Please see the questions below and answer. Thank you for your assistance.

Hawthorn Pty Ltd (Hawthorn) has 9 employees, 3 of these, Nikki, Jenny and Lauren, are its directors and it's only shareholders. The company is a furniture manufacturer and retailer in North Sydney. In early 2017, after several months of discussion amongst the directors, the company expands into the home interior design market. The idea came from Laura, an experienced journalist who is the editor and writer of the company's monthly magazine for clients 'Hawthorn News'. Hawthorn has taken out a business loan through NatBank and the bank has a security interest over all of the company's assets.

In May 2017 to keep up-to-date with furniture trends Nikki is sent to the Melbourne Furniture and Design Expo. She meets Theo, the sole director and shareholder of a small interior design company called Treehouse Pty Limited (Treehouse). Theo tells Nikki of his company's plan to expand into custom made home interiors, where furnishings and interior design are matched to clients' personalities. However, he needs expert help. Nikki tells him that Hawthorn would not be interested in the project as it only dealt in furniture retail but that she would take over the design role provided she became a 50% shareholder in Treehouse. Theo agreed. The business is an instant success and Nikki receives high returns. She does not say anything about Treehouse to the other directors of Hawthorn.

Hawthorn holds an AGM in August 2017 (its constitution requires the company to hold an AGM) and at the meeting Nikki, Jenny and Lauren are re-elected as directors.

Unfortunately for Hawthorn its turnover reduced dramatically over the last 6 months of 2017 as new competitors entered the market. As well as this in February 2018 its furniture designers start complaining of noise from the final stages of construction of a new Bunnings Super Hardware store across the road. With increased competition and a fall in output from the construction disturbance Hawthorn's cash flow falters. A further problem for Hawthorn arises when Jenny, one of its directors, injures herself rock climbing. She is in hospital for three weeks and then takes a week off work to recover.

Even though it has problems, Hawthorn has a good reputation in the furniture industry and has won awards for its creative design. It has 5 main unsecured trade creditors each owed $20,000. Four are happy to continue supplying on credit but one of them, Bournemouth Fabrics Pty Ltd, is having financial problems and on 20 February 2018 threatens to stop supply of its hand printed silk fabrics unless it is paid the $20,000 owed. These fabrics are needed for a new home interior design contract, so Hawthorn pays.

After paying Bournemouth Fabrics the cash flow situation for Hawthorn worsens. A repayment to the bank is missed. However Jenny and Lauren have an idea. After talking to Laura (the editor of Hawthorn News) they are certain that once the new Bunnings Super Hardware store opens customers will increase. So they decide that a cafe should be opened in the premises for Hawthorn's customers. They engage builders immediately. The work is completed quickly but Hawthorn doesn't have funds to pay the builders. On 20 April 2018 the builders serve a Statutory Demand under s.459E of the Corporations Act. An application to wind up is filed on 17 June 2018.

QUESTION 1

Has Nikki breached her duties as a director in relation to her involvement in Treehouse? Can Jenny and Lauren ratify her conduct? Refer to any relevant remedies or penalties