Workshop Questions

Module 2

Workshop 6

Digipies Pty Ltd is a pie company that makes and delivers pies locally. The business has been running since 2010 and is located in Brisbane, but the company wants to expand its business operations into other areas of North Queensland. Bret, Ellie, and Joe are the directors and shareholders of Digipies. Brett is the managing director and is primarily responsible for managing the company. Ellie is primarily responsible for creative decisions. Joe is responsible for preparing the company's accounts and financial reports.

In 2020, in an effort to expand its business into other areas of Queensland, Digipies entered into a contract with Trippple Advertising for $30,000 to make an advertising campaign to promote the business. However, Digipies has not yet paid the two invoices which were issued by Trippple Advertising in September 2018 and August 2019. When Trippple Advertising complained to Brett, Brett blamed Joe for not keeping proper accounting records. It was discovered that Digipies's accounting software stopped functioning and Joe had been keeping the company's accounts in a handwritten journal since June 2017.

In early 2020, Brad decided to upgrade the company's software to the 100tech software platform which was developed by a local company, Juicebox Pty Ltd ("Juicebox"). Brett contacted ABC Bank about Digipies obtaining a loan of $100,000 to purchase the 100tech software and the licence to use the software. He convinced Ellie and Joe to agree to this loan. Brett neglected to tell Ellie and Joe that he and his wife Abby are also directors and shareholders of Juicebox. Furthermore, he did not explain that Juicebox faced liquidation. His primary purpose in buying the software from Juicebox was to save Juicebox from collapse. Ellie suspected that Brett was personally connected with Juicebox, however, she did not disclose her suspicion to Joe.

By May 2020, Digipies's business has started to decline rapidly. As a consequence, Digipies failed to repay the $100,000 loan owed to ABC Bank. Unfortunately, the reality is that the drop in Digipies's profitability was caused by Brett's new gambling addiction. He had been distracted and was spending less time concentrating on the business. As a result, six months later, in December 2020, Digipies was placed into liquidation on the application of one of its creditors.

ASIC have asked for your advice about Brett, Ellie and Joe's potential liability under the Corporations Act 2001 (Cth). You do not need to discuss s184 or any other criminal provisions. You do not need to discuss remedies as part of your answer. You do not need to discuss whether Brett has breached any duties to Juicebox.

Answer:

ISSUES:

LAW:

Statute: Corporations Act 2001 (Cth)

Common Law:

APPLICATION:

CONCLUSION: