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HI6027 Business and corporation law sample

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Contents

Part-1. 2

1) Has there been any liability of the Swimmingpool?. 2

2. Is there scope for swimming company to claim not to be liable?. 2

3. Evaluate the liability of Martin for his act to the company. 3

Part – 2. 5

Issue: 5

Rule: 5

Application. 6

Conclusion. 7

References. 8

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Part-1

1) Has there been any liability of the Swimmingpool?

Issue: Can Swimmingpool Company be held liable for the act of Martin?

Rule: The same can be seen from the eyes of Law of Tort which states that employer can very well he held liable for the act of its employees. As per the law of Tort, it has been defined as Vicarious Liability. The same can be explained – If employee does something that harms third part related to employer then it can be held liable for the same. Another principle which can govern decision comes from common law which is “qui facit per alium facit per se”.

Application: From the case we can see the company was benefitted from the actions of Martin as the money that Martin had earned, a chunk of it went to the company. Martin here was the employer of the company and this has been established already. Thus, there is relationship of subordinate for Martin to the company. Now, the actions of Martin have harmed customers thus it is duty of the company to keep a tab or develop internal processes or system that can provide check to such practices. Given, that customers met Martin as an employees of Swimmingpool there is Vicarious Liability and it can be held liable.

Conclusion: The contract that customer would have signed or the deal that customer would have made, would be in the name of Martin and Swimmingpool hence if there have been any breach the company can be held liable as per the law of Tort.

2. Is there scope for swimming company to claim not to be liable?

Issue: Is there scope for swimming company to claim not to be liable because of Martin?

Rules: This is the way to argue for the case 1. The same can be seen from the light of Civil Liability Act. This is an act of 2002. As per this law, section 5Q of the Civil Liability Act, there is vicarious liability for the employer.

Application: If we refer to the judgement of the case Lister v Hesley Hall Ltd as pronounced by Lord Clyde, he stated that meager presence of employee at the location doesn’t mean employer can be held liable for his crime. He stated that the presence doesn’t mean that employer has authorized employee to commit crime hence Swimmingpool Company cannot be held liable as they didn’t ask for misinformation from Martin.  

Conclusion: Referring to the previous case, we can say that Swimmingpool Company cannot be held liable for the crime of Martin.

3. Evaluate the liability of Martin for his act to the company.

Issues: As discussed earlier, Martin has committed crime and now we have to ascertain his liability. 

Rules: There is no defined law as to how much damage can be claimed by the employer from employees for the damages that he has done to the third party i.e. the customer. We have already established that there is Vicarious Liability for the employer. However, employer can claim damage depending on the extent of negligence by employee in performing the duty. 

Application:

There are many front for which Martin is liable and first of them is that he was providing misleading information to the customers. This falls under the negligence of the duty, further, he was indifferent to the construction of pools as can be seen from the fact that he didn’t do any follow up and the end result of pool was much different than what was promised. Further, there was fraud committed by him where he had taken the money from the customers but he didn’t deposit the same to the company’s account. Thus, the liability can be on both misleading as well as cheating account. His liability not only sits with company but also the customers. 

Now of these two accounts, he can be sued for the first one which is negligence as he didn’t perform his duty and due to his actions many of the customers had to suffer. He can be sued under the breach of contract. Crimes Act of 1990 has been another act under which he can be prosecuted for frauds (Michael 2005).

Conclusion: Thus, the liability can be set under the negligence and fraud. He can be held liable for the claims made by the customers as well as the money that he own and didn’t give to the company.

4. Has there been any breach of law in the act of Martin to set up his own business?

Issue: By launching his own business, has Martin committed any crime?

Rules: Martin was working with Swimmingpool Company as marketing executive. He was interacting with clients on behalf of the company and had been providing them with wrong information at the same time he was planning to launch his own business. When we see this legally then it is wrong to do so. He cannot work for a company at the same time start a company which is rival to the employer. His liability doesn’t end there. He had also taken money from customers on the behalf of the company and had never bothered to deposit them and had kept to himself. This is a fraud in the eyes of Criminal Law.

Application:

As per the law, we have a situation where an existing employee has started his own company which is in the same business. As per the employer and employee contract, as long as employee working with the employer, he cannot work on anything else which is other source of income as he is paid for skills by the employer. This is crime under the contract of Fidelity. Further, he was also siphoning off the money. This is crime under Crimes Act 1990. 

Conclusion: Thus, as per the contract of Fidelity as well as Crime Act of 1990, we can say that Martin is guilty.

Part – 2

Issue:

In this case, we are discussing the case of Borisda Builder Pty Ltd. There are five directors of the company – Mikkhail, Zvaid, Vesna, Sergey,and Iiych,. Here, first two are working directors and the last one is accountant. Third one is an MBA and engineer while the last one is accountant. The second last one is brother of the last one and has had medical history and doesn’t participate in the functioning or meetings of the board.

