Legal Analysis: Director's Duties, Breach, and Remedies - Adoni

This case study examines whether Adoni, a director of Desert International Gold NL (DIG), breached his duties under general law and the Corporations Act 2001 (Cth). It outlines the four basic duties of directors: care and diligence (section 180), good faith (section 181), proper use of position (section 182), and proper use of information (section 183). The case highlights Adoni's purchase of a lease from Western Mining NL (WM) in his own name, his subsequent resignation from DIG, and the sale of the lease to his own company, Adoni Mining Pty Ltd, at a significant profit, suggesting a breach of his duties. Furthermore, it explores the remedies available to DIG against Adoni and his company, including claims for losses suffered by the corporation, surrender of personal profits, injunctions, damages, restoration of property, and rescission of contracts. The analysis references key legal sources to support its conclusions.

(a)
The issue in this question is if Adoni has breached his duties towards DIG under the general law
and also under the provisions of Corporations Act, 2001 (Cth).
In this regard, there are four basic duties of the directors. These are also being mentioned in the
Corporations Act. . The duty of care and diligence has been mentioned in section 180. A similar
duty is also applicable under the common law. This duty requires that the directors should act
with care and diligence. That is expected to be shown by a reasonable person under similar
circumstances (Keay, 2013). There is also the duty of good faith. The city is mentioned in
section 181 and it requires that the directors should act in good faith. Therefore, the directors
should act for proper purpose. Underestimate the directors should avoid any conflicts of interest.
In case any such conflict arises, it would be revealed and managed by the directors. This is a
fiduciary duty that is also imposed by the common law (Burrows, 2010). Another significant
duty is present in section 182. Under this duty, the directors are required to make sure that they
do not use their position improperly. The use of the position can be described as improper if it
has been used for achieving your personal benefit for the directors. In the same way, section 183
imposes an obligation on the directors. According to it, the directors should not use the
information received by them improperly.
In the present case, Adoni purchase the lease from WM in his own name. After some time he
resigned from the board of DIG and sold the lease to a company formed by him Adoni Mining
Pty Ltd. at significant profit. Under the circumstances, it can be said that there has been a breach
of the duties of selectors mentioned above by Adoni.

(b)
The issue in this question is if the remedies are available to DIG against Adoni and the company
formed by him.
In this regard, the law provides that the corporation itself can bring a claim against the director
who has breached his duties if it can be established that a loss has been suffered by the
corporation as a result of the actions of the director. In case any personal profit has been made by
the erring director, such director can be made to surrender the profit to the corporation. At the
same time, it also needs to be mentioned that any contract or other arrangement that has been
made by the director that is a breach of his duties, will be considered as void, even to the
corporation to rectify the agreement if it wants to do so (Turnbull, 2012). At the same time, in
case of a breach of duty by the director, the corporation can also seek an injunction which
prevents the director from partnering with such breach. Another option available to the
company's treatise is to seek damages in the form of compensation, where the negligence of the
director can be established. In such cases, the company can also seek the restoration of the
property belonging to the company as well as rescinding the contract if the director has any
undisclosed interest in the contract (Varzaly, 2015).

References
Burrows, S. (2010). Directors' Duties (1st edition)20102Andrew Keay. Directors' Duties (1st
edition). Jordan Publishing Limited, 2009. 476pp. International Journal of Law and
Management, 52(6), pp.482-483.
Keay, A. (2013). The Public Enforcement of Directors' Duties. SSRN Electronic Journal.
Turnbull, S. (2012). Rethinking Directors' Duties, Governance and Regulation. SSRN Electronic
Journal.
Varzaly, J. (2015). The Enforcement of Directors’ Duties in Australia: An Empirical Analysis.
European Business Organization Law Review, 16(2), pp.281-319.