Reference no: EM132519028
BAA215 Business and Corporate Law - Tasmanian School of Business and Economics
Introduction to Torts
40. Vernon and Hillary are friends. Vernon has recently retired and now has $450 000 in superannuation. He asks Hillary, an accountant, if he should invest $200 000 of his super funds in Midget Widgets Ltd. Hillary tells Vernon that she has looked at the accounts of that company and it is a good investment. Hilary does NOT charge Vernon for her services as they are friends. Unfortunately, Hillary has misread the accounts of the company which is almost insolvent. Vernon invests his money and Midget Widgets Ltd immediately goes into liquidation and Vernon loses his $200 000. Vernon discovers that many accountants/financial planners were aware of the poor financial position of the company and warnings had been published in several accounting journals and financial newspapers that Midget Widget was in financial trouble.
Required: Discuss whether Vernon has any legal rights against Hillary. In your answer consider if the legal position would be different if Hilary had charge Vernon for her services.
Practical Questions on associations, partnership and companies
48.Toady and Froggy were running a vegan cafe together. The business was having financial difficulties. Betelguese, who has known Toady and Froggy for many years had recently inherited a lot of money and Toady and Froggy asked him to lend the business $100 000 to enable them to buy sufficient stock and to upgrade the cafe for the summer season. Betelguese wanted to help his friends but also wanted to ensure that he would get his money back. He agreed to lend Toady and Froggy the money in return for a payment of $10 000 per year out of the gross returns of the cafe. The terms of the loan also provided that Toady and Froggy would consult Betelgeuse about any major contracts entered into by the business and gave him a right to inspect the accounts at regular interval.
Required:
1. Discuss whether or not a partnership exists between Toady, Froggy and Betelgeuse?
2. Would it make any difference if the terms of the loan provided for Betelgeuse to be paid $10 000 per year out of the profits of the business?
Meetings
59.Algol, Altair, Vernon, Vega, Gamma and Betelgeuse are the only shareholders and directors of Beacon Fun Stuff Pty Ltd. Algol holds 20%, Altair 60%, Vernon 5%, Vega 5%, Gamma 5% and Betelgeuse 5%. The relationship between the rest of the family and Betelgeuse breaks down and Betelgeuse has moved to the USA and is no longer actively involved in the company's management. Algol and Altair called a gen meeting to be held at the family home in Hobart on the 20th August 2020. They propose to pass a resolution removing Betelgeuse from the board.
The notice of meeting was sent to Betelguese but was delayed in the post and did not reach him until two days before the meeting. At this late stage he was unable to book a plane ticket from Missouri so could not attend the meeting.
Required: Please advise Betelguese.
Directors and Officers
63. Algol and her brother Altair set up Beacon Fun Stuff Pty Ltd some years ago. Algol had taken on the role of marketing the business and has set up a number of good contacts across Australia. Algol feels she puts in too much time and effort and that her brother is not working hard enough as he has recently become involved in other business and other activities. As a result, Algol is dissatisfied with her position in the company and decided to leave and set up her own competing business.
Before she resigned, she sent letters to many of the businesses that purchased souvenirs from Beacon Fun Stuff Pty Ltd and many customers that regularly took tours with Beacon Fun Stuff Pty Ltd. This letter invited them to transfer their business to her new business. Algol compiled the list of persons to whom she wrote from memory and publicly available sources of information such as the White Pages and other directories, not from business records.
Three days after posting these letters Algol resigned from Beacon Fun Stuff Pty Ltd. Her new tourism business launched a fortnight later and many of Beacon Fun Stuff's customers did transfer their business to Algol's new business.
Required: Provide advice to Beacon Fun Stuff Pty Ltd on:
o whether Algol has breached her fiduciary duties or any provisions of the Corporations Act 2001 (Cth); and
o if Algol has breached any general law or statutory duties, what remedies might be available to XYZ?
Remedies for Members
68.Do you agree with the High Court's ruling in Sons of Gwalia Ltd v Margaretic (2007) 231 CLR 160 which provides greater protection to shareholders rights? Or do you prefer the recent amendments to the Corporations Act as provided by the Corporations Amendment (Sons of Gwalia) Act 2010 (Cth)?
Questions on External Administration
73.What is meant by the term ‘external administration' and is a company always wound up after it goes through an external administration?
Business and Corporate Law Assignment
Tutorial 1 - Topic 1B - Legal Research, Reflection and Legal Problem Solving
During this tutorial we will be working on some of the ‘soft' skills that are required by both business professionals and legal advisors. The development of these skills will assist you in keeping pace with the content in this unit and in developing the skills you will need to undertake legal research and legal problem solving.
Tutorial 2 - Topic 2 - Contracts: Formation and Contents
Questions on Offer and Acceptance
1. Algol Rigel works with her brother Altair Rigel in a small tourism business known as Beacon Tours that operates in Tasmania. To promote the business Algol creates several vouchers. These vouchers confirm that for the first ten customers that bring the voucher plus a friend to the business premises on a weekday that they will be entitled to a tour of Port Arthur for an introductory price of $50. Normally such tours are conducted by Algol's business at a price of $200 per person. The brochures are placed into a number of letter boxes in suburbs around Hobart and Launceston.
The next Monday Horton Hearsawho arrives at the business with his friend Ned McDodd and they claim the right to be taken on the tour of Port Arthur that same day. Algol tells them that the vouchers were just promotional. Horton disagrees. Both are friends of yours and have sought your assistance.
Required: Advise Algol and Horton using the principles of offer and acceptance.
Questions to Consider:
• Has a valid offer been made?
• Has that offer been accepted?
• How was acceptance to take place?
• Is there agreement?
