LLB452 Corporations Law

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LLB452 Corporations Law

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LLB452 Corporations Law

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Course Code: LLB452
University: Murdoch University

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Country: Australia


Harry Spencer (‘Harry’) is a retired businessman and an investor. He has been doing business with the law firm of Charles Windsor & Sons, Solicitors, for many years (‘the firm’). After the death of Charles Windsor II, he had all his dealings with Meghan Thomas (‘Meghan’) who was employed by the firm as an associate. Harry had used the firm for conveyancing business and then later on for the purpose of making investments. In conveyancing matters, he had always dealt with Meghan (after the death of Charles Windsor II). Harry has gained implicit confidence in Meghan whom he regards as the ‘corner-stone’ of the firm. Harry knew that, after the death of Charles Windsor II, Meghan was carrying on the business on behalf of the executors although he did not know under what arrangements she was so doing.
When Charles Windsor II died, his son, Charles Windsor III (‘Charles’), was an articled clerk, and Meghan, who was a qualified solicitor, carried on the business for several months until Charles became qualified and purchased the business from his father’s executors.
In 2014, Charles, carrying on business under the old firm name of Charles Windsor & Sons, Solicitors, entered into an agreement with Meghan and another solicitor, Rachel Engleson (‘Rachel’), under which they were admitted as salaried partners in his business on, inter alia, the following terms and conditions:

That the term of the partnership business should be for a period of five years and should be deemed to have commenced on 1 July 2014, subject to sooner determination as therein provided.

That the partnership business should be carried on at such place in Perth as Charles should from time to time determine.

That Meghan and Rachel should devote their whole time and attention to the partnership business during all proper business hours and should in all matters connected therewith obey the lawful orders and directions of Charles and during such business hours should not engage in any other work or business without the consent of Charles.

That neither Meghan nor Rachel should pledge the credit of the firm without the consent of Charles, and, further, that neither of them should at any time represent themselves or hold out that they were employed otherwise than as salaried partners of the firm or as having any interest in or relationship to that firm otherwise than as was thereby created or expressed.

That Charles should pay to Meghan and Rachel such salary as Charles should from time to time determine provided that it should not be less than a specified minimum amount per week, together with such percentage of the net profits derived by the firm from the business in each year as Charles should think fit.

That Charles should pay the rent, salaries and wages and generally all working expenses, outgoings, debts and liabilities of the partnership and should indemnify Meghan and Rachel against the payment thereof.

That the partnership could be determined at any time by any of the members giving at least six weeks previous notice in writing of such determination.

The letterhead of the firm was headed as follows:
Charles Windsor & Sons
Charles Windsor III
Meghan Thomas
Rachel Engleson
Charles, Meghan and Rachel had full practising certificates. The register of legal practitioners showed that Meghan was entered as practising with Charles and Rachel as Charles Windsor & Sons, Solicitors, and that Rachel was practising with Charles and Meghan. The bank account was Charles’s own account and could be operated on by himself or any one of the salaried partners with a countersigning by the accountant, or the two salaried partners. The business of the firm belonged to Charles.
Harry had never spoken to or had any direct dealings with Rachel. Meghan did not deny that she did the greater part of Harry’s work and correspondence and documents supported this fact.
In 2016, there was a sale of property on behalf of Harry, and, on settlement, the firm of Charles Windsor & Sons, Solicitors, acted for him. Harry invested part of the proceeds of the sale,
approximately $30,000, with or through Charles. In this investment transaction, Charles acted personally, and Meghan had nothing to do with it except that she signed on behalf of the firm a receipt for the moneys.
Charles purported to invest the moneys in loans to various persons. The moneys were posted in the firm’s books as having been lent on mortgages to these persons but actually there were not any loans or mortgages. The moneys were misappropriated by Charles who has since absconded.
Harry claims that Charles had received moneys from him for which he had failed to account and that Meghan and Rachel were liable to pay these moneys to him because at all relevant times they were or had held themselves out to him to be partners of Charles in the transaction of the business in connection with which the moneys had been received by Charles.
Meghan and Rachel agree that they were described as salaried partners but claim that they were in fact employees of the firm.
Advise Harry as to whether he has any cause of action against Meghan and/or Rachel. You should support your advice with relevant legislation e.g. the Partnership Act 1895 (WA) and case law.
Down Under Pty Ltd (‘Down Under’), a company registered under the Corporations Act 2001 (Cth) (‘CA’), owns a chain of bookstores. Its directors and members are Rydell, Danny, Frenchy and Putzie. They each own 1,000 shares in the company. Down Under relies on the Replace-able Rules (RRs) in the CA. In addition, it has a constitution that contains the following clauses:
The directors of the company shall be Rydell, Danny, Frenchy and Putzie for a period of 10 years from 1 July 2015.
Zuko shall be employed as the company’s accountant until 31 December 2030. The board of directors must authorise all contracts entered by the company in excess of $50,000.
The directors of Down Under receive an invitation from Top End Pty Ltd (‘Top End’) to attend a launch of a new book. The directors are not able to attend the book launch so they ask Zuko to attend the book launch on their behalf. Without the knowledge of the directors, Zuko attends the book launch with his girlfriend, Betty, the company’s purchasing officer.
At the book launch, Zuko introduces himself and Betty as directors of Down Under. During the evening, Betty enters into a conversation with Cha-Cha, a director of Top End. Cha-Cha informs Betty that Top End wishes to sell its book binding business for $150,000. Betty believes that Down Under should diversify its activities so she contacts Cha-Cha in the week after the function, and after negotiations have taken place, she enters into a contract on behalf of Down Under to purchase the book binding business. Betty uses Down Under’s funds that are available to her as the purchasing officer to pay a deposit of $15,000.
When the directors learn what Betty has done, they are furious. They contact Top End and ad-vise them that they do not believe that they are bound by the contract because Betty does not have the authority to bind the company and the contract was not authorised under the company’s constitution.

