Canola Pty Ltd ("Canola") is a family company that runs an extensive canola growing farm in the Hunter Valley Region of New South Wales. The shareholders of the company are Alex (40% shares), Daisy, Alex's mother (30% shares); Cathy, his sister (20% shares); and Joshua, Cathy's husband (10% shares). Alex, Cathy, and Daisy are the directors of the company. Cathy and Daisy have delegated broad powers of management to Alex. Consequently, Alex practically manages the business and has assumed the role of managing director. In April 2021, Alex and his wife, Joan, decided to incorporate a new company called Organic Food Processor Australia Pty Ltd ("OPA"). Alex was responsible for completing the company's registration and Joan was not directly involved in the process of setting up the company. However, there was an understanding that Joan would receive a payment of $20,000 once the company was incorporated. The shareholders of the new company OPA include Alex and Joan who jointly hold 25%, Ritchie (30%), Tim (15%), Joey (15%) and Don (15%). Alex is the Managing Director, and Joan and Ritchie are the non-executive directors of OPA. A week after registering OPA as a company, Alex signed a contract on behalf of OPA to purchase an acre of land from Canola.

When Alex disclosed to Canola's board of directors that he had signed a contract for the sale of Canola's land, most of the Board considered that the contract was unfavorable to the company. A resolution was passed at the board meeting not to sell Canola's land to OPA. Alex received a commission of $50,000 from OPA for the sale of Canola's land to OPA. Daisy and Cathy did not know about the commission paid to Alex for the sale of Canola's land.

a) Have Alex and Joan breached any general law and statutory directors' duties? 

b) What remedy is available to Canola Pty Ltd against Alex?

Answer rating: 100% (QA)

a Breach of Directors Duties 1 Duty of Loyalty Alex There is a potential breach of the duty of loyal... View the full answer