2. Altair Rigel decides that his business needs another small bus. Deneb offers to sell his Fuso 12 Van to Altair for $22 000, stating that he would keep the offer open for
3 days. The following day Deneb telephoned Altair and stated that he was withdrawing the offer because he had received an offer of $23 000 from George. Altair believes that Deneb had no right to withdraw the offer to sell for $22 000 and promptly accepted the offer from Deneb.
Required: Advise Altair.
3. At law what constitutes an offer? Please provide a definition and two examples from your own experience of an offer.
Questions on Intention to Create Legal Relations
4. Altair and Algol's elderly parents Sunny and Monny lived by themselves in a large house. They asked Algol's son Betelgeuse and his wife Gamma, to come and live with them and promised that, if they did so, they would leave the house to them when they died. Relying on this Betelgeuse and Gamma subsequently sold their home and went to live with the elderly couple. After a while disputes broke out between the couples, and the Betelgeuse and Gamma left the property. They claimed damages for breach of contract by the elderly couple.
Required: Advise the parties. Do you think Gamma and Betelgeuse would succeed in their claim? If yes, why and if not why not? Please refer to case law to answer this question.
Questions on Consideration
5. Outline the ‘rules as to consideration' and provide a case that illustrates each of them.
6. Facts: Algol misplaced her laptop while taking a group of tourists on a tour at Cradle Mountain. She placed a reward notice on a notice board in a local cafe and the following day a local resident Moira, returned the computer. Moira was not aware of the reward notice at the time of returning Algol's laptop. Overjoyed at the return of the laptop, Algol agreed to pay Moira the full amount of the reward. Subsequently she purported to ‘retract her promise'.
Required: Advise the parties, is Moira entitled to receive the reward offered? Why or why not and please refer to any case law that illustrates the reason for your opinion.
Questions on Contractual Capacity
7. Altair and Algol are approached by Vega a 16-year-old daughter of a friend, Vernon. She asks if she can come along on a tour to Cradle Mountain and watch how Altair and Algol interact with their guests and conduct their tours. Altair and Algol are impressed by Vega so when she next asks to come along on a tour they agree. Vega continues to come along on tours as she can around her schooling and in fact starts assisting both Altair and Algol. After four months Vega's father Vernon approaches Algol. He believes that Altair and Algol owe his daughter money for the work that she has done for their business.
Required: Using just the principles of contract law (and if you chose employment law) do you believe there is a contract between Vega and Altair and Algol? Should Algol and Altair wish to allow Vega to continue playing an active role in their business, what should they do?
Questions on Contracts and Interpretation of the Contract
8. Algol and Altair now trade under the business name Beacon Tours. Recently they secured a contract with an international travel company to conduct a tour for 15 indigenous Finnish business people. Pursuant to the contract with the international travel company they were to undertake three days of training about Sami culture before collecting the 15 travellers from the Hobart airport. Because of some extra work Algol and Altair were too busy to undertake the 3 days of training.
The delegate for the international travel company wish to terminate the agreement. They assert that the undertaking of the Sami culture course was a fundamental term in the contract.
Required: Advise Beacon Tours if the international travel company can terminate the agreement?
Questions to Consider:
• How important is the requirement to undertake the training course?
• Is it a term or merely a representation?
• If it is considered to be a term, is it a guarantee?
• What test do the courts use to determine if there is a guarantee?
• If it is a guarantee, what remedy will be available to the travel company?
9. Beacon Tours has recently developed its own uniform for Algol, Altair and Vega Vaspasian its newest employee. Vega is now 18 years old and as part of her work for the business she took all three uniforms to be dry cleaned at 20 Minute Cleaners Pty Ltd. After handing over the clothes and paying for the cleaning Vega received a docket. On the reverse side of the docket was the following statement:
"we accept no responsibility for goods damaged during the cleaning process".
20 Minute Cleaners Pty Ltd did not take reasonable care of the uniforms and, as a result, they were damaged.
Required: Advise Beacon Tours as to whether the dry cleaner is liable to compensate them for the damage caused. Note the operation of ss 54 & 55 re guarantees under the Competition and Consumer Act 2010 (Cth).
Questions to Consider:
• Is there a contract between the parties? If there is, has the exclusion clause on the receipt become part of the contract?
• Would a reasonable person have regarded the document as one that would contain contractual terms and not one that would be regarded as a mere receipt?
• Does the ACL apply here?
• If it does, can the plaintiff rely on Pt 2-3?
Questions on Operation of the Contract
10. Two years ago, Algol acquired an option to purchase a commercial property in Hobart for $400,000, valid for 3 years. Algol is no longer in a position to exercise the option, but her 23-year-old nephew, Betelgeuse, is. The market price of this property is now over $600,000.
Required: Advise Betelgeuse as to whether he can exercise Algol's option.
Questions to Consider:
• Can Betelgeuse exercise Algol's option when he is not a party to the option?
• Did he give consideration for the option?
• If not, can Algol "sell" her option to her nephew?
• Could she allow her nephew to exercise the option as her agent, thereby avoiding the operation of the privity doctrine?
• What is the difficulty with this last approach for Betelgeuse?
Tutorial 3 - Topic 3A - Contracts: Validity - consent and legality of objects
Questions on Consent of Parties: Mistake, Misrepresentation and Unconscionable Conduct
11. Outline the different types of mistake that the law recognises that may allow a party to argue that they are not bound by a contract. Provide an example for each different type.
12. Altair Rigel wants to surprise his wife Bella for their 30th wedding anniversary so visits a local jewellery shop in Hobart. The owner of the jewellery business is Formalhaut who knows Altair quite well, having taken a number of Beacon Tours over the past few years. Over the phone Altair confirms with Formalhaut that he wants a necklace made for his wife from red beryl and white gold. A design is agreed and so is the price of $3 000. The pendant is to ready for collection by the day before Bella's birthday on the 10th November. Altair pays a $1,000 deposit and agrees to return on the 9th November to collect the pendant.
