Business Law Assignment: Case Evaluation Based On Law Of Business Organisation

Question

Business Law Assignment Task: Short answer and Problem Based Questions.

Part A consists of 8 short answer questions and Part B has two (2) legal problem-based questions. Answer all questions in Parts A and B. Refer to case law and/or statutory authority where appropriate and relevant to support your answers.

Part A: Briefly answer all 8 questions.

1. What are some of the key differences between a partnership and a joint venture, as a vehicle for operating a business.
2. Explain the concept of fiduciary duty, and its scope or duration, as applied to partnership law.
3. Describe at least three differences between an incorporated association and a company.
4. In what circumstances, does the Corporations Act impose personal liability on directors for harm caused by the company?
5. Tortoise Ltd is a shareholder in Rubicon Ltd which is listed on the ASX. Tortoise Ltd would like the shareholders to pass a resolution instructing the board of Rubicon to sign up to the United Nations Principles for Responsible Investment. Can the shareholders do so?
6. Imagine that the constitution of a company includes a provision limiting the company’s objects to investing in start-up fintech businesses. Having regard to the effect of ss 124 and 125 of the Corporations Act 2001, what is the legal effect of that limitation?
7. What are the similarities and differences between the duties of a promoter and a director in a company?
8. Explain statutory protection rules for third parties when they enter into contracts with a company.

Part B: Problem Based Questions

Answer both problem questions following the ILAC method of answering legal problem questions

Question 1: Advise the parties whether a partnership exist between them in the following situations:

1. In June 2020, Alice and Bob launched an e-commerce business to sell healthy food recipes. Alice was the content creator and Bob provided his time and skills to develop the website. They approached their wealthy friend Oscar to contribute to the business and Oscar decided to pay $50,000. Oscar was a financial analyst in a public listed company and was not involved in the day-to-day operation of the business. However, he advised Alice and Bob to consult him before making any management decisions and send him the books of account for audit purposes. Oscar wanted to double his investment within a year. There was no written agreement between Alice, Bob, and Oscar.
2. Joanna and Faye planned to start a conveyancing business together. Joanna secured a premises to set up the business and purchased necessary office furniture from IKEA. Faye mobilised her referral network to generate work and started to receive a number of queries. Unfortunately, before the official commencement of the business, Joanna was declared bankrupt and dropped the plan of doing business with Faye. Creditors wanted to pursue their claims against Faye for all the debts Joanna incurred for the business.
3. Gibran worked in a suburban boutique law firm as a graduate lawyer under the supervision of Mr. Delosa, the principal of the firm. Because of his passion for law and hardworking attitude, Mr. Delosa liked Gibran and called him “partner”. Gibran received a share of the annual profits of the business as an encouragement on top of his monthly salary for his work in the firm.

Question 2:Crazy Pearl Park (“CPP”) has run an amusement park in Sydney for which it has recently acquired a state-of-the-art amusement ride with highly advanced technology. However, in the first year of its operation, due to a serious malfunction of this ride, two CPP workers are seriously injured while operating it. They sue CPP for breach of their contract of employment by failing to ensure a safe system of work. They join CPP’s parent company Robin Hood Entertainment Ltd (“RHE”) in the action.

RHE is listed on the ASX and CPP is a wholly owned subsidiary of RHE. The CPP board comprises senior managers of RHE. CPP has its own management and staff subsidiary to the board. CPP has an issued capital of $2 and its working capital comes from RHE by way of loans and profits retained from past operations.

Advise the injured workers with respect to their rights of recovery against RHE.

Answer

Business Law Assignment Part A: The difference between partnership and joint venture business

The fiduciary duty, its scope and duration as applied to partnership law

The fiduciary duty can be referred to as the legal obligation of a one-party to proceed with the good interest of the other party (The Florida Bar, 2021)² . In any partnership business, the partners have duties of trust which are also known as fiduciary duties. This type of duty depends upon the type of partnership in that business. For example, it will depend on whether it is a general partnership or a limited partnership.

The fiduciary also referred to the relationship in which one person is obliged to a duty of act for benefiting the others in a matter under a particular scope of that relationship (Righttoinformation.wiki, 2021)³ .

In a partnership business, the time when a partner will be associated with that business are bound to some fiduciary duties.

