Down Under Pty Ltd (‘Down Under’), a company registered under the Corporations Act 2001
(Cth) (‘CA’), owns a chain of bookstores. Its directors and members are Rydell, Danny, Frenchy
and Putzie. They each own 1,000 shares in the company. Down Under relies on the Replaceable
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Rules (RRs) in the CA. In addition, it has a constitution that contains the following clauses:
The directors of the company shall be Rydell, Danny, Frenchy and Putzie for a
period of 10 years from 1 July 2015.
Zuko shall be employed as the company’s accountant until 31 December 2030.
The board of directors must authorise all contracts entered by the company in
excess of $50,000.
The directors of Down Under receive an invitation from Top End Pty Ltd (‘Top End’) to attend a
launch of a new book. The directors are not able to attend the book launch so they ask Zuko to
attend the book launch on their behalf. Without the knowledge of the directors, Zuko attends the
book launch with his girlfriend, Betty, the company’s purchasing officer.
At the book launch, Zuko introduces himself and Betty as directors of Down Under. During the
evening, Betty enters into a conversation with Cha-Cha, a director of Top End. Cha-Cha informs
Betty that Top End wishes to sell its book binding business for $150,000. Betty believes that
Down Under should diversify its activities so she contacts Cha-Cha in the week after the function,
and after negotiations have taken place, she enters into a contract on behalf of Down Under to
purchase the book binding business. Betty uses Down Under’s funds that are available to her as
the purchasing officer to pay a deposit of $15,000.
When the directors learn what Betty has done, they are furious. They contact Top End and advise
them that they do not believe that they are bound by the contract because Betty does not
have the authority to bind the company and the contract was not authorised under the company’s
(a) Is Down Under bound by the contract to buy the book binding business? Would your
answer be different if Zuko and not Betty had entered the contract with Top End on behalf
of Down Under?
(b) Rydell, Danny and Frenchy have been unhappy with Putzie and Zuko for some time. At a
meeting of the directors, they terminate Zuko’s employment contract. The following
week, the directors call a members’ meeting at which they pass a resolution removing
Putzie from her position as a director of the company.
(i) What are Putzie’s rights in relation to her removal from her position as a director of
(ii) What are Zuko’s rights in relation to his removal from his position as accountant of