Over the next few days Altair proudly tells a few friends that he is having a special pendant made by Formalhaut for his wife. He tells a number of his friends over a luncheon one day and this is overheard by some local villains.
On the 9th November one of these villains attends Fomalhaut's jewellery shop claiming to be Altair. He confirms he is there to pick up the pendant for Bella. Unfortunately, that day Formalhaut is away so he has left his new shop assistant Sirius in charge. Sirius has never seen Altair but was aware that he would be coming in to collect the pendant. Sirius hands the pendant over to the villain. Later that day when Altair attends the jewellery shop the error is discovered.
Required: Advise Altair and Formalhaut if the legal principles in relation to mistake as to identity is relevant here and who, if any does it assist? Also, applying its principle what might be the expected outcome and is this a fair result?
13. The business Beacon Tours has been running profitably for some time and Altair and Algol decide it is time that the business makes some investment decisions. They talk to their financial advisor Iota Draconis and she suggests looking at buying shares in a newly formed company Wombat Wonders Ltd. Altair confirms that he knows the managing director of the company Sigma. Altair contacts Sigma and asks to meet him to discuss the purchase by him and Algol of shares in Wombat Wonders Ltd. Sigma and Altair meet over lunch. Sigma confirms that Wombat Wonders Ltd is a Tasmanian construction company that wants to expand to enable it to tender for construction work in Devonport Tasmania.
Sigma provides Altair with a copy of the company's prospectus that sets out details around the current business operations and in relation to what the company intends to do with the funds raised by the sale of new shares. That prospects contains a number of misrepresentations. Sigma is aware of these misrepresentations but does not disclose any of this to Alistair. In reliance on both the oral statements made by Sigma and the statements made in the prospectus Altair and Algol purchase $200 000 worth of shares in Wombat Wonders Ltd. Six months after purchasing these shares Wombat Wonders Ltd is placed into liquidation.
Required: Using just the principles of misrepresentation (leaving director's duties and breaches of the Corporations Act (2001) as topics we will consider later in unit) do you believe that Altair and Algol may be able to sue Sigma?
14. Outline how the Australian consumer law has extended/ modified the common law position in relation to unconscionable conduct?
Questions on Legality of a Contract
15. What is meant by an ‘illegal contract' and how does it differ from a ‘void contract'? Give two examples of each.
16. Having suffered some recent financial lose Altair Rigel, a Tasmanian business man, pays his friend Orion, a director of several Australian listed companies, $15,000 for "inside information" which he intended to use in determining how to invest profits made by his business Beacon Tours. Insider trading is a criminal offence pursuant to the Corporations Act 2001 (Cth), s 100G. Orion has since failed to provide any information to Altair and has indicated that he has no intention of ever doing so.
Required: Advise Altair as to whether he can recover the $15,000 already paid.
Questions to Consider:
• What is the purpose of the contract?
• Is it contrary to public policy?
• Does it fall within one of the classes of contract illegal at common law?
• Will Altair be able to recover his money?
17. What is meant by the term ‘a restraint of trade clause' and what is the Courts normal approach when asked to enforce such a contract?
18. Algol and Altair intend purchasing a rival tourism business from a local entrepreneur. They wish to ensure that he cannot set up a competing travel business or tourism venture within 12 months after the purchase or they believe that the investment will not be viable.
Required: Advise Algol and Altair as to how far they can go with respect to
restraining the vendor's freedom of trade. What if they go too far?
Questions to Consider:
• What area of law is the question concerned with?
• Is a contract in restraint of trade valid or void?
• If a contract in restraint of trade is prima facie void, what does this mean?
• How can Algol and Altair protect themselves then? What factors determine whether a restraint is reasonable?
• What is the effect on Algol and Altair if the clause they insert is not reasonable?
• See Nordenfelt v Maxim Nordenfelt Guns and Ammunition - is it a useful precedent here?
Tutorial 4 - Topic 3B - Contracts: Ending - ending and remedies
Questions on Ending a Contract
19. Outline the major ways that a contract can be ended and give an example from either the material or your own experience that illustrate each of these ways.
20. What is the difference between a condition precedent and a condition subsequent? Please give an example of each.
21. Beacon Tours, a Tasmanian tourism business has recently expanded into catering as Vega one of their employees had been sponsored by the business to take a cooking qualification. This was a good addition to the business as feeding and entertaining paying guests has become expected. In October 2019 Beacon Tours, trading under their newly registered business name of Beacon Catering, agreed to cater for a wedding on the 12 January 2020.
A term of the contract provided for the food to be delivered to the wedding venue ‘before 7 o'clock' on the 12 January 2020. Believing that it is an evening wedding Beacon Catering had the food ready and attempted to deliver it to the venue by 6pm on the 12 January 2020. The customer, Canopus, who had contracted them refused to accept the food saying that the food was supposed to be delivered by 7am on the 12 January 2020 and that the wedding took place at midday and that therefore it had already taken place and food had been purchased last minute when Beacon Catering did not show up by 7am. The customer therefore refused to accept delivery due to the lateness of the hour.
Required: Can Beacon Catering sue Canopus for damages for non-acceptance? Is Beacon Catering liable to be sued by Canopus for breach of contract for failure to deliver?
Questions to Consider:
• Is the attempted delivery an issue of tender?
• What has to be established for a good tender?
• What did the contract say about delivery?
• Does the plaintiff's action in attempting to make the delivery at 7pm satisfy this criterion?
• Note the operation of the Sale of Goods legislation in relation to delivery
22. Beacon Tours are looking to expand and are wanting to purchase land in Latrobe in Tasmania to build an amusement park. They find some land that they believe might be suitable. They are aware however that they will need the permission of the local council to erect an amusement park on the land. Beacon Tours enters into a contract with the vendor of the land that contains a clause which states that the contract is subject to and conditional upon the approval of the local council within six months or Beacon Tours could cancel the contract.
