Corporation Law
Order Description
QUESTION:
Property Developments Ltd is an unlisted public building development company. The directors are
Julian, Sol and Daniel. They believe that given the continued increase in property prices, now is the
time to acquire land for future property development. Gerald who is the uncle of Julian owns some
land in the western suburbs of Melbourne. Gerald is under financial pressure from the bank to repay
the loan on the block of land and is therefore keen to sell. Julian is aware of this and wants to help
him.
The other directors of Property Developments Ltd are keen to buy land. Julian believes it is none of
the board’s business if the land is bought from Gerald and does not disclose to the other directors
his relationship to Gerald. He attends the board meeting and recommends and votes in favour of
the company acquiring the land for $850,000 which just happens to be the current market value of
the land. This value will allow Gerald to repay his debt to the Bank.
The other two directors agree with Julian’s recommendation and ask him to undertake the purchase
on behalf of the company. At the board meeting Sol and Daniel do not bother to ask for an
independent valuation of the property nor do they worry about how the company will finance the
purchase. They have a basic understanding of finance but cannot understand financial stat5ements
and leave it to the company’s accountants to sort out.
Julian’s brother Raphael is the sole owner and director of an architectural practice company.
Property Developments Ltd wants to engage an architectural firm to design plans for their
buildings. The company decides to ask various firms to tender for the role.
Julian is in charge of the tender process. He tells Raphael what each architectural firm is going to
charge. This allows Raphael to offer the lowest price which the company accepts. Julian does not
attend the board meeting or vote on this matter as he was away on holiday at the time. He did not
tell the Board that his brother was going to submit a tender.
REQUIRED:
Please advise the company directors of the following:
1. What common law duty and statutory duty if any has Julian breached?
2. What common law or statutory duty have Sol and Daniel breached?
3. If the directors have breached their duties do any of them have a defence and if not what are
the consequences for them?
In your answer you are required to refer to relevant legislation and case law

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