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The main business of Enviro Design Pty Ltd ('Enviro Design') is the supply and installation of garden sculptures and water features.
The main business of Enviro Design Pty Ltd ('Enviro Design') is the supply and installation of garden sculptures and water features. It was formed in 2009 as the result of 2 similar businesses joining forces. One of the businesses, 'Enviro Landscapes' was run by Alex and Bevan, and the other, 'Bushland Design' was run by Chris, David and Ben. All had experience in garden design and landscaping. For the purposes of start-up capital the company issued 20,000 shares at $2 each. Alex, Bevan, Chris, and David took up 3500 shares each, and Ben took 6000. At the company's first meeting Alex and Bevan were elected directors. Enviro Design has had a good year in 2015. It has a good reputation in garden landscaping. Alex and Bevan (who are still directors), and Chris and David, have become quite wealthy as a result of the business however Ben has had various personal setbacks and is in financial difficulty. Although the company has not paid dividends for the last 5 years Ben puts a proposal to the board that a dividend be paid. Neither Alex nor Bevan are in favour of the payment of a dividend and reject Ben's request. When the company was formed Chris, David and Ben were very good friends but since Ben got into financial difficulty Chris and David have avoided talking to him and have told him they are not interested in his financial troubles. Ben is frustrated that he can't share in the company's profitability through the payment of dividends, and is surprised to find that Alex and Bevan have decided to issue 3000 new shares in the company to each of Chris and David's spouses. Ben tells the directors that he is against the share issue. Enviro Design presently uses products and raw materials supplied by Landprod Pty Limited ('Landprod'). Alex and Bevan are in fact shareholders in another raw materials supplier, Materials 24 Pty Limited ('Materials 24'), and they want to make Materials 24 the supplier to 5 Enviro Design. To achieve this goal, they (as directors) rescind the contract with Landpord and enter an agreement for Materials 24 to supply landscaping products to Enviro Design. (i) Discuss whether Alex and Bevan have breached their duties, and the remedies or penalties applicable. Your answer should include reference to relevant cases and sections(ii) Discuss Ben's position as a shareholder. What are his rights and what orders can he seek. Your answer should include reference to relevant cases and sections and particularly relate to the relevance of any breaches of duty by directors.
