LAW251 Corporations Law - s3.studentvip.com.au · ‘Carrying on a business’ ... Executors and...

LAW251 Corporations Law

Contents TOPIC 1 – THE LAW OF PARTNERSHIP .................................................................................................. 19

DEFINITION OF PARTNERSHIP ........................................................................................................... 19

‘Carrying on a business’ .................................................................................................................... 19

Turnbull v Ah Mouy ....................................................................................................................... 19

Ballantyne v Raphael ..................................................................................................................... 19

Smith v Anderson .......................................................................................................................... 20

Canny Gabriel Castle Jackson Advertising v Volume Sales Pty Ltd ............................................... 20

Carrying on a business in common’ .................................................................................................. 20

Keith Spicer Ltd v Mansell ............................................................................................................. 21

Khan v Miah .................................................................................................................................. 21

Kanf-Kem v Paine .......................................................................................................................... 21

A ‘view of profit’................................................................................................................................ 21

Rule 1 – s2(1)(1) ............................................................................................................................ 22

Davis v Davis .................................................................................................................................. 22

Rule 2 – s2(1)(2) ............................................................................................................................ 22

Cribb v Korn ...................................................................................... Error! Bookmark not defined.

Rule 3 – S2(1)(3) ............................................................................... Error! Bookmark not defined.

Cox v Hickman .................................................................................. Error! Bookmark not defined.

FORMATION OF A PARTNERSHIP ......................................................... Error! Bookmark not defined.

NATURE OF A PARTNERSHIP ................................................................ Error! Bookmark not defined.

RELATIONS OF PARTNERS AND THIRD PARTIES ................................... Error! Bookmark not defined.

Agency principle ................................................................................... Error! Bookmark not defined.

Mercantile Credit Co Ltd v Garrod ................................................... Error! Bookmark not defined.

Golberg v Jenkins ............................................................................. Error! Bookmark not defined.

Construction Engineering (Aust) Pty v Hexyl Pty Ltd ( ..................... Error! Bookmark not defined.

Types of Liability .................................................................................. Error! Bookmark not defined.

Liability in Contract .............................................................................. Error! Bookmark not defined.

Liability in Tort ..................................................................................... Error! Bookmark not defined.

Hedley Byrne Co Ltd v Heller & Partners [ ....................................... Error! Bookmark not defined.

Liability of Non-Partners ...................................................................... Error! Bookmark not defined.

Australia Joint Stock Bank v Steele .................................................. Error! Bookmark not defined.

Lynch v Stiff ...................................................................................... Error! Bookmark not defined.

Duke Group Ltd (in liq) v Pilmer ....................................................... Error! Bookmark not defined.

Other relevant sections for liability of partners .................................. Error! Bookmark not defined.

RELATIONS BETWEEN PARTNERS INTERSE .......................................... Error! Bookmark not defined.

Fiduciary Relations ............................................................................... Error! Bookmark not defined.

Thompson’s Trustee v Heaton ......................................................... Error! Bookmark not defined.

Birtchnell v Equity Trustees, Executors and Agency Co Ltd ............. Error! Bookmark not defined.

Chan v Zacharia ................................................................................ Error! Bookmark not defined.

United Dominions Corp Ltd v Brian Pty Ltd ..................................... Error! Bookmark not defined.

Fleming v McKechnie ....................................................................... Error! Bookmark not defined.

Partnership Property ............................................................................ Error! Bookmark not defined.

Sharp v The Union Trustee Co of Australia Ltd ................................ Error! Bookmark not defined.

Management Matters .......................................................................... Error! Bookmark not defined.

TERMINATION (DISSOLUTION) OF A PARTNERSHIP ............................ Error! Bookmark not defined.

CONSEQUENCES OF DISSOLUTION OR TERMINATION OF A PARTNERSHIP ....... Error! Bookmark not

defined.

LIMITED PARTNERSHIPS AND INCORPORATED LIMITED PARTNERSHIPS ........... Error! Bookmark not

defined.

ADVANTAGES AND DISADVANTAGES OF A PARTNERSHIP .................. Error! Bookmark not defined.

TOPIC 2 – AGENCY LAW ........................................................................... Error! Bookmark not defined.

DEFINITION OF AGENT ......................................................................... Error! Bookmark not defined.

International Harvester Co of Australia Pty Ltd v Carrigans Haxeldene Pastoral Co .............. Error!

Bookmark not defined.

CREATION OF AGENCY ......................................................................... Error! Bookmark not defined.

Agency by agreement .......................................................................... Error! Bookmark not defined.

Lucken v Buckeye Parking Corporation ............................................ Error! Bookmark not defined.

Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd .... Error! Bookmark not defined.

Soanes v London SW Ry ................................................................... Error! Bookmark not defined.

Tooth v Laws ( .................................................................................. Error! Bookmark not defined.

Panorama Development (Guildford) v Fidelis Furnishing Fabrics .... Error! Bookmark not defined.

Crabtree-Vickers Pty v Australian Direct Mail Advertising & Addressing Co Pty Ltd .............. Error!


Overbrooke Estates Ltd v Glencombe Properties Ltd ...................... Error! Bookmark not defined.

Agency by operation of Law ................................................................ Error! Bookmark not defined.

Agency of necessity strictly so called ................................................... Error! Bookmark not defined.

Great Northern Ry v Swafield .......................................................... Error! Bookmark not defined.

Springer v Great Western Railway ................................................... Error! Bookmark not defined.

Marriage and Cohabitation .................................................................. Error! Bookmark not defined.

Pianta v Macro & Sons Pty Ltd ......................................................... Error! Bookmark not defined.

Agency by Ratification ......................................................................... Error! Bookmark not defined.

Agent must have acted as Agent ......................................................... Error! Bookmark not defined.

Keighley Maxtead & Co v Durnat ..................................................... Error! Bookmark not defined.

The alleged principal must be in existence at the time of the transaction ........ Error! Bookmark not

defined.

Kelner v Baxter ................................................................................. Error! Bookmark not defined.

TYPES OF AGENTS ................................................................................ Error! Bookmark not defined.

Universal Agent .................................................................................... Error! Bookmark not defined.

General Agent ...................................................................................... Error! Bookmark not defined.

Special Agent ........................................................................................ Error! Bookmark not defined.

Del Credere Agent ................................................................................ Error! Bookmark not defined.

RELATIONSHIP BETWEEN PRINCIPAL AND AGENT............................... Error! Bookmark not defined.

Duties of the Agent to the Principal (Principal’s duties) ...................... Error! Bookmark not defined.

Duty to obey principal’s instructions ................................................... Error! Bookmark not defined.

Bertram, Armstrong v Godfrey ........................................................ Error! Bookmark not defined.

