Fenner Fashions Ltd designs fashion items, including clothing, accessories and cosmetics. Fenner Fashions has three directors on its Board, and these directors are also directors of a subsidiary company of Fenner Fashions called Mean Beanies Pty Ltd (Mean Beanies). The three directors are majority shareholders in both Fenner Fashions and Mean Beanies.

During August of 2019, Mean Beanies contracts with another company, No Sale Pty Ltd, for the purchase of goods to the value of $250,000. In due course, No Sale Pty Ltd fails to deliver the goods to Mean Beanies, and the company does not refund any money to Mean Beanies. The three directors of Mean Beanies decide not to commence legal action to recover the $250,000 from No Sale Pty Ltd. They simply advise: it would not be an advisable course of action. This decision results in a major loss for Mean Beanies that also has a serious financial effect on Fenner Fashions.

The minority members of both Fenner Fashions and Mean Beanies are concerned with the way the company is being run by the 3 directors, and so they seek legal advice.

Question 2: Answer both A and B

A). Outline the liability of the directors in terms of their duties under the Corporations Act 2001 (Cth). Have the directors breached their duties to either Fenner Fashions or Mean Beanies? (10 marks).

B). Identity the possible remedies that the minority members could seek against Fenner Fashions and Mean Beanies. Consider whether the minority members are likely to be successful (15 marks).