FACTS: Without getting shareholder approval, Mr Dempster ("Mr D"), the controlling director and majority shareholder of both Mallina Holdings Ltd ("Mallina") and Dempster Nominees Pty Ltd ("Dempster"), responded to a Government tender to carry out very expensive exploratory research which may (if successful) land the winner of the tender a lucrative petroleum contract with the Western Australian Government. In doing so, Mr D lied in his application for the tender by claiming that "Mallina and Dempster had entered into a joint venture agreement to be able to fund the research". This was untrue and made up by Mr D.

ISSUE: When Mr D was informed that the "Mallina/ Dempster Joint Venture" won the tender, Mr D informed Mallina that "although Mallina won the contract, the government was reluctant to work with Mallina due to embarrassing news coverage involving Mallina which appeared on the news at that time". This was untrue. Mr D then deceived Mallina again by telling Mallina Directors/ shareholders that "another company, Petroleum Industries Co Ltd ("Petroleum") would pay Mallina $250,000 for the contract"... yet failed to ALSO mention that he owned 10% of Petroleum.Following a vote, Mallina shareholders agreed to the deal and sold the contract to Petroleum.

PROBLEM: Around 4 years later, Mallina shareholders realized their mistake when it was reported on the news that Petrolium's contract with the government was worth $450m (of which $50m was paid directly to Mr D).

ISSUE: When Biala (minority shareholder) sued the majority shareholders of Mallina, Mr D tried to use his majority voting power in Mallina to force the company to withdraw the legal action taken by the minority shareholder (Biala)... against himself!

HELD: Where the majority of members are alleged to have undertaken some action that is improper, and then attempt to use their majority voting power to prevent the company from bringing legal proceedings against themselves, the actions of the majority will breach the Equitable Limitation and those actions/ decisions will be void (invalid)

QUES: In the case of Biala Pty Ltd v Mallina Holdings Ltd (No 2), discuss the reasons behind Mr Dempster's wrongdoing. Which rule or law did he break?