After several months of negotiations, the CEO of BIG Pty Ltd made the long-awaited announcement to board members that BIG Pty Ltd would be buying Melbourne based company, YAY Pty Ltd for $25m. The following persons were present at the meeting: Helen and Liam (Company Directors) and Tammy (Receptionist taking meeting minutes). News of the take-over would not be released to the public until the following week.

(a) Assume Helen owns 50,000 shares in YAY Pty Ltd. Discuss whether she would be breaching any duties if she makes a secret profit of $500,000 from the takeover.  What can Helen do to avoid breaching any duties?

(b) Discuss whether Tammy would be breaching any duties if, immediately after leaving the boardroom, she phoned her husband and told him to invest $100,000 in YAY Pty Ltd.

(c) What if you were told that BIG Pty Ltd spent the past few months deciding whether to buy YAY Pty Ltd or whether to buy another company called BOO Pty Ltd. Discuss whether Liam would breach any duties if, after learning that BIG rejected BOO Pty Ltd.’s offer, Liam went out and made an offer to purchase BOO Pty Ltd without telling BIG Pty Ltd.

Suggested Answer Structure

(a)        Helen

• Issue: Whether Helen would breach any duties…
• Rule: According to Hospital Products Ltd v US Surgical Corp…
• Furthermore: According to Aberdeen Railway Co v Blaikie Bros…
• Analyze: Here, the facts tell us…
• Conclusion: Clear that Helen would be breaching Duty __   … (remember to also mention what she can do to avoid the breach)

(b)        Tammy

• Issue: What Tammy would be breaching any….
• Rule: According to CA s 182 and 183…
• Analyze: Here the facts tell us…
• Conclusion: Clear that Tammy would be breaching Duty __

(c) Liam

• Issue: Whether Liam would breach any duties if…
• Rule: According to Furs Ltd v Tomkies, a director…
• However: It was held in Peso….
• Analyze: Here, we are told that…   yet, we are then told that BIG Pty Ltd rejected…
• Conclusion: Clear that, Liam did not breach…

Answer rating: 100% (QA)

In this case BIG Pty Ltd purchases YAY Pty Ltd and Helen have some fiduciary duties against BIG Pty ... View the full answer