Veljkovic v Vrybogen ........................................................................ Error! Bookmark not defined.

Duty to exercise diligence, care and skill ............................................. Error! Bookmark not defined.

Miltor Investments v General Accident and Fire and Life Insurance Corporation Ltd ........... Error!


Keppel v Wheeler ............................................................................. Error! Bookmark not defined.

Chaudhry v Prabhakar ...................................................................... Error! Bookmark not defined.

Agent has a duty to act personally ...................................................... Error! Bookmark not defined.

John McCann & Co v Pow ................................................................ Error! Bookmark not defined.

Duty to avoid conflicts of interest ........................................................ Error! Bookmark not defined.

Blackham v Haythorpe ..................................................................... Error! Bookmark not defined.

Duty of Agent to safeguard confidential information ......................... Error! Bookmark not defined.

Duty to keep accounts and account to Principal for all benefits ......... Error! Bookmark not defined.

Duties owed by the principal to the Agent (Agents rights) ................. Error! Bookmark not defined.

Duty to pay remuneration ................................................................... Error! Bookmark not defined.

Berben v Hedditch ........................................................................... Error! Bookmark not defined.

Duty to indemnify ................................................................................ Error! Bookmark not defined.

Agent’s right of lien .............................................................................. Error! Bookmark not defined.

Right of stoppage in transit .................................................................. Error! Bookmark not defined.

RELATIONSHIP BETWEEN THE PRINCIPAL AND THIRD PARTIES .......... Error! Bookmark not defined.

A named principal ................................................................................ Error! Bookmark not defined.

Schwalz v Avery ................................................................................ Error! Bookmark not defined.


Disclosed but not named principal ...................................................... Error! Bookmark not defined.

Where neither the name nor existence of the principal is disclosed (undisclosed principal) .... Error!


Construction Engineering (Aust) Pty Ltd v Hexyl Pty Ltd ................. Error! Bookmark not defined.

Watteau v Fenwick ........................................................................... Error! Bookmark not defined.

TERMINATION OF AGENCY .................................................................. Error! Bookmark not defined.

Termination of agency by act of the parties ........................................ Error! Bookmark not defined.

Termination of agency by operation of law ......................................... Error! Bookmark not defined.

TOPIC 3 – COMPANY LAW & COMPANY FORMATION ............................ Error! Bookmark not defined.

A company as a separate legal entity .................................................. Error! Bookmark not defined.

Salomon v A Salomon & Co Pty Ltd .................................................. Error! Bookmark not defined.

Macaura v Northern Assurance Co .................................................. Error! Bookmark not defined.

Lee v Lee’s Air Farming Ltd .............................................................. Error! Bookmark not defined.

Statutory provisions ............................................................................. Error! Bookmark not defined.

Organic theory of corporations............................................................ Error! Bookmark not defined.

Lennards Carrying Co Ltd v Asiatic Petroleum Co Ltd ...................... Error! Bookmark not defined.

HL Bolton (Engineering) Co Ltd v TJ Graham & Sons Ltd ................. Error! Bookmark not defined.

Tesco Supermarkets Ltd v Nattrass .................................................. Error! Bookmark not defined.

Lifting (Piercing the Corporate veil) ..................................................... Error! Bookmark not defined.

Statutory lifting of the corporate veil .................................................. Error! Bookmark not defined.

Judicial Lifting of the corporate veil ..................................................... Error! Bookmark not defined.

Where a corporate form is used to avoid existing legal obligations ... Error! Bookmark not defined.

Gilford Motors Co Ltd v Horne ......................................................... Error! Bookmark not defined.

Creasey v Breachwood Motors Ltd .................................................. Error! Bookmark not defined.

Jones v Lipman ................................................................................. Error! Bookmark not defined.

Where the company is used as a vehicle for, or to perpetrate, fraud . Error! Bookmark not defined.

Re Darby; Ex Parte ............................................................................ Error! Bookmark not defined.

Use of a company as an agent ............................................................. Error! Bookmark not defined.

Re FG (Films) Ltd .............................................................................. Error! Bookmark not defined.

Smith, Stone and Knight v Birmingham Corporation ....................... Error! Bookmark not defined.

Involvement in directors breach of duty ............................................. Error! Bookmark not defined.

Green v Bestobell Industries Ltd ...................................................... Error! Bookmark not defined.

Groups of Companies and lifting the corporate veil – Separate legal entity in Corporate Groups

............................................................................................................. Error! Bookmark not defined.

Walker v Wimborne ......................................................................... Error! Bookmark not defined.

Industrial Equity v Blackburn ........................................................... Error! Bookmark not defined.

Briggs v James Hardie & Co Pty Ltd .................................................. Error! Bookmark not defined.

Quintex Australia Finance Ltd v Schroders Australia Ltd ................. Error! Bookmark not defined.

FORMATION OF A COMPANY .............................................................. Error! Bookmark not defined.

Types of companies ............................................................................. Error! Bookmark not defined.

Proprietary companies ......................................................................... Error! Bookmark not defined.

Public companies ................................................................................. Error! Bookmark not defined.

Company registration and its effects ................................................... Error! Bookmark not defined.

Company’s constitution and replaceable rules.................................... Error! Bookmark not defined.

PRE – INCORPORATION DEALINGS – PROMOTERS AND THEIR DUTIES .............. Error! Bookmark not

defined.

Who is a promoter? ............................................................................. Error! Bookmark not defined.

Twycross v Grant .............................................................................. Error! Bookmark not defined.

Tracy v Mandalay Pty Ltd ................................................................. Error! Bookmark not defined.

Duties of Promoters ............................................................................. Error! Bookmark not defined.

Salomon v Salomon & Co Ltd ........................................................... Error! Bookmark not defined.

Erlanger v New Sombrero Phosphate Co ......................................... Error! Bookmark not defined.

Gluckstein v Barnes .......................................................................... Error! Bookmark not defined.

Tracy v Mandalay Pty Ltd ................................................................. Error! Bookmark not defined.

Remedies for breach of promoters duties ........................................... Error! Bookmark not defined.

Cadence Asset Management Pty Ltd v Concept Sports Limited ...... Error! Bookmark not defined.

Pre-incorporation Contracts ................................................................ Error! Bookmark not defined.


Black v Smallwood ( ......................................................................... Error! Bookmark not defined.

Legislative control of promoters .......................................................... Error! Bookmark not defined.

Prospectus and Incorporation: Misstatements in and Omissions from disclosure documents . Error!


TOPIC 4 – COMPANY FINANCE I ............................................................... Error! Bookmark not defined.

Commencement of a business and Powers of the company ............... Error! Bookmark not defined.

Company constitution and replaceable rules ...................................... Error! Bookmark not defined.