After 5 months it became evident that the local council would not support an application to erect an amusement park, so they would not give approval. By this stage however Beacon Tours had realised that the land had many other uses and they wished to proceed with their purchase and erect a warehouse on the property. Beacon Tours therefore waived the condition about obtaining council approval, but the vendor is now refusing to complete the sale to Beacon Tours.
Required: On the basis of contract law, in particular the principle of contingent conditions, do you believe Beacon Tours can force the vendor to complete?
23. Altair agrees to sell his Fuso Minivan to Titan for $25,000. Moments after the contract was made, the car was destroyed by fire.
Required: Advise the parties if Titan must pay for the car? What legal principle might support his assertion that the contract is not enforceable against him?
Questions on Remedies and Restitution
24. Beacon Tours has recently moved into their new premises in Latrobe. They have installed a new computer system and are securing large contracts with international travellers coming to Tasmania to undertake one of their Tasmanian tours or travel adventures. As a result, they are heavily reliant on having a good computer set up.
Unfortunately, the company that installed their computer hardware and software systems is unable to service it, so they have found another computer repair and service company called Paxes Pty Ltd. They contact them and ask them to come in urgently to repair their mainframe computer that has stopped working.
Beacon Tours is unable to operate without the mainframe computer so stress in an email to Paxes Pty Ltd that time in the contract is of the ‘essence'. They state that Paxes must complete the repairs within 3 working days. Due to illness of certain key staff members Paxes has not made the deadline. Beacon Tours stands to lose
$4,000 per day each day the mainframe is down, and a lucrative international travel contract if it is not up by the end of the week.
Required: Advise Beacon Tours.
Questions to Consider:
• Has there been a breach?
• Has loss or injury occurred as a result of the loss?
• Is the loss or injury too remote?
• How does the rule in Hadley v Baxendale operate?
• Have both limbs of the test that is set out in Hadley v Baxendale been satisfied here?
• Should the firm mitigate?
25. Altair and his wife Bella are having a new house built. While the house is being built, they are renting alternative accommodation at $1,000 per week. The building contract provides a penalty of $1,000 per week in the event that the builder fails to complete on time.
Required: Do you think this clause would be upheld?
Questions to Consider:
• Is the clause for liquidated or unliquidated damages?
• If it is for liquidated damages, is it a genuine pre-estimate of the loss or a penalty?
• What tests will the court use to assess whether it is for liquidated damages or a penalty?
26. Algol contracts to purchase an antique merry-go-round carousel from a collector living in Railton Tasmania. Algol's business Beacon Tours has expanded into adventure tours and is wanting to further expand into the provision of amusement rides. She has been unable to locate any other merry-go-round carousels for sale anywhere else in Australia and so to find one in Tasmania has made her very happy. She negotiates what she thinks is a fair price of $28, 000.
On the day arranged for payment and collection the owner of the merry-go-round informs Algol that he had ‘changed his mind' and ‘would not part with the merry- go-round'.
Algol wants an order for specific performance.
Required: Advice Algol and Beacon Tours.
Tutorial 5 - Topic 1B - Legal Research, Reflection and Legal Problem Solving
During this tutorial we will be working on some of the soft skills that are required by both business professionals and legal advisors.
The development of these skills will assist you in keeping pace with the content in this unit and in developing the skills you will need to undertake legal research and legal problem solving.
Tutorial 6 - Topic 5 - Competition and Consumer Law & Topic 7 Law of Agency
Questions on Sale of Goods
27. What is the purpose of Schedule 2 of the Competition and Consumer Act 2010 (Cth)?
28. Algol is looking at purchasing a forklift truck to assist in moving the equipment that Beacon Tours has purchased. She asks a friend for advice about forklift trucks and she directs her to a Melbourne based business.
Algol telephones this business and confirms that she needs a forklift for ‘general equipment moving'. The salesman recommends a brand and she purchases a second hand one for $35,000. The forklift is delivered to Beacon Tours' address in Tasmania. The first time the forklift is used to move a merry-go-round carousel owned by Beacon Tours it becomes so overheated that it is unable to be used.
Required: Advise Algol.
Questions to Consider:
a. Which legislation applies, Sale of Goods or Australian Consumer Law?
b. Is there a contract?
c. Is it a contract for the sale of goods?
d. Do any of the implied terms in Schedule 2 of the ACL apply?
e. Is the forklift fit for its purpose?
f. Has the buyer made her purpose known to the seller for which the goods are required?
g. Has the buyer relied on the seller's skill and judgment?
h. Are the goods of a kind which the seller normally sells?
i. Has the buyer bought under a trade or patent name?
j. Is Algol entitled to return the forklift and obtain a full refund?
29. Recently Beacon Tours, a partnership operated by Algol and Altair Rigol, has been incorporated and the business is now known as Beacon Fun Stuff Pty Ltd. As part of its marketing plans the company places several advertisements in Tasmanian newspapers, both electronically and in print stating that everyone that goes on any of its wilderness tours on the West Coast of Tasmania is ‘guaranteed to encounter Tasmanian Devils in their natural habitat, or their money back'.
Callisto sees this advertising and he books a tour for himself and five of his friends. They enjoy the tour, but they do not see any Tasmanian Devils so are very disappointed. He seeks a refund of the tour price. Altair informs him that his business is a company and therefore it is not bound by the Australian Consumer Law and the claim about sighting of Tasmanian Devils was mere sales talk and that even if the company was bound by the ACL, they had not breached any of it.
Required: Advise Beacon Fun Stuff Pty Ltd and Callisto
Questions to Consider:
• Does the ACL apply?
• Did the transaction take place in trade or commerce?
• What sections of the ACL appear to be in breach?
• In order to establish a breach of s 18 what has to be established?