Three differences between an incorporated association and a company

The circumstances in which Corporations Act impose personal liability on directors for harm caused by the company

There are five prospective areas, where the directors of the company encountered the situation of insolvency can lead to the person liable for debts in the country Australia. The areas are defined below

• Claims on the situation of insolvent trading
• The director related transactions which are completely unreasonable
• Failed to fulfill the loss in the regard of employee entitlement
• The superannuation contribution and unpaid PAYG
• Personal guarantees

Tortoise Ltd is a shareholder in Rubicon Ltd which is listed on the ASX. Tortoise Ltd would like the shareholders to pass a resolution instructing the board of Rubicon to sign up to the United Nations Principles for Responsible Investment. Can the shareholders do so?

The United Nations Principles for Responsible Investment (UNPRI) helps to support the investors of the international network so that they can work together for the business welfare by maintaining some protocols or principles. According to the regulation of ASIC (Australian Securities and Investments Commission), the resolution can be passed with the help of a vote where the quorum (minimum number of members in a company) should be maintained. In this particular case, Tortoise Limited can pass the resolution by summoning all the shareholders of the company Rubicon Ltd. The Australian security exchange has no such provision for passing the resolution and it depends on the shareholders of the company (Cure and Robson, 2018)⁶ . In this particular case, the shareholder can pass the resolution which should be accepted by the maximum member of the organisation to incorporate the UNPRI

Imagine that the constitution of a company includes a provision limiting the company’s objects to investing in start-up fintech businesses. Having regard to the effect of ss 124 and 125 of the Corporations Act 2001, what is the legal effect of that limitation?

Section 124 of the Corporation Act empowered the company with the legal power and capacity where the company can go through any modification or alteration such as entering in contracts. Besides, it will also restrict some parts of such as issue shares. Section 125 of the Corporate law in Australia also stated that the utilisation of the Power by the company cannot be invalid because it is contrary to a prohibition in the company constitution. Therefore, it can be stated that any company in Australia can limit the investment regarding the startup of fintech businesses.

The similarities and differences between the duties of a promoter and a director in a company

Similarities
Anyone can be the promoter of a company. The director also can be the promoter. It is not necessary that the promoters are the directors.

The promoters and the directors both work toward the welfare of the company so that it can fulfil its objectives (Jackling and Johl, 2009)⁷ .

Differences
The promoters are the investors of a company but the directors are not. They are the owners and also have the right when it comes to the profit of that organisation.

The directors manage the daily operation regarding the business in a company which is not done by the promoters. The promoters make the plan of business and they carry out the legal formalities of the company.

Explanation of statutory protection rules for third parties when they enter into contracts with a company

Section 125(1) of the Corporation Act states that 'the activity of power by the organization isn't invalid since it is in opposition to an express limitation or forbiddance in the organization's constitution. On the other hand, section 125(2) states that 'a demonstration of the organization isn't invalid only on the grounds that it is opposite to or past any articles in the organization's constitution. It means that the third party who is dealing with the companies can also implement some obligations and this obligation can also be incorporated into the companies. The company even implement this obligation where the obligation was established for breaching the internal restriction (Giancaspro, 2017)⁸ . Therefore, the third party has some protection when they are involved with the other partners in a company.

PartB:a) The analysis of partnership existence between Bob, Alice and Oscar

Issue: Alice and Bob launched an E-Commerce business and later they approached their friend Oscar for investing in the company. Oscar was interested in this company but there was no agreement between Alice Bob and Oscar. This question is going to determine whether the partnership exists without an agreement or not

Law
The legislation of taxation office in Australia
Section 5 (1) LLP Act 2000

Application
According to the taxation office of Australia, a written agreement in a partnership business is not required when it comes to its existence. It is a good idea to draft a partnership agreement between the parties in order to reduce any type of disputes or conflicts. According to Section 5 (1) LLPA 2000, in the absence of any agreement, the partners can make any provision regarding any matter through the regulation under section 15(c).

Conclusion
It can be concluded that they can enforce any regulation without any agreement as the partnership exists between them.

b) The existence of a partnership between Joanna and Faye

Issue
This particular segment has presented the issue of two partners named Joanna and Faye. One of them has become insolvent before starting the business. The creditors wanted to claim the money against Faye for the debts incurred in the business.

Law
Corporation Act 2001

Application
According to the Corporation Act 2001, the partners who are associated with a partnership business are equally liable to all debt that has been incurred by another partner for the company (Bostock, 2002)⁹ .

Conclusion
The above analysis shows that a partnership exists between Faye and Joanna. Therefore, Faye is also liable to fulfill the debts which were borrowed by Joanna.

c) The existence of a partnership between Gibran and Mr Delosa

Issues
This particular segment will determine the existence of a partnership between Gibran and Mr Delosa.