Statutory requirements for internal administration of a company ..... Error! Bookmark not defined.

Registered office and operating hours ................................................ Error! Bookmark not defined.

Name of the Company ......................................................................... Error! Bookmark not defined.

Directors ............................................................................................... Error! Bookmark not defined.

Morris v Kanssen .............................................................................. Error! Bookmark not defined.

NRMA Ltd v Spragg .......................................................................... Error! Bookmark not defined.

Other company officers – company secretary and managerial staff... Error! Bookmark not defined.

Powers of the company ....................................................................... Error! Bookmark not defined.

Ashbury Railway Carriage and Iron Co v Riche ................................ Error! Bookmark not defined.

Company’s relationship with outsiders (third parties) ........................ Error! Bookmark not defined.

HL Bolton (Engineering) Co Ltd v TJ Graham & Sons Ltd ................. Error! Bookmark not defined.

Tesco Supermarkets Ltd v Nattrass .................................................. Error! Bookmark not defined.

Indoor Management Rule – 128-130 .................................................. Error! Bookmark not defined.

Royal British Bank v Turquand ......................................................... Error! Bookmark not defined.

Story v Advance Bank of Australia Ltd ............................................. Error! Bookmark not defined.

Freeman & Lockyer v Buckhurst Part Properties (Mengal) Ltd ....... Error! Bookmark not defined.

Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd ........ Error!


When not entitled to rely on the indoor management rule ................ Error! Bookmark not defined.

Northside Developments Pty Ltd v Registrar-General ..................... Error! Bookmark not defined.

Pyramid Building Society (in liq) v Scorpion Hotels Pty Ltd ............. Error! Bookmark not defined.

COMPANY FINANCE ............................................................................. Error! Bookmark not defined.

Share Capital ........................................................................................ Error! Bookmark not defined.

Classes of shares .................................................................................. Error! Bookmark not defined.

Payment for shares: cash or other consideration ................................ Error! Bookmark not defined.

Re White Star Line Ltd ...................................................................... Error! Bookmark not defined.

TOPIC 5 – COMPANY FINANCE I (cont) .................................................... Error! Bookmark not defined.

Doctrine of Maintenance of Share Capital........................................... Error! Bookmark not defined.

Alteration of shares.............................................................................. Error! Bookmark not defined.

The doctrine of maintenance of share capital ..................................... Error! Bookmark not defined.

Trevor v Whitworth .......................................................................... Error! Bookmark not defined.

Indirect self-acquisition........................................................................ Error! Bookmark not defined.

Reductions of share capital .................................................................. Error! Bookmark not defined.

Prohibition on a company’s assistance for the acquisition of its own shares – s 260A ............. Error!


Darvall v North Sydney Brick & Tile Co Ltd ...................................... Error! Bookmark not defined.

Permissible capital reductions – s 258A-258E ..................................... Error! Bookmark not defined.

Permitted share buy-backs ss 257A-257H ........................................... Error! Bookmark not defined.

Company Membership and Shareholding ........................................... Error! Bookmark not defined.

The register .......................................................................................... Error! Bookmark not defined.

Re Clifton Springs Hotel Ltd ............................................................. Error! Bookmark not defined.

Rectification of the register ................................................................. Error! Bookmark not defined.

Grant v John Grant & Sons Pty Ltd ................................................... Error! Bookmark not defined.

McLaughlin v Daily Telegraph Newspapers Co (No 2) ..................... Error! Bookmark not defined.

Share certificates ................................................................................. Error! Bookmark not defined.

Daily Telegraph Co v Cohen ............................................................. Error! Bookmark not defined.

Re Bahia & San Francisco Rail Co Ltd ............................................... Error! Bookmark not defined.

Transfer of shares ................................................................................ Error! Bookmark not defined.

Disclosure of interest in shares ............................................................ Error! Bookmark not defined.

Cessation of membership .................................................................... Error! Bookmark not defined.

Dividends.............................................................................................. Error! Bookmark not defined.

What is profit? ..................................................................................... Error! Bookmark not defined.

Who may declare a dividend? ............................................................. Error! Bookmark not defined.

Problems with the payment of dividends ............................................ Error! Bookmark not defined.

Principles re the payment of a dividend .............................................. Error! Bookmark not defined.

Verner v General Commercial Investment Trust ............................. Error! Bookmark not defined.

Remedies for improper payment of dividend...................................... Error! Bookmark not defined.

TOPIC 6 – COMPANY FINANCE II – Debt Capital ...................................... Error! Bookmark not defined.

Borrowing Powers of a company ......................................................... Error! Bookmark not defined.

Who has the power to borrow? ........................................................... Error! Bookmark not defined.

Forms of security for borrowing – secured and unsecured loans ....... Error! Bookmark not defined.

Debentures .......................................................................................... Error! Bookmark not defined.

Requirement of a Trustee .................................................................... Error! Bookmark not defined.

Duties of the borrower company ......................................................... Error! Bookmark not defined.

Trustee’s Duties ................................................................................... Error! Bookmark not defined.

Register of debenture holders ............................................................. Error! Bookmark not defined.

A debenture will become immediately payable when ... .................... Error! Bookmark not defined.

Company Charges ................................................................................ Error! Bookmark not defined.

Types of Charges .................................................................................. Error! Bookmark not defined.

Fixed Charge ......................................................................................... Error! Bookmark not defined.

Floating Charge .................................................................................... Error! Bookmark not defined.

Illingworth v Houldsworth ............................................................... Error! Bookmark not defined.

Distinction between fixed and floating charges .................................. Error! Bookmark not defined.

United Builders Pty Ltd v Mutual Acceptance ................................. Error! Bookmark not defined.

Crystallisation of Floating Charges ....................................................... Error! Bookmark not defined.

Fire Nymph Products Ltd v The Heating Centre Pty Ltd .................. Error! Bookmark not defined.

Reynolds Bros (Motors) Pty Ltd v Esanda Ltd .................................. Error! Bookmark not defined.

Priorities between fixed and floating charges – not registered .......... Error! Bookmark not defined.

Re Borax Co ...................................................................................... Error! Bookmark not defined.

Torzillu Pty Ltd v Brynac Pty Ltd ....................................................... Error! Bookmark not defined.

Re Manurew Transport Ltd .............................................................. Error! Bookmark not defined.

Re Bismarck Australia Pty Ltd .......................................................... Error! Bookmark not defined.

Registration of Charges – Chapter 2K, Pt 2K.2 (ss 262-277) ................ Error! Bookmark not defined.

Procedure for lodgement and registration of charges ........................ Error! Bookmark not defined.

Registrable charges .............................................................................. Error! Bookmark not defined.

