Question

A1 Distributors Pty Ltd is a wholesale distributor business which acts as agent for distribution electronic products. Alex, Sue and Peter are three directors of the company and equal shareholders in the company. Sue recently represented the company at a marketing seminar in Japan. During the seminar she was introduced to a leading distribution company which is looking to acquire business in Australia. Sue was told the Japanese based company would pay 4 times the current value of the shares in A1 Distributors and to start the relationship would supply at a substantial discount on a line of fridges. Sue advised that A1 Distributors would not have the capacity to take on the line of fridges but put forward her family company Sue’s Electronics Pty Ltd as a service provider who could deliver on the contract.

When Sue returned to Australia she offered to buy Alex’s and Peter’s shares at 2 times their current market value. Once she acquired their shares she then sold them to the Japanese company for the agreed 4 times value.

Alex and Peter discovered what Sue had done.

a)    Provide advice on the rights of A1 Distributors Pty Ltd have against Sue.

b)    Discuss whether Sue has a fiduciary relationship with respect to Alex and Peter in acquiring their shares in A1 Distributors Pty Ltd.   

Answer 1

Answer:
(a)

Alex and peter have the right to bring a suit against the court for violations of their rights. They can even apply for 4 times the value of their stock to be sold by sue. The explanation is that the three of them were joint partners in the venture. Alex and Peter were both equal partners of the venture, so they both had the right to know all the activities of Japan when Sue was a delegate at a seminar in Japan.
Sue was expected to tell them of his deals with a corporation where he will pay them 4 times the present value of the stock. Sue only offered them to purchase their shares at two times the current value of their shares. He did not advise them that he would sell their shares to another company at four times the value of their current shares. The right to fair profitability and the right to the accountability of transactions between shareholders have been breached.

(b)
Yeah, Sue had a fiduciary partnership with Alex and peter in the purchase of their shares in A1 distributors Pty while he was representing the seminar of the firm on behalf of the company. It is tacit and evident that Sue will work in the highest good conscience, integrity, sincerity, and justice.