Domino Ltd (“Domino”) is a transport and cargo delivery company, focusing on large retailers and high-end electronic items. Although the company is in sound financial health according to its books and accounts, it has been receiving pressure recently from one of its major customers, AAA Industrial Pty Ltd (“AAA”), who are unhappy with a recent spate of mechanical failures in the Domino transport fleet, which have held up some deliveries.

From January 2020 onwards, Mal, the managing director of Domino, and Zoe, the executive director, meet on a weekly basis with Ben, the finance manager of AAA. Ben requires them to prepare financial reports and keep an up-to-date schedule of maintenance for the Domino transport fleet. He (Ben) says this is required in order to prevent AAA from having to seek an alternative delivery company. He (Ben) also looks over the Domino delivery schedules to help them optimize the delivery routes between the AAA warehouses and stores, and also routes to other customers’ sites.

In May 2020, in order to reassure AAA, the Board of Domino decides to seek tenders for a new maintenance company to repair their fleet. Zoe passes the public tender information to her husband, Hoban, who runs a maintenance business, and assists him in tailoring his tender application to address the particular concerns expressed by the Board in their meetings.

After publication of the tender notice, some shareholders who hold about 20% of the voting shares of Domino requested the Board of Domino to hold an extraordinary general meeting (EGM) to discuss the selection of a suitable maintenance company to repair their (Domino’s) fleet. The Board of Domino ignored the request.    

In July 2020, the Board convened a Board of Directors’ meeting for selection of the best bidder from the tender applications submitted in response to the recently advertised tender notice. All tender applications are circulated to the members of the Board before the Board meeting. Hoban’s bid is ultimately successful, not because it is the cheapest, but because, according to Mal, it offers the most comprehensive options which fit best with the needs of Domino’s fleet. Other two non-executive directors Donna and Alex who attended the meeting did not make any attempt to investigate the competence and suitability of the bidders. Apparently, they did not read the tender applications thoroughly. Therefore, whatever suggested by Mal they just nodded.

Zoe abstains from the vote at the Board meeting in relation to the tenders, but is present at the meeting, and takes part in the discussion. Unfortunately, Mal is ultimately proved to be incorrect, as Hoban’s four chief mechanics quit within the following three months, leaving Hoban’s business unable to comply with the terms of the maintenance contract.

• a). Advise the Board of Domino whether the members of the Board of Directors including Mal, Zoe, Donna and Alex are in breach of any of the duties which they owe to Domino. What would be the consequences for breach of those duties? 

• b). Advise the shareholders of Domino if they can take any action for turning down the request for convening an EGM by the Board.

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

Answer rating: 100% (QA)

a The me mber s o f t he B o ard o f Domino i nclu ding M al Zoe Donna an d Alex are in breac h of t... View the full answer