Priority of registrable charges – Ch 2K, Pt 2K.3 (ss 278-282) ............... Error! Bookmark not defined.

Time of registration ............................................................................. Error! Bookmark not defined.

Rules for determining priority.............................................................. Error! Bookmark not defined.

Australian Central Credit Union v Commonwealth Bank ................ Error! Bookmark not defined.

Prospective liability .............................................................................. Error! Bookmark not defined.

Negative Pledges .................................................................................. Error! Bookmark not defined.

Invalidation of Charges ........................................................................ Error! Bookmark not defined.

TOPIC 7 – CORPORATE GOVERNANCE RULES IN THE MANAGEMENT OF THE COMPANY ............. Error!


Division of Power within a company, board of directors .................... Error! Bookmark not defined.

What is a director? ............................................................................... Error! Bookmark not defined.

‘Officer’ – many of the duties applicable to directors are also applicable to officers of the company


ASIC v Adler (No 3) ........................................................................... Error! Bookmark not defined.

Functions of the Board of Directors and General Meeting.................. Error! Bookmark not defined.

Functions of the Director/Board of Directors ...................................... Error! Bookmark not defined.

Immunity of the Board from interference by the general meeting ..... Error! Bookmark not defined.

Automatic Self-Cleansing v Cunninghame ....................................... Error! Bookmark not defined.

John Shaw Ltd v Shaw ...................................................................... Error! Bookmark not defined.

Functions of the General Meeting ....................................................... Error! Bookmark not defined.

Appointment of Directors .................................................................... Error! Bookmark not defined.

Operation of the Board of Directors .................................................... Error! Bookmark not defined.

Poliwka v Haven Holdings Pty Ltd .................................................... Error! Bookmark not defined.

Swiss Screens (Aust) Pty Ltd v Burgess ............................................ Error! Bookmark not defined.

DUTIES OF COMPANY DIRECTORS ....................................................... Error! Bookmark not defined.

To whom are the duties owed? ........................................................... Error! Bookmark not defined.

Greenhalgh v Arderne Cinemas ....................................................... Error! Bookmark not defined.

Re Smith & Fawcett Ltd .................................................................... Error! Bookmark not defined.

Directors and officers do not owe duties to individual shareholders . Error! Bookmark not defined.

Percival v Wright .............................................................................. Error! Bookmark not defined.

However, circumstances may arise in which an independent fiduciary duty may arise between a

particular director and a particular shareholder ................................. Error! Bookmark not defined.

Coleman v Myers [ ........................................................................... Error! Bookmark not defined.

Where a company acts as a trustee, directors of the trustee company may owe a duty to act in the

best interests of the beneficiaries of the trust .................................... Error! Bookmark not defined.

Hurley v BGH Nominees Pty Ltd (No 2) ............................................ Error! Bookmark not defined.

Duty to act bona fide in the interests of the company ........................ Error! Bookmark not defined.

Mills v Mills ...................................................................................... Error! Bookmark not defined.

Walker v Wimborne ......................................................................... Error! Bookmark not defined.

Duty to exercise powers for a proper purpose .................................... Error! Bookmark not defined.

Mills v Mills ...................................................................................... Error! Bookmark not defined.

Howard Smith Ltd v Ampol Petroleum Ltd ...................................... Error! Bookmark not defined.

Harlowe’s Nominees Pty Ltd v Woodside (lake entrance) Oil Co NL Error! Bookmark not defined.

Duty to retain discretion ...................................................................... Error! Bookmark not defined.

Duty to avoid conflict of interests ........................................................ Error! Bookmark not defined.

Phipps v Boardman .......................................................................... Error! Bookmark not defined.

Contracting with the company ............................................................ Error! Bookmark not defined.

Aberdeen Railway Co v Blakie Bros .................................................. Error! Bookmark not defined.

Queensland Mines Ltd v Hudson ..................................................... Error! Bookmark not defined.

Transvaal Lands Co v New Belgium (Transvaal) Lands and Development Co . Error! Bookmark not

defined.

Deriving personal profit from acting as director ................................. Error! Bookmark not defined.

Regal (Hastings) Ltd v Gulliver ......................................................... Error! Bookmark not defined.

Taking up a corporate opportunity ...................................................... Error! Bookmark not defined.

Cook v Deeks .................................................................................... Error! Bookmark not defined.

Canadian Aero Service Ltd v O’Malley ............................................. Error! Bookmark not defined.

Peso Silver Mines Ltd v Cropper ...................................................... Error! Bookmark not defined.

Queensland Mines Ltd v Hudson ..................................................... Error! Bookmark not defined.

SEA Food International Pty Ltd v Lam .............................................. Error! Bookmark not defined.

Green v Bestobell Industries Pty Ltd ................................................ Error! Bookmark not defined.

Duty of Disclosure ................................................................................ Error! Bookmark not defined.

Southern Cross Mines Management Pty Ltd v Ensham Resources Pty Ltd .... Error! Bookmark not

defined.

Duty of Care, Skill and Diligence .......................................................... Error! Bookmark not defined.

Re City Equitable Fire Insurance Co ................................................. Error! Bookmark not defined.

AWA Ltd v Daniels ............................................................................ Error! Bookmark not defined.

Daniels v Anderson .......................................................................... Error! Bookmark not defined.

Other important cases ......................................................................... Error! Bookmark not defined.

Permanent Building Society (in liq) v Wheele .................................. Error! Bookmark not defined.

ASIC v Vines ...................................................................................... Error! Bookmark not defined.

Vines v ASIC ...................................................................................... Error! Bookmark not defined.

Duke Group v Pilmer ........................................................................ Error! Bookmark not defined.

ASIC v Macdonald ............................................................................ Error! Bookmark not defined.

ASIC v Healey.................................................................................... Error! Bookmark not defined.

Defence to breach of duty to act with care, skill and diligence – Business Judgment Rule ....... Error!


ASIC v Adler ...................................................................................... Error! Bookmark not defined.

ASIC v Rich ........................................................................................ Error! Bookmark not defined.

Duty to prevent insolvent trading ........................................................ Error! Bookmark not defined.

Defences .............................................................................................. Error! Bookmark not defined.

Statewide Tobacco Services Ltd v Morley ........................................ Error! Bookmark not defined.

Commonwealth Bank Ltd v Friedrich ............................................... Error! Bookmark not defined.

ASIC v Vizard .................................................................................... Error! Bookmark not defined.

Duty not to misuse position ................................................................. Error! Bookmark not defined.

Other statutory duties ......................................................................... Error! Bookmark not defined.

Disclosure of material personal interests in contract, property, offices – s 181 and s 192. ...... Error!


Approval of benefits to directors of public companies ....................... Error! Bookmark not defined.

