LAW2485 GROUP ASSIGNMENT - SEMESTER 3 2021

GENERAL INSTRUCTIONS:
1. The due date is before 17:00 Saigon time on 13 December 2021 . Please
note that an assignment submitted later than the deadline will receive a
penalty. Check Canvas for more information about the penalty.

2. On an assignment cover sheet, you must identify your name(s), a student

ID(s), a lecturer's name(s), and the time of your tutorial (e.g., Friday 11.30
tutorial).

3. Electronically submit the assignment through Turnitin on Canvas. One

submission per group. Email submissions will not be accepted!

4. The assignment must also contain appropriate referencing in the form of

footnotes and bibliography in conformity with normal scholarly standards. The
bibliography must include all materials that you have cited.

5. You must use the IRAC.

6. The word limit is 3000+/- 10%. The word limit should exclude footnotes and
bibliography. Do not exceed the word limit. If you exceed the word limit, your
lecturer will stop reading at the word limit and mark your assignment
incomplete.

7. See the marking rubric on Canvas for more information for each grade band.
QUESTION
ABC Ltd is a large facilities and property management company that manages
manufacturing and industrial buildings throughout Australia. The company is involved
in complex property development that includes all of the following elements:
(a) englobo land value in excess of $40,000,000;
(b) commercial development;
(c) industrial development;
(d) multiple englobo land ownership; and
(e) a combination of the majority of major service infrastructure, requiring specific
catchment allocations and major service infrastructure including:
(i) highways and bridges;
(ii) sewer pump stations, pressure mains, and pre-fund gravity mains;
(iii) external water main extensions;
(iv) external gas main extensions;
(v) external high voltage electrical cable extensions;
(vi) external telecommunication cable extensions.
The company is owned predominantly by the Smith family – 75% is held by different
members of the family, 25% of the company’s issued capital is owned by many
different shareholders, including the directors. Future plans of the company included
extending facilities management to include large retail centers in the heart of
Sydney. In addition, ABC was planning to extend its business portfolio and engage in
construction works with the possibility of building multi-level shopping centers and
industrial parks across Australia. The company has three executive directors –
Ash, Ken, and Tony.
The following transactions took place between January 2020 and September 2020.
January 2020
Facilitas Group Ltd (‘Facilitas’) was planning to launch a hostile takeover of ABC
Ltd by offering the shareholders of ABC Ltd a price for their shares which is at a
premium with the existing market price. Facilitas is a large company with an
extensive facilities management profile that provides a vast range of services,
including security and risk management, in many parts of the world. It acquired some
small businesses in Australia and was rumoured to have a reputation for looting
companies it acquires and stripping their assets. The director of Facilitas David, a
close friend of Tony, approached and paid him $100,000 to persuade the board to
accept the takeover. In the board meeting, Tony mentioned the takeover bid
highlighting the offer would be beneficial for all shareholders and stakeholders
because Facilitas is a comprehensive facilities management company that looks
after all clients and puts their customers first as part of their identity and guiding
ethos. However, Tony’s connection with David and the commission remained
undisclosed. Ash and Ken were concerned that, despite the reputation of Facilitas,
the Smith family and others might still accept the offer because the founder of
the company and majority shareholder Brandon Smith was nearing retirement and
was planning to sell the company in the nearest future. Ash and Ken were convinced
to stop the takeover on the basis that the interest of ABC Ltd were those of a
commercial entity with valuable assets needing protection from a company that
had a bad reputation, rather than the interest of the Smith family and others as
members of the company. The takeover bid failed.
April 2020
The board of directors entered into an emergency discussion with a major facilities
management and construction company Edifici Pty Ltd managed by Alexander
Bugatti. Alexander was planning to build multi-storey buildings and large industrial
parks on some of the land. At the board meeting in April, the directors of ABC Ltd
proposed to accept the offer from Alexander. Tony told them that he intended to
