BUSINESS LAW ­ DIRECTORS LIABILITY

Fashionmart Ltd is a high street clothes retailer. The directors of Fashionmart Ltd are

Belinda, Sally and Helen. Belinda and Sally have between themselves ten years’ experience in the

retail industry. Helen is inexperienced. She has no professional qualifications.

Most of Fashionmart Ltd clothing is sourced from countries where the cost of labour is cheap. The

company has for the last ten years enjoyed unrivalled success as it has won over both the high street

shopper and the diehard fashionista with its simple philosophy: high style, low prices.

Recently, Fashiomart hit the headlines when the ABCPanorama programme reported that two of the

Chinese suppliers which Fashionmart had been sub­ contracting work to employed children that were

forced to work in squalid conditions. .

Belinda and Sally were overseas on business when the scandal erupted. Helen, who was in charge of

marketing and publicity failed to take immediate steps to lessen the shock of this international

expose.

The board of Fashionmart Ltd only sacked the two suppliers concerned after Belinda and Sally’s

return. Although press statements were subsequently issued to assert the company’s social

responsibility credentials, the negative publicity had, by this time, caused Fashionmart Ltd to suffer

considerable losses.

.

A) B)

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Alma is a minority shareholder of Fashionmart Ltd. She is unhappy that Belinda and

Sally have decided not to take action against Helen. She is also concerned that the board is still

intending to work with sub­contractors from countries where decent labour standards are far from a

priority.

Advise Alma

whether the company has recourse against the directors and

whether she can initiate derivative actions against the board.

Guidance

Allocate around 2000 words for Part A and 1000 words for Part B.

Assessment criteria

Knowledge and understanding

Application of the law to the relevant facts.

Ability to articulate a convincing argument.

Depth of research and ability to source for appropriate materials.

Grammar, presentation and referencing.

Guidance

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Do not treat a problem question as an invitation to write an abstract essay about the legal issues

involved in the problem.

Ensure that you have a precise understanding of the facts, since facts determine the relevance of any

legal points.

Deal with one issue at a time.

Discuss the law relevant to the issue.

Cite the relevant leading authority and apply the law to the facts. You must assess what the likely

decision would be on this issue.

combo order: 11 pages research paper + 11 pages essay

 

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