Question 1) Fluffy Toys and Costumes Pty Ltd (Fluffy) operates three pet toys, costumes and accessories stores across Sydney. On 10 April 2018 Baz was appointed to the position of Managing Director of the company for a period of two years. A form was lodged with ASIC indicating her appointment as a director effective as at 10 April 2018. On 10 April 2020, Baz was not formally reappointed by the board but she continued to act as Managing Director. No further documents were lodged with ASIC following the expiry of her two year period. Under the terms of her employment contract, there was a clause that said she could not commit the company to borrowings of more than $30,000.00 Any transactions in excess of $30,000 would need board approval.

On 15 May 2020 Baz sent a letter to BigBank Ltd on behalf of the company wanting to borrow $60,000 in order to acquire an interest in a supermarket. The companys normal bank is SmallBank Ltd but Bazs sister Michelle worked at BigBank Ltd and could facilitate the loan quicker. Together with Bazs cousin Veronica, who signed as Secretary of Fluffy, they obtained the loan from BigBank Ltd.

The Board of Fluffy have found out about the loan for $60,00 and refuse to pay the loan and interest to BigBank Ltd. You are the accountant for the company and the Board seeks your advice. FOLLOW THE HIRAC METHOD OF LEGAL PROBLEM SOLVING.