Duties in relation to corporate groups ................................................ Error! Bookmark not defined.

REMEDIES FOR BREACH OF DIRECTORS DUTIES .................................. Error! Bookmark not defined.

General Law ......................................................................................... Error! Bookmark not defined.

Civil and Criminal penalties for contravention .................................... Error! Bookmark not defined.

Exoneration and relief from liability for breach of duty ...................... Error! Bookmark not defined.

TOPIC 8: MEETINGS & RESOLUTIONS – MAJORITY RULE AND MINORITY PROTECTION ................ Error!


Types of Meetings ................................................................................ Error! Bookmark not defined.

Who may convene a general meeting? ............................................... Error! Bookmark not defined.

Board of directors ................................................................................ Error! Bookmark not defined.

Individual Director ............................................................................... Error! Bookmark not defined.

The Court ............................................................................................. Error! Bookmark not defined.

Members of the company.................................................................... Error! Bookmark not defined.

Humes Ltd v Unity APA Ltd .............................................................. Error! Bookmark not defined.

National Road & Motorists’ Association v Parker ............................ Error! Bookmark not defined.

Postponement or adjournment of meetings ....................................... Error! Bookmark not defined.

Notice of a meeting.............................................................................. Error! Bookmark not defined.

Statutory validation of PROCEDURAL irregularities in meetings ......... Error! Bookmark not defined.

Australian Hydrocarbons NL v Green ............................................... Error! Bookmark not defined.

Scullion v Family Planning Association of Queensland .................... Error! Bookmark not defined.

Bell Resources Ltd v Turnbridge Pty Ltd........................................... Error! Bookmark not defined.

Resolutions – Ordinary and Special Resolutions .................................. Error! Bookmark not defined.

Majority Rule and Minority Protection ................................................ Error! Bookmark not defined.

Foss v Harbottle ( ............................................................................. Error! Bookmark not defined.

Macdougall v Gardiner ..................................................................... Error! Bookmark not defined.

Pavlides v Jensen .............................................................................. Error! Bookmark not defined.

Exceptions to the rule in Foss v Harbottle ........................................... Error! Bookmark not defined.

Fraud on the minority – minority oppression ...................................... Error! Bookmark not defined.

Daniels v Daniels [ ............................................................................ Error! Bookmark not defined.

Allen v Gold Reefs of West Africa Ltd .............................................. Error! Bookmark not defined.

Gambotto v WCP Ltd ........................................................................ Error! Bookmark not defined.

Enforcement of members’ personal rights .......................................... Error! Bookmark not defined.

Hickman v Kent or Romney Marsh Sheep Breeders Association ..... Error! Bookmark not defined.

Eley v Positive Government Security Life Assurance Co Ltd ............ Error! Bookmark not defined.

Altering the class rights of members – statutory constraints .............. Error! Bookmark not defined.

STATUTORY REMEDIES OF MINORITY MEMBERS ................................ Error! Bookmark not defined.

Derivative Actions ................................................................................ Error! Bookmark not defined.

Swansson v RA Pratt Properties Pty Ltd (2002 ................................ Error! Bookmark not defined.

Minority Oppression ............................................................................ Error! Bookmark not defined.

Examples of unfair/oppressive conducts ............................................. Error! Bookmark not defined.

Re Spargos Mining NL ...................................................................... Error! Bookmark not defined.

Re R Harmer ..................................................................................... Error! Bookmark not defined.

Director misconduct............................................................................. Error! Bookmark not defined.

Jenkins v Enterprise Gold Mines NL ................................................. Error! Bookmark not defined.

Ebrahimi v Westbourne Galleries .................................................... Error! Bookmark not defined.

Hogg v Dymock ................................................................................ Error! Bookmark not defined.

Kotovich Constructions Pty Ltd v Wallington ................................... Error! Bookmark not defined.

Stapp v Surge Holdings Pty Ltd ........................................................ Error! Bookmark not defined.

Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd & Ors ............................. Error! Bookmark not defined.

GSF Management Services Pty Ltd v Ground & Foundation Supports Pty Ltd ..... Error! Bookmark

not defined.

Campbell v Backoffice Investments Pty Ltd ..................................... Error! Bookmark not defined.

Winding up ........................................................................................... Error! Bookmark not defined.

Statutory injunction ............................................................................. Error! Bookmark not defined.

Other remedies .................................................................................... Error! Bookmark not defined.

TOPIC 9: FINANCIAL REPORTING AND AUDIT REQUIREMENTS ............... Error! Bookmark not defined.

Financial Records ................................................................................. Error! Bookmark not defined.

Statutory requirement to keep financial records ................................ Error! Bookmark not defined.

Annual financial reports ....................................................................... Error! Bookmark not defined.

Manner of keeping financial records ................................................... Error! Bookmark not defined.

Kenna & Brown Pty Ltd v Kenna ...................................................... Error! Bookmark not defined.

Van Reesema v Flavel ....................................................................... Error! Bookmark not defined.

Access to Financial Records ................................................................. Error! Bookmark not defined.

Members .............................................................................................. Error! Bookmark not defined.

Auditors and receivers ......................................................................... Error! Bookmark not defined.

ASIC ...................................................................................................... Error! Bookmark not defined.

Obligation to prepare annual financial report ..................................... Error! Bookmark not defined.

Contents of a financial report for a financial year ............................... Error! Bookmark not defined.

Australian Securities and Investments Commission v Healey ......... Error! Bookmark not defined.

True and Fair View ............................................................................... Error! Bookmark not defined.

CAC v Barton .................................................................................... Error! Bookmark not defined.

Odeon Associated Theatres Ltd v Jones........................................... Error! Bookmark not defined.

Audit Requirements ............................................................................. Error! Bookmark not defined.

Functions of an auditor ........................................................................ Error! Bookmark not defined.

Fomento (Sterling Area) v Selsdon Fountain Pen ............................ Error! Bookmark not defined.

Appointment of an Auditor .................................................................. Error! Bookmark not defined.

Qualifications for appointment ............................................................ Error! Bookmark not defined.

Auditor’s duties to the company ............................................................. Error! Bookmark not defined.

Duty to report to members .................................................................. Error! Bookmark not defined.

Duty to report to ASIC .......................................................................... Error! Bookmark not defined.

Duty to carry out an audit .................................................................... Error! Bookmark not defined.

Pacific Acceptance Corp Ltd v Forsyth ............................................. Error! Bookmark not defined.

Duty to detect and report irregularities .............................................. Error! Bookmark not defined.


AWA Ltd v Daniels ............................................................................ Error! Bookmark not defined.

Duty to be independent ....................................................................... Error! Bookmark not defined.

Prescribed conflict of interest situations ............................................. Error! Bookmark not defined.