Is Down Under bound by the contract to buy the book binding business? Would your answer be different if Zuko and not Betty had entered the contract with Top End on behalf of Down Under?

Rydell, Danny and Frenchy have been unhappy with Putzie and Zuko for some time. At a meeting of the directors, they terminate Zuko’s employment contract. The following week, the directors call a members’ meeting at which they pass a resolution removing Putzie from her position as a director of the company.

What are Putzie’s rights in relation to her removal from her position as a director of Down Under?

What are Zuko’s rights in relation to his removal from his position as accountant of Down Under?


Harry Spencer,a long-time client of Charles Windsor & Sons Solicitors, gave Charles Windsor III some money to invest on his behalf. Harry had dealt with the firm for conveyancing and other matters. For conveyancing he always dealt with Meghan. He has dealt with Meghan since Charles Windsor II and even after the death of Charles Windsor II. He trusted Meghan and considered him the cornerstone of the firm. The firm has retained Meghan and Rachel Engleson as salaried partners; their names also appear on the firm’s letter head. Charles has misappropriated Harry’s funds. Harry now claims that Meghan and Rachel are liable.
The issue is whether Meghan and Rachel are liable.
Partnership exists between people in a common business to make profits.Sharing of profits is considered prima facie evidence of existence of a partnership. However, sharing of profits alone is not proof of a partnership.
Once partnership is established to exist, all the partners are liable for all liabilities and obligations of the firm. The law also allow third parties to recover from other persons who are not really partners but have held themselves out as partners either by words or conduct. This is doctrine of estoppel. Lynch v Stiff, is a case with similar facts, the court found Lynch liable as a partner despite the fact that Lynch was not really a partner. It was stated that for there to be a partnership by holding out the person must have knowingly represented himself as a partner, another person had acted on that representation and dealt with the firm on the faith of that representation.  In Nationwide Building Society v Lewis, Nationwide sought to rely on the doctrine of holding out to make a solicitor liable. The solicitor had been employed under a salaried partner contract. The name of the solicitor also appeared on the firm’s letterhead. It was held that there was no partnership as Nationwide failed to prove that they relied on the solicitor’s status to transact with the firm. In Briggs v Oateseven though the defendant was held out as a partner he was not really a partner because he had not share in the firm’s profit no liability was apportioned to him.
The names of both Meghan and Rachel appearing on the firm’s letterhead held them out as partners as Lynch v Stiff. Harry has never worked with Rachel and cannot attest to her competence. However, he has worked with Meghan and has developed trust in Meghan. He considers Meghan to be the cornerstone of the firm. He dealt with the firm because of his trust in Meghan and belief that Meghan is a partner.  
Harry has a cause of action against Meghan but not against Rachel. Rachel’s holding out had no influence on his decision to deal with the firm.
Down Under Pty Ltd owns a chain of bookstores. Its directors and members are Rydell, Danny, Frenchy and Putzie. It relies on replaceable and its constitution. The company’s directors received an invitation from Top End Pty Ltd to attend a launch of a new book. However, they were unable to attend and Zuko, the company’s accountant, attended on their behalf. Betty, the company purchasing officer, accompanied Zukoto the book launch. At the launch, Betty and Zuku introduced themselves as directors of Down Under. Top End informed Betty of their intention to sell their binding business. Betty negotiated and entered into contract for the purchase of the said binding business without consulting the directors.
The issue is whether the contract entered into by Betty on behalf of Down Under and Top End is binding on Down Under.
Down Under can only be bound where Betty acted as its agent.The law allows any person to act on behalf of the company. Provided expressly or impliedly authorised, that is have actual authority. Actual authority arises where the principal confers the authority on agent and the agent accepts the authority. It is consensual. The agreement provides the limits of the authority. Where the agreement fails to cover some aspects of the authority the agent might still be presumed to have authority. The implied authority is based on the circumstances of the agent’s appointment and the transaction. Hely-Hurchinson v Brayhead Ltdgave the difference between express and implied authority.  In Equiticorp Finance Ltd v Bank of New Zealandit was stated that implied authority depends on possibility of the agent being granted express authority.
