Page 5 of 5 QUESTION ONE (COMPANY LAW)-(TOTAL 15 Marks) (a) Johnny and Sam are currently partners in a partnership. They have read the case of Salomon v A Salomon & Co Ltd [1896] UKHL 1 (hereafter...

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Page 5 of 5 QUESTION ONE (COMPANY LAW)-(TOTAL 15 Marks) (a) Johnny and Sam are currently partners in a partnership. They have read the case of Salomon v A Salomon & Co Ltd [1896] UKHL 1 (hereafter Salomon) with great interest and now think perhaps a company is a better structure for them. Advise them on the significance of Salomon’s case as well as on the advantages and disadvantages of a company structure. (5 marks) (b) Tom is intending to start a business providing childcare services in an office complex for busy parents working in businesses in the complex. He has discovered through his research that there are various types of companies that can be set up. Advise him on the characteristics of each of these types of companies and advise him on the specific one you would recommend him to use in the first few years while his business grows. (5 marks) (c) Vincent is a minority member in Top Shotz Pty Ltd who has discovered that the directors, Larry and Dunton who are in addition majority shareholders, have been diverting company profits to their own personal company, ABC Rockz Pty Ltd. Larry and Dunton have advised Vincent that he is unable to do anything to address this unfair situation. Advise him as to any appropriate members’ remedies that can assist him in the circumstances. (5 marks) Page 2 of 5 2 QUESTION TWO (CONTRACT LAW) TOTAL 15 Marks David owns a catering business that operates 12 hours a day making special string hoppers (an indian delicacy). On the premises, is a special machine which mixes all the ingredients to make the string hoppers. In the week before New Year’s, which is when he tends to get the highest number of orders, the machine breaks down. David informs the manufacturer of the machine, Quality Machinz Pty Ltd, who sends a carrier service to pick up the machine for repairs. David informs the manufacturer that it was very important that the machine be returned within the next four days this was the only machine he had to keep up with orders requiring large scale production. Unfortunately, as the manufacturer was short on staff in the lead up to New Year’s, it was unable to start on the repairs until three days after it had picked up the machine. The manufacturer rings David and informs him that the work will only be completed in a week’s time. David attempted to use his backup machine but found that he could not keep up with his orders. He then called up Premium Rentalz Pty Ltd and hired out another machine at an increased cost (due to it being the holiday period). Despite using the two machines, both machines were of a lower capacity and hence had lower production efficiencies than the one that was being repaired and he therefore suffered significant loss of sales during the New Year period. In addition, he has lost out on a very profitable contract to cater for a wedding hosting 500 guests. He had not informed Quality Machinz Pty Ltd about this contract at the time of entry into the contract. Please answer the following questions using CONTRACT LAW: (a) Advise David, based on the facts above, whether there is a breach of contract here and whether the losses can be claimable against Quality Machinz Pty Ltd in damages, with reference to concepts such as remoteness and mitigation. (10 marks) (b) David further recalls that prior to the purchase of the special machine from Quality Machinz Pty Ltd, a sales representative had made various promises about the functionality and efficiencies of the machine. These statements all turned out to be untrue, although none were in the written contract. Advise him what arguments he can raise under contract law. (5 marks) Page 3 of 5 3 QUESTION THREE (CONSUMER LAW) TOTAL 20 Marks Dickson has set up a restaurant. He has leased a suitable location and begins to fit out the premises. He purchases $100,000 worth of carpets from Carpet Galore Pty Ltd. The carpets are described as ‘premium and industrial quality’, ‘designed for long lasting use’ and ‘slip-resistant’. Dickson opens the business and is regularly fully-booked, with up to 200 customers each weekend. A few months after the business is opened, Dickson notices that many of the carpets are worn out or damaged, resulting from heavy foot traffic. He contacts an employee of Carpet Galore Pty Ltd named Ronald, and demands that the carpets be replaced or that he get a refund. Ronald refuses, saying that the damage is a result of wear and tear and points out a clause in the contract Dickson has signed that states: “Carpet Galore Pty Ltd assumes no responsibility or liability regarding the quality or the fitness of the supplied