Mistress, Mia and Mimi are directors and shareholders of MMM Fashion Pty Ltd. Mistress, the founder of the company, owns 50% of the shares while Mia and Mimi each own 25% of the shares in the company. Mistress is also a single director and shareholder of CAT Clothing. Mistress convinced the board of MMM Fashion Pty Ltd that the company could improve its position by acquiring a rival fashion brand, CAT Clothing, at a cost of $5.5 million. Mistress did not seek due diligence or competitive pricing in the value of the rival fashion brand. At the Board meeting, Mistress showed Mia andMimi various financialfigures, prepared by Zed, the newly hired graduate accountant at MMM Fashion and said "Zed is confident the company would benefit financially if we go ahead with this". None of the directors understood the financial figures and had not realised the company's cash flow was low and that the loan could lead the company into insolvency. Mia and Mimi were unaware that Mistress was also a director and shareholder at CAT Clothing. Mistress also made several representations with respect to the rival clothing company yet failed to mention that they were the single director and shareholder

Answer the following questions:

1. Advise Mistress, Mia and Mimi whether they have breached any of the directors' duties under the Corporations Act 2001 (Cth) and if so, how? 5 marks

2. Advise what if any defences and remedies are available to Mistress, Mia and Mimi 3 marks

As things transpired, the directors had no alternative but to place MMM Fashion into voluntary administration and it was subsequently placed into liquidation. 3. The liquidator now desires to commence an action against the directors alleging the directors for insolvent trading. Advise under what section this action would be and when liability would accrue and to whom.