keep the land for building a business (office) park in the nearest future since ABC Ltd
was looking for opportunities to expand its business portfolio. The businesses that
occupy the offices in a business park are commercial enterprises, not industrial
ones. Industrial companies have their offices there, but not their factories or
industrial parks. There are no residential properties in a business park. Commercial
rental yields received from industrial parks are high meaning a higher return or a
greater property value.
Ken and Ash, without informing Tony, entered into the contract with Alexander,
under which they would personally take a percentage of profits to be realised by the
sale of completed commercial units in the buildings and industrial rents.
When Tony found out, a serious disagreement arose between the directors. Tony
told the board of directors that he intended to make an offer to sell the land to
Centrium Ltd without further delay. Ash and Ken rejected Tony’s offer calling it
absurd. Two weeks later, Centrium Ltd acquired the land from ABC Ltd for $5
million. It is estimated that the land sold to Centrium Ltd is worth a much greater
sum than paid by Centrium Ltd. Tony transferred some of the amounts to his private
bank account. It was later revealed that the directors of Centrium Ltd paid $200,000
to Tony to influence his decision-making in ABC Ltd to resolve the sale with the
outcome preferential to Centrium Ltd. Tony was to retain the money regardless of
the outcome.
Soon after, the surge of Covid-19 cases across Australia, restrictions on travel, and
small business operations had caused disruptions to many businesses across
Australia. The property management sector was also affected. Since the virus
outbreak, the reality had changed, and commercial real estate players had been hit
hard across the value chain. Service providers were struggling to mitigate health
risks for their employees and customers. Many commercial developers could not
obtain permits and they faced construction delays, stoppages, and potentially
shrinking rates of return.
September 2020
ABC Ltd was engaged in security and risk management and had collaborated with
other companies including Securitas Ltd. ABC directors Ash and Ken were
concerned that Centrium Ltd was acquiring a substantial shareholding in the
company through purchases on the stock exchange. Ken and Ash were fearful that
Centrium intended to use this shareholding as a base for a future takeover bid. In
these circumstances, ABC made an allotment of shares to Securitas and some to
employees of ABC who were friendly to the management. Under the allotment
agreement, Securitas was to pay for shares upon application and was entitled to full
voting rights upon allotment and to appoint a nominee director to ABC’s board. The
directors did not want to allow Centrium to acquire a substantial shareholding as
they did not have a good relationship with the management of the company, fearing
that acquisition could result in diminishing their powers as Centrium would have
likely requested to appoint its nominee director on the board of directors of ABC Ltd.
The directors of ABC also viewed that having Securitas as a partner would be
beneficial in long term than having Centrium. However, it was later revealed that the
directors of Securitas offered expensive lavish gifts to Ash and Ken.
It was also revealed that the minutes of the board meeting set out the reasons for
issuing shares to Securitas and some employees as follows:
- ABC Ltd required further capital for expansion;
- The share issue will provide an incentive to employees to increase
productivity;
- It will prevent Centrium from taking over ABC.
These transactions occurred without Tony’s knowledge as he was on stress leave
due to his previous disagreements with Ash and Ken.
REQUIRED:
Advise ASIC and ABC Ltd if the directors breached their duties. Discuss all
relevant legal issues. Refer to relevant Australian law. Week 4 is examined.
(40 marks)
DRAFT

The legal issue is whether.. . ..

-
-
-
-
Etc…
When/ because he .

LEGAL TEST:

you must discuss any legal test that the court will consider.
The court will impose an objective standard - > what would a reasonable
director or board of directors believe to be in the best interest of the
company

APPLICATIONS RULES + cases

REMEDIES:

Damages for compensation –

Accounts of profits

Rescission of contract –

Injunctions

Civil penalties - breach of statutory duties

THOAI: events 3 –

I ->
R; focus
A -> view + notes
C

Vi: 1 + 2
Chau: 5 + 7 + 4
Linh: 6

Finding law + case law -> compare case law.

Thứ 3 (30/11) : legal issue -> law + case law -> compare case law.

Thứ 6: (3/12) -> bullet points IRAC.

Thứ 3 (7/12) -> done

CN (12/12) -> revised.