Duty to Avoid Conflicts of Interests

1559 WordsSep 14, 20137 Pages
When analysing the breach of duty, should give examples (“the facts of this case are similar to ‘…’”) to strengthen the arguments. Outline for “Duty to avoid conflicts of interest”: (Practice question about Agrico) Consider the company Agrico Limited, discussed last week. Jenny Smith is the managing director of Agrico, and she is also a director and shareholder of 50% of the shares in Telegenics Pty Ltd – a small IT company founded by her husband (he is the other director and 50% shareholder of the company). The other directors of Agrico are not aware of Jenny’s interest in Telegenics. Telegenics is tendering for a contract with Agrico and Telegenics’ quoted price of $10,000 is the same as that given by Telstra Corporation Limited.…show more content…
* Exceptions apply? Look at what Telstra’s offer and Telegenics’ offer. The prices are exactly the same. -> What Telegenics is offering is no less favourable than the offer from an arm’s length term (from an unrelated party – Telstra) -> fit with s210 * Could be no breach in s208. Probably not acting in the company’s best interest and for a proper purpose Outline for “Duty to exercise reasonable care and diligence Look again at the questions about Agrico Limited from weeks 8 and 9. One of the directors of Agrico – Donald Jones – is close to retirement and is bored in his role as a non-executive director (although he is happy to keep collecting board fees). He only comes to half the board meetings and does not read the board papers. He always votes in the same manner as the Jenny Smith, the managing director, believing her to be well-informed and careful. After entry into an IT contract with Telegenics Pty Ltd, it is found that the company is inexperienced and unable to provide appropriate services to Agrico. Telstra needs to take over the contract at the last minute, at increased expense. Was Donald in breach of his duty to exercise reasonable care and skill in voting in favour of the Telegenics tender quote? * Consider Agrico Limited and the contract arranged with Telegenics Pty Ltd. What action could Agrico take against Jenny Smith or Donald Jones for breach of duty? * Apart from action by Agrico Ltd – what are the other possible
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