Assignment Problem: Dan, Steve and Nella are the founders, directors, and equal shareholders of At Home Pty Ltd (At Home). At Home relies on the replaceable rules.
At Home is the parent company in a corporate group in the property development and mortgage broking business. Between it and its subsidiaries, At Home's revenue for the 2021-22 financial year was $38 million, which was an increase of 10% on the previous financial year. An insurer has valued the group's landholding, customer databases, and goodwill at approximately $20 million. Moreover, from an initial staff of three, At Home group companies now employ 80 people.
Dan, Steve and Nella are considering growing At Home's business by purchasing all the shares in Factories Pty Ltd (Factories), a smaller company which owns some light industrial land. Factories employs 15 people, has assets of $10 million and a revenue in the 2021-22 financial year of $10 million. Factories' founder, governing director and CEO is Garry.
Dan, Steve and Nella have done their due diligence on Factories and have decided that it is a good investment with strong synergies with At Home. However, they are concerned that Factories is being sued by several individuals who own land backing onto the Woolloongabba Creek.
Those individuals allege that Garry personally arranged for barrels of toxic chemicals, which were produced at Factories' Woolloongabba premises, to be dumped into the creek, thereby polluting their land.
It appears that other neighbours of the Woolloongabba site may be interested in joining that action or bringing similar actions for nuisance. Factories would have insufficient assets to pay all the damages claims, especially if those other neighbours did also sue and were successful.
1) Advise Dan, Steve and Nella on the consequences (if any) for At Home if it bought all the shares in Factories.
2) Would your answer change if it was alleged that Factories committed a criminal offence under environmental protection legislation in connection with Garry's actions? Explain your answer.