Business and Corporate Law - Question 1

Issues:

  • How is the distribution of property to creditors initiated and what are the conditions that have to be met?

Laws Applicable:

  • Bankruptcy Act, 1966

Application:

According to the provisions of section 58[1] and 58A[2], which talks of Vesting of property upon bankruptcy, the conditions that have to be fulfilled are:

  • The property, not being after acquired property, goes to the control of the Official liquidator.
  • The trustee has to be registered under the provisions of section 156A[3]

After the declaration of the debtor as bankrupt, the creditor is not allowed to enforce any remedy available to him even when a debt has been proved.

  • Where the debtor is a tenant of the landlord, the remedy of payment of rent shall not be allowed to be levied on the bankrupt debtor.
  • The rights of a secured creditor are not harmed.
  • In case the debtor becomes the owner of a property after he has been declared bankrupt shall directly go under the control of the Official trustee or the registered trustee.

Conclusion:

If the creditor is able to prove a debt against the bankrupt debtor and is also able to show the court that the debtor has enough property, or property ownership might be given to him in the future, the creditor may claim his debt from the Official or registered trustee, who has bee appointed

Business and Corporate Law - Question 2

Issues:

  • Difference between intention to create enforceable obligation in social contracts and commercial contracts.

Laws Applicable:

  • Case Laws

Application:

The question as to whether or not the document is binding revolves around whether there is an intention to be legally bound. A “contract" is legally binding and an “agreement” is not. To create a contract there must be a common intention of the parties to enter into legal relations, mutually communicated either expressly or impliedly- held in Rose and Frank Co vs. JR Crompton & Bros Ltd.[4]

If you enter into an agreement in the context of a social or domestic situation, there is a presumption that you did not intend the agreement to have any legal consequences. On the other hand, if you enter into the agreement in a business/commercial setting than there is a presumption that the necessary legal intent was present. The final test for any question would be ‘if a reasonable person would hold it as binding?’

To work out whether the presumption applies in the domestic or social context, the nature of the relationship of the parties who enter into the agreement is relevant. In Merritt vs. Merritt,[5] a married couple separated, but before they divorced, they mutually agreed that if the wife paid off the mortgage, the husband would then transfer his interest in the home to her. He signed a document to this effect but later refused to transfer his interest after she had paid out the mortgage. The court held the requisite legal intention was established.

In Wakeling vs. Ripley,[6] a wealthy old man invited his sister and her husband (both lived in the UK) to move to Australia to care for him on the basis that he would provide them with an income, and also his property upon his death. The couple agreed, the husband giving up a stable job in the UK in order to relocate. A dispute arose, and the couple sued for breach of contact. They succeeded on the basis that the agreement was ‘more than a mere family or social agreement.

In case of commercial agreements/contracts, the presumption that the intention to be legally bound is difficult to rebut.

In Esso Petroleum vs. Customs & Excise,[7] Esso ran a promotion whereby any person purchasing four gallons of petrol would get a free coin from their World Cup Coins Collection. The question for the court was whether these coins were ‘produced in quantity for general resale’ if so they would be subject to tax and Esso would be liable to pay £200,000. Esso argued that the coins were simply a free gift and the promotion was not intended to have legal effect and also that there was no resale.

Held: 3:2 There was an intention to create legal relations. The coins were offered in a commercial context which raised a presumption that they did intend to be bound. However, the coins were not exchanged for a money consideration and therefore the coins were not for resale.

For a better understanding, the following cases have been compared:

In Albert vs. MIB,[8] A docker was killed in a road collision on his way to work. He was a passenger in a car owned and driven by a work colleague. The driver gave lifts to the deceased and other dockers in return for payment. He had given lifts to different dockers over a period of eight years. A claim was made against the Motor Insurance Bureau (MIB) as the driver had no insurance cover for passengers. The MIB was only obliged to pay if there existed a contract between the docker and the driver.

Held: The lifts were offered in a commercial context as he had given lifts to different people over a period of time. Therefore, there was an intention to create a binding contract.

In Coward vs. MIB,[9] Coward was killed whilst riding pillion on a motorcycle driven by a friend and work colleague on the way to work. The collision was due to the negligence of the friend. Coward's widow sought to claim damages from the Motor Insurance Bureau since the rider's insurance did not cover pillion passengers. The Motor Insurance Bureau would only be obliged to pay if insurance for the pillion was compulsory. Insurance was only compulsory for pillions if they were carried for hire or reward. Coward paid the friend a small weekly sum to take him to and from work each day. The widow therefore argued that this was a contract for hire or reward. However, the MIB argued that to amount to a contract for hire or reward there had to be an intention to create legal relations which was absent in agreements of this nature between friends.

Held: There was no contract of hire or reward as it was a social and domestic agreement and therefore no intention to create legal relations. The widow was therefore not entitled to compensation.

