone call from one of the company's trade suppliers (SupplyCo) demanding that an overdue monthly supply account be paid. Lee thought this was very strange because Bruce was normally very efficient at paying the company's bills. However, Lee was very busy that day and he left a message for Bruce on his desk.

Two weeks later when Lee asked Bruce about the bill, he replied that he paid it. On 1 August 2017, Lee again receives a telephone call from SupplyCo demanding payment. Lee emails Bruce about this, who replies that he has "sorted it out". What Bruce has in fact done is pay off the creditor using the company's credit card which is now over its limit.

Any doubts that Lee had about the company's financial position is removed when Bruce sends an email to him advising that the company had been able to review its tax position and received a "huge" refund from the tax department, which he has used to buy new company cars for each of the directors costing $55,000 each. Although Lee is not happy about Bruce buying the cars without consulting him, Bruce insists that he only bought the cars to take advantage of a special tax advantage in buying luxury cars for business purposes.

Bruce, who has a reputation as a liar, had given false information to Lee. Bruce has been selling several company assets to pay off the luxury cars and his personal gambling debts. The money used to pay for the Christmas party was taken from another company credit card that Bruce signed up for. The company has been surviving on credit for all of 2017. Bruce has been able to conceal this from Lee by failing to keep proper financial records since 1 August 2016.

On 1 November 2017, Lee tries to use his company credit card, but it is rejected by the ATM due to insufficient funds. Lee tries to contact Bruce but his answering machine states that he is on holiday and will return to work on 8 November 2017.

On 9 November 2017 Lee becomes concerned because Bruce does not return from holidays and his mobile phone has been disconnected. On 10 November 2017, Lee receives a telephone call from the company's bank manager who informs him that the company has now exceeded its $150,000 overdraft and that, for this reason, the bank will no longer honour any payments made by Ninja Computers Pty ltd.

On 14 December 2017, a liquidator is appointed by the court. The liquidator now seeks to repay the creditors of Ninja Computers Pty Ltd, but the company has insufficient funds and assets to make any repayment of debts totalling more than $285,000.

(a)Advise the liquidator, with reference to the Corporations Act 2001 (Cth), as to what action she should take against Bruce and Lee and the chances of her success; and

(b)Assume ASIC, instead of the liquidator, has taken legal action Bruce and Lee for breach of the Corporations Act identified in your answer in part (a). Explain, with reasons, what are the most likely potential legal consequences for Bruce and Lee?