Lily and Morris are the directors and shareholders of Zap Graphics Pty Ltd. Recently, the company began to suffer cash flow problems and needed additional capital. Lily persuaded Rodney to invest $100,000 in Zap Graphics Pty Ltd. Lily and Morris held a directors meeting and decided to issue Rodney with two shares in the company. A general meeting of shareholders also appointed Rodney as a director of the company.

The companys financial position improved as a result of Rodneys $100,000 investment, as well as the considerable efforts of Lily and Morris. Despite the companys increased profits, Lily and Morris decide not to increase dividends, leaving them at the same level as the previous year. Instead they gave themselves pay rises and arranged for the company to lease two new Mercedes-Benz cars for their personal use.

Rodney began to attend directors meetings and made a number of suggestions to improve the profitability of the business. He also questioned Lily and Morris about their pay rises. Lily and Morris resented these questions and took the following actions:

- they formed another company, Lily, Morris & Carol Graphics Pty Ltd, in which Rodney was not involved, and diverted a valuable government design contract that they had been negotiating to their new company.

- They also called a shareholders meeting at which it was resolved that Rodney would be removed from his position as a director. The meeting also approved the diversion of the government design contract to Lily, Morris & Carol Graphics Pty Ltd. Lily and Morris made sure that Rodney did not receive notice of this shareholders meeting.

Advise Rodney as to whether:

A) Lily & Morris have breached any of their fiduciary duties to Zap Graphics Pty Ltd or their duties under the Corporations Act 2001 (Cth).

B) Rodney himself can take action against Lily & Morris or Zap Graphics Pty Ltd in relation to Rodneys removal as a director and the diversion of the contract to a new company.