Issue – 1

Despite being the part of the board’s of Borsida, Vesna has been attending the board meeting of his brother’s design company and has been advising to the same. Recently Borsida has entered into the contract with the Doug the Designer and the same was managed by Borsida. The quote of the Doug Designer was lesser than rest of the quotes in fact it was lesser than the cost of the work.

Issue –II

The second issue here has been arisen from a situation where the accountant board member Iiiych has come up with an idea which was rejected by the board. He went with that idea to some other company and has become its board member and has been taking 10% of the commission from the sale.

Issue – III

The board has been allowing the company to trade recklessly despite financial trouble.

Rule:

The duties and role of the directors has been defined under the Corporate and Statutory law. These duties can primarily defined under section 180 (1), 181 (1), 182 (1), 183 (1), 191 (1).

These duties can be summarized as:

Care and diligence

As per this rule, the directors of the Borisda needs to act with care and diligence as any responsible person would exercise the same.

Duty of Act in good faith

This is the second duty where the directors of Borisda need to act in the best interest of the corporation and the same should be with proper purpose (Ford 1999).

Use of Position

As per this law, the director of the board of Borsida must not use their position to gain undue advantage for themselves or for someone else. There use of position should not be detrimental to the company.

Use of Information

This is another duty of the board as per which the director of the board of Borsida must not use the information that they have to gain undue advantage to themselves or others if it harms the company (Renard  2012).

Disclosure of interest

As per this rule, the director of the company if has personal material interest in a matter that is related to the company needs to provide notice for the same.

Apart from these there are several other duties of the directors and these include:

  1. Duty to avoid conflict of interest
  2. Duty to exercise power for proper purpose
  3. Duty to retain discretion
  4. Insolvent trading

Application

Thus, we can apply these rules to Borsida. Here, in case of Vesna she has been in breach of many duties namely care and diligence, conflict of interest, duty to act in good faith as well as use of information and position.

The reason for the same is that she has information of the contract. She had used this information to allow his brother’s company to benefit from the same. She was director of the company and she was leading this contract. She has used this information and passed on all the quotes to the Doug Designer and allowed them to quote the lowest price and get the contract. She has a conflict of interest here as she was attending and advising the board of the Doug Designer. She has misused and she has not acted in the best interest.

Now, we are going to look at the role of Zviad. He had used his power and position to their advantage. The reason for the same is that he has used the board seat to help his ailing brother. His brother had not ever read the books and shown any interest in the same. Thus, this decision was not in the best interest of the company. Thus, he is in the breach of duty to act in good faith and use of position (Farrar 2008)

The company has been in bad financial shape despite that all the directors has decided to pay dividend of 9c. Despite knowing the position this decision was not in the best interest of the company. Thus, board is in the violation of acting in the good faith.

Now, we are discussing the role of Iilych. He went with the offer to some other company and has asked for commission and board seat. He has violated many of his duties such as breach of the use of position and information. He had duty to avoid conflict of interest that he didn’t do (Tomasic 2002)

Conclusion

Here, at the end we can conclude that the board members and the breach is as below:

Vesna – Conflict of interest, care and diligence, use of information and position

Reason – She had benefitted the brother’s company by allowing them to quote lower price for a contract decided by her.

Zviad – Use of position, duty to act in good faith

Reason – he used his position to allow his brother to come to board despite he was not mentally prepared for the same and has not shown any interest in the same.

Iilych – duty in act in good faith, use of information

Reason – He went to other company with his plan for money and position

References

IBM, 2018, Summary of Australian Statutory & Common Law Directors’ Duties 2015, https://www.internationalbusinessmentors.com/summary-of-australian-statutory-common-law-directors-duties-2015/, last accessed at Sep 17, 2018.

Michael, K, 2005, “Foreword: Company Law in Australia: Principles and Applications“, Retrieved Sep 17, 2018.

Renard, I. 2012, Takeovers and Reconstructions in Australia, Butterworths.

Farrar, J., 2008, Corporate governance : theories, principles and practice, (SJ100 FAR).

Farrar, J., 2001, Corporate governance in Australia and New Zealand, (KU956 F24).

Ford, H., 1999, Ford and Austin’s principles of corporation law (KD956 F69) (9th ed.).

Tomasic, R., 2002, Corporations law in Australia (SJ100 TOM).

Laws

Corporations Act 2001 (Cth) s 182-183.

 Queensland Mines Ltd v Hudson [1978] UKPC 2, (1978) 18 ALR 1, Privy Council (on appeal from NSW).

 Adler v ASIC [2003] NSWCA 131, (2003) 46 FLR 1 (8 July 2003), NSW Court of Appeal.

 Corporations Act 2001 (Cth) s 207-230.

 Daniels v Anderson (1995) 37 NSWLR 438.

 Corporations Act 2001 (Cth) s 180(2).

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