However, limitation provided in the company’s constitution do not invalidate contract entered into by the agent in exercise of actual authority. Even where the person lacks actual authority to bind the company to a contract, the company may still be boundprovided it held out the agent to have authority. This is known as ostensible or apparent authority. The company is estopped from denying the agent’s authority. This assumption of authority applies even where the officer has acted fraudulently.
The authority may exist where the agent has actual authority but has acted beyond his authority. An agent’s representation that he has an authority does not establish ostensible authority. Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltddefined apparent or ostensible authority to arise where the principal represents to another personthat the agent possess authority intending the person to rely on it and the person relies in that representation and enters into a contract. Ostensible authority has three elements, that is, a principal’s representation to another person, the person relying on that representation, and the person suffering a detriment.
Betty was the purchasing authority. She had authority to enter into purchasing contracts binding the company. However, she needed to seek the director’s authority for contract beyond $50, 000. She entered into a contract beyond $50,000 without the knowledge or consent of the directors. However, under s. 125(1) such contract remains valid despite the limitation.
The company is liable under the contract. Betty had authority to enter into the contract. However, Zuko lacked express, implied or ostensible authority to bind the company and, therefore, the company would not have been bound.
Putzie was one of the Directors of the company and is still a shareholder of the company. She was removed from the directorship.
Issue is whether she has any cause of action.
The Corporations Act 2001 (Cth) s.s 232-235 provides protection for minor shareholders where the majority shareholders have acted oppressively. The Court may grant any of the orders provided in s. 233 of the Act to protect the oppressed shareholder. Section 234 of the Act provides person qualified to apply for the orders. Raymond v Cookit was held that the jurisdiction go beyond the external corporate activity to oppressive internal management and abuses by individual.
Putzie was removed from the directorship by majority of shareholders on flimsy ground. This is acting oppressively against Putzie the minority shareholder.
Putzie can apply to the court for orders under s. 233 to be reinstated as a director and order restraining her victimisation by the other shareholders/ directors.
Zuko was employed under a contract for a term ending 31 December 2030. Zuko was dismissed before the end of the term of his contract.
The issue is whether Zuko can claim unfair dismissal.
Fixed term employees are engaged under a contract having operation for a specific time.There is dismissal where employee is dismissed after expiry of the contract term. However, dismissal arises under a fixed term or fixed term contract where the termination occurs before the end of the term of the contract. Where employment is terminated before the end of the term period, the employee was held in Miss Eleanor Downes v The Uniting Church of Australia Property Trust (Q.) T/A Wesley Mission Brisbaneentitled to claim unfair dismissal and seek remedies under s. 390 of the Act.
Zuko was employed under a fixed term period ending 31 December 2030. The contract was terminated at the initiative of the company before the end of the term period. This amounted to dismissal under s. 386(1) and unfair under s. 385.
Zuko’s employment was unfairly terminated and can claim reinstatement or compensation under s. 386.
Bottomley, Stephen, Kaith Hall, Peta Spender and Beth Nosworthy, Contemporary Australian Corporate Law (Cambridge University Press, 2017)
Hor, Joydeep and Keats Louise, How To Attract and Retain Great Employees (CCH Australia, 2008)
Deards, Practice Notes on Partnership Law (Cavendish Publishing, 2013)
Marsh, S.B and J Soulsby , Business Law (Nelson Thornes, 2002)
Morse, Geoffrey,Partnership Law (OUP Oxford, 2010)
Thampapillai, Dilan,Vivi Tan, Claudio Bozzi and Anne Mathew, Australian Commercial Law (Cambridge University Press, 2015)
Tomasic, Roman, Stephen Bottomley and Rob McQueen, Corporations Law in Australia (Federation, 2002)
Briggs v Oates (1990)1 CR 473
Equiticorp Finance Ltd v Bank of New Zealand (1993) 11 ACL 952
Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480
Hely-Hurchinson v Brayhead Ltd (1968)1 QB 549
Lynch v Stiff(1943) 68 CLR 428
Nationwide Building Society v Lewis(1998)3 All ER 143
Mission Brisbane [2013] FWC 8890
Miss Eleanor Downes v The Uniting Church of Australia Property Trust (Q) T/A Wesley
Raymond v Cook (1998)29 ACSR 252
Corporations Act 2001 (Cth)
Fair Work Act 2009 (Cth)
Partnership Act of 1985 (WA)

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