Compensation for non executive directors
In April 2006, Earl became the managing director of a newly registered
Company, Go-Carts Limited (Go-Carts). Go-Carts at that time controlled a chain
Of successful go-karting venues and was in a strong financial position.
In December 2007, a liquidator was appointed to Go-Carts. An investigation of
The affairs of Go-Carts by the liquidator disclosed a probable shortage of funds
Of over $3 million.
Although there had been a steady increase in Go-Carts’ sales of tickets into the
Go-karting venues from 2006 to 2007 (resulting in substantial trading profits),
The liquidator reported the following:
(a) the purchase of a $4 million estate in France with funds from Go-Carts
Which, upon resale, was only likely to realize $3 million – representing an
Expected net loss of $1 million.
(b) the purchase of new motorized sweepers designed to collect litter on the
Go-karting tracks which, despite high hopes at the time and potentially large
(labour) cost savings, subsequently proved to be unsuitable and had to be
Replaced at a net cost of over $800,000.
(c) That $200,000 is due from Shrewd Advisers Ltd (Shrewd), Go-Carts’
Investment advisers, a company of which Earl is the governing director and
Majority shareholder. There is a guarantee by Shrewd in favour of Go-carts
For $100,000 but, given Shrewd’s financial position, no more than $70,000
Is likely to be recovered. Earl did not disclose his interest in Shrewd Pty Ltd
To the Go-carts Board, although they knew about it; and
(d) Earl had himself fraudulently misappropriated about $1 million to finance his
Extravagant lifestyle. Fraud charges against Earl are currently being heard
In court.
The directors of Go-carts during the period 2003 -2004 were:
· Earl, as managing director and Chair;
· Elisabeth Deal, a partner of a leading firm of chartered accountants;
· Enid Patton, a highly regarded doctor who sits on several public
Company boards;
· Eleanor Arnold, a public relations consultant and go-karting enthusiast.
Eleanor was ill for mush of 2004 and was unable to attend board
Meetings or take any part in the company’s management.
The day-to-day management of Go-carts was left to Earl. The non-executive
Directors conceived their role to be planning and policy-making. There is no
Evidence of willful neglect or default by any of the non-executive directors, who
Were all deceived by Earl, as were the auditors.
Advise the liquidator whether she should pursue any of the non-executive
Directors for compensation.
