Letters Pty Ltd is a private company that provides business consulting and advertising services to other large companies across Australia. Letters has five directors: Jenny J, Mel B, Jeff T, Biggy W and Zee Z. Jenny is the Managing Director and Zee is the CFO. The others are all non-executive directors. Each of the directors hold 20% of the shares in Letters Ltd. Generally, meetings and decision-making run smoothly. This is supported by the fact that the constitution of Letters Ltd provides a lot of detail on how decisions should be made and the responsibilities of different positions. For example, the constitution includes a clause 6A, "that at least 2 weeks' notice must be provided for all meetings"; clause 6B "that a quorum for a members meeting is three members"; clause 6C "that all decisions for loans over $10 million must be decided by a general resolution at a members' meeting".

Recently, Jenny J and Zee Z have been in disagreement about whether or not to expand the business and take out a large loan of $50 million to do so. Jenny promotes the idea of expanding the business and supports the loan, while Zee thinks it is a risky move that compromises the business. Jenny knows that Mel B supports her position. Mel and Jenny are best friends and Mel always agrees with Jenny regardless. Zee knows that Jeff T supports his position that the loan would be a poor choice and reckless for the business. The decision then turns on convincing Biggy W one way or the other.

Jenny J is very keen to take out the loan and "get cracking". To increase her odds, she sends out notice of the members meeting to be held in three days' time, at a location she knows it will be difficult for Zee to get to, as he lives almost 8 hours away. She also provides a video link for board members who cannot attend in person.

Zee is not taking any chances, despite the challenge, he makes it to the meeting in person to present his case against the loan. However, both Biggy W and Jeff T choose to attend via video link. During the meeting, the video connection is poor and there is a lot of static in the line, Jenny disconnects both Biggy and Jeff and does not reconnect them. With only the 3 members in attendance, she and Zee put forward their arguments for and against the loan. Ultimately, the vote goes in favour of Jenny. Although Mel has some misgivings about the financial issues raised by Zee, she votes predictably in favour of Jenny, as she always does. Without back up from Jeff and without clarity on how Biggy would have voted, the decision is passed in favour of the loan.

After being kicked off the video link and discovering the outcome of the meeting, Jeff approaches you for advice.

a) Advise Jeff on the validity of the decision in favour of the loan, any liability Jenny and Mel may have as Directors, and what actions and remedies may be possible. (20 marks)

Subsequently, Jeff wants to ensure that this type of conduct cannot occur again. He comes to you to request advice on the process for changing the constitution of Letters Ltd so that decisions like the one above require a special resolution of members.

b) Advise Jeff on whether such an amendment is possible and how it could be done. (15 marks)