Question 1 [10 marks]
Kruger is Heavy Machinery Sales Manager of JCI Ltd. He has frequently negotiated and signed contracts on behalf of JCI Ltd with Oppenheimer, Managing Director of Anglo-American Corporation Ltd. Kruger and Oppenheimer have been in negotiations over the supply of an ore smelter by JCI to Anglo-American. On Friday 5 July at 10.00 am Kruger phones Oppenheimer and says “We will offer to sell you the ore smelter for $ 3.5 million. I’ll be at your office at 3pm to sign a contract.”
At 1 pm, Oppenheimer is having lunch at the Rand Club with Rhodes, who is another executive of JCI. During the lunch Rhodes says “Things are awful at JCI. Kruger has been making too many mistakes this year, his department hasn’t been trading profitably, and I heard he was going to get a nasty surprise at our lunchtime Board meeting. Frankly, I can’t see him surviving”. Oppenheimer goes back to his office and mentions the lunchtime conversation to Jameson, a fellow Anglo-American executive, saying that he (Oppenheimer) thinks that Kruger may have been ousted. Jameson says "Look, we're getting a good deal here, don't worry about what is going on at JCI". At 3pm Kruger arrives and signs the deal to sell the machinery to Anglo American for $ 3.5 million.
However on Monday the Financial News carries an article headed “JCI Heavy Machinery Sales Manager Fired at Board Meeting Last Friday”. Anglo American has tendered a cheque to JCI for $ 3.5 million, and has demanded delivery of the smelter, but JCI refuses to deliver it, saying that Kruger had no authority to sell the smelter because he had been fired at 1.30pm. Advise JCI as to their legal position, citing statutory and case law authority.
Question 2 [10 marks]
John, Paul and Ringo and George are musicians who operate out of a garage in Melbourne.They initially form a partnership, but then decide to incorporate, and register a company called New Beatles Pty Ltd of which John, Paul and Ringo own 30% each and George owns 10%.The business of the company is to play music, hold concerts and record CDs.All four brothers are also directors.Things go well for a year, but then disputes occur.Ringo comes to you and asks you advice in relation to the following:
Ringo has found out that a meeting of shareholders was held without giving notice to him and that at the meeting an ordinary resolution to change the company logo from a silver guitar to a red trumpet was agreed to by all his brothers.Ringo tells you that he objects to this step.
By another resolution – also agreed to by the other three brothers - the actual constitution of New Beatles Pty Ltd was changed so as to insert a provision which limits the company’s activities to Australia.Ringo tells you that he objects to this, as he believed the company should start touring overseas.
Ringo also discovered that over the past couple of years Paul has been giving his (Paul’s) girlfriend Sarah $ 500 per week from company funds, and that in total the company has suffered a loss of $ XXXXXXXXXXbecause of these payments.When Ringo raised this at a board meeting and proposed that the company’s lawyers be asked to initiate action against Paul and Sarah to recover the money, the other three directors voted against the proposal.
Finally, Ringo tells you that since he confronted his brothers about Paul’s conduct, they have begun holding board meetings without telling him (Ringo).
Advise Ringo as to what remedies he can obtain in relation to the above, citing legal authority. [You should assume, and therefore do not need to prove, that the payments by Paul to Sarah are a breach of the duty to act in the best interests of the company under s 181 of theCorporations Act 2001(Cth).]