Retiring partners becoming officers during an audit ........................... Error! Bookmark not defined.

Auditor independence declaration ...................................................... Error! Bookmark not defined.

Auditor Rotation requirements ........................................................... Error! Bookmark not defined.

ASIC relief powers ................................................................................ Error! Bookmark not defined.

Re Transplanters (Holding Co) Ltd ................................................... Error! Bookmark not defined.

Duty to exercise reasonable care and skill ........................................... Error! Bookmark not defined.

Re Kingston Cotton Mills .................................................................. Error! Bookmark not defined.

Re Thomas Gerrard & Sons Ltd ........................................................ Error! Bookmark not defined.

Standard of care and skill ..................................................................... Error! Bookmark not defined.

Pacific Acceptance Corp Ltd v Forsyth ............................................. Error! Bookmark not defined.

Daniels v Anderson; Hooke v Daniels; Daniels v AWA Ltd ............... Error! Bookmark not defined.

Arthur Young & Co v WA Chip & Pulp Co Pty Ltd ............................. Error! Bookmark not defined.

Segenhoe Ltd v Akins ....................................................................... Error! Bookmark not defined.

Internal control systems ...................................................................... Error! Bookmark not defined.

Causation ............................................................................................. Error! Bookmark not defined.

Daniels v Anderson; Hooke v Daniels; Daniels v AWA Ltd ............... Error! Bookmark not defined.

Other aspects of Auditors liability ....................................................... Error! Bookmark not defined.

Indemnification from liability .............................................................. Error! Bookmark not defined.

Contributory Negligence ...................................................................... Error! Bookmark not defined.


Auditor’s duty to third parties – liability of auditors to individual shareholders and third parties


Chandler v Crane, Christmas & Co ................................................... Error! Bookmark not defined.

Hedley Byrne Co Ltd v Heller & Partners ......................................... Error! Bookmark not defined.

Shaddock & Associates Pty Ltd v Parramatta City Council .............. Error! Bookmark not defined.

Scott Group Ltd v McFarlane ........................................................... Error! Bookmark not defined.

Caparo Industries Plc v Dickman ...................................................... Error! Bookmark not defined.

Recent Australian Decisions ................................................................. Error! Bookmark not defined.

R Lowe Lippmann Figdor & Frank v AGC (Advances) Ltd ................. Error! Bookmark not defined.

Columbia Coffee & Tea Pty Ltd v Churchill t/as Nelson Parkhill ...... Error! Bookmark not defined.

Esanda Finance Corp Ltd v Peat Marwick Hungerfords ................... Error! Bookmark not defined.

Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd... Error! Bookmark not

defined.

Auditors prospectus liability ................................................................ Error! Bookmark not defined.

Proportionate Liability of Auditors ...................................................... Error! Bookmark not defined.

TOPIC 10 – COMPANIES IN DISTRESS – External Administration............. Error! Bookmark not defined.

ASIC Investigations ............................................................................... Error! Bookmark not defined.

ASIC Investigations ............................................................................... Error! Bookmark not defined.

Information gathering by ASIC ............................................................. Error! Bookmark not defined.

Bell v ASC .......................................................................................... Error! Bookmark not defined.

Use of information obtained during investigation .............................. Error! Bookmark not defined.

Review of ASIC decisions by regulators ............................................... Error! Bookmark not defined.

John David Rich v ASIC ..................................................................... Error! Bookmark not defined.

Receivership (ss 416-434C) .................................................................. Error! Bookmark not defined.

Meaning of a receiver .......................................................................... Error! Bookmark not defined.

Re Manchester & Milford Railway Co .............................................. Error! Bookmark not defined.

Who may be appointed as a receiver? ................................................ Error! Bookmark not defined.

Appointment of receivers .................................................................... Error! Bookmark not defined.

Bond Brewing Holdings Ltd v National Australia Bank Ltd .............. Error! Bookmark not defined.

Privately appointed receivers .............................................................. Error! Bookmark not defined.

Duffy v Super Centre Development Corp Ltd .................................. Error! Bookmark not defined.

Re North City Developments Pty Ltd; Ex Parte Walker .................... Error! Bookmark not defined.

Effect of appointment of a receiver ..................................................... Error! Bookmark not defined.

Deangrove Pty Ltd v Commonwealth Bank of Australia [ ................ Error! Bookmark not defined.

Powers of a Receiver ............................................................................ Error! Bookmark not defined.

Duties of Receiver and manager .......................................................... Error! Bookmark not defined.

Expo International Pty Ltd v Chant .................................................. Error! Bookmark not defined.

Example: Receivers exercising power of sale (s420A) ......................... Error! Bookmark not defined.

Forsyth v Blundell ............................................................................. Error! Bookmark not defined.

Duty for priority debts ......................................................................... Error! Bookmark not defined.

Duty to report breaches ....................................................................... Error! Bookmark not defined.

Liability of Receivers to third parties ................................................... Error! Bookmark not defined.

Termination of receivership ................................................................. Error! Bookmark not defined.

Voluntary Administration (Part 5.3A – ss 436A, 436B, 436C, 437A) .... Error! Bookmark not defined.

Who may be an administrator ............................................................. Error! Bookmark not defined.

Independence ...................................................................................... Error! Bookmark not defined.

Re Monarch Gold Mining Co Ltd ...................................................... Error! Bookmark not defined.

Investigation of company..................................................................... Error! Bookmark not defined.

Powers of the Administrator ................................................................ Error! Bookmark not defined.

Suspension of rights of claimants against the company ...................... Error! Bookmark not defined.

Exceptions ............................................................................................ Error! Bookmark not defined.

Administrators liabilities ...................................................................... Error! Bookmark not defined.

Re Heesh .......................................................................................... Error! Bookmark not defined.

Administrators Indemnity .................................................................... Error! Bookmark not defined.

Removal and replacement of administrators ...................................... Error! Bookmark not defined.

Meetings of creditors ........................................................................... Error! Bookmark not defined.

Administration under a Deed of Company Arrangement .................... Error! Bookmark not defined.

Powers of the court ............................................................................. Error! Bookmark not defined.

Australasian Memory Pty Ltd v ........................................................ Error! Bookmark not defined.

Schemes of Arrangement and Reconstructions (Pt 5.1 CA; ss 411 and 415) ..... Error! Bookmark not

defined.

Types of Schemes ................................................................................. Error! Bookmark not defined.

Appointment of a scheme administrator ............................................ Error! Bookmark not defined.

Procedures for adoption and approval of a scheme ........................... Error! Bookmark not defined.

TOPIC 11 – TAKEOVERS & REGULATION OF SECURITIES & FINANCIAL SERVICES .. Error! Bookmark not

defined.

