Lilly, Briah, Chloe, and Terry are the directors and equal shareholders of Fantastic Holidayz Pty Ltd, a company that runs an exclusive airline company and operates in several high-rise office buildings in Melbourne. Briah is the Managing Director and Terry is the Chief Financial Officer. Lilly and Chloe are non-executive directors.

The Company has adopted a written constitution which contains the following clauses:

(36) A directors' meeting may be called by a director giving reasonable notice individually to every other director.

(37) Quorum for directors' meetings is four directors and the quorum must be always present during the meeting.

(42) A resolution of the majority of directors may resolve to remove another director of the company.

Business is booming, and Fantastic Holidayz has made a great deal of money over the last few years. However, the Board of Directors have rejected Lilly's proposal to declare a dividend for the last 7 years in a row - and she is getting fed up. The other directors always outvote her, arguing that it is better to keep the profits in reserve and continue to expand the business. Terry is currently investigating the possibility of opening further destinations to their itinerary.

In October 2017, Lilly was overseas for a family funeral and on her return to Melbourne, she discovers that the other directors have met and passed resolutions to remove her as a director of the company. Lilly did not receive any notice of the director's meeting. In another resolution, the remaining directors voted to pay themselves $500,000 in bonuses - equating to the entire year's profit.

Lilly is angry that she has been removed and not paid a bonus and comes to you for your professional advice and opinion.

Further, Fantastic Holidayz has a longstanding agreement with several travel agencies, and in January 2018, Fantastic's financial accounts showed that one agency owed the company $85,000, and there was no applicable security.

Recently, Lilly discovered that by June 2018 the debt owing to Fantastic Holidayz had blown out to $200,000. Terry had approved additional credit without the knowledge of the other directors. He did this, even though the agency had been taking a long time to pay its overdue account. Additionally, there are now rumours that are insolvent, but this cannot be proven.

REQUIRED:

1. Discuss whether Lilly can bring any action to challenge the other directors' decision to deny dividends for several years and then pay themselves bonuses?(5 marks)

2. Advise Lilly about the process and potential outcomes if the travel agency is placed into voluntary administration - and any implications of this on Fantastic Holidayz.(5 marks)

3. Advise Lilly about whether Terry has breached any of his statutory duties as a director of Fantastic Holidayz. Include in your answer the consequences of a breach of duty, whether Lilly could bring an action for compensation on behalf of the company against Terry, and whether there are any defences available