Part A (12 marks)

RState the Relevant law;

AApply the Relevant Law to the facts;

Question:

Al Bundy had a profitable shoe store Al's Shoes.He arranged for a new company calledShoemart Pty Ltd ("Shoemart") to be set up to purchase his business and the building which it occupied.

On 3^rd May 2021, Shoemart was incorporated and its constitution is a combination of all the replaceable rules and the following provisions:

"Clause 1

The sole object of the company is to carry on the manufacture and sale of shoes.

Clause 2

Peggy Bundy shall remain as a Managing Director for so long as she desires.

Clause 3

Al Bundy shall be employed as a Shoe Consultant until 2025 at a salary of $40,000 per annum."

The company issued 10 shares each to Peggy and Bud (Al's sister and brother) and 80 shares to Kelly (Al's daughter). Peggy and Bud were appointed as directors with Peggy as Managing Director.

On 5^th May2021, Shoemart entered into a contract with Al to purchase the shoe business and the building for $500,000.The business and building were independently valued in February 2021 for $350,000.

Al is unhappy about the following events:

(i)Kelly requested the Board for an extraordinary general meeting, which was refused. The next day, without informing Peggy, she invited Bud for lunch at her home and called it a General Meeting. She named herself Chairperson and declared that three resolutions were passed at the meeting. The first resolution deleted Clause 2 from Shoemart's constitution. The second resolution dismissed both Peggy and Bud from their position as directors. The third resolution appointed Kelly as the sole director of Shoemart. As sole director, she dismissed Al from his position as consultant. Discuss whether all three have lost their positions in the company. (7 marks)

(ii)Kelly wondered why the business and the building were bought at such an overvalue.When she confronted Bud and Peggy, they said that they were not informed of the inflated price and that they had followed Al's instructions as they had trusted him.They went on to say that it was too late now and that she should not begrudge her father the overpayment.On Shoemart's behalf, Kelly, as sole director, plans to take action against Al.Advise Al on Shoemart's chances of success.(5 marks)