Ebony and Sam are the directors BananaRama Ltd, a producer of banana flavored cordials. They each hold 40% of the shares in the company. 15% of shares are owned by Sam's brother, Jordan and 5% by Kai, an external investor. Jordan and Kai are not directors.

In January 2020 Sam proposed to Ebony that BananaRama Pty Ltd open a second factory. With significant domestic growth, they need a second factory to keep up with orders. Ebony was not keen on expanding the business and building a second factory as she thinks it is too risky in the current economy. Instead she thinks they should be investing in the company's visibility internationally.

Despite Ebony's protest Sam forges ahead with the plan and put out a call for tenders. They receive three bids, including on from Jordan's construction company, Ubuild Pty Ltd. Although Sam knew this was Jordan's company he did not disclose this to Ebony and award the contract to Jordan's company. When Ebony finds out that Sam has undergone the tender process without consulting her first she is furious. She tells Sam that the money should have been used for the international expansion. Sam in turn is not keen on expanding internationally and doesn't believe that there is a taste for banana flavored cordial abroad. Ebony suggests that they explore the market further to see whether this may be a viable option - to which Sam agrees.

After two months of undertaking substantial research Ebony forms a proposal and puts it to Sam who turns it down without even reading it. The proposal included the opportunity to pursue three contracts abroad - in the UK, Canada and the US. This would have increased the profitability of the company by 50%. When Ebony' inquires why Sam has refused, Sam says he thinks they should partner with RaspberryBelieve Pty Ltd, a company which specializes in carbonated drinks.

Ebony disagreed and says that BananaRama Ltd is about health and wellness and being associated with a carbonated drink company, which is well known for high caffeine and sugar in its drinks, will hurt the company's image."Let's look at this as an opportunity - we could attract a new form of clientele". Before Ebony can answer Sam smiles and says "I knew you would love the idea, that is why I already signed the contract. Don't worry - I protected us, the contract is through a subsidiary of ours BananaBee Pty Ltd." Ebony is left sputtering in outrage as Sam leaves the room.

Ebony looks into this further and discovers that UBuild is Jordan's company and that Sam holds shares in uBuild. She also looks into RaspberryBelieve Pty Ltd and learns from Kai that the director is Sam's new girlfriend.

a) Ebony has come to you for advice and wants to know if Sam has breached his duties. (20 marks)

Following the above incident, Ebony is put on leave due to high blood pressure because of all the stress Sam is causing her. Two weeks later Sam breaks up with his girlfriend and refuses to follow through with the contract made with RaspberryBelieve Pty Ltd. Technically RaspberryBelieve Pty Ltd has a contract with BananaBee Pty Ltd, which is a company with no assets.