QUESTION ONE

Little Gold Pty Ltd ("Little Gold") is a gold mining company.The directors of Little Gold were Jan, Sam and Tim.Jan was the managing director. Sam was a well-known gold miner and has a PhD specialising in the geology of gold deposits. Tim was a former investment banker for a large multinational investment bank.

Little Gold had approximately $100,000,000 in the bank and was looking to acquire new mining tenements. Tiny Specs Pty Ltd ("Tiny Specs") approached Little Gold offering to sell it some tenements which it held.Coincidentally, Tim was a director of Tiny Specs and owned 50% of its shares.

Little Gold retained Big Geo Expert Pty Ltd ("Big Geo"), a geology firm, to provide an assessment of Tiny Specs' tenements to determine if there was enough gold to establish a viable mining operation. Big Geo informed the board of Little Gold that while it specialized in geological surveys, it had never undertaken an assessment for a potential gold mine.Notwithstanding, Big Geo proceeded with its assessment and prepared a report for the board.

The only person on the board who read the report was Sam.But since he was busy, he only read the summary which said there was gold in the tenements.Unfortunately, Sam didn't read footnote 55 on page 36 which provided that while there was gold present, due to the geographical and topographical issues with the location of the tenements, it would be next to impossible to remove the ore to process it.

Jan asked Sam if he thought the tenements were good value.Sam said he read the report and "it all looks good to me."

The board proceeded to pass a resolution approving the purchase of Tiny Specs' tenements for $50,000,000.It was soon discovered that gold could not be mined from the tenements due to the issues identified in the expert's report and Little Gold had to sell the tenements at a significant loss.

Tim disclosed his interest in Tiny Specs to Jan before the board meeting approving the purchase of the tenements.

Part A

Should have Tim have made any further disclosure regarding his association with Little Gold?

(3 marks)

Part B

Has Tim breached his duty under sections 182 or 183 of the Corporation Act or his general law duty to avoid a conflicts of interest?

(6 marks)

Part C

Have any of the directors of Little Gold breached their duty under section 180(1) or the general law equivalent? Discuss potential defenses.

(7 marks)

Part D

Is there any way that a shareholder of Little Gold could pursue the causes of action you have discussed in Part B and Part C on behalf of Little Gold?

(4 marks)

[TOTAL 20 marks]