a property development company

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Kate, Anne and Elizabeth are directors and shareholders of Artistic Property Developers Pty Ltd (APD), a property development company. Kate and Anne are sisters. Anne and Elizabeth are friends and partners in a financial consulting firm. Kate is an unemployed violinist and sole parent of three young children whose father recently died in a car crash. Each owns equal number of fully paid shares in APD. APD has been very successful but has not paid any dividends to its shareholders for the last two years. Profits have instead been invested in further development projects. Kate’s husband has recently died and she is very short of money to look after her family. Kate approaches Anne and Elizabeth and asks them to consider whether APD would begin to pay dividends to its shareholders. Anne and Elizabeth refuse, maintaining that it would upset “APD’s long- term goals”. Kate is upset by this response and announces she wants to sell her shares. Anne and Elizabeth refuse to buy her out and demand that Kate resigns as a director because she has lost her objectivity. Kate resigns reluctantly. She asks to see APD’s most recent financial statement but Anne and Elizabeth refuse to give her any information. Kate accidently discovers that APD has been paying large “management fees” to Anne and Elizabeth’s accounting firm. Kate comes to you as her legal adviser. Advise Kate as to the following: (a) Should she bring a derivative or personal action against Anne and Elizabeth? What factors should she take into account in making this decision? (12 marks) (b) If she brings a personal action, should she bring it under general law or make an oppression claim under s.232? What factors would influence your recommendation? (9 marks) (c) If successful, what remedies should she seek? (4 marks)

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