Custom essays on Australia Law (New South Wales) – The position of the liquidator

In such a context, the position of the liquidator reveals weaknesses and inconsistencies in the position of the lessee and reveals the full extent to which shareholders suffered from the lease and could not influence the decision concerning the lease. In fact, the liquidator denies the breach of duty from the part of the shareholders and insists on the breach of duty from the part of parents of the lessee. This is the strategic position of the liquidator, which makes directors, i.e. parents of the lessee, fully responsible for the breach of duty that allows the liquidator to insist on setting aside the lease.
Basically, the position of the liquidator has two major points. First, the liquidator insists that no shareholders’ meeting took place to ratify the breach of duty. This means that shareholders did not take any decision concerning the lease and, therefore, they could not be involved in or responsible for the breach of duty. The development of the argument of the liquidator leads to the only conclusion that it was the directors, who were responsible for the breach of duty, whereas shareholders could not be involved in the ratification of the breach of duty physically. Obviously, to take a decision on any subject matter, shareholders need to have a meeting. As there were no meeting as the liquidator estimates, than there could be no decision concerning the lease. Hence, the full responsibility for the lease lies on the directors, i.e. parents of the lessee.
Moreover, the liquidator argues that shareholders were not informed enough to ratify the breach of duty. In actuality, this means that, even if the shareholders had a meeting, they could not take a decision on the lease because they did not have detailed information on the lease. Instead, they could only consider the further analysis of the prospects of taking a positive or negative decision on the lease but they could never agree on the lease just because they did not have detailed information on it. In fact, the lease needed substantial financial resources and could and did lead to substantial financial losses. Consequently, no reasonable shareholder would agree to take a decision on a matter he or she did not understand but which negative effects he or she could be aware of as a stakeholder, who had a direct relation to the Hutt Limited.
Possible outcome of the case
In such a situation, the case is likely to lead to negative outcomes for parents of the lessee. In fact, parents of the lessee had the duty of care of shareholders and the lease but they failed to perform their duty properly. Hence the liquidator is likely to win the case because the breach of duty from the part of the lessee’s parents led to the negligence of interests of shareholders and abused them causing material harms to shareholders, who were not aware of the breach of duty from the part of the lessee’s parents, who performed functions of directors. It proves beyond a doubt that parents of the lessee were directors and performed functions of directors. Whether they were appointed validly or not, they took decisions as if they were directors and they did not take into consideration the position of shareholders. Moreover, they just did not inform shareholders on the matter of the lease. As a result, shareholders were just left aside, while the decision was taken by parents of the lessee solely. In such a context, arguments of the lessee turn out to be inconsistent and the court should take the side of the liquidator because of the violation of interests of shareholders and their non-involvement in the lease. In fact, they were not even aware or informed about the lease. Consequently, they could not take any decision and they were not responsible for outcomes of the lease. The shareholders’ interests were ignored, while their financial position was put under a threat, when the directors took the decision on the lease (Randy, 2003). In this respect, the breach of duty from the part of directors is obvious because they should inform shareholders and take a decision along with shareholders during the meeting dedicated to the lease. Instead, the directors took the decision secretly, deceiving shareholders and ignoring their interests as well as interests of the company. In this respect, it is worth mentioning the Corporation Act of 2001, which regulates relationships between companies as well as within companies, including regulation of relationships between the management of companies, i.e. directors, and shareholders. In such a way, the liquidator has the right to set aside the lease on the ground of the Corporation Act of 2001 because directors misused the power and violated existing legal regulations. In addition, it is possible to refer to the case of Green and Clara Pty Ltd v. Bestobell Industry Pty Ltd (1982), in which the court took the decision in favour of the plaintiff.
Conclusion
Thus, taking into account all above mentioned, it is important to place emphasis on the fact that the case of the Hutt Limited is particularly noteworthy in regard to the breach of duty from the part of directors. In fact, directors of the company took decisions ignoring shareholders and their interests. Instead, they attempted to take the lead and manage the company on their own. However, they did not have legal as well as ethical rights to ignore interests of shareholders and took decisions independently of them. In the case of the Hutt Limited, the position of the directors is particularly uncertain from the legal point of view because the lessee himself insists that they were not appointed validly. Nevertheless, judging from their work in the company, their actions and decisions and their effects, they performed functions of directors that is the direct abuse of power just because they did not have the right to perform functions of directors, if they were not appointed validly. In such a situation, the court should take the side of the liquidator because this is a rational decision grounded on the analysis of the position of both the lessee and the liquidator.

 
References:
Atiyah, P.S. (1979). The Rise and Fall of Freedom of Contract. Clarendon Press Ewan.
Fruehwald, S. (2009). “Reciprocal Altruism as the Basis for Contract,” University of Louisville Law Review, 47, p. 489.
McKendrick, G. (2005) Contract Law – Text, Cases and Materials. Oxford University Press.
Randy, E. B. (2003). Contracts. Sydney: Aspen Publishers