Durie James owns a garden supplies and design business. He decides to form a company, Drastic Designs Pty Ltd to take over the business. Durie will be the only shareholder and will do all the work. Durie sells his business to Drastic Designs, lending the company $100,000 towards the purchase price. As security for his loan to the company, Durie takes a security interest over the assets of Drastic Designs. In the first year, Drastic Designs makes a small profit. The following year a pandemic affects the economy and garden design work becomes hard to find. In an attempt to keep Drastic Designs afloat, Durie makes several choices. These include: delaying payment to suppliers, insisting clients pay a large deposit before work commences, and reducing equipment hire costs. Semester 1, 2020 BULAW5915 Corporate Law Page 4 of 8 Drastic Designs substantially reduces its equipment hire costs by taking advantage of off- peak rates for overnight hire. Durie changes his work routines. He works through the night using hired machinery to prepare gardens for design projects. Drastic Designs financial situation improves. One night while using a Bobcat to dig holes for a retaining wall Durie falls asleep and loses control of the machine. The Bobcat rolls over and Durie breaks several ribs. He is unable to work for at least 12 weeks. With no one to carry out the work, Drastic Designs cannot finish the garden design projects it has started and customers are now demanding repayment of their deposits. Durie is in financial difficulty.

Required A: Advise Durie whether he is entitled to seek repayment of the $100,000 loan (5 marks) and whether he can claim compensation under Drastic Designs employee accident insurance policy?