mats for any purpose. No refunds, exchange or compensation given.The Australian Consumer Law (ACL) is hereby excluded.” On the premises as well, is a bakery selling pastries to patrons of the restaurant. The pastries have been described as ‘freshly made and organic’, although in reality, the dough used for the pastries was made in Malaysia and shipped to Australia only to be baked almost one week after the dough is made. The café is aware that the dough is made in Malaysia using non-organic ingredients but continue to use the ‘organic’ description on its menus and packaging. Further, the café claims that these pastries have a tick on the packaging with a statement next to it stating that they have been certified five stars by the ‘Heart Foundation’ as being healthy due to having low fat and that they are 100% nut-free. In fact, the ingredients have a high fat content, are not nut-free and the tick turns out to be one invented by the bakery and not one used by the Heart Foundation. A number of customers have now discovered the truth of the nature of the pastries being sold. Please answer the questions below, using the AUSTRALIAN CONSUMER LAW (ACL). Please do NOT use contract law to answer this question. a) Dickson’s restaurant is a consumer under the ACL. Advise Dickson as to whether any of the consumer guarantees could assist him. (7 marks) b) Advise Dickson as to what remedies are available to him under the ACL. (4 marks) Page 4 of 5 4 c) Explain if the above clause in the contract is legally valid under the ACL. Refer to relevant law in your answer. (3 marks) d) Explain if Dickson has been subjected to any type of ‘Prohibited Conduct’ as per the ACL and what remedies/penalties might apply. (6 marks) 5
Answered 1 days AfterMar 18, 2021

Answer To: Page 5 of 5 QUESTION ONE (COMPANY LAW)-(TOTAL 15 Marks) (a) Johnny and Sam are currently partners...

Tanmoy answered on Mar 19 2021
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QUESTION ONE (COMPANYLAW) -    (TOTAL15 Marks)
(a) Johnny and Sam are currently partners in a partnership. They have read the case of Salomon v A Salomon & Co Ltd [1896] UKHL 1 (here after Salomon) with great interest and now think perhaps a company is a better structure for them. Advise them on the significance of Salomon’s case as well as on the advantages and disadvantages of a company structure. (5marks)
    In a partnership firm there are various risks associated with the business operations. The risks and liabilities have to be borne by all the partners in the partnership firm. Therefore, each of the partners has the obligation to the debts and liabilities regardless of the debt incurred by the organization or the individual partners. The
individual partners in case of a partnership are also exposed to the greatest risk of personal liabilities which also includes all of their personal assets to be borne in case the partnership fails (Legal Nature.com). Therefore, in case of Johnny and Sam who are operating a partnership firm has to bear all the liabilities which may reach also to their personal assets in case the partnership firm becomes insolvent or gets winded up.
If we discuss about the case of Solomon V Solomon Co Ltd (1897) AC 22, it was discovered that Solomon was a boot maker and a sole proprietor. He had debts from his creditors while operating the sole proprietorship business. Later he sold his business to a company known as Solomon Co Ltd. This company consisted of himself and his family who were the members or shareholders of the company. The transfer of the company from proprietorship also accompanied with a floating charge which had a security against it. The company failed and went to liquidation. It was Solomon who was a debt holder and received his claims prior to the claims of the creditors. While due to bankruptcy, the company was unable to pay the creditors. The creditors filed suit against Solomon which the court thoroughly rejected and stated that Solomon & Co Ltd is a distinct and separate legal entity from Solomon. Therefore no charges can be held against Solomon. Thus there were various benefits for Johnny and Sam if they convert their partnership firm in a company. They will be the shareholders of the company and will be separate from their company. Thus, ensuring that the owners of the company pays upto the amount of shares held by them and not exceeding beyond it. It will be the company who may be sued or can sue against any other companies. The lifespan of the company is unlimited as there is perpetual legal succession until it is winded up. The directors will not be liable for the company’s debt as they are the company agents. The disadvantages will be u/s 588G there will be personal liabilities against the director who will trade while he is insolvent to repay the debts of the company [Re Darby (1911) KB 95].
