Matilda, Jane and Sam are directors of Fun Fruits Pty Ltd, which is in the business of

selling pre-cut fruit packs to retailers in Brisbane. They each own equal shares in the

company. The company has one employee, Juan, who cuts fruit.

Matilda and Jane had another business which was run as a partnership, and this business

provided freshly caught seafood to restaurants in Brisbane. Matilda and Jane make Juan

deliver this seafood to restaurants while he was being paid by Fun Fruits Pty Ltd to cut

fruit. As a result, the company missed a few orders with retailers who cancelled their

contracts with Fun Fruits Pty Ltd. Sam is very unhappy about this, and a toxic environment

develops in the company. Sam takes a 5 month leave of absence for stress from 1 May

2020, and he does not take part in managing the company for the next 5 months.

In her capacity as a director of Fun Fruits Pty Ltd Matilda obtains information from a

supplier about a lucrative investment opportunity in a tropical fruit farm in far north

Queensland. This was brought to Matilda's attention because, on a prior occasion, the

board of directors had thought about diversifying their business. Matilda keeps this

information secret, and tells her sister Margaret about the opportunity. Margaret then buys

the fruit farm, which turns out to be very profitable as a tourist attraction and supplier of

whole fruit to supermarkets around the area.

The business of the company was performing well until 10 July 2020, when the media

reported that people in Brisbane and Sydney had fell ill with Hepatitis A and food

poisoning linked to unhygienically handled pre-cut fruit. Due to this down turn in demand

for pre-cut fruit, the business entered into financial difficulty and it is unable to pay its

debts when they fall due. There is a large amount of unused fruit in their warehouse and

on order from farms in Queensland. Matilda and Jane develop a plan to increase income

for the business and make use of unused fruit. They decided to make the fruit into fruit

juice, and on 15 July 2020 they buy pasteurizers (which are used to heat fruit juice to a

level which kills pathogens like bacteria and viruses, etc). They did not want the company

to be wound up.

Use your knowledge of Australian company law to advise:

(a) whether any common law and/or statutory directors' duties have been breached

[15 marks]

(b) what remedies are available to the company, and what penalties might be

imposed on directors, for these breaches [5 marks]

(c) who can bring action to seek compensation from the directors in breach of

directors' duties, and how [5 marks]

Answer rating: 100% (QA)

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