QUESTION 1

The Five-A-Day Group (5D Group) is a leading supplier of fruit and vegetables in Australia. It operates through 5D Ltd (5D), an ASX listed parent company, and ten subsidiaries. The subsidiaries include Fruit Pty Ltd (Fruit) and Veg Pty Ltd (Veg). Each is 100% owned by 5D and managed by directors, Reg, Lily, and Sam, who also sit on the board of 5D.

Most of the subsidiaries are doing very well. However, there are problems in Fruit and Veg.

5D established Veg in late 2019 to sell a new line of washed and chopped packaged vegetables. The products were pitched at working parents who would like to serve fresh food to their children but do not have time to prepare meals from scratch. However, the market is very competitive and, due to the pandemic, Veg did not have a very strong start. Veg is now losing money.

Fruit was doing well but has recently been the subject of media reports to the effect that its frozen berry range contain bacteria that cause (sometimes fatal) food poisoning. The reports suggest that the berries spoiled due to the negligence of Fruits employee, Marvin. The report also says that up to two hundred thousand people may get sick from the berries. If they all sue Fruit in tort for damages, Fruit will not have sufficient assets to meet all those claims.

1. a) If Fruit and Veg are wound up with insufficient assets to meet their creditors claims, can their creditors recover what they are owed from 5D or the other companies in the 5D Group? (12 marks)

2. b) How would your answer with respect to Fruit differ if it was actually Tad, an employee of 5D, who had caused the contamination of the berries through his negligence?

   (3 marks)