(b) Tom is intending to start a business providing childcare services in an office complex for busy parents working in businesses in the complex. He has discovered through his research that there are various types of companies that can be set up. Advise him on the characteristics of each of these types of companies and advise him on the specific one you would recommend him to use in the first few years while his business grows. (5marks)
There are various types of companies that can be initiated by Tom in order to grow his child care business in the first few years. But, Tom is operating the child care services from his home and delivering the services to the busy working parents of the same complex. Therefore, Tom should register himself as a sole proprietorship business. Below are the features of starting a sole proprietorship business.
Proprietary business: The proprietary business will be treated as a private limited company. In this case the liability will be unlimited to the amount of share capital held by the proprietor. This will also protect the sole proprietor against any types of lawsuits. The main advantage of starting a sole proprietorship company by Tom will be its simplicity to start. The cost of expenses is also very low as there are no additional registration charges like a company. Secondly, Tom will have full control over the administration and management of the company as well as on its earnings. The major disadvantage of the sole proprietorship business will be higher taxes to be borne by Tom as well as the debt and losses of the proprietorship will be borne by Tom himself (Himama, 2013).
Limited Liability Company: Here the sole proprietor Tom can agree with other owners to combine their businesses and pay taxes individually to initiate their child care business. If the proprietorship business is initiated as a limited liability company from the home then the portion of the business will not cover the home, furniture and equipments. Also, it will also not protect Tom against any lawsuit filed by the child’s parents due to any major injury caused to the child. On the other hand the only advantage of a limited liability company is that the owners will not be personally held liable for any losses or damages caused to the company. Also, the investment for development of the child care services will be equally borne by the owners of the LLC (Wonderschool, 2017).
(c) Vincent is a minority member in Top Shotz Pty Ltd who has discovered that the directors, Larry and Dunton who are in addition majority shareholders, have been diverting company profits to their own personal company, ABC Rockz Pty Ltd. Larry and Dunton have advised Vincent that he is unable to do anything to address this unfair situation. Advise him as to any appropriate members’ remedies that can assist him in the circumstances. (5marks)
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    This case is similar to the suit filed in the famous case law of Cook V Deeks (1916) UKPC 10 where it was found that the majority directors who were also the directors of the Toronto Construction Company in order to take the contract of Canadian Pacific Railway Company in their own name wanted to oust the minority shareholder of Toronto Construction Company as well as the fourth director. The three majority shareholders held a quarter of the company’s shares and passed a resolution by declaring that there is no interest of Toronto Construction Company in building a line at the Guelph junction and Hamilton branch for Canadian Pacific Railway. Mr. Cook was the fourth minority shareholder and director of Toronto Construction Company and filed a suit against the first three majority shareholder and directors that the contract between Toronto Construction and Canadian Pacific Railways was not for any personal purpose and was a contract between the two companies. He also stated that the majority directors misused their powers and used the voting rights to make the contract in their own name. It was held by the Privy Council that the three majority directors breached the duty of loyalty and the ratification of the shareholders was a fraudulent practice by holding Mr. Cook as a minority shareholder and unacceptable. Thus, the profits made to the contractual opportunities were held on the trust of the Toronto Construction Company. Similarly, in the above case of Top Shotz Pty Ltd where Vincent is a minority shareholders and is unable to protest against the unfair trade practices by majority shareholder and directors Larry and Dunton who diverted the funds of Top Shotz Pty to a personal company ABC Rockz Pty Ltd, must file a suit against the two directors and take appropriate actions against them. This is the appropriate remedy.
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QUESTION TWO (CONTRACTLAW)                    TOTAL15 Marks
David owns a catering...
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