Reference no: EM133474418
Karl started a small business called "Karl's Birds Farm", which is a business breeding kestrels, eagles, falcons and other large birds of prey. The business became successful and breeding large birds of prey became increasingly popular, especially since Karl 's Birds Farm featured in the newest breeding machine in South Australia.
The business was so successful that Karl decided to incorporate the business with a view to future growth. Karl registered "Karl's Birds Farm Pty Ltd" (KBF) and transferred all business assets including his breeding machine to the new company. Karl owns 19,000 shares with a nominal value of $10 each, and his wife Hanna owns 1,000 KBF shares. Olivia is Karl's sibling and Olivia acts as managing director of KBF, though she has never actually been formally appointed to that position. Olivia is, however, described in the ASIC return as the managing director. Karl and Hanna are the other directors of KBF.
To begin with, Karl did all of the work for the company himself. A few months later, business was booming and KBF expanded by buying a second breeding machine from Breedingmac Pty Ltd for $120,000 ($60,000 up front and 6 monthly instalments of $10,000). KBF also hired breeding machine operator and a receptionist that dealt with all the administrative work.
4 months after the purchase of the breeding machine, business dropped significantly as a result of an unexpected decrease in need of the large birds to the area. KBF was not able to make the final 2 repayments. Breedingmac Pty Ltd demands that Karl and Hanna pay the remaining $20,000 because KBF does not have any money left. Both Karl and Hanna refuse.
One day, Olivia takes an external telephone call from a retail outlet asking for a KBF company order number for a retail purchase made by Emily. Olivia replied that Emily was the company's Principal Finance officer, and said "she'll see you right", transferring that call to Emily's office. Later it transpired that Emily has purchased a widescreen plasma TV for $9999, and it was delivered to her home. The contract was made by Emily on behalf of KBF.
Emily has acted as Principal Finance officer of KBF for some time, but has never actually formally been appointed as such. The Constitution of KBF contains a clause which requires a board resolution for the purchase of goods valued at more than $8000, but no resolution has been passed by the board for the plasma TV. Emily no longer resides at her previous home address, and her spouse says "Good riddance to her and her widescreen TV." The whereabouts of Emily and the plasma widescreen TV are currently unknown.
Using IRAC,Discuss
- whether Breedingmac can demand payment from Karl and Hanna and;
- whether KBF is liable for the cost of the widescreen plasma TV.