Roberta is the managing director of Eternal Youth Pty Ltd (EY), a profitable company specialising in buying and selling anti-ageing cosmetics and shampoos for sensitive hair. The market for EY's products are women between the ages of 40 and 70 years.
While at the hairdresser's having a power perm, Roberta chats to her hairdresser, Leonardo. Leonardo Roberta whether her company would be interested in helping him to market a new organic hair soap called "Wonder Bar". Leonardo claims that the soap prevents male hair loss.
Roberta tells Leonardo that her company would not be interested because it sells women's products only. She offers to help Leonardo herself. Leonardo is agrees. Roberta and Leonardo set up a company called Wonder Hair Soap Pty Ltd (WHS) and become its directors and members. Roberta is the majority member. The business of the company is an overnight success.
At a board meeting of EY six months later, Roberta proposes that EY enters into a long-term contract with WHS to buy supplies of the organic hair soap for resale. The board agrees and, as part of the contract, Roberta negotiates with the board that she will be paid a small commission on each sale because she drew the board's attention to this new product opportunity. EY makes large profits from selling the soap overseas.
EY learns that Roberta is the majority member in WHS. They seek advice on the following:
(a) Has Roberta breached any of her directors' duties owed to EY? Which (if any) has she breached and why has she breached them?
(b) Should Roberta have been present at the board meeting when the contract with WHS was discussed and voted on?
(c) Should the contract also have been disclosed to the general meeting for approval before EY went ahead?
(d) What general law or statutory remedies (if any) should EY seek against Roberta?
(e) What statutory penalties (if any) can be imposed against her? Who can impose them?
Please, Consider the following duties in your answer:
- Statutory duties
o s..182
o s.183
o s.184
- General law duties
o Conflict of interest