Takeovers (Ch 6 CA) ............................................................................. Error! Bookmark not defined.

General Prohibition for takeovers ....................................................... Error! Bookmark not defined.

Exceptions to the General Prohibition ................................................. Error! Bookmark not defined.

‘Relevant Interest’ ................................................................................ Error! Bookmark not defined.

North Sydney Brick and Tile Co Ltd v Darvall ................................... Error! Bookmark not defined.

Common directorships ......................................................................... Error! Bookmark not defined.

Clements Marshall Consolidated Ltd v ENT Ltd ............................... Error! Bookmark not defined.

Interposed Companies ......................................................................... Error! Bookmark not defined.

NCSC v Brierley Investments Ltd ...................................................... Error! Bookmark not defined.

Takeover procedure (Pt 6.5 CA) ........................................................... Error! Bookmark not defined.

Variation of offers ................................................................................ Error! Bookmark not defined.

Withdrawal of offers ............................................................................ Error! Bookmark not defined.

Escalation Clauses or Agreements ....................................................... Error! Bookmark not defined.

Collateral benefits ................................................................................ Error! Bookmark not defined.

Aberfoyle Ltd v Western Metals Ltd ................................................ Error! Bookmark not defined.

Compulsory Acquisition (Pt 6A.2 – 661A-665C) ................................... Error! Bookmark not defined.

Offences and Sanctions ........................................................................ Error! Bookmark not defined.

False and misleading statements ......................................................... Error! Bookmark not defined.

Re Pine Vale Investments ................................................................. Error! Bookmark not defined.

Misleading or deceptive conduct ......................................................... Error! Bookmark not defined.

Administrative Powers of the ASIC and Takeovers Panel .................... Error! Bookmark not defined.

Role of ASIC .......................................................................................... Error! Bookmark not defined.

ASIC v DB Management Pty Ltd ....................................................... Error! Bookmark not defined.

The Takeovers Panel ............................................................................ Error! Bookmark not defined.

Declaration of Unacceptable circumstances ....................................... Error! Bookmark not defined.

Re Pinnacle VRB Ltd (No 5) .............................................................. Error! Bookmark not defined.

Role of the Court .................................................................................. Error! Bookmark not defined.

REGULATION OF THE FINANCIAL (SECURITIES) MARKET ..................... Error! Bookmark not defined.

Regulation of Market Offences – Market Misconduct ........................ Error! Bookmark not defined.

National Exchange Pty Ltd v ASIC ..................................................... Error! Bookmark not defined.

Insider Trading ..................................................................................... Error! Bookmark not defined.

R v Hannes ........................................................................................ Error! Bookmark not defined.

Information “generally available” ........................................................ Error! Bookmark not defined.

R v Firns ............................................................................................ Error! Bookmark not defined.

R v Rivkin .......................................................................................... Error! Bookmark not defined.

Material effect on price ....................................................................... Error! Bookmark not defined.

Possession of inside information ......................................................... Error! Bookmark not defined.

Hannes v DPP ................................................................................... Error! Bookmark not defined.

Exceptions/defences to Insider Trading Provisions ............................. Error! Bookmark not defined.

Penalties for breach of s 1043A/remedies for those suffering damage as a result of an individual’s

breach .................................................................................................. Error! Bookmark not defined.

CRIMINAL ............................................................................................. Error! Bookmark not defined.

CIVIL ..................................................................................................... Error! Bookmark not defined.

Role of ASIC .......................................................................................... Error! Bookmark not defined.

TOPIC 12 – WINDING UP OF A COMPANY (Part 5.4 CA) .......................... Error! Bookmark not defined.

Compulsory winding up in insolvency by the court (s 459A) ............... Error! Bookmark not defined.

Prospective and contingent creditors .................................................. Error! Bookmark not defined.

Community Pty Ltd v Engwirda Construction Co ............................. Error! Bookmark not defined.

Roy Morgan Research Centre Pty Ltd v Wilson Market Research Pty Ltd ...... Error! Bookmark not

defined.

Before the court can order winding up in insolvency it must appear that the company is insolvent.


What is insolvency? ............................................................................. Error! Bookmark not defined.

Sandell v Porter ................................................................................ Error! Bookmark not defined.

Downey v Aira Pty Ltd ...................................................................... Error! Bookmark not defined.

Statutory demand ................................................................................ Error! Bookmark not defined.

Compulsory winding up for grounds other than insolvency................ Error! Bookmark not defined.

Re William Brooks & Co Ltd ............................................................. Error! Bookmark not defined.

Ebrahimi v Westbourne Galleries Ltd .............................................. Error! Bookmark not defined.

Re Dalkeith Investments Pty Ltd ...................................................... Error! Bookmark not defined.

Voluntary Winding up .......................................................................... Error! Bookmark not defined.

Voluntary Winding up by members ..................................................... Error! Bookmark not defined.

Voluntary Winding up by creditors ...................................................... Error! Bookmark not defined.

Liquidators ........................................................................................... Error! Bookmark not defined.

Who may be appointed as a liquidator? .............................................. Error! Bookmark not defined.

Powers of the liquidator ...................................................................... Error! Bookmark not defined.

Recovery of company funds for voidable transactions (Part 5.7B Div 2 – ss 588FA-588FJ) ....... Error!


Unfair preferences ............................................................................... Error! Bookmark not defined.

Uncommercial transactions ................................................................. Error! Bookmark not defined.

Unfair loans .......................................................................................... Error! Bookmark not defined.

Unreasonable director-related transactions ....................................... Error! Bookmark not defined.

Duties of Liquidators ............................................................................ Error! Bookmark not defined.

Effect of winding up ............................................................................. Error! Bookmark not defined.

Proof of Debts – payment of secured creditors in winding up ............ Error! Bookmark not defined.

Priority on payments of unsecured debts............................................ Error! Bookmark not defined.

Payment of Member debts .................................................................. Error! Bookmark not defined.

Houldsworth v City of Glasgow Bank ............................................... Error! Bookmark not defined.

Sons of Gwalia Ltd v Margaretic ...................................................... Error! Bookmark not defined.

Division of surplus assets ..................................................................... Error! Bookmark not defined.

De-registration ..................................................................................... Error! Bookmark not defined.

TOPIC 1 – THE LAW OF PARTNERSHIP

DEFINITION OF PARTNERSHIP

A partnership is one of the oldest forms of unincorporated business association.

The definition of ‘partnership’ can be found in Partnership Act 1892 (NSW) s1(1) o Partnership is the relation which exists between persons carrying on a business in

common with a view of profit and includes an incorporated limited partnership.

The ‘view of profit’ is a distinguishing feature of a partnership that helps to differentiate a partnership from other unincorporated associations e.g. not for profit associations.