• Is the advertising likely to be misleading or deceptive or likely to mislead or deceive?
• Does the advertising contravene s 29(1)?
• What remedies are available to Callisto?
30. The Managing Director of Beacon Fun Stuff Pty Ltd and senior staff members of Tas Travel Pty Ltd, competitors in the market for Tasmanian travel tours meet in Hobart to agree to increases in their list prices and to formulate pricing strategies for tenders and tours in which they are both involved. They also occasionally discuss such matters over the telephone.
Required: Does such conduct contravene the CCA?
Questions to Consider:
• Does the proposed conduct fall within Part IV of the CCA?
• What section(s) could the proposed conduct contravene?
• Does such conduct contravene the Act as price-fixing?
• Could such conduct also be regarded as market-sharing and in contravention of s 45?
• What sort of penalties could the parties face if they are contraventions of the CCA?
31. Beacon Fun Stuff Pty Ltd has recently started selling Tasmanian souvenirs that are organically and sustainably made. They have quickly become known for making the best souvenirs of their type. Confident of their product Beacon Tours Pty Ltd tells all its retail customers that it will not supply them if they discount the souvenirs.
Required: Has Beacon Fun Stuff Pty Ltd breached the provisions of the Competition and Consumer Act 2010?
Questions on Agency
32. Algol and Altair are keen to get their Tasmanian souvenirs sold in Queensland. They meet a Cairns businessman, Greg, at a conference and, after much talk, but with nothing in writing, they come to the following business arrangement:
• Beacon Fun Stuff Pty Ltd is to supply Greg with a range of their most popular souvenirs but the items remain the property of Beacon Fun Stuff Pty Ltd and will be displayed as such;
• Greg is to sell the items to his customers and pay Beacon Fun Stuff 85% of the
proceeds.
Required: What is the legal nature of Beacon Fun Stuff Pty Ltd's and Greg's arrangement? Would it be different if Beacon Fun Stuff Pty Ltd were to simply sell souvenirs to Greg?
Questions to Consider:
• Has an agency agreement been reached between Beacon Fun Stuff Pty Ltd and Greg?
• Has an agency agreement been expressly created?
• Does an agency agreement have to be created in writing or can it be created orally?
• Who is the principal in such an arrangement?
• If Beacon Fun Stuff Pty Ltd sells souvenirs to Greg, is there any contractual relationship between Beacon Fun Stuff Pty Ltd.'s and Greg's customers?
• Is this an issue of privity of contract?
33. Axel is a bricklaying working with his team on a building site for Beacon Fun Stuff Pty Ltd. He and his team are the only ones on the site, as Algol the managing director of Beacon Fun Stuff Ltd is on a tour for the day. A delivery truck from Timber West arrives with a load of timber and the driver asks Axel to sign for it. Axel signs. The next day Algol returns to the site. He says that there has been a mistake and that Beacon Fun Stuff Pty Ltd did not order the timber. He rings Timber West to ask them to pick up the timber. Timber West says that as far as they are concerned Beacon Fun Stuff Pty Ltd have signed for the timber and will have to pay for it.
Required: Advise the parties.
34. Go back to question 33. Later in the day that the timber arrives, rains is threatening, and Axel knows that the timber needs to remain dry. He jumps in his car and buys an expensive tarpaulin on the Beacon Fun Stuff Pty Ltd.'s account at Hardware House and covers the timber.
When they get their monthly invoice from Hardware House, Algol queries the tarpaulin charge and asks Axel who explains what happened. Algol says that Beacon Fun Stuff Pty Ltd will not pay it because, if Axel had only called the office, they would have sent out someone with a tarpaulin straight away.
Required: Axel does not want the tarpaulin or to pay for it. Advise him.
35. Vega, an employee of Beacon Fun Stuff Pty Ltd knows that her employees Algol and Altair Rigel are looking to purchase a new transit van.
On her way home one day she spots one parked on the side of the road. The owner, Charon is with the vehicle and he chats with Vega. Vega explains that her work Beacon Fun Stuff Pty Ltd is looking for a new van. The owner Charon agrees with Vega to sell the vehicle to Beacon Fun Stuff Pty Ltd for $28 000. He agrees to have it professionally cleaned and new tyres put on and that he will deliver it to Beacon Fun Stuff Pty Ltd.'s business premises in three days' time.
Charon does as he said he would and arrives at 9am on the appointed day. When he approaches Algol, she tells him she knows nothing about the agreement to purchase a vehicle form him. She confirms that Vega is an employee but not an agent for the company and that therefore there is no contract. Charon has spent
$1500 on new tyres and lost a day's work to deliver the vehicle. He claims that Vega is an agent and that therefore Altair and Algol are obligated to complete the purchase.
Required: Advise the parties.
Tutorial 7 - Topic 6 - Introduction to Torts
36. What is meant by the terms: ‘reasonably foreseeable, ‘negligent misstatement' and ‘voluntary assumption of risk'? Give examples for each.
37. Yvette is a medical student assisting at a doctor's surgery. Altair visits the surgery, complaining of chronic fatigue. Yvette conducts a brief examination of him while the doctor is out for lunch, without informing him that she is not a fully qualified medical practitioner. Yvette tells Altair that he is in good health and has been working too hard. On his way home, Altair falls asleep at the wheel and hits a parked car, causing significant damage to both vehicles. Medical examinations after the accident show that Altair has a sleeping disorder, which could have been diagnosed and treated by a competent doctor.
Required: Advise Altair.
Questions to Consider:
• Is the damage to person or to property?
• In light of the harm suffered by Altair, what is the most appropriate action? Negligence?
• Does Yvette owe a duty of care to Altair?
• Was it reasonably foreseeable that her acts or omissions could affect Altair's well-being?
• Is there a relationship of proximity?
• What is the standard of care in this case?