Laws
Section 1 of Partnership Act 1980

Application
Section 1 of the Partnership Act 1980 has defined that both parties or the partners should share the profit equally which is also done by Gibran and Mr Delosa (Taylor et al. 2018)¹⁰ .

Conclusion
Therefore, it can be concluded that the partnership between Gibran and Mr Delosa Exists.

Answer 2

The advice to the injured employees of RHE against the recovery of Damages

Issue
This particular issue has been talked about by a company CPP which fails to provide security to their employees which led to their injury. In this particular case, the insured employee is compensated with the help of loans and the profits of another company RHE which is the parent company of CPP. This segment is focused to determine the recovery process of RHE.

Law
The case law of “DSG Pty Ltd v Victorian WorkCover Authority”
CHESS (“Clearing House Electronic Sub Register System”) which is enforced by the ASX

Application
The judgment of the case law “DSG Pty Ltd v Victorian WorkCover Authority” has provided the judgment against the employer by maintaining the law of section 138 of the Accident compensation act of 1985. It helps to compensate the employee for the losses.

The regulation CHESS under the ASX is operated by the ASX settlement Private Limited which is a subsidiary company of the ASX. It provides compensation for the damages to the company listed under the ASX (Almatarneh, 2020)¹¹ . The national guarantee fund is compensation which provides the compensation against the damages which happened in a company that is listed under ASX. It will provide compensation when the company failed to deal with the property and in this particular case, the failure in functioning the right can be considered with this situation.

Conclusion
Therefore, the company RHE can benefit in order to reduce the damages as a loan by the ASX. The court should dissolve the sue against CPP because the parent company RHE already provided the compensation to the injured employees.

Bibliography

1. Demarco.com.au, 2021. What is the difference between a Partnership and a Joint Venture?. [online] Available at: [Accessed 20 December 2021].
2. The Florida Bar, 2021. Understanding Fiduciary Duty. [online] Available at: [Accessed 20 December 2021].
3. Righttoinformation.wiki, 2021. What is Fiduciary Relationship [Right to Information Wiki]. [online] Available at: [Accessed 20 December 2021].
4. The Association Specialists, 2021. Incorporated Association or Company Limited by Guarantee - The Association Specialists. [online] Available at: [Accessed 20 December 2021].
5. Murfett.com.au, 2021. [online] Available at: [Accessed 20 December 2021].
6. Cure, N.D. and Robson, S.J., 2018. Changes in hysterectomy route and adnexal removal for benign disease in Australia 2001–2015: a national population-based study. Minimally invasive surgery, 2018. https://www.hindawi.com/journals/mis/2018/5828071/
7. Jackling, B. and Johl, S., 2009. Board structure and firm performance: Evidence from India's top companies. Business law assignment Corporate Governance: An International Review, 17(4), pp.492-509. https://www.academia.edu/download/47601999/Board_Structure_and_Firm_Performance_Evi20160728-31146-7givuq.pdf
8. Giancaspro, M., 2017. Is a ‘smart contract’really a smart idea? Insights from a legal perspective. Computer law & security review, 33(6), pp.825-835. https://www.researchgate.net/profile/Mark-Giancaspro/publication/317354410_Is_a_'smart_contract'_really_a_smart_idea_Insights_from_a_ legal_perspective/links/5c2d5891a6fdccfc707902d8/Is-a-smart-contract-really-a-smart-idea-Insights-from-a-legal-perspective.pdf
9. Bostock, T., 2002. The Corporations Act 2001. Amicus Curiae, 2002(39), pp.26-27. https://sas-space.sas.ac.uk/3721/1/1303-1394-1-SM.pdf
10. Taylor, G.S., Braby, M.F., Moir, M.L., Harvey, M.S., Sands, D.P., New, T.R., Kitching, R.L., McQuillan, P.B., Hogendoorn, K., Glatz, R.V. and Andren, M., 2018. Strategic national approach for improving the conservation management of insects and allied invertebrates in Australia. Austral Entomology, 57(2), pp.124-149. https://onlinelibrary.wiley.com/doi/pdf/10.1111/aen.12343
11. Almatarneh, A., 2020. Blockchain technology and corporate governance: the issue of smart contracts—current perspectives and evolving concerns. Éthique et économique= Ethics and economics, 17(1). https://papyrus.bib.umontreal.ca/xmlui/bitstream/handle/1866/23114/2020v17n1Almatarneh.pdf?sequence=1