Nia and Tom are close friends and food enthusiasts. They have been active on Twitter and their YouTube channel, Organic Earth Food, for the last five years and have attracted an audience of 3.5 million. In January 2021, they started to explore the possibility of resigning from their 'normal' jobs and focusing on the development of the Organic Earth Food brand. Nia prepared a draft business plan in February 2021. Nia wanted the business to not only continue to provide content on the Organic Earth Food YouTube Channel but also to open a chain of restaurants selling healthy and organic food at affordable prices. Tom was keen on the idea of opening restaurants but believed that it would be extremely expensive. He thus preferred to continue growing the YouTube audience. After lengthy discussions, they agreed that if Nia could attract investors to provide equity capital for the restaurants, Tom would help her to pursue her business plan.

Before beginning the search for potential investors, Nia decided to lease a small office space that could serve as the headquarters of her nascent restaurant business. She contacted her friend Yue who was the managing director of Offices for All Ltd, a real estate agency, and told her that she was looking for an office near Sydney's Town Hall from which to run a new business. The following day, Yue offered Nia a small office that was available near the Town Hall train station. The day after that, Nia went to Yue's office to execute the contract. Nia explained to Yue that as her new company would soon be incorporated, she was in a position to sign the lease agreement on behalf of the company. The lease agreement was signed on 25 March 2021. The rent was set at $1,200 per week for three years.

Once she was settled in the new office, Nia focused on refining her business plan and arranging meetings with potential investors. After two weeks of unfruitful meetings, she met Angela, the CEO of a Singaporean company called Innovations Ltd that invests in start-ups in Australasia. Angela was very interested in Nia's business proposal to expand the Organic Earth Food brand and agreed to support the enterprise. However, since Nia and Tom would retain control of the business, Angela demanded that it be led by an experienced manager.

Soon after, on 20 April 2021, Nia incorporated Organic Earth Food Pty Ltd (OEF) and a certificate of registration was issued by ASIC. Nia and Tom each received 35% of the company's shares while Innovations Ltd acquired 30%. Nominated by Innovations Ltd, Paul became the first managing director of OEF. He had more than 20 years of experience in the food industry and degrees from universities in France and Australia. Nia and Tom were also appointed directors. The shareholders agreed that the company would adopt the replaceable rules.

Shortly after incorporation and with the funds provided by Innovations Ltd, OEF started operating from the office rented from Offices for All Ltd. In the first twelve months of operations, OEF focused on expanding its YouTube channel following with great success (it grew to 6.2 million), increasing the company's advertising income. However, not everything went well with the company and there was often conflict between Paul and the other two directors. Paul wanted to open five restaurants in Sydney and Wollongong while Nia and Tom preferred to go slower and open one restaurant in Sydney. Paul proposed to the OEF Board of Directors that they sign a service agreement with We Work Quickly Ltd (WWQ), a company with extensive experience in the restaurant industry that could speed up the process of opening restaurants in Sydney and Wollongong. Paul could not answer some of the questions asked by Tom and Nia regarding WWQ. With the support of Nia and Tom, the Board deferred its decision regarding the contract with WWQ.

Despite the Board's decision, Paul decided to go ahead with the contract with WWQ and executed an agreement with WWQ in June 2022. The contract was signed by the CEO of WWQ, Paul and Joe, Paul's assistant, on behalf of OEF. Paul told WWQ that Joe was the company's secretary and they were both authorised by the Board of Directors to execute the contract.

Later, when Nia and Tom were informed about the signing of the contract between OEF and WWQ, they were furious. They checked WWQ's details and learned that Paul was the controlling shareholder of WWQ. Nia and Tom believe that the contract was not beneficial for OEF.

The problems between the directors started affecting OEF's performance. With the support of Tom and Nia, the Board of Directors approved:

Not paying dividends on the profits made by the company in the financial year 2021-22 and instead reinvesting these profits in the business to fund its expansion.

Removing Paul from his position as managing director and appointing Nia as the new managing director.

Moving out of the Town Hall office and not paying the accrued rent since the contract was not executed by OEF.

Angela was unhappy with the board of directors' resolution and was concerned about the appointment of Nia as the new managing director.

Questions

Can Offices for All Ltd enforce the contract signed by Nia? (10 marks)

Has Paul breached his duties as managing director of Organic Earth Food Pty Ltd? (10 marks)

What, if any, legal action can Innovations Ltd take against Organic Earth Food Pty Ltd or the

directors to protect its investment? (10 marks)