• Is the standard of care higher than that of a reasonable person?
• Has Yvette breached her duty of care to Altair?
• Has Altair suffered damage?
• Can Altair establish causation and remoteness?
• Are there any defences available to Yvette?
38. What are the facts of the case Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] and what legal principal comes from this case and is it still relevant and applicable today?
39. Algol is a keen gardener. She is particularly proud of the large apricot tree in her back yard, the branches of which overhang her barbeque area and provide her with shade. Algol awakes one morning, however, to discover that her new neighbours have lopped off almost half the branches of her apricot tree, hoping to get more light in their main bedroom.
Required: Algol is furious and seeks your legal advice.
Questions to Consider:
• Is the damage to person or to property?
• In light of the harm suffered by P, what is the most appropriate action? Trespass to land?
• Can Algol show a direct interference with her lawful possession of land?
• Does there have to be an entry on to her land for a trespass to arise?
• Did she consent to the lopping of the tree?
• Do the neighbours have any defences available to them for their actions?
40. Vernon and Hillary are friends. Vernon has recently retired and now has $450 000 in superannuation. He asks Hillary, an accountant, if he should invest $200 000 of his super funds in Midget Widgets Ltd. Hillary tells Vernon that she has looked at the accounts of that company and it is a good investment. Hilary does NOT charge Vernon for her services as they are friends. Unfortunately, Hillary has misread the
accounts of the company which is almost insolvent. Vernon invests his money and Midget Widgets Ltd immediately goes into liquidation and Vernon loses his $200
000. Vernon discovers that many accountants/financial planners were aware of the poor financial position of the company and warnings had been published in several accounting journals and financial newspapers that Midget Widget was in financial trouble.
Required: Discuss whether Vernon has any legal rights against Hillary. In your answer consider if the legal position would be different if Hilary had charge Vernon for her services.
41. Read the case study on Campbell v Hay at [6.860] in the text book. Why did the finding of negligence in the District Court have no impact on the defendant's liability in that first decision?
Tutorial 8 - Topic 9 - Business Organisations
Questions on Partnerships
42. Describe the rules for determining the existence of a partnership as defined in s7 of the Partnership Act 1891 (Tas).
43. Explain the most important differences between the position of a member of a partnership and a shareholder (member) of a company in respect of:
a. the partnership's or company's dealings with outsiders; and
b. relations between the members.
Questions on Associations
44. Identify the major differences between a business association and a not-for-profit association.
45. What are the major disadvantages of an unincorporated not-for-profit association's lack of legal status? Give some reasons why the members of an unincorporated association might decide not to apply for the association to be registered as an incorporated association.
Questions on Companies
46. Define and briefly explain the following types of business entities:
c. proprietary companies - "small" and "large";
d. holding and subsidiary companies;
e. recognised and foreign companies;
f. related bodies corporates;
g. registrable Australian bodies; and
h. trustee companies.
47. What are the main differences between proprietary companies and public companies? Identify the main advantages of each.
Practical Questions on associations, partnership and companies
48. Toady and Froggy were running a vegan cafe together. The business was having financial difficulties. Betelguese, who has known Toady and Froggy for many years had recently inherited a lot of money and Toady and Froggy asked him to lend the business $100 000 to enable them to buy sufficient stock and to upgrade the cafe for the summer season. Betelguese wanted to help his friends but also wanted to ensure that he would get his money back. He agreed to lend Toady and Froggy the money in return for a payment of $10 000 per year out of the gross returns of the cafe. The terms of the loan also provided that Toady and Froggy would consult Betelgeuse about any major contracts entered into by the business and gave him a right to inspect the accounts at regular interval.
Required:
a. Discuss whether or not a partnership exists between Toady, Froggy and Betelgeuse?
b. Would it make any difference if the terms of the loan provided for Betelgeuse to be paid $10 000 per year out of the profits of the business?
49. Vernon has recently retired as a partner in the firm of ABC & Co (ABC). When he retired he ensured that his name was removed from the firm's letterhead. No other notification of his retirement was given to the firm's clients. After Vernon retired, ABC got into financial difficulties. Vernon has just received a demand for payment from Daniel, who is a creditor of ABC. This debt was incurred after Alex's retirement.
Required: Discuss whether Vernon would be personally liable for ABC's debt owed to Daniel. Would the position be different if the debt had been incurred before Vernon retired?
50. Vega has been working for Beacon Fun Stuff Pty Ltd for two years but decides she wishes to set up her own company. She wants to call the company "Vega's Guaranteed Fun Tours Pty Ltd".
Required: Please provide advice:
a. What are the major steps she should go through to register a company?
b. Will Vega be able to register the company with this name? If so, how can she ensure that no one else uses it before her company is registered?
c. Is Vega required to have a registered office? If so, can she use her parents' home address and, does the office have to be open to the public?
d. Does she have to display the company name and/or ACN/ABN:
a. on her accounts?; or
b. outside her parents' house?
51. Now assume that Vega has registered her company and it is trading profitably. After almost a year she decides to move to her own flat and moves the company's registered office to that address. A few days later the company receives an Annual Statement from ASIC which is forwarded from her parents' home address.
Required: How should Vega respond to this statement?
Tutorial 9 - Topic 10 - Internal Rules & Topic 11 - Meetings
52. Algol and her brother Altair have operated a successful tourism and souvenir business in Tasmania for a number of years. They incorporated that business under the name Beacon Fun Stuff Pty Ltd in 2019. At the beginning of 2020 Algol was approached by a company that sells souvenirs across Victoria, New South Wales and South Australia. They encouraged Algol and Altair to expand their souvenir manufacturing operations to enable sales of Australian souvenirs across these three states.
