Posters and Frames Ltd deals in printing posters and framing and managed by Matt Granite The only shareholders and directors are husband and wife, Frank and Jane Smith. Frank and Jane left the operations of the company to Matt - preferring to take no active role in the company. When the company lost 2 major clients and fell into financial difficulties, Matt assured both Frank and Jane that the company could trade its way out of trouble. Unfortunately, 7 months later, the company failed and went into liquidation. Matt disappeared with cash reserves from the company account, and the company was left owing creditors more than $2m.

The liquidators of Posters and Frames Ltd argue that Frank and Jane are responsible for the company losses and should be held accountable to repay the debts.

With reference to the Companies Act s135, explain how Frank and Jane can be held accountable for the company debt

Hammond J. identifies the 3 essential pillars when the court must decide whether a breach of s135 has occurred. What are they? Make sure to provide an explanation.