Pearl Bhd is a wholly owned subsidiary of Hisbiscus Bhd. The directors of Pearl are also the directors of Hibiscus. Previously, Pearl owned Pandan Sdn Bhd, an oil & gas company. However, in 2016 Pearl sold all its shares in Pandan to Serai Bhd (so that Pandan became a subsidiary of Serai). It was a term of the sale contract between Pearl and Serai that Pearl would not engage in oil-drilling for five years.

In Dec 2017, Pearl held a board meeting, at which its directors decided to recommence oil & gas business.

Since Pandan was acquired by Serai, Pandans safety record has deteriorated sharply. There have been several leaks at Pandans oil & gas facilities. These accidents have resulted from Pandans negligence, and they have injured both employees of, and neighbours of, Pandan. Pandan is on the verge of insolvency.

Advise Serai whether:

a) it can take any action against Pearl for breach of the 2016 contract; (15 marks) b) it could be held liable in respect of the accidents caused to the employees and neighbours. (15marks)