Altair and Algol have agreed to the expansion and are considering incorporating another company. Currently Beacon Fun Stuff Pty Ltd does not have its own constitution but Altair feels that should they incorporate another company he and his sister should become clearer on the key benefits of operating a company and take some advice on if they should consider adopting a constitution instead of relying on the replaceable rules contained in the Corporations Act 2001 (Cth)
Required: Please advise Algol and Altair on:
a. the key benefits of operating a company rather than a partnership;
b. the role of the replaceable rules;
c. the role of a constitution for a company; and
d. the ways that a constitution can be adopted and the major limits on the right to alter a constitution once it has been established.
53. Outline: -
a. the circumstances under which members of a company may call a meeting; and
b. the purpose of and the major rules set out in the Corporations Act 2001 (Cth) around the types and formalities around meetings that a company must have.
54. Altair and Algol are shareholders in Savvy Stuff Ltd (Savvy), a large, listed company. Between them they hold 400 ordinary shares. They are unhappy with Savvy's environmental record. At the annual general meeting, Algol asks the board two questions on Savvy's mining operations. She considers the answers given to be totally inadequate. She wants to ask further questions about Savvy's offshore drilling operations.
Required: Provide advice - is the Chair obliged to allow Algol time to ask these questions?
55. Can directors hold their meetings by way of either a conference telephone call or email?
56. Revisit question 54 - Vernon is also a shareholder in Savvy Stuff Ltd. Two weeks before the AGM he submitted a list of detailed written questions to the auditor about the content of the auditor's report to be considered at the AGM.
At the AGM the auditor was represented by a very junior employee who provided brief oral answers to the written questions submitted by Vernon. The Chair of the meeting then refused to allow Vernon to ask any further questions.
Required: Have either the Chair of the meeting or the auditor breached the
Corporations Act 2001 (Cth)?
57. Revisit questions 54 & 66. After the AGM, Algol, Altair and Vernon and 97 other small shareholders in Savvy Stuff Ltd who have similar views decide to campaign to force Savvy to alter its environmental policy. Algol and Vernon each transfer one share in Savvy Stuff Ltd to their family members Vega and Gamma so that the group now numbers more than 100. They then request the directors of the company to call an extraordinary general meeting to consider a resolution proposing major changes to the company's environmental policies.
Required: Provide advice to Savvy Stuff Ltd.
58. Suppose a resolution is passed at a general meeting without a quorum being present. If a member disagreed with the resolution, what could he or she do about it?
59. Algol, Altair, Vernon, Vega, Gamma and Betelgeuse are the only shareholders and directors of Beacon Fun Stuff Pty Ltd. Algol holds 20%, Altair 60%, Vernon 5%, Vega 5%, Gamma 5% and Betelgeuse 5%. The relationship between the rest of the family and Betelgeuse breaks down and Betelgeuse has moved to the USA and is no longer actively involved in the company's management. Algol and Altair called a general
meeting to be held at the family home in Hobart on the 20th August 2020. They propose to pass a resolution removing Betelgeuse from the board.
The notice of meeting was sent to Betelguese but was delayed in the post and did not reach him until two days before the meeting. At this late stage he was unable to book a plane ticket from Missouri so could not attend the meeting.
Required: Please advise Betelguese.
Tutorial 10 - Topic 13 - Directors and Officers
60. What are the major types of directors a company can have and who appoints directors?
61. In April 2018, Betelgeuse became the managing director of a newly registered company, Aussie Ace Souvenirs Limited (AAS). At that time the company was in a strong financial position. In December 2019, a liquidator was appointed to AAS. An investigation of the affairs of AAS by the liquidator disclosed a probable shortage of funds of over $3 million.
Although there had been a steady increase in souvenir sales from 2017 to 2019 (resulting in substantial trading profits), the liquidator reported the following:
o the purchase of a $1 million apartment in Sydney with funds from AAS which, upon resale, was only likely to realise $600 000 - representing an expected net loss of $400 000;
o the purchase of new machinery designed to substantially speed up the manufacturer of a number of lines of Australian souvenirs, 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;
o that $200,000 is due from Shrewd Advisers Ltd (Shrewd), Ace's investment advisers, a company of which Betelgeuse is a director and majority shareholder. There is a guarantee by Shrewd in favour of AAS for $100,000 but, given Shrewd's financial position; no more than $70,000 is likely to be recovered. Betelguese did not disclose his interest in Shrewd Pty Ltd to AAS's Board, although they knew about it; and
o Betelgeuse had himself fraudulently misappropriated about $500 000 to finance his extravagant lifestyle. Fraud charges against Betelgeuse are currently being heard by the court.
The directors of AAS during the period 2018-2019 were:
o Betelgeuse, as Managing Director and Chair;
o Altair Rigel, (Executive Director) and director in another related business Beacon Fun Stuff Pty Ltd;
o Penny Patton, (Non-Executive Director) a highly regarded accountant who sits on several public company boards;
o Vernon, (Non-Executive Director), retired business man and friend of Altair; and
o Eleanor Arnold (Non-Executive Director), a public relations consultant.
Eleanor was ill for much of 2018 and was unable to attend board meetings or take any part in the company's management.
The day-to-day management of AAS was left to Betelgeuse. The other executive director Altair is Betelgeuse's father and he only spent a day every week overseeing and working at any of the premises occupied by AAS. 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 Betelgeuse, as were the auditors.
Required: Advise the liquidator whether she should pursue any of the directors for compensation. Also advise which directors duties may have been breached?
62. Facts: Gamma is the managing director of Eternal Youth Pty Ltd (EY), a profitable company specialising in buying and selling anti-ageing cosmetics and shampoos for sensitive hair. The market for EY's products are women between the ages of 40 and 70 years.
While at the hairdresser's having a power perm, Gamma chats to her hairdresser, Alistair. Alistair asks Gamma whether her company would be interested in helping him to market a new organic hair soap called "Wonder Bar". Alistair claims that the soap prevents male hair loss.