There are three key elements of a partnership o Carrying on a business o In common o With a view of profit

There are three core elements of a partnership that assist in distinguishing it from other business associations such as a joint venture (which is an association of persons for particular commercial endeavours (e.g. development of land) with a view of mutual profit no business in common) and a unit trust (which is a trust in which the beneficial interest in the trust property is divided in the trust instrument into fractions which are typically offered to the public). These elements are the carrying on of a business, in common, with a view of profit.

‘Carrying on a business’

Turnbull v Ah Mouy (1871) 2 AJR 40

Facts

A & T entered into a contract for the sale of rice which stated that A was to have ¼ interest in T’s remaining stocks of rice and A was to receive a 2.5% commission on all rise sold.

The agreement was signed by both A and T and T lost several 000 pounds of rice and A sued for the price of the rice that was lost.

It was argued that there was no right to sue as they were in a partnership (NOTE: IN A PARTNERSHIP ALL PARTNERS MUST SHARE THE PROFITS AND LOSSES UNLESS OTHERWISE AGREED)

Decision

It had previously been held in other courts that a single venture could not constitute a partnership because partnership required consistent acts

the majority found that a partnership did not exist the agreement was one of sale, there was no business in common with a view of profit but rather a single venture and a single venture does not constitute the carrying on of a business.

Ballantyne v Raphael (1889) 15 VLR 538

Facts

Court had to consider whether or not a syndicate comprising of more than 20 members formed for the single purposes of purchasing a block of land and subdividing it and reselling for profit was a partnership.

Decision

It was held that the syndicate was not an association for the purpose of carrying on any business since there was not a ‘series of acts’ being done. The syndicate was a single venture and there was a need for continuity in acts and thus no partnership existed.

Smith v Anderson (1880) 15 Ch D 247

Facts

unit trust (a trust in which the beneficial interest in the trust property is divided in the trust instrument into fractions which are typically offered to the public) which had more than 20 members who subscribed to purchase shares in a number of companies. The shares were held by trustees and income from the shares was used to pay interest to subscribers and the balance was used to redeem shares from members.

On completion of redemption of the shares the balance was shared among the members. Decision

It was held that no partnership existed

There was only a single venture – the subscribers simply put money in to purchase the shares and then awaited interest without really participating in managing the venture

held that in order for a partnership to be found there must be a series of acts to constitute the carrying on of a business

Canny Gabriel Castle Jackson Advertising v Volume Sales Pty Ltd (1974) 131 CLR 321

Facts

This case represents a contrast to Smith v Anderson which found that a partnership cannot be formed where the association is for one act.

The case concerned an agreement, joint venture, between a promoter and financer (Volume Sales) to operate a tour involving two singers (one was Elton John)

It was agreed that the profit was to be shared equally and if the venture failed then the loan would be repaid to the financer and an equitable charge was granted over the box office receipt to Canny Gabriel. The agreement also contained an arbitration clause for the settlement of disputes.

Decision

It was held that a partnership did exist.

The joint venture was established with a view of profit to be shared and the agreement contained concern for each party just like partners – there were clauses pertaining to the sharing of profits and the settlement of disputes the parties were acting like partners.

NOTE: after Canny Gabriel it is now established that a single venture can constitute a

partnership and emphasis is not necessarily placed on continuity or continuation of acts it

depends on the circumstances of each particular case.

The term joint venture is expressly contained in s32(b) of the Partnership Act which pertains

to the dissolution of partnerships the legislation expressly recognises that a single

venture can constitute a partnership.

Carrying on a business in common’

The partners must not be seen to be each carrying on their own individual business for

mutual benefit. Carrying on a business in common refers to the fact that the alleged

business of partnership must have been carried out by or on behalf of all parties.

Keith Spicer Ltd v Mansell [1970] 1 All ER 462

Facts

A & B were in the process of setting out a restaurant business. Prior to incorporation A ordered products from a third party P and the goods were not paid for. P sued B arguing that B was the partner of A.

Decision

It was held that there was no business being carried out with a view of profit because the business was not open at that stage, it was merely being set up.

Therefore there was no partnership as there was no business in common.

Khan v Miah [2000] 1 WLR 2123

Facts

Contrast to Keith Spicer Ltd

The parties agreed to a joint venture. According to the agreement the parties were to find, acquire and fit out premises as a restaurant and run the business with a view of profit. One partner left before the restaurant opened.

Decision

Tthe agreement between the parties clearly stated what was required in order to run the business with a view of profit.

the HOL held that the rule was that an individual who agreed to carry on business activity in a joint venture did not become a partner until they actually embarked on the activity in question

The mutual rights and obligations of partners did not depend on whether the partnership broke up on the day before or the day after opening but rather in whether It was before or after they embarked on the activity stated in the agreement.

The activities of setting up the restaurant were expressly part of the agreement and thus a partnership existed.

Kanf-Kem v Paine [2004] NSWSC 3

Facts

P ran 2 restaurants and dealt with all financial matters regarding the restaurants including the proceeds. His de-facto partner D was involved as an ‘investor’ in the restaurant and not a proprietor.

P broke up with D and D sued P for the alleged amount invested in the restaurant. Decision

Barrett J held that there was no mutuality, neither party acted in the interests of the business at the agent of the others. The rights and obligations arising from the business were not mutual, they were separate and several.

Even though each party played a role in the totality both the P and D had an interest in seeing the business succeed but the interest was not an interest in common the D had an investment interest to protect. Therefore there was no partnership and D was entitled to sue.

A ‘view of profit’

In order to be a partnership the business must be run with a view of profit. There are several

necessary requirements

o The intention of the parties

o Whether there is sharing of the profits; and

o Whether there is an agency relationship between the parties.

These requirements are confirmed in the statutory rules for determining the existence of a

partnership

Rule 1 – s2(1)(1)

Joint tenancy, tenancy in common, joint property, or part ownership does not of itself create a partnership as to anything so held or owned, whether the tenants or owners do or do not share any profits made by the use thereof.

Davis v Davis [1894] CH 393

Facts

Father left his business to his sons who continued to run the business and derived equal shares as pocket money from the profit of the business

Decision

Was held that a partnership relationship did exist because there was mutual interest in carrying on the business in common.

Rule 2 – s2(1)(2)

The sharing of gross returns does not of itself create a partnership, whether the persons sharing such returns have or have not a joint or common right or interest in any property from which or from the use of which the returns are derived.

LAW251 Corporations Law - s3.studentvip.com.au · ‘Carrying on a business’ ... Executors and...

Documents

Transcript of LAW251 Corporations Law - s3.studentvip.com.au · ‘Carrying on a business’ ... Executors and...