Conclusion: The intention of the parties matters the most in this scenario. Along with that, the perspective of a reasonable person can be taken by the Court.

Business and Corporate Law - Question 4

Issues:

  • When is the personal interest of the Directors in a particular matter considered relevant?
  • How is such personal interest treated?

Laws Applicable:

  • Corporations Act, 2001.

Application:

The concept of 'material personal interest' comes from corporation law.

This is because specific obligations to disclose material personal interests and to refrain from attending meetings or voting on matters in which an individual has the material personal interest are generally imposed where the individual holds a position of trust (such as a director of a company).

This is because, underpinning the obligation to disclose material personal interests is the concept that individuals who are in a position of trust must not profit from that position, or place themselves in a position where duty and interest might conflict. A person in this position must not promote their personal interest where there is a real and substantial conflict between that personal interest and the interests of those who the person is bound to protect.

Under the general law, a material personal interest exists if the relevant interest is:

  • Material – the interest needs to be of some substance or value, rather than merely a slight or low value interest: Grand Enterprises Pty Ltd vs. Aurium Resources Ltd[10]. Any interest that has the capacity to influence the vote of an official is material, regardless of how it arises.
  • Personal – the interest must be an interest of the official themselves. It will not be personal if it is an interest of someone else only. The interest may not be personal if it affects the official as a member of a wide group or class and in the same manner and to the same degree that it affects the other members of the group or class (such as ordinary shareholders in a company).

The interest need not be pecuniary: The Bell Group (in liq) vs. Westpac Banking Corporation.[11]

Sections 191 and 192[12] specifically lay out the situations in which a director is obliged to disclose his/her personal interest in the matters of the company. These are the material situations to be considered for disclosing a director’s personal interests.

In general terms, directors have statutory duties (among others) to:

  • exercise their powers and discharge their duties with care and diligence (s. 180 of the Corporations Act 2001)
  • exercise their powers and discharge their duties in the best interest of the corporation and for proper purposes (s. 181 of the Corporations Act 2001)
  • not improperly use their position to gain advantage for themselves or someone else, or cause detriment to the company (s. 182 of the Corporations Act 2001)
  • not improperly use information gained as a director to gain advantage for themselves or someone else, or cause detriment to the company (s. 183 of the Corporations Act 2001).
  • It can constitute an offence if directors breach those obligations recklessly or intentionally dishonestly (s. 184 of the Corporations Act 2001).

There is no difference mentioned in the Corporations Act, 2001 in the treatment of non-disclosure of personal interest between Directors of public companies and proprietorship companies.

Conclusion:

The treatment of non-disclosure shall be treated the same in both types of companies.

Business and Corporate Law - Question 4

Issues:

  • Negligence on part of Rugby Board while drafting rules of the game.

Laws Applicable:

  • Law of Negligence and Limitation of Liability Act, 2008
  • Case Laws.

Application:

To succeed in an action of negligence, the victim must be able to prove three things:

  • That he was owed a duty of care
  • That that duty of care was breached
  • The damage suffered was caused by that breach

In contact sports, such as football or rugby, all participants owe a duty of care to one another. In order to show a breach of that duty, conduct must be reckless and fall below the standard required of a reasonably skilful and competent professional player. It must be an act that is more serious than an error of judgement. Thereafter, the injury suffered must be foreseeable.

In sport, it is not always the assailant who is open to be sued – players, clubs, governing bodies and referees can also find themselves subject to legal action.

Rugby is a dangerous sport with heavy body collisions between players and regularly, multiple players at any given time. Therefore, it is likely that injuries arising from such play occur frequently but when do they occur as an act of negligence?

Again, the focus will always be on what is expected of the reasonably competent rugby player, what care has been shown in the tackles, what is regarded as an error of judgement compared to complete recklessness and of course, the Court will consider the rules of the game.

There are two cases whereby rugby players have recovered from their fellow players following injuries caused by “spear” tackles.

Jarrod Mccracken vs. Melbourne Storm Rugby League Club (2005) and Ramsay Elshafey vs. Javed Clay (2001)

Both players alleged that they were injured as a result of a “spear” tackle whereby both players were lifted off the ground and allowed to fall headfirst. The Courts, in both cases, commented that rugby is a fast moving, intense physical contest involving heavy body collisions. However, the assailants were aware of what they were doing when they lifted and upended their opponents. They had intended them to fall heavily to the ground below. Given that, the Court held that the defendants had breached their duty of care.

Conclusion:

  • Peter may proceed with a case of negligence against the board and the other players.
  • The league board can claim that the injury was foreseeable, and thus, they would not be liable.
  • Johannes cannot claim any compensation against the company as he suffered injuries due to his own fault and the company was not liable for his injuries.
  • The Rugby League Board did not owe any duty of care to Johannes as he was not a party to any contract with the Board.

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Law Assignment Help

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