QUESTION 3[Answer all aspects of this question][20 marks]

Alan, Bill and Clare were the directors and shareholders of Albatross Pty Ltd (Albatross) which distributes and sells boating equipment. Alan and Bill each had 300 shares in Albatross while Clare had 200 shares. All three of them actively participated in the company's management. Last year Clare suffered a mild heart attack and decided that she should resign from the board of Albatross and transfer her shares to her daughter, Gail. Alan and Bill did not object and the transfer was registered. Shortly afterwards, Alan discovered that Gail's fiance, Tom, was a major shareholder in and a director of a large interstate company that intended to expand its business and would possibly be a serious competitor to Albatross. Alan called a general meeting of Albatross which passed a special resolution adopting the following internal rule:

"If a member or the spouse or child of a member carries on or is a director of a business that in the opinion of the directors is a competitor or a potential competitor of Albatross, the directors may require that member to sell her or his shares to a person named by the directors at a fair price fixed by an independent expert appointed by the directors."

The resolution was passed by Alan and Bill, who were the only people at the meeting. Gail was on her honeymoon in the Cook Islands at the time and did not receive the notice of meeting until she returned home. When she returned, she was given a notice requiring her to sell half her shares to Alan's wife, Sue, and half to Bill's wife, Helen, at a price of $20 per share (the value put on the shares by Graeme, the independent expert appointed by Alan and Bill). Gail does not want to sell her shares in Albatross.

Gail also came to know that Alan and Bill had a Board of Directors' meeting during her absence. In that meeting, they (Alan and Bill) have decided to sell Albatross's only yacht to Sailaway Pty Ltd (Sailaway), a tourism company jointly owned by Alan and Bill. While the market price of the yacht is about $120,000 Albatross has decided to sell it at only $60,000.

Advise Gail:

• whether the meeting had power to adopt the internal rule set out above (6 marks);
• whether Gail has any grounds to challenge the notice requiring her to sell her shares (8 marks) and
• what actions Gail can take in relation to the proposed sale of Albatross's only yacht at reduced price. (6 marks)

Advise Gail with the help of Corporations Act 2001 (Cth) and relevant case laws, and fully justify your answer.