Gamma tells Alistair that her company would not be interested because it sells women's products only. She offers to help Alistair herself. Alistair agrees. Gamma and Alistair set up a company called Wonder Hair Soap Pty Ltd (WHS) and become its directors and members. Gamma is the majority member. The business of the company is an overnight success.
At a board meeting of EY six months later, Gamma proposes that EY enters into a long- term contract with WHS to buy supplies of the organic hair soap for resale. The board agrees and, as part of the contract, Gamma negotiates with the board that she will be paid a small commission on each sale because she drew the board's attention to this new product opportunity. EY makes large profits from selling the soap overseas.
Required: EY learns that Gamma is the majority member in WHS. They seek advice on the following:
o Has Gamma breached any of her directors' duties owed to EY? Which (if any) has she breached and why has she breached them?
o Should Gamma have been present at the board meeting when the contract with WHS was discussed and voted on?
o Should the contract also have been disclosed to the general meeting for approval before EY went ahead?
o What general law or statutory remedies (if any) should EY seek against Gamma?
o What statutory penalties (if any) can be imposed against her? Who can impose them?
63. Algol and her brother Altair set up Beacon Fun Stuff Pty Ltd some years ago. Algol had taken on the role of marketing the business and has set up a number of good contacts across Australia. Algol feels she puts in too much time and effort and that her brother is not working hard enough as he has recently become involved in other business and other activities. As a result, Algol is dissatisfied with her position in the company and decided to leave and set up her own competing business.
Before she resigned, she sent letters to many of the businesses that purchased souvenirs from Beacon Fun Stuff Pty Ltd and many customers that regularly took tours with Beacon Fun Stuff Pty Ltd. This letter invited them to transfer their business to her new business. Algol compiled the list of persons to whom she wrote from memory and publicly available sources of information such as the White Pages and other directories, not from business records.
Three days after posting these letters Algol resigned from Beacon Fun Stuff Pty Ltd. Her new tourism business launched a fortnight later and many of Beacon Fun Stuff's customers did transfer their business to Algol's new business.
Required: Provide advice to Beacon Fun Stuff Pty Ltd on:
o whether Algol has breached her fiduciary duties or any provisions of the Corporations Act 2001 (Cth); and
o if Algol has breached any general law or statutory duties, what remedies might be available to XYZ?
Tutorial 11 - Topic 14 - Remedies for Members
64. What rights does ownership of a share give the holder?
65. What advantages do statutory remedies have over general law remedies for members?
66. In what kinds of situations is a member likely to be successful in obtaining relief from oppression under Pt 2F.1 of the Corporations Act 2001 (Cth)?
67. Identify some of the circumstances which may form the basis for a winding up order under s 461(1).
68. Do you agree with the High Court's ruling in Sons of Gwalia Ltd v Margaretic (2007) 231 CLR 160 which provides greater protection to shareholders rights? Or do you prefer the recent amendments to the Corporations Act as provided by the Corporations Amendment (Sons of Gwalia) Act 2010 (Cth)?
69. "Statutory derivative actions have not been very effective in achieving protection for shareholders, as demonstrated by the very fact that so few derivative actions have been brought before the courts". Critically discuss the above statement.
70. Bill and Clare are mushroom farmers. Three years ago, they were persuaded by Vernon, Bill's brother to incorporate a company to start selling mushrooms to supermarkets. To do this Vernon invested heavily and they established Mushroom Topia Pty Ltd (Mushroom). Vernon and Bill each had 300 shares in Mushroom while Clare had 200 shares. All three of them actively participated in the company's management and each became directors.
Last year Clare suffered a mild heart attack and decided that she should resign from the board of Mushroom and transfer her shares to her daughter, Gail. Vernon and Bill did not object and the transfer was registered. Shortly afterwards, Vernon discovered that Gail's fiancée, Tom, was a major shareholder in and a director of a large interstate company that intended to expand its business and would possibly be a serious competitor to Mushroom. Vernon called a general meeting of Mushroom which passed a special resolution adopting the following internal rule:
If a member or the spouse or child of a member carries on or is a director of a business that in the opinion of the directors is a competitor or a potential competitor of Mushroom Topia Pty Ltd , the directors may require that member to sell her or his shares to a person named by the directors at a fair price fixed by an independent expert appointed by the directors.
The resolution was passed by Vernon and Bill, who were the only people at the meeting. Gail was on her honeymoon in the Cook Islands at the time and did not receive the notice of meeting until she returned home. When she returned, she was given a notice requiring her to sell half her shares to Vernon's daughter, Vega, and half to Bill's wife, Clare, at a price of $20 per share (the value put on the shares by Graeme, the independent expert appointed by Vernon and Bill).
Required: Gail does not want to sell her shares in Mushroom. Advise Gail:
(a) if the meeting had power to adopt the internal rule set out above?; and
(b) if she has any grounds to challenge the notice requiring her to sell her shares?
Tutorial 12 - Topic 12 - Corporate Liability & Topic 19 - External Administration
Questions on Corporate Liability
71. Assume that a person who appears on ASIC records as a director, and whom everyone (including the company) thought was validly appointed as a director, is not, in fact, validly appointed. (The notice requirements for the convening of the board of directors' meeting at which she was appointed were not complied with.) Does this fact alone invalidate a contract signed by her in the capacity of director?
72. When an employee sells a defective product that causes harm, is the employer company or the employee liable for the damage?
Questions on External Administration
73. What is meant by the term ‘external administration' and is a company always wound
up after it goes through an external administration?
74. Who has power to appoint an administrator?
75. What are the three things that can happen when a voluntary administration ends?
76. Consider what is meant by an ‘antecedent transaction' and why might a liquidator pursue such transactions?
Note: Need only 40, 48, 59, 63, 68, 73 Questions
Attachment:- tutorial questions and assessment task.rar