Posted: September 6th, 2016

Peter Grand, Alan Foo and Freda Garden are the directors of Better Lifestyle Pools Ltd (BLPL), a pool building company.

Peter Grand, Alan Foo and Freda Garden are the directors of Better Lifestyle Pools Ltd (BLPL), a pool building company. A search of ASIC records reveals that all of these directors were appointed when the company was incorporated. BLPL has an issued share capital of 1 000 shares. Peter, Alan and Freda each own 100 shares in BLPL, with the remaining 700 shares being owned by The Pool Company Ltd (TPCL). BLPL has not adopted a Constitution.
The directors of BLPL had board meetings on the first Monday of each month when they met at their business premises at Lutwyche. Freda was the chairperson.
When BLPL held their September meeting Alan was too busy at attend the meeting in person so he phoned in and was on speakerphone. The day before the meeting Alan had an afternoon coffee with Michael Bronte, a director of TPCL. During his chat with Alan, Michael mentioned a number of times that the TPCL board knew that Alan was up for re-election as a director of BLPL. He also noted that the TPCL board would support him if Alan proposed to the board of BLPL that they agreed to use Brisbane Concrete as the sole supplier of concrete. Brisbane Concrete was a wholly owned subsidiary of TPCL.
Alan followed Michael’s request and put forward a proposal to use Brisbane Concrete as the sole supplier of cement. Alan argued very strongly outlining that reviews of Brisbane Concrete’s product showed it to be a superior. The three directors had a very robust discussion when they examined the advantages and disadvantages of the proposal. After about 45 minutes, a resolution was passed that Brisbane Concrete was to be the sole supplier of concrete to BLPL. Alan was very pleased with his skills in negotiating an outcome that would secure his position as a director of BLPL.
BLPL’s business was doing very well and the company had significant deposits in their bank account. Due to the Reserve Bank reducing the cash rate the company was only receiving 1.75% interest. The directors discussed how the company could invest its funds. Alan and Freda had prior experience as investment bankers and had many associates in the industry. They invited a mutual associate who put a detailed proposal before the board, in particular it recommended investing in Max Ltd and Sophie Ltd. They also discussed how they had connections at YG Investment Corporation (YG) who would be able to assist.
Peter took detailed notes during the meeting. The next day he went to YG and said that as a director of BLPL he was requesting that that YG arrange for him to acquire securities in both Max Limited and Sophie Limited. He also said that as a director of BLPL he expected a discounted Commission. BLPL ultimately decided not to go ahead with the acquisition of the securities in either company.
Finally, in the same meeting there was a vote by the directors on whether BLPL should expand its operations into landscaping. The company had a due diligence completed and the report recommended that the business not expand into landscaping. Freda had not read the report and voted for expanding the business into landscaping. Alan voted for and Peter voted against. This was a financial disaster for the company. It was established that Freda breached her duty to take care and diligence in her role as a director.